Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 [2018] AUSStaCSBSD 231 (17 October 2018)

• Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018
• Exclusion of judicial review 160

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Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018

Purpose	This bill seeks to amend various Acts relating to taxation to: • limit access to tax concessions for foreign investors by increasing the managed investment trust withholding rate on fund payments in certain circumstances; • amend thin capitalisation rules to prevent double gearing structures; • limit access to tax concessions for foreign investors by limiting the tax withholding tax exemption for superannuation funds for foreign residents; and • limit access to tax concessions for foreign investors by codifying and limiting the scope of the sovereign immunity tax exemption
Portfolio	Treasury
Introduced	House of Representatives on 20 September 2018

Exclusion of judicial review ^[160]

1.156 Schedules 1 and 5 to the bill seek to limit access to tax concessions for foreign investors, by increasing the managed investment trust (MIT) withholding rate attributable to non-concessional MIT income from 15 per cent to 30 per cent (the rate equal to the top corporate tax rate). Relevantly, non-concessional MIT income includes MIT cross staple arrangement income.^[161]

1.157 Proposed section 12-439^[162] seeks to create an exemption from the increased withholding rate in relation to approved 'economic infrastructure facilities'.^[163] Proposed subsection 12-439(3) provides that an Australian government agency (other than the Commonwealth) may make an application to the Treasurer in respect of a facility, or an improvement to a facility, specified in the application. The Treasurer may approve the facility if satisfied that a number of specified criteria are met.^[164] Where a facility or an improvement is approved by the Treasurer, any rent from land investment that is attributable to the facility or improvement will not be counted as MIT cross staple arrangement income, and will therefore not attract the higher withholding rate.

1.158 Item 14 of the bill seeks to amend the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act) to insert a new paragraph (gaaa) into Schedule 1. The effect of this amendment would be that the ADJR Act would not apply to decisions of the Treasurer under proposed section 12-439.

1.159 Where a provision excludes the operation of the ADJR Act, the committee would expect the explanatory memorandum to provide a sound justification for the exclusion. In this instance, the explanatory memorandum states:

The Treasurer's decision to approve a facility, or an improvement to a facility, as an approved economic infrastructure facility is excluded from the operation of the Administrative Decisions (Judicial Review) Act 1977 and therefore is not reviewable on its merits.
The Treasurer's decision is not reviewable on its merits because key factors that must be taken into account when making a decision include whether:
• the facility will significantly enhance the long-term productive capacity of the economy; and
• approving the facility is in the national interest.
Consideration of these factors involves complex questions of government policy that can have broad ranging implications for persons other than those immediately affected by the decision. Therefore, it is not appropriate for the decision to be subject to merits [review] under the Administrative Decision (Judicial Review) Act 1977.
However, the Treasurer's decision will remain subject to judicial review under section 39B of the Judiciary Act 1903.^[165]

1.160 This information indicates that decisions by the Treasurer under proposed section 12-439 may be decisions of a high political content. Consequently, it may be appropriate to exclude such decisions from merits review (for example, by the Administrative Appeals Tribunal).^[166] However, the effect of the amendment in item 14 would be to exclude judicial review under the ADJR Act. The committee notes in this regard that the explanatory memorandum provides no specific justification for excluding judicial review. Moreover, noting that decisions of the Treasurer would remain subject to judicial review under the Judiciary Act 1903 (Judiciary Act), it is unclear whether it is intended to exclude judicial review under the ADJR Act, or whether it is intended only to exclude merits review.

1.161 In this regard, the committee emphasises that the ADJR Act is beneficial legislation that overcomes a number of technical and remedial complications that arise in an application for judicial review under alternative jurisdictional bases (principally, section 39B of the Judiciary Act) and also provides for the right to reasons in some circumstances. From a scrutiny perspective, the committee considers that the proliferation of exclusions from the ADJR Act should be avoided.

1.162 The committee requests the minister's detailed justification for seeking to exclude judicial review under the Administrative Decisions (Judicial Review) Act 1977 in relation to decisions by the Treasurer for an exemption for an economic infrastructure facility under proposed section 12-439.

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[160] Schedule 1, item 14. The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(iii).

[161] In this regard, see explanatory memorandum, pp. 12-13.

[162] Schedule 1, item 11.

[163] Proposed subsection 12-439(5) defines 'economic infrastructure facility' as a facility that is any of the following: transport infrastructure; energy infrastructure; communications infrastructure; or water infrastructure.

[164] The criteria are specified in proposed subsection 12-439(4), and include: the facility is an economic infrastructure facility; estimated capital expenditure on the facility or improvement is $500 million or more; the facility or improvement is yet to be constructed; the facility or improvement will significantly enhance the long-term productive capacity of the economy; and improving the facility or improvement is in the national interest.

[165] Explanatory memorandum, p. 29.

[166] See Administrative Review Council, What decisions should be subject to merit review? (1999), [4.22]-[4.30].