Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 [2023] AUSStaCSBSD 188 (18 October 2023)

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Purpose	The bill seeks to amend: • the Income Tax (Transitional Provisions) Act 1997 to temporarily increase the instant asset write-off threshold; • the Income Tax (Transitional Provisions) Act 1997 to provide small and medium businesses with access to a bonus deduction equal to 20 per cent of the cost of eligible assets or improvements to existing assets that support electrification or more efficient energy use; • the Income Tax Assessment Act 1997 to list and extend deductible gift recipients (DGR); • the Income Tax Assessment Act 1997 to continue to provide the Global Infrastructure Hub with an exemption from the liability to pay income tax on its ordinary and statutory income. The bill also seeks to: • create a new class of community charity trusts and community charity corporations that may apply for DGR endorsement by the Commissioner; • amend the income tax law with respect to general insurance to provide broad alignment with the new accounting standard, AASB 17; • change the rules for non-arm’s length expenses for superannuation entities; and • amend the Corporations Act 2001 to restore the Australian Financial Complaints Authority's jurisdiction to validly receive and resolve complaints which relate to superannuation, irrespective of whether the complaint falls within the definition of a ‘superannuation complaint’ in the Corporations Act 2001.
Portfolio	Treasury
Introduced	House of Representatives on 13 September 2023
Bill status	Before the House of Representatives

1.173 Existing subsection 426-120(1) of the Taxation Administration Act 1953 (the Act) prescribes liability for an administrative penalty where trustees of an ancillary fund hold the fund out as being endorsed, entitled to be endorsed, or entitled to remain endorsed, as a deductible gift recipient, and the fund is not so endorsed or entitled. Item 12 of schedule 3 to the bill seeks to amend existing section 426-120 to extend the operation of this provision to both ancillary and community charity trust funds.

1.174 Item 11 of schedule 3 to the bill seeks to insert proposed section 426-118 into the Act. Proposed paragraph 426-118(a) provides that the minister must formulate community charity trust guidelines by legislative instrument setting out rules that community charity trusts and their trustees must comply with if the trusts are to be, or are to remain, endorsed as deductible gift recipients. Proposed paragraph 426-118(b) provides that the charity trust guidelines must also set out the amount of the administrative penalty, or how to work out the amount of the administrative penalty, for the purposes of subsection 426-120(1) in relation to community charity trusts.

1.175 Existing subsection 426-120(3) of the Act prescribes that the penalty amount incurred under subsection 426-120(1) is specified in guidelines. Item 15 of schedule 3 to the bill seeks to amend existing subsection 426-120(3) of the Act to include community charity trust funds. As per proposed amended section 426-120(3), the penalty for the offence in subsection 426-120(1) would be:

1.176 Item 34 seeks to insert proposed section 426-195 into the Act. Proposed subsection 426-195(1) prescribes liability for an administrative penalty where a community charity corporation, or a direct holds out that:

1.177 Proposed subsection 426-195(2) provides that the penalty is the amount specified in the community charity corporation guidelines, or the amount worked out in accordance with the method specified in the community charity corporation guidelines. Proposed subsection 426-195(2) also provides that the guidelines may specify different penalties or methods for different circumstances. Proposed subsection 426-195(3) provides that a director who is liable to the penalty must not be reimbursed the penalty from the corporation.

1.178 In addition, proposed subsection 426-195(4) prescribes an offence-specific defence for the offence set out in proposed subsection 426-195(1). Proposed subsection 426-195(6) provides that the evidential burden of proof is reversed for persons relying on this defence.

1.179 Item 34 of schedule 3 to the bill also seeks to insert proposed section 426-185 into the Act. Proposed paragraph 426-185(a) provides that the minister must formulate community charity corporation guidelines by legislative instrument setting out rules that community charity corporations and their directors must comply with if the corporations are to be, or are to remain, endorsed as deductible gift recipients (DGR). Proposed paragraph 426-118(b) provides that the charity trust guidelines must also set out the amount of the administrative penalty, or how to work out the amount of the administrative penalty, under subsection 426-195(1) in relation to community charity corporations.

1.180 These items represent a significant delegation of legislative power in that they allow regulations (which are not subject to the same level of parliamentary scrutiny as primary legislation) to impose penalties. The committee's view is that significant matters, such as the imposition of penalties, should be included in primary legislation unless a sound justification for the use of delegated legislation is provided. In this instance the bill provides for the imposition of civil penalties in delegated legislation, without the provision of guidance or factors to be considered when determining these amounts. The committee's preference is that guidance, factors to be considered, or a cap on the penalty amounts be included on the face of the bill, to constrain the scope of legislative power that is being delegated.

1.181 In relation to proposed sections 426-118 and 426-185, the explanatory memorandum explains:

The guidelines may specify different penalties or methods for different infringing behaviours. It is appropriate for the guidelines to set out penalty amounts, as this allows for them to be customised to the nature and size of the breach, as well as taking account of the trustee or director’s level of culpability. This level of specificity is not present in, or appropriate for, the primary legislation, which sets out an overarching narrative in the context of which detailed obligations would be out of place and difficult to comprehend. An additional reason for including penalty amounts in the guidelines rather than the primary legislation is that the former may be more readily updated to respond to new factual scenarios and ensure recipients of DGR status are being satisfactorily regulated.144F^[113]

1.182 In relation to the reversal of the evidential burden of proof in proposed section 426-195, the explanatory memorandum states:

It is appropriate to place the burden of proof on a director to make out this defence, because knowledge of whether or not they were aware of the breach is peculiarly within their possession and would be relatively easy to establish. Also, as noted, these provisions are not novel; they have been extended or used as a model in respect of community charities.145F^[114]

1.183 The imposition of an offence-specific defence which reverses the evidential burden of proof ordinarily heightens the committee's concerns in relation to the imposition of indeterminate penalty amounts to be prescribed in delegated legislation. However the committee notes that in this instance, the relevant offence is a civil rather than criminal offence which mitigates the committee's concerns, to an extent.

1.184 In light of the above, the committee requests the minister's advice as to:

^[112] Schedule 3, item 11, proposed section 426-118; item 15, proposed subsection 426-120(3); item 34, proposed section 426-185 and 426-195. The committee draws senators' attention to these provisions pursuant to Senate standing order 24(1)(a)(i) and (iv).

Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests

Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 [2023] AUSStaCSBSD 188 (18 October 2023)

Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023[111]

Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023^[111]