Division Description Changes — Bills — Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018; Second Reading — 17th Sep 2018

Change	Division
senate vote 2018-09-17#2 Edited by mackay staff on 2018-10-19 16:16:29	Title Bills — Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018; Second Reading Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018 - Second Reading - Money laundering Description ~~<p class="speaker">Zed Seselja</p>~~ <p>Before I sum up, I thought I would to take the opportunity to respond to the Greens' second reading amendment, which the government will be opposing. This amendment calls upon the government to introduce legislation by the end of 2018 to regulate lawyers, conveyancers, accountants, high-value dealers, real estate agents and trust and company service providers under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. The amendment does not directly relate to the measures contained in the bill. The government will be opposing the Greens' amendment, and I will go into some of those reasons before I sum up.</p> <p>Australia has a strong and effective regime for combatting money laundering and terrorism financing, but there is more work to be done to strengthen our ability to prevent, disrupt and prosecute this and other criminal activity. The effectiveness of our regime was supported by findings of the 2015 FATF mutual evaluation, which found we have strong institutional frameworks and an overall effective regime. The statutory review of the AML/CTF Act tabled in 2016 contained 84 recommendations to improve the regime, including recommendations to create a more efficient and effective regulatory framework. These recommendations were aimed in part at addressing feedback from industry through the consultation process that the existing regime is complex, which can make it difficult for some regulated businesses to understand their obligations.</p> The majority voted in favour of a [motion](https://www.openaustralia.org.au/senate/?id=2018-09-17.19.2) introduced by Greens Senator [Peter Whish-Wilson](https://theyvoteforyou.org.au/people/senate/tasmania/peter_whish-wilson), which means the words below will be added to the usual [second reading motion](https://www.peo.gov.au/learning/fact-sheets/making-a-law.html) "that the bill be read a second time" (which is parliamentary jargon for "that the main idea of the bill be agreed to"). ### Motion text > At the end of the motion, add "but the Senate: > (a) notes that: *>> (i) the explanatory memorandum to the Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 forecast a second tranche of legislation that would regulate real estate agents, jewellers, and a range of non-financial trans*actions provided by accountants and lawyers, *>> (ii) in April 2016, the Government released the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 that contained a recommendation for the Government to develop options for regulating lawyers, conveyancers, accountants, high-*value dealers, real estate agents and trust and company service providers under the Act, *>> (iii) the Government commenced consultation on the regula*tion of lawyers, conveyancers, accountants, high-value dealers, real estate agents and trust and company service providers under the Act, and submissions to this consultation closed in January 2017, >> (iv) the Financial Action Task Force's April 2015 Mutual Evaluation Report on Australia's measures to combat money laundering and terrorist financing stated that Australia is an attractive destination for foreign proceeds of crime, particularly corruption-related proceeds flowing into real estate, and >> (v) the December 2017 OECD Phase 4 Report on Australia's implementation of the OECD Anti-Bribery Convention recommended that Australia address the risk that the real estate sector could be used to launder the proceeds of foreign bribery; and *> (b) calls on the Government to introduce legislation that would** address money laundering through real estate".* ### What is the bill's main idea? According to the [bill digest](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd1718a/18bd114): > The purpose of the Bill is ... to introduce: *>> criminal offences for the production, distribu*tion, possession and use of electronic sales suppression tools (ESS tool) which are used to falsify tax records created by electronic point of sale systems and >> administrative penalties corresponding to the criminal offences and *>> reporting obligations on entiti*es that provide a courier or cleaning service and engage other entities to perform a courier or cleaning service on their behalf. <p>The government is committed to working closely with industry to make the regime as efficient as possible while continuing to meet Australia's international AML/CTF obligations. The government has commenced implementing the statutory review recommendations on a phased basis to ensure time for proper consultation with industry and other stakeholders, and to avoid regulatory fatigue. It would not be a sensible approach to extend the current regime to new sectors while the regime is undergoing reform. The government passed the first phase of reforms to Australia's AML/CTF regime in December 2017, which saw the expansion of the regime to regulating cryptocurrency exchanges in response to the high money-laundering and terrorism risks inherent to the sector.</p> <p>The next phase of reform is scheduled for introduction late in the current sittings of parliament. It is proposed these reforms will include provisions to enable non-regulated entities, including tranche 2 entities, and members of the public to provide 'suspicious matters' reports to AUSTRAC. They will provide greater flexibility for industry to rely upon customer identification and verification procedures undertaken by a broader range of Australian and foreign entities, thereby enabling industry to reduce some of the associated regulatory cost. And they will include a rewrite of the complex and cumbersome provisions governing access to and use of AUSTRAC's financial intelligence. The Australian government is committed to ensuring that Australia has a robust AML/CTF regime to support our law enforcement and national security agencies in the fight against money laundering, terrorist financing and other serious and organised crime. So, for all of those reasons, the government will not be supporting the Greens' second reading amendment.</p> <p>In summing up debate on the bill, I want to again thank senators for their contribution to this debate. These measures are very much about addressing the growing economic and social problem of the black economy, as established in the Black Economy Taskforce interim report as part of the 2017-18 budget. When we're talking about the black economy, we are talking about activities and transactions which happen outside the usual tax and regulatory regime. These activities might include cash-in-hand jobs that have the purpose of avoiding tax; not reporting or underreporting income; underpayment of wages; money laundering; counterfeit goods; illegal phoenixing; and identity fraud.</p> <p>The Black Economy Taskforce was established in 2017 to examine the operations of the black economy in Australia and develop a forward-looking, multipronged policy response, recognising—and this is a very important point—that these issues cannot be tackled by traditional tax enforcement measures alone. As important as they are, we need a special and particular response to this challenge. The task force estimates that the black economy could have doubled since 2012, to now represent up to $50 billion in 2015-16 dollars. That's $50 billion in the black economy which isn't subject to the usual taxation arrangements, and therefore is being cheated from the Australian public, which could be offered for tax relief and offered for the delivery of services in other areas.</p> <p>This represents not only a loss of revenue to the government but also a penalty on Australians who do the right thing and pay their taxes and don't avoid taxes in this way. It penalises them because it creates an uneven playing field for business, because unscrupulous businesses operating in the black economy can undercut their competitors who are following the rules. That has a negative impact on the viability of those businesses doing the right thing and on the livelihoods of the people who run them as they struggle to remain profitable and compete with those who are cheating the system.</p> <p>The black economy undermines community trust in the tax system, gives some businesses an unfair advantage, puts pressure on the margins of honest businesses, and often includes the exploitation of vulnerable employees through the underpayment of wages and the loss of entitlements. The underpayment of wages and loss of entitlements are elements of the black economy that are a particular concern. Too often vulnerable employees are taken advantage of by people who are trying to dodge the system, and that can have profound consequences for those employees. This bill directly addresses two of those key concerns: firstly, avoiding tax by hiding income and, secondly, helping employees in certain sectors by ensuring their payments are reported to the Australian Taxation Office.</p> <p>Schedule 1 to this bill bans the manufacture, distribution, possession, use or sale of sales suppression technology. This technology has no legitimate use and allows businesses to hide their income—and we don't apologise for the very stiff penalties that are attached to some of these offences. These tools remove transactions from electronic record-keeping systems. They change transactions to reduce the amount of each sale and they can modify GST taxable sales to non-GST taxable sales. In all instances, no audit trail of the changes made exist. The fact is that this technology is used solely for the purposes of tax evasion, and we are introducing new offences that are subject to heavy penalties to deter their use. These new offences will restore integrity to the tax system.</p> <p>Schedule 2 to this bill extends the taxable payments reporting system to contractor payments in the high-risk courier and cleaning industries. This will ensure that payments made to contractors are reported to the Australian Taxation Office. From 1 July 2018, businesses in the courier and cleaning industries will be required to give an annual report to the ATO regarding the payments they make to businesses for them to provide courier or cleaning services. The reporting obligation will apply from the 2018-19 income year and reports will be required by 28 August 2019. The measure is estimated to result in tax receipts of $132 million over the forward estimates.</p> <p>Implementation of a taxable payments reporting system in the building and construction industry resulted in improved contractor tax compliance and reporting of income. The government is extending this reporting system to other high-risk industries. The ATO has prepared guidance material to assist businesses in the courier and cleaning industries to comply with their reporting requirements, and these amendments will bolster the integrity of Australia's tax system. They are important steps in dealing with the unique problems posed by the black economy and will be vital to improve our tax system. We in the coalition believe in lower and fairer taxes, but we don't believe that paying tax is an optional extra. We believe everyone should pay their legal requirement and their fair share.</p> <p>These measures also build on action we've already taken, such as the work done with states and territories to combat illegal gambling and the introduction of strong new penalties that apply to employers who dodge their obligation to pay the superannuation guarantee for their employees. We also legislated against GST fraud in both the precious metals industry and the new residential premises construction sector. We understand in the coalition that combatting the black economy is a big job that requires long-term reform and it is reform that needs the support of the wider community. We will continue to work with all of the relevant stakeholders in addressing this very significant issue. I hope that this bill will pass this chamber and we can take this big step forward in combatting the black economy. I want to once again thank senators for their contribution. I commend the bill to the Senate.</p> ~~<p class="speaker">Scott Ryan</p>~~ ~~<p>The question is that the second reading amendment moved by Senator Whish-Wilson be agreed to.</p>~~

~~Zed Seselja~~
Before I sum up, I thought I would to take the opportunity to respond to the Greens' second reading amendment, which the government will be opposing. This amendment calls upon the government to introduce legislation by the end of 2018 to regulate lawyers, conveyancers, accountants, high-value dealers, real estate agents and trust and company service providers under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. The amendment does not directly relate to the measures contained in the bill. The government will be opposing the Greens' amendment, and I will go into some of those reasons before I sum up.
Australia has a strong and effective regime for combatting money laundering and terrorism financing, but there is more work to be done to strengthen our ability to prevent, disrupt and prosecute this and other criminal activity. The effectiveness of our regime was supported by findings of the 2015 FATF mutual evaluation, which found we have strong institutional frameworks and an overall effective regime. The statutory review of the AML/CTF Act tabled in 2016 contained 84 recommendations to improve the regime, including recommendations to create a more efficient and effective regulatory framework. These recommendations were aimed in part at addressing feedback from industry through the consultation process that the existing regime is complex, which can make it difficult for some regulated businesses to understand their obligations.
The majority voted in favour of a [motion](https://www.openaustralia.org.au/senate/?id=2018-09-17.19.2) introduced by Greens Senator [Peter Whish-Wilson](https://theyvoteforyou.org.au/people/senate/tasmania/peter_whish-wilson), which means the words below will be added to the usual [second reading motion](https://www.peo.gov.au/learning/fact-sheets/making-a-law.html) "that the bill be read a second time" (which is parliamentary jargon for "that the main idea of the bill be agreed to").
### Motion text
> *At the end of the motion, add "but the Senate:*
> *(a) notes that:*
>> *(i) the explanatory memorandum to the Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 forecast a second tranche of legislation that would regulate real estate agents, jewellers, and a range of non-financial transactions provided by accountants and lawyers,*
>> *(ii) in April 2016, the Government released the statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 that contained a recommendation for the Government to develop options for regulating lawyers, conveyancers, accountants, high-value dealers, real estate agents and trust and company service providers under the Act,*
>> *(iii) the Government commenced consultation on the regulation of lawyers, conveyancers, accountants, high-value dealers, real estate agents and trust and company service providers under the Act, and submissions to this consultation closed in January 2017,*
>> *(iv) the Financial Action Task Force's April 2015 Mutual Evaluation Report on Australia's measures to combat money laundering and terrorist financing stated that Australia is an attractive destination for foreign proceeds of crime, particularly corruption-related proceeds flowing into real estate, and*
>> *(v) the December 2017 OECD Phase 4 Report on Australia's implementation of the OECD Anti-Bribery Convention recommended that Australia address the risk that the real estate sector could be used to launder the proceeds of foreign bribery; and*
> *(b) calls on the Government to introduce legislation that would address money laundering through real estate".*
### What is the bill's main idea?
According to the [bill digest](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd1718a/18bd114):
> *The purpose of the Bill is ... to introduce:*
>> *criminal offences for the production, distribution, possession and use of electronic sales suppression tools (ESS tool) which are used to falsify tax records created by electronic point of sale systems and*
>> *administrative penalties corresponding to the criminal offences and*
>> *reporting obligations on entities that provide a courier or cleaning service and engage other entities to perform a courier or cleaning service on their behalf.*
The government is committed to working closely with industry to make the regime as efficient as possible while continuing to meet Australia's international AML/CTF obligations. The government has commenced implementing the statutory review recommendations on a phased basis to ensure time for proper consultation with industry and other stakeholders, and to avoid regulatory fatigue. It would not be a sensible approach to extend the current regime to new sectors while the regime is undergoing reform. The government passed the first phase of reforms to Australia's AML/CTF regime in December 2017, which saw the expansion of the regime to regulating cryptocurrency exchanges in response to the high money-laundering and terrorism risks inherent to the sector.
The next phase of reform is scheduled for introduction late in the current sittings of parliament. It is proposed these reforms will include provisions to enable non-regulated entities, including tranche 2 entities, and members of the public to provide 'suspicious matters' reports to AUSTRAC. They will provide greater flexibility for industry to rely upon customer identification and verification procedures undertaken by a broader range of Australian and foreign entities, thereby enabling industry to reduce some of the associated regulatory cost. And they will include a rewrite of the complex and cumbersome provisions governing access to and use of AUSTRAC's financial intelligence. The Australian government is committed to ensuring that Australia has a robust AML/CTF regime to support our law enforcement and national security agencies in the fight against money laundering, terrorist financing and other serious and organised crime. So, for all of those reasons, the government will not be supporting the Greens' second reading amendment.
In summing up debate on the bill, I want to again thank senators for their contribution to this debate. These measures are very much about addressing the growing economic and social problem of the black economy, as established in the Black Economy Taskforce interim report as part of the 2017-18 budget. When we're talking about the black economy, we are talking about activities and transactions which happen outside the usual tax and regulatory regime. These activities might include cash-in-hand jobs that have the purpose of avoiding tax; not reporting or underreporting income; underpayment of wages; money laundering; counterfeit goods; illegal phoenixing; and identity fraud.
The Black Economy Taskforce was established in 2017 to examine the operations of the black economy in Australia and develop a forward-looking, multipronged policy response, recognising—and this is a very important point—that these issues cannot be tackled by traditional tax enforcement measures alone. As important as they are, we need a special and particular response to this challenge. The task force estimates that the black economy could have doubled since 2012, to now represent up to $50 billion in 2015-16 dollars. That's $50 billion in the black economy which isn't subject to the usual taxation arrangements, and therefore is being cheated from the Australian public, which could be offered for tax relief and offered for the delivery of services in other areas.
This represents not only a loss of revenue to the government but also a penalty on Australians who do the right thing and pay their taxes and don't avoid taxes in this way. It penalises them because it creates an uneven playing field for business, because unscrupulous businesses operating in the black economy can undercut their competitors who are following the rules. That has a negative impact on the viability of those businesses doing the right thing and on the livelihoods of the people who run them as they struggle to remain profitable and compete with those who are cheating the system.
The black economy undermines community trust in the tax system, gives some businesses an unfair advantage, puts pressure on the margins of honest businesses, and often includes the exploitation of vulnerable employees through the underpayment of wages and the loss of entitlements. The underpayment of wages and loss of entitlements are elements of the black economy that are a particular concern. Too often vulnerable employees are taken advantage of by people who are trying to dodge the system, and that can have profound consequences for those employees. This bill directly addresses two of those key concerns: firstly, avoiding tax by hiding income and, secondly, helping employees in certain sectors by ensuring their payments are reported to the Australian Taxation Office.
Schedule 1 to this bill bans the manufacture, distribution, possession, use or sale of sales suppression technology. This technology has no legitimate use and allows businesses to hide their income—and we don't apologise for the very stiff penalties that are attached to some of these offences. These tools remove transactions from electronic record-keeping systems. They change transactions to reduce the amount of each sale and they can modify GST taxable sales to non-GST taxable sales. In all instances, no audit trail of the changes made exist. The fact is that this technology is used solely for the purposes of tax evasion, and we are introducing new offences that are subject to heavy penalties to deter their use. These new offences will restore integrity to the tax system.
Schedule 2 to this bill extends the taxable payments reporting system to contractor payments in the high-risk courier and cleaning industries. This will ensure that payments made to contractors are reported to the Australian Taxation Office. From 1 July 2018, businesses in the courier and cleaning industries will be required to give an annual report to the ATO regarding the payments they make to businesses for them to provide courier or cleaning services. The reporting obligation will apply from the 2018-19 income year and reports will be required by 28 August 2019. The measure is estimated to result in tax receipts of $132 million over the forward estimates.
Implementation of a taxable payments reporting system in the building and construction industry resulted in improved contractor tax compliance and reporting of income. The government is extending this reporting system to other high-risk industries. The ATO has prepared guidance material to assist businesses in the courier and cleaning industries to comply with their reporting requirements, and these amendments will bolster the integrity of Australia's tax system. They are important steps in dealing with the unique problems posed by the black economy and will be vital to improve our tax system. We in the coalition believe in lower and fairer taxes, but we don't believe that paying tax is an optional extra. We believe everyone should pay their legal requirement and their fair share.
These measures also build on action we've already taken, such as the work done with states and territories to combat illegal gambling and the introduction of strong new penalties that apply to employers who dodge their obligation to pay the superannuation guarantee for their employees. We also legislated against GST fraud in both the precious metals industry and the new residential premises construction sector. We understand in the coalition that combatting the black economy is a big job that requires long-term reform and it is reform that needs the support of the wider community. We will continue to work with all of the relevant stakeholders in addressing this very significant issue. I hope that this bill will pass this chamber and we can take this big step forward in combatting the black economy. I want to once again thank senators for their contribution. I commend the bill to the Senate.
~~Scott Ryan~~
~~The question is that the second reading amendment moved by Senator Whish-Wilson be agreed to.~~