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Taxation Administration Amendment Bill 2016

Mr KEVIN ANDERSON ( Tamworth ) ( 12:00 ): On behalf of Ms Gladys Berejiklian: I move:

That this bill be now read a second time.

This bill was introduced in the other place on 11 May 2016 and is in the same form as the bill before the House. The second reading speech appears at pages 6 and 7 of the Hansardproof of the Legislative Council for that day. I commend the bill to the House.

Mr CLAYTON BARR ( Cessnock ) ( 12:01 ): I lead for the Opposition in debate on the Taxation Administration Amendment (Collection and Disclosure of Information to Commonwealth) Bill 2016 in this House, recognising that it has already been dealt with in the other place. The purpose of the bill is to amend the Taxation Administration Act 1996 to enable the Chief Commissioner of State Revenue to collect and disclose to the Commissioner of Taxation of the Commonwealth information about the transfer of freehold and leasehold interests in real property situated in New South Wales. Essentially, this will allow for a register of foreign ownership, under the guise of taxation accountability. The New South Wales Opposition will not oppose this bill.

In September 2015 the Federal Coalition introduced and passed three bills related to foreign ownership in the Federal Parliament in Canberra. The bill from that time which is most closely related to this bill, and was referred to by the Hon. Rick Colless in the other place in his introductory second reading speech, was the Register of Foreign Ownership of Agricultural Land Bill 2015. When those three bills travelled through the Federal Parliament they were referred to at the time as "discriminatory" and a "dog whistle" and specifically "anti‑Asian investment".

The fact is that the Register of Foreign Ownership of Agricultural Land Bill 2015, which was dealt with in the Federal Parliament of this country, allows for $1 billion worth of investment from United States of America, Chilean or New Zealand investors before scrutiny but allows only $15 million from other foreign investors, including those from Asia, specifically China, Japan and Korea. That is not sensational or hysterical language on my part; that is the reality of the bill. This matter is dealt with under the heading of "Monetary Thresholds" on the website of the Foreign Investment Review Board. Members can go online to and see the very facts I have just outlined about the levels of investment that will be scrutinised.

Subsequently, in October 2015, by agreement of Commonwealth, State and Territory Treasurers, a national register of foreign ownership of land titles was agreed to be established. This bill gives effect to that agreement. The Government has proposed that the bill before us today will give greater integrity and strength to the taxation and funding regime at State and Federal levels, such as land tax, first home owner benefits, GST and capital gains tax. The structure of the bill and increased sharing of information between the State and Commonwealth is entirely likely to do exactly that. This is the effect specifically of the land titling and registration element of the bill.

In the second reading speech in the other place and in reply to the debate, interestingly the Government was entirely silent on the other effects of the bill, including the collection and disclosure of reportable information by the head of a public service agency. I will repeat that: the collection and disclosure of reportable information by the head of a—meaning "any"—public service agency. Section 80E of the bill allows for that. Section 80F goes one step further and allows for the Treasurer to "direct the head of a public service agency to disclose information". That means that the Treasurer will now have the authority and capacity to obtain any information about any resident of New South Wales or any investor within New South Wales if any of that information is registered through any public service or agency, and the Treasurer can do that by direction.

The disclosure by public service agencies could have wide and far-reaching implications, unknowable at first glance and certainly not defined or clarified by the Government in its handling of the bill to date, despite the fact that the debate has already occurred in the other place, the upper House of New South Wales. Yet the Government, ironically, remains silent while the private details of citizens of New South Wales are not afforded the same privacy. As with various other pieces of legislation that have passed through this Parliament in recent years, there seems to be a complete eradication of privacy in this State under this Government. This time, the actions of this Government are in conjunction with its Federal Coalition colleagues, driven by the anti‑Asian investment philosophy of The Nationals.

Mr Damien Tudehope: That's outrageous.

Mr CLAYTON BARR: I acknowledge the interjection and I refer to my comments about the monetary thresholds of international investment in property here in Australia. In another element of irony, it is Labor's belief that any such national register should be a public and transparent document administered by the Australian Taxation Office, yet this invitation to transparency has been refused and denied by the Coalition Government at the Federal level. So while individuals across Australia and New South Wales will lose their rights to privacy, the Federal Coalition will embellish its own right to secrecy, aided in this instance by the New South Wales Coalition. But that should come as no surprise to anyone in this State. In 2011 this Coalition Government campaigned on the platform of open government and transparency but has delivered, emphatically and systematically, a State of complete dictatorial secrecy. While the matter of transparency is not dealt with in this bill and is entirely a matter for the Federal Government, it is worth noting during debate.

The bill also allows for more detail and additional processes during land sales, resulting in related amendments to the Conveyancing (Sale of Land) Regulation 2010. The real and actual result of this bill will be more effort, more work, more forms, more processes and more checking at the point of sale in all negotiations subsequent to a land sale. The sale process will now require additional detail of identity, additional detail of nationality, additional detail of residency and additional detail of both the vendor and the purchaser. How embarrassing and hypocritical of the Government to be introducing all of this new red tape, and to what end? Is it really just for the sake of a dog whistle? Would they really forego their supposed core beliefs because of xenophobia? Is their language about red tape something that they truly believe in or is it just political convenience? Which is it?

Mr Matt Kean: Point of order: The member is better than that. He knows that this has nothing to do with xenophobia. He should withdraw that comment and speak to the substantive motion.

TEMPORARY SPEAKER ( Ms Melanie Gibbons ): Will the member for Cessnock withdraw his comments and return to the leave of the bill?

Mr CLAYTON BARR: My comment about xenophobia was in the form of a question, not a statement or an accusation.

TEMPORARY SPEAKER ( Ms Melanie Gibbons ): If the member directed his comments through the Chair he might avoid that issue.

Mr CLAYTON BARR: If my comments offended those opposite I withdraw them. Obviously, these additional processes will place a burden on real estate agents, conveyancers, financial institutions and, of course, the New South Wales Land and Property Information [LPI]. Buyers, sellers, small business and government departments will pay for these additional processes and regulations. This will hinder the state of business in New South Wales. It will increase the cost burden to all concerned, which will ultimately fall at the feet of the consumer. We should not let this red tape moment go by without at least acknowledging that the ideological rats are deserting their ideological sinking ship on red tape.

The Government's proposed future privatisation of Land and Property Information is diametrically at odds with this bill. Here is the important element of this bill which the Government seeks to overlook. The assumption in this bill is that the Chief Commissioner of the Office of State Revenue will have access to the land and title registration information of New South Wales. But the Government is selling off that very same business unit, the land titling and registration of the Land and Property Information. It is to be privatised, sold off, separated from LPI.

Requiring the chief commissioner to pass on the title information could come at a significant cost to the State because the chief commissioner may have to purchase back that information from the new private entity that will own the land and property titling information. As a result of this Government's dedication to selling everything, if the legislation is passed it will result in a potential massive on-cost from the Federal Government to the State Government to purchase and provide the details of land title. I have no confidence that the people of New South Wales would agree with the bill. I have even less confidence that they would want to pay for it to be enacted, and they may have to pay many millions of dollars in order to achieve it.

I ask the Minister to answer three key questions in his speech in reply. They were posed in the upper House but received no response. First, how will the Minister address the responsibility of the chief commissioner to pass on titling information once the LPI titling is privatised and will the Minister guarantee that this will not come at the expense of the people of New South Wales? Secondly, how is this bill addressing the Minister's rhetoric about red tape? Thirdly, how will this bill save land and property purchasers from additional cost and expenses in the purchase of land?

Mr DAMIEN TUDEHOPE ( Eppi ng ) ( 12:13 ): I speak in support of the Taxation Administration Amendment (Collection and Disclosure of Information to Commonwealth) Bill 2016. In the explanatory note that accompanies this bill, the purpose of the bill is simply, clearly and succinctly put. It states that the Office of State Revenue, through the Chief Commissioner, will be entitled to collect information to disclose to the Commissioner for Taxation of the Commonwealth relating to the transfer of freehold and leasehold interests in real property situated in New South Wales. The information collected is proposed to be used by the Australian Taxation Office [ATO] for the purposes of data matching and ensuring compliance with taxation laws of the Commonwealth.

In addition, the explanatory note provides that it is proposed that the information will be used for a national register of foreign ownership of land titles, which is administered by the Australian Taxation Office. The national register was created by the Commonwealth pursuant to an agreement entered into at a meeting of the Council on Federal Financial Relations on 16 October 2015. It is clear that without the collection of information by State bodies, the population of information within the national register would be almost impossible. The strategy being adopted by the Commonwealth is a component of strengthening Australia's foreign investment framework.

Previously, foreign investors were required to obtain approval from the Foreign Investment Review Board for the purposes of entering into contracts for the purchase of residential real estate. In its memorandum, the Australian Taxation Office announced in February 2015 that it was taking over responsibility for approving foreign investment in residential real estate and for the creation of a new register of foreign investment in agricultural land. This has now been extended to residential property. In May 2015 the Federal Government provided further details of the new functions of the ATO as part of strengthening of the Australian investment framework. These provisions included:

The Australian Taxation Office will immediately commence compliance activities to ensure foreign investors who have invested in Australian residential property are meeting their obligations under the Foreign Acquisition and Takeover Act 1975.

For investors who voluntarily inform the Australian Taxation Office that they have breached the rules about investing in residential property, there was a reduced penalty period from 2 May 2015 to 30 November 2015. This excluded those involved in current ATO Foreign Investment Review Board [FIRB] investigations and those involved in serious crime. From 1 December 2015 the Australian Taxation Office became responsible for administering all aspects of the Foreign Acquisition and Takeover Act 1975 in relation to residential real estate.

Finally, the memorandum from the ATO advised that from 1 July 2016 the Australian Taxation Office will be responsible for a register of foreign ownership of residential real estate. What does this mean? It means that foreign persons must apply for approval prior to purchasing Australian residential land. Applications for approval to purchase land will be processed by the ATO. A penalty regime commenced as a component of the Act and previous criminal and divestment orders will be supplemented by pecuniary penalties and infringement notices for less serious breaches of the real estate rules. Third parties who knowingly assist a foreign investor to breach the rules will be subject to civil and criminal penalties. Advanced off-the-plan certificates will be available. However, the value of the dwelling that can be bought by a single foreign investor in a development will be limited to $3 million. Investors seeking to purchase properties over $3 million will require individual approval.

Developers will be required to market buildings in Australia and overseas and if they do not they will be subject to civil and criminal penalties. The ATO will use its data-matching systems to identify possible breaches and ensure that the rules are enforced. It is the last paragraph of the ATO's memorandum that requires the cooperation of State governments to provide data-matching information so as to establish the identity of vendors and purchasers of land. The bill therefore enables New South Wales to collect a full suite of real property transfer data to inform the national register from 1 July 2016. We are all aware of high-profile cases involving the purchase of significant residential properties the value of which exceeded $10 million where no approval had been sought.

The major remedy available in those circumstances was divestment orders rather than civil and pecuniary penalties. The practical manner in which the scheme will be implemented will have a substantive effect on the practice of conveyancing. A number of important changes have been made to the practice that will be adopted by conveyancers. The changes have necessitated a number of amendments to the current edition for the contract of sale issued by the Law Society of New South Wales. The changes are significant and it is worth reiterating the obligations in reporting that have been addressed by that contract in respect of compliance with the Commonwealth's foreign resident capital gains withholding tax measures. Those measures also begin on 1 July 2016.

Under those measures, where the sale price of a contract is $2 million or more, a purchaser must withhold 10 per cent of the price and remit to the Australian Taxation Office [ATO] on settlement, unless a clearance certificate confirming that the vendor is not a foreign resident is provided to the purchaser before settlement. This means that Australian residents selling properties for $2 million or more will need to obtain a clearance certificate from the ATO or the withholding tax will apply. The mechanics of this operate as follows. The vendor must obtain a clearance certificate from the ATO website confirming that they are not a foreign resident for the purposes of the measure. Where there is more than one vendor, a clearance certificate must be provided for each vendor.

Ideally, the clearance certificate should be attached to the contract, though it can be provided any time before settlement. Upon completion, the purchaser must register with the Australian Taxation Office, advising it of the details and the amount of the withholding payment. Under the legislation that we are considering today, a vendor will be required to obtain a land tax certificate and serve it on the purchaser. A land tax certificate is available from the Office of State Revenue. Previously land tax certificates were obtained by purchasers. Now it is the obligation of the vendor to obtain them.

For the information of the previous speaker, I indicate that it is the obtaining of land tax certificates that will trigger notifications from the Office of State Revenue to the Australian Taxation Office of potential sales by foreign investors. It is this certificate that discloses the sale of the land. As vendors are required to apply for the certificate, this will enable the New South Wales chief commissioner to obtain information about the vendor which can then be disclosed to the ATO. This legislation is sensible and appropriate. It complies with the undertaking given by the New South Wales Government to the Commonwealth. I support the bill.

Mr MATT KEAN ( Hornsby ) ( 12:22 ): On behalf of Ms Gladys Berejiklian, in reply: I thank all members who have spoken on the Taxation Administration Amendment (Collection and Disclosure of Information to Commonwealth) Bill 2016. This bill delivers on the commitment of all Australian Treasurers, with the exception of the Northern Territory, to implement a national register of foreign ownership of land titles. This bill will facilitate the collection and provision of additional data to the Australian Taxation Office [ATO], which will maintain the Commonwealth's national register. Commonwealth and State agencies will benefit from having more comprehensive data to improve compliance, including better enforcement of State laws in areas such as land tax, first home owner benefits and improved compliance with goods and services tax and capital gains tax laws.

In New South Wales, the Office of State Revenue [OSR] is the agency best placed to collect the data and provide the data returns to the ATO through existing data exchange channels. Land and Property Information [LPI] data will also be aggregated by the OSR for provision to the ATO. The data collection will be incorporated into existing requirements for property revenue transactions. It requires changes to the OSR systems, including electronic forms used by the conveyancing industry. The Office of State Revenue has designed the collection process with industry, to minimise disruption.

The Office of State Revenue will provide assistance to the conveyancing industry through a targeted education and communication program. The data will be subject to the normal privacy provisions that apply to all individual and business information retained for tax administration purposes. The Commonwealth Government has committed to provide funding support to meet the costs of changing data collection systems in participating States. New South Wales looks forward to finalising the arrangements as soon as possible.

I note the three questions raised by the member for Cessnock while he was trying to score political points. The problem is that the member for Cessnock did not receive the memo from his colleagues in the upper House. They left him off the mail-out list. The memo, which went to all other Labor members, raised four questions. For the benefit of the member for Cessnock I will answer the fourth question, which he forgot to mention. I am sure his colleague in the upper House the Hon. Peter Primrose will be disappointed that the member was sloppy in his homework and was not able to transcribe all four questions that he raised in the other place.

I quite like the member for Cessnock, so I will not pull him up for not doing his homework with due diligence and did not ask the four questions that his colleague raised in the upper House. Question one was: How will the bill work with a possibly privatised land titles and registration service? The answer is: Quite easily. This bill facilitates the OSR as the primary data collection entity in New South Wales. The OSR collects and provides to the ATO the data required under changes to the Commonwealth Taxation Administration Act. The Office of State Revenue will use stamp duty processes and land tax clearance certificates to collect the new data. Both mechanisms are not administered by LPI. Existing data provided by LPI will continue to be provided to the OSR after privatisation, which should not have an impact on the legislation.

The member for Cessnock lectured Government members about abandoning our ideological principles. It is good to see that he is sticking to his ideological principles. He is the great socialist from Cessnock who wants more government intervention. He wants government to own everything in the State. We will airbrush that period of history when Labor privatised many State services. The member for Cessnock, the great socialist, wants everything back in public ownership.

Mr Clayton Barr: Correct.

Mr MATT KEAN: I note the interjection by the member for Cessnock acknowledging that he is the great socialist and that he wants government to own everything. There should be no private sector in the State of New South Wales, according to the member for Cessnock. The second question that the member for Cessnock correctly transcribed from the speech of his friend in the upper House the Hon. Peter Primrose was: How will this bill reduce red tape, which is one of the objectives that the Government set for itself? The member is right; the Government did set that objective. This bill will see no significant increase in red tape burden.

There will be benefits from improved data on foreign ownership and improved compliance across Commonwealth and State taxes, including capital gains tax, goods and services tax and land tax, which should outweigh all of the costs. It is a win-win situation. Everyone is happy, except for the member for Cessnock. The Labor Party hates good news. Labor hated the budget yesterday, when the Government delivered a great result for the people of New South Wales. Labor hates the fact that the Government is cutting red tape and lessening the tax burden on the people of New South Wales. This is good news for the people of New South Wales. It is no wonder that the member for Cessnock hates it.

The data collection process has been co-designed with industry. We have worked with industry because we understand that the private sector are stakeholders in this. The member for Cessnock does not believe in industry; he believes in more government. We will continue to work with the people affected by these changes. We will use existing processes and integrate them with the OSR's move towards a fully digitised process. It is very exciting. The member for Tweed is very excited about this.

For the benefit of the member for Cessnock, the third question that Labor raised in the upper House was: How will this bill ultimately save taxpayers money? I am shocked that Labor is interested in saving taxpayers money. We heard it here first: Labor is interested in saving taxpayers money. I am excited that the socialist member for Cessnock is suddenly concerned about taxpayers. I join the member for Cessnock in being concerned about taxpayers. That is why the data collected under this bill will improve tax compliance across a range of taxes, which makes the tax system fairer for all Australians. Who could complain about that?

Mr Geoff Provest: You might have to repeat that for the member for Cessnock.

Mr MATT KEAN: The member for Tweed wants me to say it again. It will make the system fairer for all Australians. That is a good thing. And we are all up for having a fair tax system. The Australian Taxation Office will also use the data to make tax returns simpler, and to make it easier and less costly for taxpayers to comply with tax legislation. There has never been a more exciting time to live in New South Wales, to paraphrase the Prime Minister. The member for Cessnock has been very sloppy; he could not transcribe the four questions asked of the Government in the upper House. He forgot one. The one that he forgot was about privacy. For the benefit of the member for Cessnock, I note that this bill has been through the Legislation Review Committee of Parliament. It has reviewed the bill to make sure that it does meet privacy requirements. Guess what? The committee has concluded that the bill does not unreasonably intrude on privacy rights given that the transfer of information is intended to improve compliance with tax laws and the foreign investment framework. So listeners have heard it here first.

I am giving the member for Cessnock the task of transcribing the answers to the four questions, not just the three questions, and taking them to the Hon. Peter Primrose. If he has to include some pictures to make it all the more understandable then so be it. The department has been wonderful in helping us get this information today and doing so much work on this bill, and I commend all the staff of the Office of State Revenue who are here today for helping us get to this point. Maybe they could help us find some pictures for the member for Cessnock to take to his colleagues in the upper House to explain in full detail the answers to all four questions that they raised. The Commissioner of Taxation would also be subject to equivalent privacy laws at the Commonwealth level. So it seems to me that there are a lot of protections in place around privacy. The Legislation Review Committee of the Parliament is happy. Tick. The bill has to meet the equivalent privacy laws at the Commonwealth level. Tick. Everyone is a winner.

Mr Clayton Barr: And I have an answer to a question I didn't ask.

Mr MATT KEAN: The member for Cessnock did not ask it; he forgot to ask it. I am sure he will be castigated in caucus for not doing his homework properly. Luckily I am here to do his homework for him. I will print a copy of Hansard straightaway just so that the member for Cessnock can see all the answers that cover all the questions, all the fearmongering, and all the chest thumping and so that everyone is relaxed and happy that this is a good bill. This is a good piece of legislation that will deliver on our commitment to comply with the Commonwealth Government's national register of foreign ownership in time for the 1  July introduction of the reporting requirements. I commend this bill to the House.

TEMPORARY SPEAKER ( Mr Adam Marshall ): The question is that this bill be now read a second time.

Motion agreed to .

Third Reading

Mr MATT KEAN ( Hornsby ) ( 12:33 ): On behalf of Ms Gladys Berejiklian: I move:

That this bill be now read a third time.

Motion agreed to.

To read the full hansard transcript, click here.