Living within our means
Ensuring that the Government lives within its means
Exposing the black economy
Addressing the black economy to improve fairness for businesses
The black economy is a significant, complex and growing economic and social problem. It undermines the community’s trust in the tax system, creates an uneven playing field for business, fosters the exploitation of workers, and results in lost government revenue and undue welfare expenses. These activities disproportionately hurt the most vulnerable in our community.
In response, the Government established the Black Economy Taskforce, independently chaired by Mr Michael Andrew AO, to develop a policy framework to tackle the black economy.
The Government has released the Taskforce’s Interim Report, accepting its recommendations for immediate action, including:
- The extension of the Taxable Payment Reporting System to the courier and cleaning sectors to ensure payments made to contractors are reported to the ATO.
- The continuation of funding for ATO audit and compliance activities that target the black economy.
- A ban on the manufacture, distribution, possession, use or sale of sales suppression technology. This technology allows businesses to hide sales, and has been identified as a threat to the fairness of the tax system both in Australia and internationally.
In addition, the Government has agreed to the Taskforce’s recommendation that a proposal be developed later this year to ensure that Australian Government procurement processes promote good tax behaviour.
The Final Report of the Taskforce, due in October, will consider further measures to counter the black economy to make it harder for those who want to cheat the system, and address the social norms that facilitate acceptance of these activities. By ensuring businesses can be competitive and operate on a level playing field, and ensuring workers are not subject to exploitation, these measures will build a stronger Australian economy.
Protecting the integrity of the tax system
Tougher action to prevent tax avoidance and ensure everyone pays their fair share
New rules to protect tax whistleblowers
The Government is developing new laws to protect those who come forward to report tax misconduct. The development of these new laws is being informed by the submissions received in the Government’s consultation process.
Improving the integrity of residential property investment
The Government will improve the integrity of residential property investment rules by disallowing deductions for travel expenses related to owning a residential investment property. The Government will also confine depreciation deductions for plant and equipment — these are items that can be easily removed such as carpets and dishwashers — only to those expenses directly incurred by investors.
Strengthening the integrity of capital gains tax rules for foreign investors
The Government is introducing tougher rules on foreign investment in residential real estate to ensure foreign investors meet their capital gains tax obligations.
The main residence capital gains tax exemption for foreign and temporary tax residents that own Australian real estate will be removed.
To reduce the avoidance of foreign residents’ capital gains tax liabilities in Australia, the Government will bolster the withholding regime by increasing the withholding rate from 10 per cent to 12.5 per cent, while also lowering the threshold from sales valued at $2 million or above to $750,000 or above.
The Government has also pursued a range of measures to improve corporate tax transparency and strengthen confidence in the tax system.
Tax Transparency Code
The Government has endorsed the Tax Transparency Code, which is a set of principles and minimum standards to guide medium and large businesses, including multinationals, on the public disclosure of their own tax information. This complements the public reporting of key tax information of large corporates in the ATO’s annual report of entity tax information.
Australia is participating in the Extractive Industries Transparency Initiative, an international standard that requires companies and governments to report annually on payments in the oil, gas and mining sectors.
In addition, the Government has legislated the Common Reporting Standard which will provide tax authorities with information on individuals with offshore accounts located around the world.
Combating serious financial and organised crime
Ensuring all individuals and businesses pay their fair share of tax
Fighting serious crime
Serious crime poses a genuine threat to national security and to the integrity of Australia’s economy, financial markets, regulatory frameworks and tax system.
The Government is committed to combating serious financial and organised crime to ensure all individuals and businesses are paying their fair share of tax, which funds vital community services such as education, transport and public health.
Following on from the success of Project Wickenby, the Government established the Serious Financial Crime Taskforce in 2015 to disrupt and deter serious financial crimes. The Taskforce pools the resources and capabilities of the Australian Federal Police, the Australian Taxation Office, the Australian Criminal Intelligence Commission, the Attorney-General’s Department, AUSTRAC, the Australian Securities and Investments Commission, the Australian Border Force and the Commonwealth Director of Public Prosecutions.
To date the Taskforce has been highly successful — progressing 26 joint operations, achieving numerous criminal convictions with significant custodial sentences and raising $198 million in taxation liabilities and collecting $108 million in cash.
The Taskforce has identified an increasing participation of organised crime groups in serious financial crime. Organised crime groups are increasingly using complex and sophisticated organisational structures, making them less recognisable and harder to detect.
The Taskforce forms an integral part of the Government’s stance against tax crime and includes a strong focus on information from international sources demonstrating that hiding income and assets offshore will not be tolerated.
The package contained in this Budget provides the ATO with $28.2 million in additional funding to continue to target serious organised crime, removing wealth generated by these organised criminal groups and returning an additional $408.5 million in revenue to Government.
The package complements the work being done by the Taskforce to disrupt and deter serious financial crime.
Whilst the Taskforce and serious organised crime package will produce a positive cash return, its primary purpose is more than revenue collection. Its focus is the broader benefits for the community from addressing criminal activity.