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Economics Legislation Committee
Inspector-General of Taxation

Inspector-General of Taxation


CHAIR: Good afternoon, Mr Noroozi. Thank you very much for your patience this afternoon. Good afternoon, gentlemen. I am going to kick off the questions with Senator Ketter today. I am so sorry; do you have an opening statement? I should have asked you if you had an opening statement.

Mr Noroozi : We have tabled it. I will read it quickly. It is very short anyway.

CHAIR: I am sorry. It is late in the day; the coffee has not kicked in.

Mr Noroozi : Thank you for the opportunity to appear before the committee. The parliamentary scrutineering framework is vital to the integrity of governmental services and processes. A committee of this nature and independent scrutineering agencies such as the Inspector-General of Taxation are integral to that framework. They provide the community with confidence and assurance that the service agencies and their processes are transparent and open to improvements.

The improvement of tax administration is at the heart of the IGT's function. My team seeks to foster trust and confidence in the tax system by championing effective engagement with taxpayers and tax professionals, enhancing voluntary participation and providing assurance over the integrity and fairness of the Australian Taxation Office and Tax Practitioners Board administrative actions. We seek to achieve this primarily through investigating complaints regarding the ATO and the TPB and by conducting reviews into broader tax administration issues.

Our complaint investigation service provides free and independent support to address concerns of taxpayers and tax practitioners. We have received over 2,000 complaints in the year to date, with a similar number being resolved in the same period. Complainant feedback has been very positive. The initial findings of a survey conducted this financial year indicated that the satisfaction rating is approximately 80 per cent. This figure includes those who may not have achieved their preferred outcome.

Our broader reviews are independent and publicly reported. My review into ATO's employer obligation audits was released recently and focused on easing the compliance burden, particularly on small businesses, whilst ensuring that obligations to employees are met. My review into the Taxpayers' Charter and protections, which had been released earlier, sought to promote fairness and taxpayer rights through a number of recommendations, including that the Taxpayers' Charter should be at the forefront of ATO's interactions with the community and its performance against charter principles be measured and publicly reported.

We have also announced and commenced three new reviews, two of which are being conducted largely due to complaints we have received. They focus on aspects of the pay-as-you-go instalment system and goods and services tax refund integrity. The other review examines the future of the tax profession. That is being undertaken at the request of the Commissioner of Taxation and in response to tax practitioner concerns.

Significantly, our team is a collegiate group of dedicated and specialist tax professionals who also topped the recent APS survey in fostering an innovation culture. In closing, I would like to welcome any questions you might have.

CHAIR: Thank you, Mr Noroozi. I will turn the questions over to Senator Ketter.

Senator KETTER: Thank you very much, Mr Noroozi. I will start on an issue which I think most of the general public would believe goes to the heart of the perception of integrity and trust in the ATO, and that is the tax scam allegations concerning Deputy Commissioner Cranston's family. I am not going to push you on the details of that, but I just ask if you can look at the processes that you are aware of that are in place for cases like this to prevent those sorts of things from occurring in the future. What are the processes that should be in place within the ATO to prevent those sorts of things from occurring?

Mr Noroozi : Before I make comment on those, I should conduct a review and allow people to make their submissions. I would not want to prejudge any review that I might do into this area. Can I just make some general comments about this. You would have noted that my public statements on this whole affair had been initially to calm the situation down. One of the jobs of my office is to inspire confidence in the system, not only to ensure that taxpayers are given a fair go. But that in itself inspires confidence in the system, and that has been proven to be one of the key indicators of voluntary compliance. So my initial reaction was: 'Look, there are two investigations on foot—by the AFP and the ATO. On top of that, there are court proceedings. So let's see how that unfolds. Also, we can't really prejudice court proceedings.' However, I do appreciate that this has now become a topic around Australia among all sections of our community.

I also note that there were new revelations that came to light last night or today. We are watching this space, and we may well do a review. The question is about timing and what we would review. Many issues have been raised with us. It really concerns the community. I think it is a review that probably needs to be done outside of the ATO. When it has been at least allegedly linked to ATO officials, it seems that it needs to be done, in my opinion, by an agency that is separate from the ATO. I do understand that I would be potentially the right candidate.

The question, when I say, 'What needs to be reviewed,' is also around the decisions we make to ensure that what we do is closely linked and not prejudicing the court proceedings. For example, one of the things we have considered looking at is their procedures, structures and practices on how they detect fraud, particularly where an ATO officer may be involved. But, again, we need to be careful about how we might do that. We have to ask: will that prejudice any current investigations?

Other issues that have been raised with us are: were their risk assessment techniques working appropriately? Was this issue identified expeditiously and appropriately? Also, if it was—or even if it was not—how quick were they to move on it? There are a lot of questions that the community has, and I do appreciate their concern, but what we have been doing is watching it closely to see how it is unfolding to determine what it is we might do and when we might do it. Of course, it is open to you, as a parliamentary committee, to request that I do a review. That is open to you. I may self-initiate, if you like, and, of course, there are a number of others who can direct or request that I do a review.

Senator KETTER: Have you received any complaints about this incident?

Mr Noroozi : For example, I had to give a talk at a conference on Saturday, and the first question I was asked was about this. My staff present to tax discussion groups, and the first questions they have been asked have been about this. It is not something that people ring us up about, register concerns about or approach us with concerns about because, in order for a complaint to be made, it usually has to affect the taxpayer directly. Although, they can come to us and seek that we do a review. Obviously some people have called out for a review publicly, and you would be aware of that.

Senator KETTER: You have made it fairly clear that you can self-initiate an inquiry and that you do not need any reference from us to do that.

Mr Noroozi : The legislation allows you to do that should you wish to do that, but, yes, the majority of the reviews I do are self-initiated. Of course, the thing I would point out is: I just announced a work program, as I have mentioned, and I already have three reviews on foot. That does not mean they cannot be rejigged or put on hold while I do something more urgent.

CHAIR: Are you considering that?

Mr Noroozi : As I said, yes, we are watching what is unfolding and also exploring what can be reviewed without prejudicing what the court proceedings are. But you may recall that there was another parliamentary process a couple of years ago where I was told something that should be paramount: 'the duplication of work duties. So I am aware that the ATO and the AFP are also doing reviews. That is a lesser consideration—the duplication of work—but, nevertheless, it is a consideration.

Senator KETTER: Has any government minister or official sought advice from you in relation to this matter?

Mr Noroozi : Yes.

Senator KETTER: Can you tell us about that.

Mr Noroozi : Yes, the Treasurer's office has asked for advice and I have provided that advice. That is consistent with what I have said publicly and with what I have shared with you today.

Senator KETTER: What powers do you have to investigate systemic issues in the ATO?

Mr Noroozi : We have quite extensive powers. I can take evidence. I have full access to all of the ATO's systems. I can even take evidence under oath if required. We have never had to do that, of course. We have far-ranging access powers. We would not need additional powers, I do not think, from my initial considerations of the issues, but, as I said, it is a matter of timing and what we look at.

Senator WHISH-WILSON: What about resources? Would you need additional resources?

Mr Noroozi : We would probably manage it by putting other things on hold. Of course, if I was to do that as well as what—we try to manage our work load.

Senator WHISH-WILSON: Expertise?

Mr Noroozi : We can contract in expertise, should we need it, but all my staff except a couple of support staff are tax specialists. I have been in this job for 8½ years looking at all kinds of tax administration issues. We would have a fair amount of expertise. But, for example, if I was looking at the ATO IT systems again I might need some particular expertise.

Mr McLoughlin : I think we can say that we have a broad range of skill sets: we have everything from double degree and masters qualified candidates within our group. Across that there would be people with accountancy backgrounds and tax backgrounds, of course, but also law and other specialist designations. We have been deliberately set up as a specialist scrutineer so that we can talk the talk and walk the walk.

Senator KETTER: Are you able to conduct the investigations without prejudicing the current court case?

Mr Noroozi : That is what I was exploring with you earlier. For example, one of the things we can do is at least providing assurance to the community moving forward. It would be difficult to actually investigate the current Cranston affair, if you like, because that is part of court proceedings, but, for example, we might be able to look at their processes, procedures and structures, and at least that might provide a degree of assurance to the community: 'Look, their processes are fine,' or: 'Look, they're probably okay but they could do with improving in these areas,' or we could come out an say: 'They're inadequate. They need to replace them with these.' That is something we might be able to do. I am exploring that currently, to see what would not prejudice any of the current court proceedings.

Senator KETTER: Mr Jordan this morning talked about the fact that there is an internal review happening, as well as the engagement of a former Fair Work commissioner to look at potential breaches of the APS Code of Contact. I hope I am not putting words in his mouth, but I think Mr Jordan suggested that you may wish for those two investigations to conclude before you commenced your investigation. Is that your view?

Mr Noroozi : I should probably reflect on what he has actually said. As to the breaches of the APS Code of Conduct, that is quite a separate issue. It is not something that is within my jurisdiction, anyway, because the APS Code of Conduct would be looked at by the Australian Public Service Commission. Those would not be what I would be looking at, in any event—that particular issue. We get on our complaint line complaints from ATO officers about other ATO officers breaching the code of conduct, and we refer them to the Public Service Commission.

Mr McLoughlin : The particular issue is that human resources issues in relation to individual officers—ones that are excluded under our act—there is already provision for that to work through the agency or the APSC. We would look at the tax administration issues, though, that relate to the methodologies, the systems and the procedures. It is not to look at individuals, as such, but to look at what has occurred so we can make a recommendation on how that might be approved.

Mr Noroozi : Again, I would reiterate what I said earlier. I think, first of all, this needs to be independent. It cannot be conducted by the ATO, nor can it be conducted by someone that they commission. They have done that, for example, with the IT outages, but this one is a very different scenario.

Senator KETTER: I want to turn to the story in TheCanberra Times today which you have alluded to. This is a question that I did put to the commissioner. It is in relation to instructions that had been issued by the former commissioner, Mr D'Ascenzo, that tax agents, accountants and lawyers should not be allowed to directly contact SES officers except in accordance with ATO's established procedure. Are you familiar with those instructions?

Mr Noroozi : I would have to go back and check as to what was said under the previous commissioner. The only thing I would say is that obviously that story is of a great deal of concern, but we were not aware of how serious the breaches were. Was it a fact that somebody was just behind in their lodgement? Although, it seems to suggest that it was the subject of a court case. Because it has only come out overnight, we have not had the opportunity to get a great deal of facts about it. I did not know how serious those accusations are or how much money was involved. Was it simply that a few years of BAS statements were not lodged?

Senator KETTER: My question does not go to the particulars of that. It goes to whether there were procedures in place to prevent tax agents, accountants and lawyers from contacting SES staff with the potential for corrupt activity to occur.

Mr Noroozi : Are you asking if there were rules or practices in place before which have been done away with?

Senator KETTER: Yes.

Mr Noroozi : I would have to take that on notice.

Mr Pengilley : It may be a question better directed to the ATO as it is about their history. In the reviews we have conducted, we are not aware of any such process.

Senator KETTER: They have agreed to take that on notice.

Mr Noroozi : They have? In that case, we will probably wait and see what their answer is, because we would be looking at their system and looking at their processes. If you want to ask us that question having received their response, that is probably more appropriate. But, as I said, I am not aware. If I can go back to the story in TheCanberra Times, my concern and why I am considering whether a review should be conducted sooner rather than later in light of this is because, irrespective of whether these are with foundation or whether they are baseless, we may start getting a lot of these accusations. All of this, whether true or not, starts affecting perception and will start eroding confidence in the system. Those are things that are at the forefront of my mind in the next little bit—to see what transpires and what we ought to do.

Senator KETTER: If you get a lot of feedback that that effect is occurring then that will—

Mr Noroozi : That is already occurring. A day has not gone by when there has not been some news article on this issue since it broke. On the Friday, for example, pretty much every media agency was covering this no matter where you were in the country.

Senator KETTER: Have you received any feedback through correspondence yourself in terms of—

Mr Noroozi : Yes. If you look at the ATO's Facebook page, there are hundreds of comments. As I said, I was asked about this in the Northern Territory on Saturday, so the news has travelled. I had to speak in front of a whole bunch of tax practitioners. It has been raised with my staff who have been going through New South Wales speaking to tax practitioners. In Tasmania, the issues have been raised with us. What you have to appreciate is that it has attracted a lot of attention. All I am saying is that it may be that, if we do not start something, more and more stuff may come out which may be baseless but which may still have a negative effect.

Mr McLoughlin : We recognise that it is a very difficult time for an agency to have anything of that nature arise. There is no joy in seeing those situations. I think it is a question of how we can best respond to ensure that people are feeling that there is a confident administration and that there are not perpetual issues raised or thrown in from the side. Possibly one way of dealing with that is to get onto the front foot and deal with it with an independent review as a way of inoculating what could be a lot of noisy media articles that may not really go to terribly much at the end of the day but may continue to foster a situation that is of no benefit to anyone, including the ATO as an agency.

Mr Noroozi : I will be very up-front with you and tell you exactly the two different factors that are uppermost in my mind. On the one hand I do not want to prejudice court proceedings. I also do not want duplication of effort. As the commissioner I believe has said today, this has really affected the ATO itself and its staff, and I do not want to add to that pain. But on the other hand I may be contributing to that pain.

For example, some years ago there was much uproar about the IT failures at the ATO. Basically, there was much uproar, but then, when it was announced that I would do a review, the heat was taken out of the system. Everybody directed all their issues at me. I was able to look at it calmly and then come out with an outcome. The other thing I am thinking is, if I did that, it might take the heat out of the situation, but it also may not. People may still want to go to the media and all the rest of it.

Senator KETTER: Finally, I think I speak on behalf of my colleagues: there are such high stakes involved here—public confidence in the ATO. When, as you say, that is directly linked to the level of voluntary compliance, I would certainly support your organisation conducting an independent review, because I think that is essential to restoring public confidence.

Senator WHISH-WILSON: Mr Noroozi, if the committee did write to you and asked you to conduct an investigation—and I, along with probably Senator Ketter and others, am certainly proposing that we do this—can you refuse that? Do you still have discretion?

Mr Noroozi : Yes. Only the minister can direct me to do something. The committee can request. But I would also say this: I have never turned down a request in the past. In the current circumstances it would be a very brave inspector-general that would turn down such a request. I have been known to be courageous, but there are limits.

Senator WHISH-WILSON: How about I flip that on its head and ask: can the minister direct you not to do it?

Senator Cormann: Now that you have directed the question to me, I would just reconfirm what I said this morning, and it is, I believe, broadly consistent with what the inspector-general has said. From where we sit obviously a very serious and very concerning fraud has occurred—a conspiracy to defraud the Commonwealth. The fraud was detected. It was investigated and stopped. The systems from where we sit, we believe, worked as intended. The independent advice that we got from the Australian Federal Police is that this was an isolated incident in the ATO and not a systemic issue. It was isolated in the sense that it relates—

Senator WHISH-WILSON: Senator Cormann, I would just like to take a point of order.

Senator Cormann: in the context that the—

CHAIR: Point of order. Senator Whish-Wilson.

Senator WHISH-WILSON: On a point of order: I understand what Senator Cormann is saying. But my question was very specific, which he is not addressing, and it was whether the minister can direct the commissioner not to—

Senator Cormann: He has already said that. I am just finalising my answer. The government is mindful that there are ongoing investigations that should be allowed to take their course. Based on the advice from the AFP, independent to the ATO, we do not believe that there are any systemic issues. There is an isolated occurrence in circumstances that are well understood, and even in relation to the senior official of the ATO that is implicated, there is no suggestion that he—

Senator WHISH-WILSON: Point of order.

CHAIR: Point of order. Senator Whish Wilson.

Senator Cormann: There is no allegation against him—

CHAIR: There has been a point of order, Minister.

Senator Cormann: that he was involved in a conspiracy to defraud the Commonwealth.

Senator WHISH-WILSON: Point of order. You had a second chance to answer my question, Senator Cormann—

Senator Cormann: There is an allegation against him that in specific circumstances—

Senator WHISH-WILSON: Point of order, Chair.

CHAIR: There has already been a point of order, Minister. Just a moment.

Senator WHISH-WILSON: He has had a second chance to answer my question, but he still refuses to answer it.

CHAIR: I actually thought I had heard the answer.

Senator WHISH-WILSON: No. I have not heard the answer.

Senator Cormann: I am actually answering the question. So—

Senator WHISH-WILSON: Can you tell the Inspector-General of Taxation not to do an inquiry, if we request it?

CHAIR: I think the minister has said yes, but he would—

Senator Cormann: This is not actually the proposition. You are now changing your question. The point that we are making, which I believe is consistent with the point of the independent Inspector-General of Taxation has made, is that we believe it is premature at this point to go into an additional investigation on top of the—

Senator WHISH-WILSON: Point of order, again.

CHAIR: Point of order, again, Senator Whish-Wilson.

Senator WHISH-WILSON: A point of order: I do not believe you have answered my question. Yes or no? Can you tell the Inspector-General of Taxation not to conduct an inquiry?

Mr McLoughlin : There is a specific section in the act that provides for direction or request, and that just is in the act.

Mr Noroozi : The wording of the legislation is that they can direct me. So you can interpret that how you will. We have not had—

Senator WHISH-WILSON: Thank you. That is all I was after.

Senator Cormann: The truth of the matter is that the inspector-general, as he has indicated, can self-initiate an inquiry if, in his judgement, he feels that is required.

Senator WHISH-WILSON: Thank you. That was all I wanted to know. Inspector-General, you mentioned—or certainly Mr Jordan mentioned—that there a lot of emotion has already has come into this—previous investigations and clients and those kinds of things—and that you could perhaps take some of that away. I think that sounds very logical. Have you had any complaints or have you had any contact with lawyers of people who are currently under investigation about potential issues with Mr Cranston?

Mr Noroozi : Lawyers who are representing the?

Senator WHISH-WILSON: The clients who may be under investigation or who have been investigated by the ATO under Mr Cranston previously.

Mr Noroozi : Not that I am aware of. That is because we have lots of contact—I declare that up-front; nobody that I actually know—

Mr McLoughlin : Any citizen is free to raise a complaint with us. Whether or not we act upon that complaint is at the determination of the inspector-general.

Mr Noroozi : When I say that, it is also because we have a complaints handling line. Obviously I do not personally handle them; that would be my staff. I think I can speak for the three of us: we have not been approached by anyone whom we know has had any dealings with him.

Mr Pengilley : Certainly no-one has identified themselves.

Senator WHISH-WILSON: The ATO said today they have had contact from people saying, 'Wait a second, this guy has been involved in prosecuting my client, but he has now been charged himself.' I am just worried about potential repercussions and whether you have received any complaints that might undermine some of the greater integrity of the role of the tax department, which I think is doing a very good job.

Mr McLoughlin : Just so you are aware, when we do receive complaints we try and do that on a disclosed basis so that we can actually help the taxpayer to try and realise an outcome. We work quite well with the tax office for a cooperative outcome in trying to improve things for individuals and helping them to get through whatever difficulty or concern they may have with the tax system. They can do it anonymously but we cannot really do much for people when they do it anonymously because it is very hard to get an outcome when the tax office does not know who that party is.

Senator WHISH-WILSON: You mentioned in a previous submission to the House committee, which was looking at ATO oversight, that the ATO used to have an internal independent integrity adviser. It is something I asked the ATO about today. They obviously do not have one. Do you have a position on whether that role should be there?

Mr Noroozi : I did meet with a person who used to do that role but that was a very long time ago. My impression of that role was that it was about ensuring that the ATO had met all its regulatory and legal obligations. I am not entirely sure whether that person would have played a crucial role in this instance. It was an internal appointment of the commissioner himself.

Senator WHISH-WILSON: Therefore not independent.

Mr Noroozi : Right. Also, there used to be an aggressive tax-planning unit and there used to be a serious non-compliance unit. Those were really more concerned with dealing with fraud or avoidance than as an integrity adviser. I am not entirely sure—

Senator WHISH-WILSON: I understand their role was to do a lot of processing of—

Mr Noroozi : As I understood it, it was basically a tick-off, to make sure that they had met their legal and regulatory obligations. That is my understanding. Again, the ATO may be better placed to answer that.

Mr Pengilley : There is also an internal fraud investigation area, which had reported previously—at the same time as the integrity commission was there—to a different senior executive.

Senator WHISH-WILSON: Is that the Internal Investigation Group? Is that correct?

Mr Pengilley : No, that would be Fraud Prevention and Control. That was the name at the time. They used to look at matters where it was alleged that ATO officers—

Senator WHISH-WILSON: Within the ATO.

Mr Pengilley : Yes.

Senator WHISH-WILSON: Not external matters. That is no longer there.

Mr Pengilley : It may have been renamed.

Mr Noroozi : It may have been renamed. They also have their audit and risk committees. You do need some internal detection mechanism too. I think it is quite valid for them to have those. Not everything has to be independent. But obviously when something like this happens then probably you do need it.

Senator WHISH-WILSON: My question today was around the two employees that were stood down. I understand one is back working now and another is pending. Who would they go to if they felt uncomfortable? The answer I got, and they are taking it on notice, was that they can leave a whistleblower. There is nowhere to go to.

Mr Noroozi : Yes, but there is also the PID, the public interest disclosure. They can raise that. We have had people raise issues with us in the past. Where it was to do with something of a systemic nature in the administration of the tax system, we have taken it on board and we have looked at it. But that does not necessarily mean that we are able to report back to that individual. In some instances, the PID system may provide them with better protection.

Mr Pengilley : One of the issues to consider, as well, is the nature of the concerns they are raising. Because if it is about their own employment situation and how they were dealt with, our legislation does not allow us to look at the employer-employee relationship or an issue there. The difficulty is that if you have an ATO staff member who is saying, 'I'm being treated in a certain way because I have talked about or raised issues to do with systemic issues,' then we need to be very clear in the communication with any such officers coming to us that we can only look at things which are within our jurisdiction, which are the tax administration issues.

Senator WHISH-WILSON: Maladministration?

Mr Pengilley : On tax issues. The employer-employee relationship is something that is a separate issue.

Mr Noroozi : It is separate.

Senator WHISH-WILSON: I see.

Mr McLoughlin : In relation to the broad nature of governance and access issues that I think you have been talking about, if we were to do a review then they are the sorts of things that we would look at. But not in relation to individual employment as such, as to whether or not a given employee might be useful as an example to look at whether or not there is a broader concern, or whether there might be a reason to amend or improve a policy, procedure or something of that nature.

Senator WHISH-WILSON: Just to be clear, in this case where there is potential for an AFP charge—as in the case of Mr Cranston—would that be treated as maladministration?

Mr McLoughlin : We would not obviously talk about an individual case as such, around what may or may not apply in relation to that individual. But as a broader consideration, the nature of the manner in which we would look at issues of that nature are more from a tax administration standpoint. The nature of individual liability or culpability that might apply for a given employee, as a public servant, would be more appropriately directed to the relevant agency or APSC, as the case may be in relation to code of conduct resolution.

Senator WHISH-WILSON: I obviously support you guys doing an inquiry. I am wondering whether it is the appropriate scope for you to do the inquiry if this situation does not fall under your direct relevant legislation.

Mr Noroozi : As I said, it depends what it is you would like us to do. If it is to look at a process—something like whether the policies, procedures and structures are adequate for safeguarding against this sort of thing happening—yes, that is within scope. That would be right. But to the extent that it deals with that employer-employee relationship, that would be out of scope.

Senator WHISH-WILSON: Would that include whistleblowing?

Mr Noroozi : Whistleblowing is a different issue again. At the moment that falls within the jurisdiction of the ombudsman. But, as you know, there is the Moss review out that suggests some of that move around. But we have not had a response to that yet.

Senator WHISH-WILSON: The ombudsman handpass to you guys, don't they?

Mr Noroozi : Yes, but not for PID. The public interest disclosure stuff is still handled by them, for all government agencies.

Mr McLoughlin : The intensive management arrangements, access issues to management that were raised earlier, broader risk issues and how to best identify risks whatever they may be within the organisation as an entity type concept, they are the sorts of things we would look at.

Mr Noroozi : And we have done a review in the past into their use of risk assessment tools so those are all within purview.

CHAIR: Thank you very much, Inspector-General of Taxation and officers. That was terrific. We will have a five-minute suspension of proceedings and will resume at 3:50 with the markets group. I have a copy of the GST-free Supply (Health Goods) Determination 2011, which is still current, which was made by Nicola Roxon on 13 December 2011, which I table.

CHAIR: Thank you very much for that, Minister. We now welcome Markets Group to the table. Do have an opening statement for us?

Mr Lonsdale : No, Chair.

CHAIR: Thank you very much. We will start questions with Senator Gallagher.

Senator GALLAGHER: I hope this is the right place. I have some questions about the bank levy. I begin by asking: when was the regulation impact statement, which was released as part of the explanatory memorandum today, commenced?

Mr Lonsdale : This is a decision of government that went to ERC and cabinet and, consistent with that, a RIS was provided at the point of decision. What then generally happens is that, once the measure is announced and we go through consultation, we supplement that RIS, and what you see here is the finished product that is released with the explanatory material in the bill.

Senator GALLAGHER: Some of the consultations you have done in the period post the announcement of the budget are reflected in this RIS?

Mr Lonsdale : Correct. One of the options is the modifications that were made to the levy that was announced in relation to what was introduced. There were some small changes made to the levy and some of those reflect consultations that we had with the industry.

Senator GALLAGHER: Thank you. You have taken on notice whether we will be provided access to the modelling that is mentioned in the explanatory memorandum—

Senator Cormann: What I said to you—and I am happy to repeat it again—is that I took on notice your question that I would consult with the Treasurer and that I would provide an answer to your question before the debate takes place in the Senate.

Senator GALLAGHER: Is there an issue with providing the modelling?

Senator Cormann: I have taken the question on notice and I will consult with the Treasurer and I will get back to you in the usual way. In terms of the timetable, I have undertaken to do that in good time before the debate starts the Senate, instead of relying on the usual deadline for the submission of answers to questions on notice. This is an abundance of helpfulness, I would have thought.

Senator GALLAGHER: Sort of.

Senator Cormann: But I cannot pre-empt what the answer will be.

Senator GALLAGHER: You are looking helpful while you are not really being helpful.

Senator Cormann: You are asking me to pre-empt the answer and I cannot pre-empt the answer.

Senator GALLAGHER: Regarding the modelling that is mentioned in the EM, did that assume the full or partial pass-on of the levy cost to customers?

Senator Cormann: That goes directly to the question that I have previously taken on notice. When we spoke earlier—

Senator GALLAGHER: It is a pretty critical question that we have been trying to understand since budget day.

Senator Cormann: The government's position—and that is well articulated—in relation to the major bank levy, which is supported of course by Labor and the Greens, is that there is no need for the banks to pass the cost of this levy on to customers. The major banks make more than $30 billion in after-tax profits. This $1.5 billion contribution per annum, we believe, is fair and proportionate, and it is an appropriate contribution in all of the circumstances, given that the major banks are more dominant and more profitable than they otherwise would be, courtesy of the market structure in Australia that gives them a particularly dominant position. In particular, the four largest banks are very dominant in the Australian market, courtesy of the four-pillars policy and everything that flows from it. They are more dominant and more profitable than they otherwise would be. Of course, the design features of the major bank levy include a specific decision not to apply the levy to smaller banks, which will help enhance competition in the banking sector, which will help ensure that we can keep downward pressure on any decisions on pricing that the major banks may want to make otherwise. We have also given resources to the ACCC and asked the ACCC to monitor the pricing behaviour and what the banks might want to say about their pricing decisions in this context very carefully.

Senator GALLAGHER: I do want to come to that. The modelling is mentioned in the EM. I accept that you are not going to provide a copy of the modelling to us at this point—you are going to take advice on that—but I think it is reasonable for me to ask a question about the modelling that is mentioned in the EM. I think there is a fundamental difference between the government saying there is no need for banks to pass on the costs, as opposed to me asking: did Treasury assume that the banks would pass on, partially or in full, the cost as part of the modelling that is outlined in the EM? That is a different question to 'no need', Minister.

Senator Cormann: This is a repeat of the question that you asked earlier. It goes to the assumptions and to the modelling. I have already taken on notice questions in relation to the assumptions underpinning the modelling and the modelling. I have already indicated that I will be consulting with the Treasurer and that I will be providing an answer to those questions about the modelling and the assumptions in time before the debate in the Senate.

Senator GALLAGHER: So you are not allowing Treasury to answer that question of mine?

Senator Cormann: I have already taken it on notice.

Senator GALLAGHER: The one about whether or not the modelling included the partial or full pass-on of the levy to customers—did it form part of the modelling?

Senator Cormann: I have taken questions on notice in relation to the modelling and the assumptions underpinning the modelling, and we will provide—

Senator GALLAGHER: So you are not allowing Treasury to answer that. I do not know why.

Senator Cormann: I have taken it on notice, so we will provide it. That is something that—

Senator GALLAGHER: But Treasury know the answer. They know the answer. You are not allowing them to answer it.

Senator Cormann: I want to make sure that the answer is absolutely accurate and it is absolutely precise.

Senator GALLAGHER: What is that meant to mean—that they will not give me correct evidence?

Senator Cormann: As I have indicated to you, I will be consulting with the Treasurer to ensure that we provide you with the right answer at the right time.

Senator GALLAGHER: I understand that about releasing the modelling. I do understand that.

Senator Cormann: Of course, we could be providing that information at the time determined by the committee for the answers to questions on notice, but what we are doing—

Senator GALLAGHER: Oh, so this is a warning? If I continue, you will—

Senator Cormann: is that, in an abundance of helpfulness, I have made the commitment to ensure that the answer is provided before the Senate has to consider this legislation.

Senator GALLAGHER: I accept that you have to take advice on releasing the modelling as a document, but my question now to you, Minister, is: are you refusing to allow Treasury to answer this question of mine, in the full knowledge that they would know the answer, sitting right next to you, but you are not allowing them to tell you?

Senator Cormann: I am not refusing anything.

Senator GALLAGHER: Well, you are.

Senator Cormann: I am using my prerogative, which was a prerogative used by ministers in your government on a regular basis. I am using my prerogative to take the question on notice so I can consult with the Treasurer and provide the information, as is usual practice, on notice.

Senator Bushby: [inaudible]

Senator Cormann: Senator Wong said—

Senator GALLAGHER: I do not know how other people's behaviour is relevant to the question that I am asking.

Senator Cormann: You mean former senior Labor cabinet ministers?

Senator GALLAGHER: Well, I was not here. I do not know. I am asking a question today about what is going on with this levy.

Senator Cormann: You are asking a question about a major bank levy that the Labor Party have already indicated you would support. So this is in many respects a very academic conversation on your behalf because you have already indicated on budget night, through your shadow Treasurer, that you will be backing this measure in.

Senator KETTER: But that does not mean that public scrutiny of the measure should fall off a cliff. We have a responsibility—

Senator Cormann: We have had lots of conversations over the last 48 hours, and I am sure there will be many more conversations about this and other measures in the budget, but, in relation to the specific line of questioning that Senator Gallagher was pursuing, I have already taken those questions on notice.

Senator GALLAGHER: Okay.

CHAIR: We might move on to the next question.

Senator GALLAGHER: We are going round and round the mulberry bush, yes. In terms of the EM, on page 31 under option 2, there are some quite serious concerns raised around potential costs and features that may be significant, but Treasury say in this that they are 'difficult to quantify'. Were these concerns raised post the announcement of the budget measure?

Mr Lonsdale : May I please clarify that? The document you are talking about is the RIS—is that right?

Senator GALLAGHER: Yes. I think it is on page 32 of part of the—

Mr Lonsdale : Where is the serious concern you—

Senator GALLAGHER: It is under option 2. Do you have that document?

Mr Lonsdale : Yes, I have it in front of me.

Senator GALLAGHER: It is basically the dot points: the impact on capital markets—

Senator Cormann: Which dot points? They are numbered.

Mr Lonsdale : I think it is the first two. Both of those issues were explored during the consultation period. We paid a lot of attention to ensuring that the base and the design of the tax did not cut across prudential issues. As I mentioned to you yesterday, that involved consultation—particularly with APRA and the Reserve Bank. The view was that the design for the levy we have now did not pose any issues for prudential regulation. The one change that was made was the second dot point—the ESA accounts. The Reserve Bank in particular, but also some of the banks, raised this as an issue. The result of that was that there is an additional subtraction to the base on the levy, which you will see under option 3. But with the first dot point—the REPO issues and the short-term issues—they were considered and still remain part of the base.

Senator GALLAGHER: But you did accept the second dot point about the ESA balances. We did touch briefly on consultations with APRA and the RBA, but just to be clear: with the measure itself and the draft bill, when were the RBA and APRA consulted? Yesterday we had a discussion in which there was talk of collecting data earlier—in March, I think. But specifically for the measure, as designed under option 2, and for the draft bill, when were the RBA and APRA consulted? How many times were they consulted with?

Mr Lonsdale : Yesterday I think we said we would take on notice the actual—

Senator GALLAGHER: Have you been able to obtain that information?

Mr Lonsdale : Not in the time available. For half that time, I have been here, but we will come back to you on that. What I can say, though, is that we certainly did talk to APRA in March, and there were various discussions with APRA, as I mentioned yesterday, through the course of April—and with the Reserve Bank as well. After the release of the measure, there were a number of discussions, not just with the prudential regulator and the Reserve Bank but also with the banks themselves, as you know, to finetune some of the technical issues with the design. They are set out on page 30, I think, of the RIS—the key changes that were made between the budget and now.

Senator GALLAGHER: Referring back to that second dot point on page 32, the one you did accept—if that had been raised by the RBA as part of consultations, would that not normally have been dealt with in the original measure rather than cropping up in the post-budget period and you then having to respond to it?

Mr Lonsdale : As is usual, we find that when we go out and talk to stakeholders, we get a richer set of information. As we outlined yesterday, we were not able to talk to the banks, the taxpayers involved, until after the measure was announced. At that stage, they came back with very detailed and helpful information on a whole range of design elements. They raised issues that we then tested with regulators, and tested within as well, to form a position to put to government. That is pretty much how it worked out.

Senator GALLAGHER: Can I assume from that that the RBA raised it during the pre-budget consultations, but it was then subsequently backed up by the banks in the post-budget consultations, and that is why you are addressing it now as part of the final draft legislation?

Mr Lonsdale : I think that is reading a little bit too much into the first part in terms of the interaction with the Reserve Bank. There are a number of what I would call fine-detail design issues that were raised after the levy was announced, things like the netting of derivatives, the ESA account and the averaging of the liability base over the quarterly period. These sorts of issues benefited from discussion with industry and also with the regulators.

Senator GALLAGHER: The explanatory memorandum also confirms that the bank levy will be a BAS provision at, I think, 1.51.

Mr Lonsdale : Is this paragraph 1.51?

Senator GALLAGHER: Yes.

Mr Lonsdale : In the EM or in the RIS?

Senator GALLAGHER: Have I got them connected as two documents? They all appear in one for me. My question is: does that imply that tax deductions will be available the month after the first payment is made?

Mr Lonsdale : I will just check so that I can give you a precise answer. Sorry, it is technical, so I want to get it right.

Senator GALLAGHER: Sure.

Mr Maloney : Your question was about whether the levy will be collected through the business activities—

Senator GALLAGHER: Whether the tax deductions on the levy will be available the month after the first payment is made.

Mr Maloney : I am assuming that the levy will be collected through the business activity statement.

Senator GALLAGHER: Yes.

Mr Maloney : The corporate tax deduction is generally going to be available when they lodge their tax return, and then, ultimately, that will adjust their pay-as-you-go instalment rate. That takes time to take effect. It is open to entities to adjust their pay-as-you-go instalment rate, but I would not say it is a common thing.

Senator GALLAGHER: We might come back to that when I have more time. What does Treasury believe the total dollar value of tax deductions claimed in relation to the levy will be? Do you have a total figure?

Mr Lonsdale : That is one of the interactions, and it is not something that we have at the moment. If you—

Senator Cormann: We will consider, as part of the questions on notice on modelling and assumptions, how we can best assist in relation to that.

Senator GALLAGHER: Presumably, if you have the tables showing what you expect to collect as part of net revenue without interactions—

Senator Cormann: The revenue estimates are what is reflected in the budget papers. But, if I understand the question you are asking, you are asking the expected gross revenue minus relevant deductions—

Senator GALLAGHER: Exactly.

Senator Cormann: We will see, on notice, as part of the question on modelling and assumptions, what we can provide.

Senator GALLAGHER: Because it is not available at hand?

Senator Cormann: The evidence that was just given by Mr Lonsdale was that he did not have it at hand, which is why we have taken it on notice.

CHAIR: Thank you, Senator Gallagher. Senator Bushby?

Senator BUSHBY: Firstly, are you able to outline the steps that the government has taken to fulfil its election commitment to undertake an independent review of the voluntary industry agreement on access to service and repair information for motor vehicles?

Mr Lonsdale : I am advised the ACCC is undertaking that review, so that is probably a question for them.

Senator BUSHBY: I understand they are undertaking the review. I thought you might be able to give a bit of background to how the government has approached dealing with that one.

Mr Lonsdale : I will ask Ms Martin to give you that.

Ms Martin : Yes, the government made an election commitment with regard to motor vehicle servicing information and has met that commitment by asking the ACCC to undertake that independent review.

Senator BUSHBY: And are they doing that as a stand-alone review? How have the ACCC been asked to do that?

Ms Martin : They were undertaking a market study into car servicing and repaid information. This additional review is part of that.

Senator BUSHBY: The election promise was made for what reason? What are we actually looking at?

Ms Martin : There were concerns raised by stakeholders, particularly motor vehicle repairers, that they could not access the information they needed to service cars.

Senator BUSHBY: Because of the highly computerised nature of cars and the specialised diagnostic equipment that is required?

Ms Martin : That is correct.

Senator BUSHBY: It effectively creates a monopoly for new car retailers.

Ms Martin : Yes.

Senator BUSHBY: Okay. I will ask the ACCC some questions on that one when they appear before us.

I understand the budget also includes a $300 million incentive for states to reduce red tape. That is correct?

Mr Lonsdale : That is correct.

Senator BUSHBY: Can you run through how that measure will work in practice?

Mr Lonsdale : That was an issue that we would have happily talked about as part of Markets Group, but it is now in the Structural Reform Group, which I think you have dealt with already.

Senator BUSHBY: Very good. I will put those on notice then. What about professional standards reform?

Mr Lonsdale : We can definitely talk about that. I will ask Ms Brown to do that.

Senator BUSHBY: What can you tell us about the government's professional standards reforms? How well advanced is the implementation of the reform process?

Ms Brown : Legislation has been passed to raise the professional standards of financial advisers. New entrants or new financial advisers will be required to have a degree to qualify for registration and to have passed an exam by 2019. Existing financial advisers will have till 2021 to pass the exam and 2024 to have a degree-equivalent qualification. The government recently established the board that will establish the exam and also set the educational requirements. The government has announced the membership of that board. It will be chaired by Ms Catherine Walter and it is expected to be operational by 1 July this year.

Senator BUSHBY: How is it anticipated that these reforms once they are fully up and running will benefit consumers?

Ms Brown : They will lead to financial advisers that are more qualified. They will be expected to provider higher-quality advice and combine with other reforms to raise duty of care and to deal with conflicts of interest. Consumers should be better protected.

Senator BUSHBY: Thank you. It is good to hear that that is progressing

What about the Australian Financial Complaints Authority? Can you tell us about how FOS and the CIO currently operate? What cases can they consider? Are decisions binding? Can compensation be paid? How are the schemes funded?

Ms Brown : The cases that they hear will depend on the members of each of the relevant ombudsman services and the complaints that have been made by consumers to those bodies. Each ombudsman will hear the complaint put to them and will make a decision that is binding on the member firm, but it is open to the consumer to take action elsewhere if they are not satisfied with that decision. Each ombudsman service is funded by the industry.

Senator BUSHBY: The government has announced in the budget the establishment of the Australian Financial Complaints Authority. What will the new body do, and how will the one-stop shop provide benefits to consumers that are not available currently?

Ms Brown : It will be, as you said, a one-stop shop, so consumers will be able to go to one place. It will combine the activities of the Financial Ombudsman Service, the Credit and Investment Ombudsman service and the Superannuation Complaints Tribunal. The limit of the disputes will be higher under the new AFCA: complaints of up to $5 million credit facilities for small businesses and $1 million for other financial disputes. The quantum of compensation that will be payable will also be higher.

Senator BUSHBY: How is it all to be funded?

Ms Brown : The board will be funded, again, by industry.

Senator BUSHBY: That might be all I have for the moment. Thank you.

Senator RHIANNON: I want to move on to issues to do with foreign investors. Can I confirm that the charge or levy of $5,000 is applicable to foreign investors who need approval from the Foreign Investment Review Board to purchase a property?

Mr Brake : There are existing fees which are required to be paid for foreign investors wishing to purchase residential real estate. I am not sure, but I think you may be talking about the budget measure relating to the vacancy charge where properties are left vacant. There are the two issues there.

Senator RHIANNON: Yes. You have one that has a $5,000 levy.

Mr Brake : Correct. As I said, there are existing fees which are payable for foreign investors wishing to purchase residential real estate. It is a scale of fees. If the price of the acquisition is $1 million or less, the fee payable is $5,000. If it is more than $1 million and less than $2 million, the fee payable is $10,100. It increases with the price of dwelling.

Senator RHIANNON: How many properties are currently owned by investors who meet this definition? Could we have the number that are under $1 million, $1 million to $2 million et cetera?

Mr Brake : I do not think we could probably give you an estimate of the overall stock of dwellings owned by foreigners.

Senator RHIANNON: Not even an estimate?

Mr Brake : We can take it on notice and see what we can do. We have figures on how many applications are received each year, so we can provide that information, but for stock we would obviously need to go back for a long period of time.

Senator Cormann: We have taken it on notice and will see what we can do.

Senator RHIANNON: Thank you. Do you have any figures about vacancy at all—like how many of the properties are vacant?

Mr Brake : As part of our own Foreign Investment Review Board, as there is not currently a conditional requirement for an additional levy, where the property is vacant we do not currently collect that data ourselves.

Senator RHIANNON: I have been interested in this and picked up some information from the New South Wales government that suggests that in the period July 2016 to February 2017 total foreign residential investor purchases were 2,153 out of a possible 142,168 residential purchases. That actually suggests a low rate of foreign investment in residential real estate in the period. It comes out at about 1.5 per cent. Does this accord with your information and estimates for Australia as a whole? Is that a fair trend that we are seeing around the country?

Mr Brake : We will take that on notice and provide some more information.

Senator RHIANNON: How many properties are expected to be made available for rent as a result of this policy that otherwise would not have been made available?

Mr Brake : We would anticipate that the vacancy charge encourages holders of vacant property to make those properties available to rent, so you would expect that there would be some behavioural response. I should note that the measure applies to purchasers who are making an application from budget night on. So it will not apply to foreign investors who already own property. It will be only for foreign investors making applications from budget night. So you would expect that the impact would build over time.

Senator RHIANNON: My question was actually about figures and, according to your fact sheet 1.6, you have some figures that suggest that you have come up with some idea or some estimation. You expected it to raise $20 million?

Mr Lonsdale : We would have figures. They would underline the costings. But we do not have them here. If you would like them, we are very happy to take that question on notice.

Senator RHIANNON: I mean—

Senator Cormann: The officer has taken it on notice.

Senator RHIANNON: I heard that well and truly, but it is in fact sheet 1.6, which is one of, obviously, the top order of what would be read when people are trying to sort this out. The charge is expected to raise $20 million, which equals a $5,000 charge on 4,000 properties. You have obviously come up with a figure that must be in the heads of the people who are sitting behind these desks. So I do not understand why it has to be taken on notice when you have worked it out.

Senator Cormann: There are a lot of things that are worked out as part of a budget which obviously has a significant number of measures in it, and there is a lot of detail that underpins it all. The officer has taken it on notice in order to ensure that we can provide you with an accurate response, and that is the way the process usually works.

Senator RHIANNON: But, Minister or Deputy Secretary, how can you have estimated that without having some estimate on the number of vacant properties and some estimate of change of behaviour?

Senator Cormann: That was not the evidence. The evidence was that we will take the question on notice so we can review all of the information we hold and provide you with an appropriate response on notice.

Senator RHIANNON: How did you arrive at the $5,000 figure then?

Senator Cormann: But that is the same question asked in a different way.

Senator RHIANNON: But it is fair enough. It is estimates and you have this housing affordability package. You tell us in every second sentence, Minister, that you are dealing with housing affordability. When we ask questions, there is nothing solid behind it. $5,000 is your definite figure; how did you come to it?

Senator Cormann: What I am saying is that we have a package of measures which, taken together, is designed to boost supply of affordable housing and boost supply of housing generally. In relation to this measure, we anticipate that there will be a behavioural response by relevant owners of these vacant properties—that is, that either they will make the property genuinely available for rent or they might dispose of the property because they want to avoid paying this particular tax. Yes, you are quite right that, in putting together these measures and costing the impact of these measures, various assumptions are made in order to come up with the relevant forecasts. You are asking a question that very much goes to that underlying detail, and we have taken that question on notice.

Senator RHIANNON: How will the enforcement work? How will you assess if a property is occupied or available to rent?

Mr Brake : The administration and compliance work will be done by the tax office, so it will not be the responsibility of—

Senator Cormann: This is a pre-existing concept, I hasten to add. The tax office already has a definition when it comes to, for example, the concept of a property being genuinely available for rent. In the measure—I think it is in the measure description, from memory—we are talking about the property being occupied or genuinely available for rent for at least six months out of the previous 12.

Senator RHIANNON: Does that mean that all foreign held properties will be assessed for use, or will all properties be assessed for use and then the charge applied only to those owned by foreign investors?

Mr Konza : We do not have too much to say because this is a government budget proposal. However, I can, perhaps, make some observations that will help you with it. The proposal is that everyone—that is, all those foreign persons who have bought a property after 9 May 2017—will be required to make a declaration as to whether their property was occupied or not. Most of those people will declare that their properties were occupied, some will declare that they were not, and levies will be charged on those who have declared that they were not occupied. We will have to make sure that declarations are received from all those who have purchased a property, and we will do that through data matching and through normal compliance action that we are well used to.

In respect of those declarations where they say that they are occupied, we will have to check in some cases to make sure that they are correct. In some cases (a) most properties are in fact occupied, (b) most people will now move to have their property occupied given the economic indicator that has been sent by the levy to them, and (c) some people may value their property so greatly that they do not want anyone in there and they will pay the levy because they prefer it pristine. We will then be able to use data matching to look at ways of matching properties that appear to be unoccupied with those that are said to be occupied. That has to be worked up, and it has to be worked up after we have seen the actual legislation as well. Finally, we do accept community information as well. I would expect that we would be getting some people who would be telling us based on their own observations whether they think properties are occupied, and we chase up all community information.

Senator RHIANNON: Thank you. Minister, if this is a housing affordability measure designed to increase supply, how do you justify applying an additional charge only on vacant properties owned by foreign investors and not domestic investors?

Senator Cormann: Because that is the judgement we have made. You can go to the next election with a policy that you want to apply of a tax across the board. That is your prerogative. We took the view that if you have a foreign investor who is purchasing an apartment with the intention of leaving it vacant, then this measure will help encourage a behavioural response where the property is either occupied or genuinely made available for rent and, as such, increasing the supply of rental accommodation, or the property is disposed of by the foreign investor, in those circumstances also increasing the supply of available properties in the market. You are quite entitled to come to a different judgement, but that is the judgement that we have made.

Senator RHIANNON: I was not questioning that you have made a judgement. Because you are the one who constantly links everything that you put forward here with housing affordability, the question was: if you are arguing this is to expand housing affordability, why did you not also apply it to domestic investors?

Senator Cormann: Because we have made a judgement that it would not be appropriate to apply this measure to domestic investors. We made a decision that it was appropriate, in all of the circumstances, to apply it to foreign investors. That is in the context of an assessed increase in the incidence of properties being purchased by people residing overseas with the intention of keeping the property vacant instead of having it either occupied or genuinely available for rent. That is the specific issue that this measure seeks to address. We are not seeking to address anything else.

Senator RHIANNON: What information is Treasury and/or the ATO planning to release publicly in relation to the national register of foreign ownership of land titles?

Mr Brake : Senator, are you talking there about agricultural land?

Senator RHIANNON: I am mainly talking about houses. I am interested in whether there will be information on the number of properties purchased, not just approved as is currently the case.

Mr McKissack : The Land Register will be released in the second half of this year. It will release aggregate data on foreign holdings of land, but not individual holding data.

Senator RHIANNON: Will it includes citizenship or visa status details?

Mr McKissack : I think we have not decided on the exact detail. We will probably have regional data and perhaps data by country, but I am not sure about visa status.

Senator RHIANNON: And the location of properties?

Mr McKissack : By broad region; obviously, we do not want to identify people by individual addresses, but certainly by state and territory.

Senator RHIANNON: Will location and cost of properties be in?

Mr McKissack : I think that is a decision that still needs to be made once we have the data available.

Senator RHIANNON: How regularly will the data be released?

Mr McKissack : The plan is for an annual register, so it will be released annually.

Senator RHIANNON: It is going to be released annually, so in a year's time—any idea?

Mr McKissack : I think the ATO is still compiling the data for the first report. It is still something of a work in progress as to how long it will take to produce that first report. We are aiming for something in the second half of 2017. From there on, we would expect annual updates once that data becomes available.

Senator RHIANNON: I understand that, from September 2016, the ATO is consolidating and matching quarterly data provided by the states and the ACT. What is the status of the information gathering from the states and territories, and have there been any problems in obtaining information from the states and territories?

Mr McKissack : The Land Register is being compiled using land title data from all of the states and territories. There is a financial arrangement between the Commonwealth and the states and territories to ensure that the states have resources to gather data on foreign ownership. All of the states and territories except the Northern Territory have signed up to this agreement. That data is in the process of being provided to the ATO. Obviously, various states were at various stages of preparedness to provide the data, and that is still a work in progress. But the progress has been good to date and the ATO will be able to put together that data later—

Senator RHIANNON: Are you referring to the test dataset?

Mr McKissack : I am referring to the land title data that the states collect and will be providing to the ATO once it becomes available in respect of foreign ownership.

Senator GALLAGHER: Just to finish up on the bank levy: I just want to go through the different numbers in the budget paper. I touched on this before. If we could start with the difference between the underlying cash balance and the fiscal balance presentation—I understand what the difference is, but between the outline of the revenue totals over the forward estimates, could you explain the year-by-year difference, as quickly as we can?

Senator McALLISTER: The lag.

Senator GALLAGHER: Yes, say if I am putting the two different ways that they are reported in the budget papers together, in 2017-18 the fiscal balance—the budget measure—is shown as $1.6 billion and the cash receipts in the underlying cash balance presentation are $1.2 billion. What is the difference between the $1.6 billion and $1.2 billion?

Mr Lonsdale : Can I just be very clear on which figures we are talking about? Can I repeat them back to you—the revenue head estimates on page 10-24 compared with the cash revenue head estimates on 5-18?

Senator GALLAGHER: I think that is right, yes.

Mr Lonsdale : Is that right?

Senator GALLAGHER: I have them put together for my sake.

Mr Lonsdale : So if we do 10-24 first, these are fiscal estimates of the revenue head itself. They do not take into account things like deductions or other interactions; they are fiscal revenue estimates of the bank levy revenue head. They are calculated on what is called an economic transaction method, which aims to capture the revenue in an economic sense over the course of the year. It is the purest form of accrual accounting we have. So when you compare that with the cash numbers on 5-18, they are cash—that is, again, not taking into account deductions and not taking into account other interactions, but the cash revenue head.

Senator GALLAGHER: Coming in that financial year?

Mr Lonsdale : That is right, across the forward estimates. So when you think about the fiscal numbers, they would have a fiscal estimate revenue head for every quarter of that financial year, whereas the cash ones would not have that—they would not assume that in the first year. So that would explain the majority of the 2017-18 difference.

Senator GALLAGHER: So that is deductions and other interactions?

Mr Lonsdale : What I am trying to explain is there is a range of interactions that happen that are embedded in other revenue heads. For example, a bank will potentially claim a deduction for the tax it has paid. That does not appear in the revenue head line item; that is embedded in another revenue head like company tax, for example.

Senator McALLISTER: But it does appear in the cash?

Mr Lonsdale : That is right. So there will be a cash table and an accruals table. That is the way it has been for a very long time.

Senator McALLISTER: Mr Lonsdale, can I ask a follow up? I did not understand. You said that the cash statement did not include those other interactions, I thought, in your earlier evidence. Does it or does it not include those other interactions—the cash statement?

Mr Lonsdale : The revenue head major bank levy on page 5-18?

Senator McALLISTER: No, the cash statement.

Mr Lonsdale : Can you give me the precise page number, Senator?

Senator GALLAGHER: That is it; it is 5-18.

Mr Lonsdale : That is correct. So these figures—the $1.2 billion, $1.6 billion, $1.7 billion, and $1.8 billion—are the cash revenue head. So the other interactions—for example, the deduction—will apply, to the extent a bank claims a deduction. You will find that in another revenue head. I will just check that I have gotten that right. I am getting nods from behind me, so that is right.

Senator GALLAGHER: In total, over four years of the revenue head—I think that is what you are calling it—the fiscal balance is $6.2 billion. The cash receipts balance across the forward estimates is $6.3 billion, as I have added it up. Can you explain what the difference there might be?

Mr Lonsdale : You are adding the four years across?

Senator GALLAGHER: Yes, I am.

Mr Lonsdale : Timing of collections is the key difference between the two.

Senator GALLAGHER: How do those numbers—the $6.2 billion and $6.3 billion—then relate to budget paper No. 1 on 3-29, which talks about $5.5 billion over the forward estimates?

Mr Lonsdale : Could I explain two things to you, Senator? It might be easiest. On 3-29 the $5.5 billion—could I take that? It might be clearer if I explain it with the measure description in budget paper No. 2 on page 24. Do you have that, Senator?

Senator GALLAGHER: Yes.

Mr Lonsdale : I will explain this one first, and then I will explain the one on page 329, because they are related. Is that okay, Senator?

Senator GALLAGHER: Yes, sure.

Mr Lonsdale : Budget Paper No. 2 contains the actual revenue gain of the measure itself. So, if you think about the revenue head and interactions that apply—deductions, timing, growth from the base—there are a whole bunch of things that are tied up in determining the revenue impact of the measure. And that is done, in a fiscal sense, on page 24. Again, this is the same way it has been done for a very long time.

Senator GALLAGHER: So that is the $6.2 billion.

Mr Lonsdale : That is the $6.2 billion, and that equivalent measure, the revenue impact of the measure—in cash terms, not in fiscal terms—is the figure on page 329. That is the $5.5 billion. The way I think about it is, in Budget Paper No. 2, the $6.2 billion across the forwards is the fiscal revenue impact of the measure, and the $5.5 billion is the cash revenue impact of the measure.

Senator GALLAGHER: So that is once other interactions and deductions have occurred.

Mr Lonsdale : Correct, Senator. If you are asking what the revenue gain of the measure is, it is expressed in fiscal terms and it is expressed in cash terms.

Senator GALLAGHER: I think I get that. I will probably come back to this in the Senate inquiry. Is it possible to provide the $5.5 billion broken down over the forwards in a similar way? It does not relate then to the underlying cash table that you have outlined either, does it? It sits independent of that $6.3 billion.

Mr Lonsdale : There would be four numbers that add up to this. If you are asking whether you can have those numbers, I am happy to take that on notice, if that is what you are after.

Senator GALLAGHER: Okay. So the $5.5 billion, the $6.3 billion and the $6.2 billion are all the same measure. The $5.5 billion is the total receipts. The $6.2 billion and the $6.3 billion other revenue gains reported in accrual in a cash way. Is that right?

Mr Lonsdale : The two earlier figures that we talked about, the one in statement 10 and the one in statement 5, are both revenue head numbers—just the raw revenue head. The other two numbers that we talked about, the one in Budget Paper No. 2 on page 24 and the reference to $5.5 billion on page 329, so that is statement 3, is the revenue impact of the measure—not the revenue head; the revenue impact of the measure, all included.

Senator GALLAGHER: This assumes that this levy applies to five entities only.

Mr Lonsdale : The design of the measure, as you know, is ADIs over $100 billion in liabilities, but—

Senator GALLAGHER: So that is your five.

Mr Lonsdale : You are correct; at the moment that is five entities.

Senator GALLAGHER: Are you able to advise the committee what Treasury estimated each of those five would have to pay both before and after tax in both underlying cash and fiscal balance terms for each of the years over the forward estimates?

Mr Lonsdale : Just so I am clear, Senator, you are asking for the fiscal and cash revenue collected by each of the taxpayers that will pay the levy.

Senator GALLAGHER: Yes, that you have estimated.

Mr Lonsdale : I will have to take that on notice, Senator.

Senator GALLAGHER: I guess it goes to the issue that the banks released information to the ASX last week on the costs as a result of the bank levy. You would be aware of those releases and the figures that they have highlighted?

Mr Lonsdale : Yes.

Senator GALLAGHER: Have you had to reassess your forecasts and projected revenue gains against what the banks have informed the ASX?

Mr Lonsdale : I think we mentioned this yesterday: we always look at additional information. There is nothing that we have seen that would cause us to change the revenue estimates that are outlined in the budget. We think the revenue estimates are correct.

Senator GALLAGHER: So the banks have got it wrong, have they?

Mr Lonsdale : I am not saying that. As I have tried to explain, there are a range of interactions that happen in the calculation of the figures. They go to timing and other things.

Senator GALLAGHER: Just to quickly finish, given the banks' disclosures and what you have just said then, are you saying that the banks will have to pay the $1.2 billion in cash terms regardless of what they have advised the ASX?

Mr Lonsdale : I cannot make a decision on what the banks will pay. That is an issue for the tax office. What I am saying here today is that the figures are the estimates that are outlined in the budget papers, with all the information that we have seen. We stand by those figures, and the banks have obviously calculated their estimates on a basis.

Senator Cormann: The point here is—just to correct a premise of your questions—that the major banks' tax liability under the major bank levy is not determined by what the major banks self-disclosed to the ASX; it is determined by the provisions in the law which is now before the parliament, as administered by the Australian Taxation Office.

Senator GALLAGHER: Are you suggesting they were not honest last week with the ASX?

Senator Cormann: No, that is not what we are suggesting at all. This is obviously an issue that has been discussed for some time. The banks no doubt have made their own assessments using their own assumptions. In the end, the banks will not pay the major bank levy based on their assumptions or their disclosures to the ASX. They will pay the major bank levy based on the legislation that is passed by the parliament and administered by the Taxation Office.

Senator GALLAGHER: I was presuming their advice to the ASX was based on the consultations they had had with you, in knowledge of the draft legislation. So now I am a little confused about what you are trying to suggest.

Senator Cormann: There is nothing confusing at all.

Senator GALLAGHER: You are saying you stand by your figures, the banks are saying it is not as much as the government has indicated it is, and you are saying it is not up to the banks what they pay. So who is not telling the truth?

Senator Cormann: We do stand by our figures, and the banks will have to pay the major bank levy consistent with the provisions in the relevant legislation.

Senator GALLAGHER: Well, of course they will.

Senator Cormann: But the premise of your question before was that they would have to pay the major bank levy on the basis of their declarations to the ASX. That is not the way this works.

Senator GALLAGHER: No, that is not at all what I was saying. I was saying: are you suggesting that what they advised the ASX was them not informing the correct amount?

Senator Cormann: What I am suggesting to you is that we stand by our figures and, if you want to find out how the banks came up with their figures, you would have to ask them that.

Senator GALLAGHER: They have had to sign a confidentiality paper while they have been discussing it with you, so no-one has been able to discuss it with the banks. I am just a bit confused about what you are trying to suggest there.

Senator Cormann: There is nothing confusing. The point is that we stand by the estimates as reflected in the budget papers. That is very clear—nothing confusing about that. In the end, obviously, you will get different revenue estimates based on the assumptions that you are using, but the bank estimates are actually not that inconsistent when you look at the forecasts and projections in our budget papers on a cash basis.

Senator WHISH-WILSON: On a cash basis? They signed confidentiality agreements. The legislation was tabled today. Why were they putting out their estimates last week? Was that based on what we have in front of us, on the legislation, or would it have been based on incomplete information?

Mr Lonsdale : We asked the banks to sign confidentiality agreements on the draft law that was provided to them, which is different to the draft law in the parliament at the moment, through the measures that we outline in the RIS. There are some changes that we outline, so it is not identical.

Senator GALLAGHER: But it did not impact materially on the costings?

Senator WHISH-WILSON: How were they able to publicly release their estimates based on their private consultations with you? Shouldn't they have waited till the legislation was—

Mr Lonsdale : That is an issue for them. They have legal obligations that I am sure they make decisions and judgements on. That is not something that we advised on.

Senator WHISH-WILSON: Could they have breached your confidentiality agreements?

CHAIR: You have had three questions, Senator Whish-Wilson.

Senator WHISH-WILSON: On the same subject.

CHAIR: You promised me one.

Senator WHISH-WILSON: Is it possible they have breached their confidentiality agreements with the government by releasing that information?

Senator DASTYARI: It was a non-core promise!

Mr Lonsdale : Not to my knowledge.

CHAIR: We will now take a break until five past five, when we will resume with Markets Group.

Proceedings suspended from 16:50 to 17:05

CHAIR: Good evening, we will continue with the Senate Economics Legislation Committee's estimates hearings. We will start questioning with Senator Dastyari.

Senator DASTYARI: I can actually get through with just one question, if this works.

CHAIR: That is terrific.

Senator DASTYARI: Who is the representative from FIRB here? Is that Mr Brake?

Mr Brake : Yes.

Senator DASTYARI: It actually may be quite a bit easier if we perhaps do this at a separate time. I had a whole series of questions regarding FIRB, regarding understanding how the processes work. It kind of ties into some of the work the Senate is doing separately with inquiring into public interest journalism. Your name has come up a bit, so I am sure you have kind of half kept an eye on it. It might easier—if it is okay with you, Minister; and I will talk to the secretariat—if we invite you to come and give evidence, when that committee is getting together, to give us a bit of background on that. Mr Brake, if you are happy to come at that point to the inquiry, that saves me having to use this is the opportunity to ask you those questions.

Mr Brake : Yes, that is fine.

Senator DASTYARI: Why don't we do that? We will invite you to formally come and give evidence to that inquiry. Mr Brake just agreed to come.

Senator KETTER: My questions relate to the banking executive accountability regime. One of the requirements of the new regime is that bank executive bonuses are to be withheld. My question is: has Treasury conducted an analysis of whether the banks would just increase the base rate of pay and reduce the amount of bonuses?

Mr Lonsdale : Certainly, that was an issue that was thought through as one of the issues when it was put the government. The measure is to really have a hard vesting period of a minimum of four years, but the prudential regulator—that is, APRA—will be conducting a review around some of the issues here. I think the short answer to your question is: yes, it was something that was thought about. We will certainly be thinking more about it as we go through the consultation period.

Senator KETTER: Are you aware of how many executives have been suspended under the equivalent UK regime?

Mr Lonsdale : I do not have that with me.

Senator KETTER: Can you take that on notice?

Mr Lonsdale : I am happy to take that on notice.

Senator KETTER: Will the new regime apply to executives in life insurance companies?

Mr Lonsdale : It will apply to ADIs. To the extent that you have an ADI with a life insurer as part of it, the answer is yes.

Senator KETTER: Could it have applied to the managing director of CommInsure?

Ms Brown : If that executive is part of the ADI, it would apply.

Senator KETTER: There are a number of other issues to just explore. In relation to the remuneration packages of bank executives, what will happen to existing contractual entitlements if those entitlements are inconsistent with the remuneration requirements of the regime? For example, if an executive has an entitlement to be paid the full amount of a bonus after a year.

Mr Lonsdale : We would need to work through this particular issue as we go through and consult with industry. There will be a period where we to that. But the intent of the measure is clear: for at-risk parts of remuneration, the vesting of that will be a longer period than it is now. That will be legislated for. As you point out, there will be a range of transitional things that we will need to go through, and that is one of them.

Senator KETTER: Presumably the regime's requirements will overwrite contractual terms?

Mr Lonsdale : I think that is an issue we need to work through. If it is a contractual term, we will need to look at that very carefully as we always do and we will be going through that process.

Senator KETTER: At what point would an ADI be required to report a suspected breach?

Mr Lonsdale : Are you talking about in terms of the register or are you talking about the rent?

Senator KETTER: The register.

Mr Lonsdale : The register is something that APRA will keep. For an entity that wishes to appoint a senior executive director, they would typically approach APRA under this. They would inform APRA. If there was a breach, if the prudential regulator knew that, that would be informed back to the bank. If a breach occurred while the person was in their position, again, the timing is an that we will need to work through.

Senator KETTER: Does the reporting have to occur once an allegation has been investigated and substantiated? Is that the point at which a breach occurs?

Mr Lonsdale : Yes. If there is a breach, that would need to be reported. That is right.

Senator KETTER: So it is only an allegation until the investigation is completed?

Mr Lonsdale : Again, you are getting to when is a breach a breach? Is it hearsay? Is it proven in a court of law or by some process? They are issues of detail that we will work through. But the intent of the measure is to make sure that we have got executives in senior positions running ADIs that are reputable fit and proper people. To the extent there is a breach then that would be reported to the prudential regulator and there is a range of steps that the prudential regulator could take.

Senator KETTER: What will happen once APRA removes a non-executive director's name from the regime registry? Does that have the effect of automatically disqualifying a non-executive director from his or her directorship?

Mr Lonsdale : There is a range of things that could happen.

Ms Brown : APRA would have the power to remove or disqualify people and that would mean they could either no longer be in the position or be disqualified from the industry and no longer be in the industry.

Mr Lonsdale : And it would depend on the type of issue.

Senator KETTER: Will the ADI be required to take steps to remove the non-executive director? Does it automatically occur or do steps have to be taken?

Ms Brown : The proposal here is that APRA would be able to remove someone directly.

Senator KETTER: What happens when APRA removes a senior executive's name from APRA's registry? Will the regime provide the ADI is not liable to the senior executive for the early termination of his or her contract of employment?

Mr Lonsdale : Again, that is quite a technical issue that we will need to work through in the implementation of the law. The intent is very clear.

Senator KETTER: Have you agreed to take all of those questions on notice? Is that correct?

Mr Lonsdale : We are happy to take them on notice but I think the way that it will play out is we will need to talk to industry some more to get answers to those and to formulate advice to put to government. There have been some discussions prior to the measure with ADIs that did highlight some issues. We have tried to take those into account. The secretary conducted some discussions with the major banks but, again, they were typically issues of first order and not the technical issues that we still have to work through.

Senator KETTER: What is the timetable for those further consultations?

Ms Brown : We would be looking to put a consultation paper out shortly, with the exposure draft legislation after that.

Senator KETTER: When you say 'shortly', what does that mean?

Ms Brown : Probably in coming months.

Senator GALLAGHER: I have a couple of questions to follow on from there. I am trying to see if there has ever been a date mentioned for this measure coming into effect?

Ms Brown : The government has not announced a commencement date, no.

Senator GALLAGHER: So it was announced in the budget—it appears in the budget paper but there is no date for it to come into effect?

Senator Cormann: Obviously, we are now going through the policies. As soon as we are in a position to make relevant announcements, we will.

Senator GALLAGHER: So the legislation is to come?

Mr Lonsdale : Correct.

Senator GALLAGHER: All I have to work on for the detail of this executive accountability regime, apart from what is in the budget, is an opinion piece today. If I go to the Treasurer's media release of 9 May—do you have that?

Mr Lonsdale : Yes, I have it.

Senator GALLAGHER: I note that the powers and penalties to be given under this regime and the additional expectations will be for how banks and their executives conduct their business consistent with good prudential outcomes.

Mr Lonsdale : That is correct.

Senator GALLAGHER: I can certainly think of examples in the last few years where there have been very poor customer outcomes which may not be poor prudential outcomes. I am wondering how misconduct, poor advice and fees for no service—all of those systemic problems that have arisen—would be dealt with in terms of a scheme that looks at the prudential outcomes?

Mr Lonsdale : I will ask Ms Brown to give a more comprehensive answer than I can. One of the policy underpinnings that we have in the financial sector is the twin-peak model—we have a prudential regulator and a market conduct regulator.

Senator GALLAGHER: I understand that.

Mr Lonsdale : The government was very clear in having this measure focus on the prudential side and not on the market conduct side. You are right in saying that the measure is targeted at prudential conduct.

Ms Brown : Some conduct would be of such a nature as to give rise to prudential concerns. That would fall under here, but the government has an extensive reform agenda. While this is a focus on APRA and improving APRA's tools, there is also other work going on looking at ASIC's enforcement tool. There is currently an enforcement review of ASIC's regulatory toolkit underway which would look at strengthening and enhancing ASIC's powers. It will deal with other types of market misconduct.

Senator GALLAGHER: Right. So this accountability regime will be focused on executives' conduct as it relates to prudential outcomes. And then in terms of the poor customer outcomes and the misconduct that we have seen, that is to be dealt with somewhere else under the regulatory review for ASIC?

Mr Lonsdale : That is correct.

Ms Brown : Sometimes poor customer conduct—

Senator GALLAGHER: People reading the media today could have taken the view that it was actually about dealing with poor customer outcomes—holding bank executives to account for their misconduct and poor advice that customers have put up with—but it seems this is different. We will wait and see how that comes out through the consultations. We will certainly have questions for APRA and ASIC about it.

The Department of Treasury gets $1.1 million to oversee the timely implementation of a more accountable and competitive banking system. Is that your area?

Mr Lonsdale : That is correct.

Senator GALLAGHER: What would that be used for?

Mr Lonsdale : The press release that you raise, Senator, has a range of measures in it—the bank levy, the BEAR. There is a range of work that needs to happen with the data measure, so the OBR—

Senator GALLAGHER: I thought that was separate. Wasn't the data funded separately?

Ms Brown : There is a separate measure for open data—you are correct, Senator. There are a range of measures in the government's—

Senator GALLAGHER: You are getting a $12 million increase somewhere, aren't you? Specifically on that 1.1, is it just for short-term resources?

Ms Brown : That is right. It is for short-term resources to make sure that—

Senator GALLAGHER: So it is for 12-month contracts for people to come in and assist with the work?

Ms Brown : That is right.

Senator GALLAGHER: How many would you get for $1.1 million?

Ms Brown : I cannot recall off the top of my head. I would have to take that on notice, sorry.

Senator KETTER: I am going to turn to the issue of credit card reforms. Has drafting commenced for phase 1 of the credit card reforms as yet?

Ms Brown : The minister made a commitment for legislation to be introduced this year, and we are working towards achieving that commitment.

Senator KETTER: Any particular time this year? Can you be a bit more specific?

Ms Brown : It will be next sitting session, in spring.

Senator KETTER: Is there similarity between the four reforms announced in the Treasurer's budget night media release and the credit card paper released in May 2016?

Ms Brown : The May 2016 paper was a consultation paper that informed the announcement made on budget night this year.

Senator KETTER: So they are identical points, those four reforms—

Ms Brown : Following that consultation paper and other work that was undertaken, the government has decided to proceed with those four particular measures and legislate for those.

Senator KETTER: Has drafting commenced on the reforms to small amount credit contracts?

Ms Brown : Again, that is work that is still to be undertaken.

Senator KETTER: What is the time frame for that?

Ms Brown : It will depend on a range of other work and other legislative priorities, but we are working on it to do it as soon as we can.

Senator KETTER: Will that be this year?

Mr Lonsdale : Yes, this year, 2017.

Senator KETTER: Has drafting commenced on laws regarding the bank bill swap rate?

Ms Brown : That is the financial benchmarks more broadly. Yes, drafting has commenced on that.

Senator KETTER: It has commenced. It has not concluded as yet?

Ms Brown : Legislation has not been introduced as yet, no. It needs to be introduced by the end of the year.

Senator KETTER: Have exposure draft bills been produced as yet?

Ms Brown : No, not as yet, I believe.

Mr Lonsdale : That is correct. That is in progress.

Senator KETTER: And that is expected this year as well?

Mr Lonsdale : Yes. We are endeavouring to do that this year.

Senator McALLISTER: I want to ask about the charge on foreign owners of underutilised residential property. Did Markets Group have input to this from the perspective of its impact on the housing market?

Mr Lonsdale : We did have input.

Senator McALLISTER: So asking questions about this measure is appropriate at this time?

Mr Brake : Correct.

Senator McALLISTER: I want to know what Treasury's involvement will be in the implementation of the measure.

Mr Brake : Senator, you may have been out of the room when Mr Konza from the tax office talked through this. The ATO is responsible for the administration and compliance of this measure. He answered questions about how the ATO was expecting to undertake the administration and compliance.

Senator McALLISTER: Can I ask about some of the assumptions. There is an assumption of revenue of $20 million over the forward estimates. I am wondering what the assumption is there about the average charge.

Senator Cormann: We have actually taken these questions on notice. We had the same line of questioning from Senator Rhiannon earlier today.

Senator McALLISTER: Apologies. I will place mine on notice—because they are all assumptions.

Senator Cormann: We will be as helpful as we possibly can.

Senator McALLISTER: I am interested in understanding what the assumptions are over the forward estimates for the number of vacant properties attributable to foreign owners and I would like those broken-down on a state-by-state basis. Do you think you have it available on a state-by-state basis?

Senator Cormann: We will see what we can provide.

Senator McALLISTER: Do the assumptions include behavioural assumptions about an increased number of dwellings as a result of the financial incentives?

Senator Cormann: It does include behavioural assumptions. What they show and what they are we will provide you on notice.

Senator McALLISTER: What I would be interested to know is what assumptions have been made about the number of increased dwellings that will result each year as a result of implementation of the measure. Can I ask whether the states and territories were consulted in developing the measure.

Mr Brake : The specific measure, no.

Mr Lonsdale : No.

Senator McALLISTER: Was the FIRB consulted in relation to the measure?

Mr Brake : We engage with the FIRB on a wide range of matters.

Senator McALLISTER: On this measure?

Mr Lonsdale : I think we are saying that we will check.

Senator McALLISTER: Thanks. Do they have a role in any way in the administration or implementation of the measure?

Mr Lonsdale : No.

Mr Brake : The board, no.

Senator McALLISTER: Just to clarify: not even to the extent of providing information to the ATO to support the administration of the measure?

Mr Brake : That is a responsibility for the tax office.

Senator McALLISTER: Of?

Mr Brake : The administration is purely a matter for the tax office.

Senator McALLISTER: Thank you. That is it for me.

Senator RHIANNON: Did the Markets Group have a role in developing free-range egg information standards?

Mr Lonsdale : Yes, we did.

Senator RHIANNON: Could you please explain what the role was.

Mr Lonsdale : I will ask Ms Martin, who was very involved in that process to talk to you.

Ms Martin : The consumer affairs ministers agreed in March 2015, I think it was, to an information standard for free-range egg labelling. Treasury then undertook a RIS process, so there was a consultation process that was undertaken. We consulted with stakeholders, drafted the information standard and that information standard was registered just recently.

Senator RHIANNON: So it has been registered, and that is the one that allows 10,000 hens per hectare to be labelled as free-range—is that correct?

Ms Martin : That is the maximum outdoor stocking density, yes.

Senator RHIANNON: That is a misleading standard. What has been the interaction with the ACCC in setting up a misleading standard?

Ms Martin : I am not sure what you mean by 'misleading standard'.

Senator RHIANNON: Having that many hens per hectare has been widely recognised as overstocking and is not the equivalent of free-range. My question was about the interaction with the ACCC with regard to this.

Ms Martin : The ACCC will be enforcing the compliance on the information standard at a maximum stocking density of 10,000 hens per hectare.

Senator RHIANNON: How much contact did Treasury have with representatives of Egg Farmers of Australia and the Australian Egg Corporation regarding the development of the standard?

Ms Martin : They were consulted in the development of the standard.

Senator RHIANNON: When were you meeting with them?

Ms Martin : I would have to take that on notice.

Senator RHIANNON: Was it between the end of 2015 and leading up to March 2016?

Ms Martin : There would have been several meetings. I am not sure of the dates. I would have to take it on notice.

Senator RHIANNON: Did the Minister for Agriculture and Water Resources, or representatives of the minister, discuss the proposed information standard with small-business minister, Michael McCormack; Minister Kelly O'Dwyer; or any of your staff during this period?

Ms Martin : I am not aware of any discussions of that nature. I would have to take that on notice as well.

Senator RHIANNON: The final information standard contains five broad exceptions for providing meaningful and regular access to the outdoor range, and includes none of the factors that are relevant to determining the extent to which birds will access the range. What consideration was given to the new information standard actually making the ACCC's job in policing dodgy free-range claims even harder?

Ms Martin : Sorry?

Senator RHIANNON: What consideration was given to the new information standard with regard to the ACCC's job in policing free-range claims?

Ms Martin : A range of stakeholders' views were taken into consideration in developing the information standard, including consultation with ACCC.

Senator RHIANNON: To what extent was the ACCC kept informed of the development of the information standard?

Ms Martin : They were kept closely informed.

Senator RHIANNON: So, like, whenever you would have a meeting, you would update them—share all of the minutes and that sort of thing?

Ms Martin : Yes. They are also represented on the consumer affairs forum for Australia and New Zealand.

Senator RHIANNON: Did the ACCC express a view to Treasury about the proposed information standard?

Ms Martin : They provided a number of different comments and views throughout the process on the development of the information standard.

Senator RHIANNON: Was that at variance with 1,500 hens per hectare?

Ms Martin : The information standard has a maximum stocking density of 10,000 hens per hectare.

Senator RHIANNON: Was it at variance with that?

Ms Martin : That was a decision of ministers, 10,000 hens per hectare. That decision was made by consumer affairs ministers, and that is what we were instructed to implement.

Senator RHIANNON: Has the ACCC made any indications to Treasury that the proposed information standard may make enforcement of free-range claims more difficult?

Ms Martin : Not that I am aware of.

Senator RHIANNON: That would be fairly significant because enforcement is now where it is at. Do you need to take it on notice or are you aware of it?

Mr Lonsdale : I think we are clear.

Senator RHIANNON: You are clear that they did not?

Mr Lonsdale : Yes. To the best of our knowledge, that is right.

Senator RHIANNON: When I hear 'best of our knowledge', it is often code for—

Senator Cormann: There is no code. It is very straightforward. I reject the implication, of you suggesting that this is code. It is a very direct and straightforward answer.

Senator RHIANNON: What level of consideration did the markets group give to the fact that 68 per cent of Australians buy free-range eggs for animal welfare reasons and to support true free-range-eggs producers?

Ms Martin : The information standard was not about animal welfare, it was about providing consumers with clear information on the types of eggs that they were buying, to be in line with the decision made by consumer affairs ministers.

Senator RHIANNON: But you have just said that it was to provide information to consumers. Much of the research shows that consumers buy free-range eggs for animal welfare reasons. Wouldn't that be relevant, to take that into consideration?

Ms Martin : We were implementing an information standard where the broad parameters had already been agreed by consumer affairs ministers, including 10,000 hens per hectare—which might be considered an animal welfare issue, but we were not open to changing that.

Senator RHIANNON: The animal welfare issue did not come into it when you were working out what the stocking level should be?

Ms Martin : We did not work out what the stocking level should be; ministers agreed that.

Senator RHIANNON: In terms of what your input is not taking into account on animal welfare issues—

Ms Martin : No, animal welfare issues go to the model code for poultry. That is an issue for the agriculture department.

Senator RHIANNON: Are you referring to the CSIRO voluntary code there or to another code?

Ms Martin : I think it is a voluntary code, yes. It is under review at the moment.

Senator RHIANNON: So the CSIRO voluntary code of practice—

Ms Martin : I am not sure if it is a CSIRO voluntary code, but there is a model code for poultry.

Senator RHIANNON: I have a question on the CSIRO voluntary code, so I will just ask that. The CSIRO voluntary code of practice for free range egg-stocking densities has been at 1,500 per hectare for quite a while. Do you know for how long that has been in place and does it still exist, or has the government done away with it? I know that it is not your area of work, but, considering Treasury has been giving advice on this, I would have assumed that you would have gained advice from within government. What I am trying to determine is what advice you have gained from other departments that you have then based your recommendations on.

Ms Martin : As you said, we are not responsible for the model code for poultry. I understand that that is being reviewed at the moment. In terms of how long it has been in place for, I would need to refer that question probably to the department of agriculture.

Senator RHIANNON: Just to finish up: when you are undertaking this work, I imagine you are looking at other jurisdictions. Have you come across any other jurisdictions which determine that 'free range' can be a stocking level up to 10,000?

Ms Martin : Other jurisdictions?

Senator RHIANNON: Other countries.

Ms Martin : I am not aware of any other countries that have a maximum stocking density of 10,000 hens per hectare.

Senator RHIANNON: Did you look at other countries?

Ms Martin : I am aware that there are different stocking density levels in our countries, yes.

Senator RHIANNON: What are they—the ones that you looked at?

Ms Martin : I would have to take that on notice.

Senator RHIANNON: Do you know of any free range egg accreditation scheme in other countries and what their maximum is?

Ms Martin : We would have looked at those things in informing consumer affairs ministers, but I would have to take on notice what they actually are.

Senator RHIANNON: I imagine you would agree that it would be very significant, considering that the most controversial aspect of this whole decision was the maximum level. You would have information on it. Is that correct?

Mr Lonsdale : What Ms Martin is saying is that we would have information. You are right, Senator. These are the sorts of issues that would be brought to ministers attention in making decisions, but we do not have a comprehensive list of acreage for free range hens across countries here. If you would like that, we are happy to take that on notice.

Senator RHIANNON: Thank you.

Senator GALLAGHER: I was told that markets is the group that supports the small business minister.

Mr Lonsdale : Correct. We have Mr Boneham here. Mr Boneham is the division head of the small business division.

Senator GALLAGHER: Thank you. I have some questions about the small business roadshows. Are you coordinating the small business roadshows?

Mr Boneham : No. We do not organise that. That is organised out of the small business minister's office.

Senator GALLAGHER: I spoke with the ATO and the small business commissioner—I think I am not verballing them—and they were saying that their attendance was coordinated through Treasury.

Mr Boneham : My understanding is that they have been invited by the office rather than Treasury.

Senator GALLAGHER: How do you support the roadshows? What is your role?

Mr Boneham : Basically, our role would be that if there are issues which come up and we are asked for advice, we provide that advice. We do not do anything like organise venues or organise flights. It is mainly advice issues. If they want advice on what the government is doing in relation to skills, we can provide that advice.

Senator GALLAGHER: Do you attend the roadshows?

Mr Boneham : No.

Senator GALLAGHER: Interesting. Who pays for them?

Mr Boneham : I think you will need to confirm that with the minister's office. We are going to take that on notice. My understanding is that the ACCC, the ATO and the ombudsman will pay for their airfares. I think that was confirmed today by the ATO—

Senator GALLAGHER: I think they took it on notice.

Mr Boneham : when they said that they try to send their staff members around the general area to cut down costs. I imagine that the issue for the small business minister's office is coming out of his budget.

Senator Cormann: The Small Business Roadshow is, of course, a policy forum designed to provide assistance and support to small business. It is a very valuable platform for the minister and agencies to gain feedback and ideas to inform the policymaking process.

Senator GALLAGHER: Yes. What do you mean when you say, 'His budget'? Is there a separate ministerial budget for hire venue costs?

Mr Boneham : I will take that on notice, but we are not involved in funding any of that expenditure.

Senator GALLAGHER: So you do not print any of the materials?

Mr Boneham : No, I do not think we have been asked to print any of those either.

Senator GALLAGHER: It is an unusual arrangement, isn't it? They are promoted as official government forums with government public servants there.

Senator Cormann: Well, they are.

Senator GALLAGHER: I am just interested in the administrative unit that supports the work.

Senator Cormann: If you want to get further details on the administrative arrangements, we have already indicated that we will provide that information on notice. It is an official government event. It is a policy development forum.

Senator GALLAGHER: I will be pretty brief. I had a look at these roadshows, and by my assessment there have been 32 of these hosted between February and May. There may have been a couple more in the last week, I have not followed it up. But all of them have been in government electorates with government MPs invited to attend, except for three of them. Twenty nine of the 32 have been in government seats across the country. Of the two or three, I think there was one in Indi—so that is an Independent seat, but that Independent was not invited to attend. And then there have been two in Labor-held seats, and on both of those occasions another Liberal attended. In one instance it was Senator Payne, perhaps as the duty senator. What is your response to that: that the roadshows are only visiting places in Australia that voted for Liberal members?

Senator Cormann: I am not personally aware of what the schedule is, but I will find out on notice from the responsible minister, Minister McCormack on what basis decisions are made to visit relevant parts of Australia.

Senator GALLAGHER: It does look a bit odd though, doesn't it, when you have had 32 roadshows and none of them have managed either to invite a local Labor member or hold one in a Labor seat. Twenty-nine of them have been hosted in Liberal electorates, with public servants attending, mind you—public servants from the ATO, the small business ombudsman and the ACCC. They are advertised as a function with public servants to attend, but it seems to me that it is a highly political event.

Senator Cormann: I do not agree that it is a highly political event. I do not agree with that. It is a government policy forum, so it is not unusual that government members would attend.

Senator GALLAGHER: Not if you choose government seats.

Senator Cormann: I am not aware of the logistical arrangements underpinning this particular roadshow. I have heard your questions and I have taken them on notice. I will see what answers Minister McCormack is able to provide.

Senator GALLAGHER: The other information we have certainly heard from one of the events is that there is openly advertised criticism of the opposition's policy positions to be discussed at the forum, which public servants then attend as well.

Senator Cormann: Again, I do not think it is unusual for members of the government, as it is not unusual for members of the opposition, to express views on alternative approaches.

Senator GALLAGHER: But not if it is a Liberal Party event that would not surprise me, but if this is—

Senator Cormann: The government is obviously focused on developing and promoting government policy.

Senator GALLAGHER: That is fine, but at these events public servants are being invited to attend and provide support to those meetings. Do you not see a problem with that?

Senator Cormann: That is commentary on your part. In relation to the active part of the question, as to the logistics underpinning these fora, we have taken that on notice.

Senator GALLAGHER: Taxpayer funds are being used to attend. There will be travel allowance, there will be flights and there will be resourcing, seemingly only to visit Liberal or National electorates.

Senator Cormann: This is all commentary.

Senator GALLAGHER: It is not commentary.

Senator Cormann: Well, it is commentary.

Senator GALLAGHER: Do you know where I got all this information from? Minister McCormack's—

Senator Cormann: I am actually advised that Robert Mitchell, Jacinta Collins and David Feeney have all been invited.

Senator GALLAGHER: Yes, do you know when that happened? Last week after questions got asked to you in Finance estimates. There was a flurry of activity.

Senator Cormann: I cannot recall the question, in fairness.

Senator GALLAGHER: Yes, it was asked as part of -not Finance; PM&C.

Senator Cormann: The conversation I remember was the suggestion that I was not circulating my press releases and transcripts to members and senators. I hope you getting them now.

Senator GALLAGHER: We are all on that list. That has been fixed up. I have got a lot of friends who have been thanking me for being added. In fact, there is one now.

Senator Cormann: We aim to please.

Senator GALLAGHER: It gets even murkier. I think were questions asked in PM&C estimates—I was wrong, it was not Finance—and then there was a flurry of activity and phone calls to actually organise some of these roadshows in other seats. But in the meantime from the 32 that I have looked at, which have all been taken from the minister's own media releases we have got quite considerable expenditure of public servants and taxpayer funds for attending these meanings.

Senator Cormann: We are obviously providing the relevant information on notice. I am not sure that that is an appropriate characterisation. I am sure that Minister McCormack is very focused on making sure that the expenditure is as low as possible and that the roadshow and the policy fora are run in the most efficient way possible.

Senator GALLAGHER: As long as they are in Liberal-held seats. Based on the information I provided today, do you believe this is appropriate?

Senator Cormann: I do not accept that. I will make my own inquiries, and I have already taken questions on notice. I am not going to provide a commentary based on your assertions. I will provide answers to the questions taken on notice.

Senator GALLAGHER: You do not believe me?

Senator Cormann: I am not going to provide commentary in response to commentary. That is not what estimates is for.

Senator GALLAGHER: It is not commentary. This is information that I have taken from the media.

Senator Cormann: You are making commentary, and you are inviting me to comment on your comments.

Senator GALLAGHER: No.

Senator Cormann: That is not what I am proposing to do.

Senator GALLAGHER: Any questions I have about who attended, the materials used and all of that has to go to the minister's own office?

Mr Boneham : We would have to ask the minister's office.

Senator GALLAGHER: So you would not have any of that information at all?

Ms Brown : We do not retain any of that information.

Senator GALLAGHER: Can you confirm that Treasury officials did not attend any of these?

Mr Boneham : No Treasury officials have attended.

Senator GALLAGHER: Okay, I will follow that up. I want to go back to the bank tax numbers—I promise for one last time. Mr Lonsdale, you took me to statement 10-24, which I think gives us a total impact of $7 billion for the major bank levy. Is that right?

Mr Lonsdale : In fiscal terms for the revenue head, correct.

Senator GALLAGHER: You said that the figures at 10-24 do not take into account things like deductions and other interactions. Could you provide us—I meant to ask this earlier—with a list of what the other interactions would be?

Mr Lonsdale : I am happy to take that on notice.

Senator GALLAGHER: You cannot—

Senator Cormann: We have taken it on notice.

Senator GALLAGHER: How much of the difference between the fiscal balance numbers at 10-22 and the numbers in BP 2 are deductions and how many are other interactions?

Senator Cormann: We will take that on notice.

Senator GALLAGHER: Again, you cannot answer that now?

Senator Cormann: We will take that on notice. No, I cannot answer that now.

Senator GALLAGHER: Could officials answer it?

Senator Cormann: I have taken it on notice, and we will make sure that you get an accurate response.

Senator GALLAGHER: This is very frustrating. This is a major element of the budget, and it is budget estimates.

Senator Cormann: And no doubt there will be a Senate inquiry specifically into this bill.

Senator GALLAGHER: We will ask them again.

Senator Cormann: You are asking questions that will, of course—

Senator GALLAGHER: People should come prepared for them, then.

Senator Cormann: be explored during the Senate inquiry as well.

Senator GALLAGHER: I do not think there is any excuse. Can I just confirm—I missed Senator Ketter asking about this—will the credit card reforms be introduced this year?

Ms Brown : Yes, in the Spring.

Senator Cormann: Which ones?

Senator GALLAGHER: The credit card reforms. Not the small-amount credit cards—I just want to be specific.

Ms Brown : They will be introduced in the Spring sittings.

Senator GALLAGHER: And you have the legislation being drafted?

Ms Brown : We are working on preparing to achieve that.

Senator Cormann: By the way, I have to correct an assertion that you made in relation to the attendance of various Labor members at these policy forums. I am advised that the three members that I mentioned personally asked Minister McCormack in the chamber to be involved long before last week. This is not something that is in any way related to any questioning at Senate estimates last week. That is what I have been advised.

Senator GALLAGHER: I asked if the roadshows were ever going to visit their own seats because 32 of them had not. I do not think that helps very much, but I appreciate the information.

Senator WHISH-WILSON: I have one question on the bank levy. Mr Lonsdale, it has been proposed by some members of parliament, and I think by the ABA, that the levy be extended to foreign banks. I understand that, the way the legislation has been set up now, there is a $100 billion liability for any bank that is above that level. If the legislation was changed—for example, with an amendment to include foreign banks with much lower liability levels—would it be workable?

Mr Lonsdale : That is a policy issue. It is, in some sense, a hypothetical issue because we do not have it. It would be something that would require quite a bit of design, I think. There are a range of issues around what is a foreign bank. Are we talking about branches operating here in very large international banks? How would that operate. Is there scope to move things? They are the issues that would need very careful consideration.

Senator WHISH-WILSON: If it did not include the second tier Australian banks—so, if they were excluded from the levy based on their size and were not included with foreign banks—would that be workable?

Mr Lonsdale : Again, these are policy issues for the government. It is hard for me to add to my previous answer. All of these issues are very significant issues, I have to say. They are very significant issues that will go to the design of the base. Because of that, you would want to have a very close look at them and the interactions before putting advice to government. But, you are right, they are issues that were raised by the banks and the industry in the consultation period.

Senator KETTER: I would like to go to the campaign which is called Keep Me Posted, which is in relation to a campaign initiated by the shadow minister for consumer affairs. It is about vulnerable consumers who are required to pay extra for statements, bills and accounts being sent by mail rather than electronically. In a speech in the other place, the member for Mackellar indicated that the Minister for Small Business has advised that he has tasked Treasury with reviewing regulatory arrangements around fees for paper bills, with the view to identifying scope for regulatory reform. When did Treasury receive the request from the minister to explore this issue?

Mr Lonsdale : I might ask Ms Martin to comment on that.

Ms Martin : In the last few weeks, we have had discussions with the minister's office and they have indicated that the minister would like us to review the current laws such as the Australian Consumer Law and how that applies to this area.

Senator KETTER: Are you able to give me a specific date for the initiation of that?

Ms Martin : I would have to take that on notice.

Senator KETTER: Okay. What is the nature of your work in this area?

Ms Martin : We are looking at how the Australian Consumer Law might apply in this area. We are also looking at the electronic transactions regulations. We are looking at the extent of the problem and whether additional specific legislation is ultimately required.

Senator KETTER: What resources are you requiring to do this work, human and financial?

Ms Martin : We are using our business-as-usual resources in the consumer policy unit.

Senator KETTER: Is there a due date nominated by the minister or his office by which Treasury must report on this work?

Ms Martin : There has not been, no.

Senator KETTER: What consultation has Treasury or the minister or the minister's office conducted in relation to this issue?

Ms Martin : I met with Keep Me Posted yesterday and I understand the minister has met with Keep Me Posted a number of times.

Senator KETTER: Can you provide the dates for those on notice?

Ms Martin : Yes.

Senator KETTER: Has Treasury briefed the minister on this issue?

Ms Martin : No.

Senator KETTER: Does Treasury intend to take the issue to state and territory ministers through COAG or the CAM process?

Ms Martin : To the consumer affairs ministers forum? A decision has not been made on that.

Senator GALLAGHER: Are you the group that does the northern Australia insurance report?

Mr Lonsdale : Yes.

Senator GALLAGHER: I think the minister gave a commitment to release the government response to the task force report some time ago now. Can you give me an update on where that is?

Mr Lonsdale : My understanding is that the report is with government.

Ms Brown : The report was released in March 2016.

Senator GALLAGHER: The report was released, but:

The government will consider the options contained in the report and intends to provide a detailed response by 30 June 2016.

That is a quote from the minister on 4 March 2016. Is there any further information you can provide as to a detailed response?

Mr Lonsdale : All I can say is the government is yet to announce its response to the report. I cannot give you a date on when that is coming.

Senator GALLAGHER: Has the response been finalised or is it in the process of being finalised?

Mr Lonsdale : We would have provided advice to government and, as at this moment, there is no public response.

Senator GALLAGHER: Can you explain why there has been a delay from what the minister promised?

Mr Lonsdale : It is an issue for government as to when they would like to release a response. If it is helpful, I am happy to take that question on notice and provide you with a response.

Senator GALLAGHER: I would certainly like to know when it is coming. I know quite a lot of people, particularly in the insurance industry, who would be interested in the government's response and have been waiting for it.

Mr Lonsdale : I understand.

Senator GALLAGHER: It certainly comes up a lot when I am talking to people. Whatever you can provide—

Mr Lonsdale : If we can provide more, we will come back to you.

Senator GALLAGHER: And I think there was one further question on product intervention power. Have you started drafting that legislation?

Ms Brown : A consultation paper was issued in December. Submissions closed I think on 13 March, or sometime in March. So, those submissions are still being considered, before legislation would begin to be drafted. So, we are still in the process of reviewing the submissions.

Senator GALLAGHER: Is there one step before the legislation? Is there a response from the consultation? Or do you just then go straight to draft legislation?

Ms Brown : We would put a recommendation to the minister as to what policy position should inform the legislation, based on the submissions received and other matters considered as part of the consultation process. We would then prepare drafting instructions consistent with that policy decision made by the minister and progress that to legislation.

Senator GALLAGHER: So, you cannot at this point give a timetable on what we are looking at for that legislation?

Mr Lonsdale : We do not have a timetable, but we can say that we are intending to prepare draft legislation this calendar year. That is what we are trying to do.

Senator GALLAGHER: Is that with some of the extra resources you have in your budget measure?

Mr Lonsdale : This is a measure that pre-dates the budget. It was one of the key measures in the Murray inquiry, under the consumer outcomes.

Senator GALLAGHER: But you have struggled for resources—that is what I take from the budget measure. You have a heavy legislative program. So, I presume that the government has responded to that through the measure to allow Treasury additional resources for legislation.

Mr Lonsdale : Correct. There is a very large number of measures that we are busy drafting and trying to implement legislation for. This is one of them.

Senator GALLAGHER: All right. Well, no doubt we will talk about that again.

CHAIR: There are no more questions for the Treasury Markets Group, so you are free to go. Thank you very much for your attendance here today.