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Tuesday, 14 February 2017
Page: 833

Senator PAYNE (New South WalesMinister for Defence) (17:25): I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—


Second Reading Speech

The Customs and Other Legislation Amendment Bill 2016 is an omnibus Bill that proposes a number of changes to the Customs Act, as well as amendments to the Commerce (Trade Descriptions) Act, and the Maritime Powers Act.

The amendments proposed in Schedule 1 of the Bill will allow regulations to be made so that export permits for defence and strategic goods can be revoked where, in the opinion of the Defence Minister, the exportation of those goods would prejudice Australia's national security, defence or international relations. After this amendment to the Customs Act commences, the Customs (Prohibited Exports) Regulations 1958 will need to be amended to give effect to this power.

Following feedback from participants throughout the pilot phase, Schedule 2 of the Bill will further streamline the accreditation process for the Australian Trusted Trader programme, by amending the Customs Act to remove the requirement that the Comptroller-General of Customs enter into an agreement with an entity that confers interim trusted trader status. This is being done at the suggestion of industry, and will reduce the regulatory burden on businesses seeking accreditation under the Australian Trusted Trader programme, and incentivise greater industry participation.

The Customs Act does not currently contain any mechanism by which an owner of goods can be exempt from liability to pay the import declaration processing charge. Schedule 3 of the Bill will amend the Customs Act to allow a determination that certain parties or goods are exempt from liability to pay this charge. These amendments will allow Australia to comply with international agreements and treaties involving the application of fees and charges at the border. These amendments ensure that people who pay the charge but are exempt from doing so are able to have their payment refunded.

Schedule 4 of the Bill will amend the Customs Act to extend the circumstances in which a person can apply to move, alter or interfere with goods for export that are subject to customs control. Outwards duty-free goods, including those issued under the current duty-free 'sealed bag scheme' require the same screening as any other baggage of travellers on international flights and voyages.

Screening staff at an international gateway airport are required to screen all liquids, aerosols and gels presented at a departure screening point. If an alarm is triggered while screening the goods, the goods are required to be re-screened. If the item is a duty-free item, this means removing it from the sealed duty-free packaging. However, the opening of sealed duty-free bags and/or tampering with the contents without permission while they are subject to customs control is an offence punishable under the Customs Act.

These amendments will allow screening authorities to apply for permission to open sealed duty-free bags for re-screening without breaching the Customs Act. Granting this permission will be relevant at international gateway airports, such as Melbourne, where departure screening occurs prior to customs processing.

Schedule 5 of the Bill will amend the Customs Act to remove unnecessary requirements for producers when demonstrating that they have made goods in Australia. Currently, when Australian manufacturers apply to have a tariff concession order revoked, or object to the making of a tariff concession order, they must meet two tests. They must demonstrate that at least 25 percent of factory costs of substitutable goods occur in Australia and that a substantial process of manufacture is also undertaken in Australia.

Where a substantial process of manufacture in Australia is proved, the Australian content always exceeds the 25 percent threshold as a matter of fact. Therefore, this requirement is to be removed. Providing evidence of factory costs requires detailed and confidential company accounting information and is a significant and costly administrative burden for manufacturers. Its removal is consistent with the Government's deregulation agenda.

Schedule 5 of the Bill also clarifies the requirements for Australian producers of made-to-order capital equipment when seeking to revoke a tariff concession order, or object to the making of a tariff concession order. If the tariff concession order relates to goods that are made-to-order capital equipment, Australian manufacturers need only demonstrate that they have the capacity to produce substitutable goods. Australian producers of made-to-order capital equipment do not need to have actually made substitutable goods the subject of a TCO application or revocation.

The amendment also extends the evidentiary window for a local manufacturer to demonstrate capability of production of substitutable goods from 2 years to 5 years. The current period of 2 years is often insufficient for an Australian manufacturer to demonstrate such capability in relation to large-scale capital works such as unique mining machinery, given the amount of time and labour involved in such manufacture.

Amendments to the Customs Act proposed in schedule 6 of the Bill will repeal an obsolete provision relating to the collection of duty on goods imported for a temporary purpose.

Schedule 7 of the Bill amends the Commerce (Trade Descriptions) Act to allow an officer to inspect and examine goods that are, or that the officer reasonably believes are, goods prescribed by the regulations made under that Act which are imported, and allows those Regulations to prescribe penalties, not exceeding 50 penalty units, for offences against those Regulations. These amendments reflect modern drafting practices.

The amendments proposed in Schedule 8 of the Bill are intended to confirm the Government's clear intent that the powers under the Maritime Powers Act are able to be exercised in the course of passage through or above the waters of another country in a manner consistent with the 1982 United Nations Convention on the Law of the Sea.

Finally, Schedule 9 of the Bill will repeal the Customs (Tariff Concession System Validations) Act 1999 and the Import Processing Charges (Amendment and Repeal) Act 2002 as these Acts are now redundant.

I commend the Bill to the Chamber.


Second Reading Speech

The Customs Tariff Amendment Bill 2016 contains four amendments to the Customs Tariff Act 1995 that will further enhance the operation of certain aspects of this Act.

Firstly, the Bill will repeal Schedule 1 to the Act and will enable its contents to instead be included in the Customs Tariff Regulations 2004. Schedule 1 provides for countries and places that are eligible for preferential rates of customs duty for certain goods. Placing these details in a regulation will allow the provisions to be updated in a timelier manner, when required.

Secondly, this Bill will remove the expired safeguard provisions relating to the Thailand-Australia Free Trade Agreement from the Act. These agricultural safeguard provisions expired on 31 December 2008, and their removal will not affect the collection of customs duties.

Thirdly, the Bill will add three new Additional Notes to Schedule 3 of the Act to clarify the tariff classification of certain fruits, vegetables and pastas in response to recent Administrative Appeals Tribunal decisions. These new notes will ensure that goods imported into Australia are classified consistently with our trading partners and our international obligations. This amendment will help to minimise administrative costs for importers and will not affect the amount of customs duty payable on such goods.

Finally, this Bill will amend the provisions relating to the concessional treatment of goods imported under the Enhanced Project By-law Scheme, which is implemented under item 44 of Schedule 4. This Scheme was closed to new applicants as part of the 2016-17 Budget. Importers that currently have a valid determination will continue to be able to access the Scheme until 31 December 2017 at this time all valid determinations will have expired. This Bill will provide clarity to importers using this scheme by inserting the end date in item 44.


Second Reading Speech

The Superannuation Amendment (PSSAP Membership) Bill 2016 (the Bill) enables members of the Public Sector Superannuation Accumulation Plan (PSSAP) who move to non-Commonwealth employment to choose to remain a contributory member of PSSAP.

The PSSAP, which was established on 1 July 2005, is the current default fund for new Commonwealth employees and employees of prescribed Commonwealth entities. As a fully funded accumulation scheme, the PSSAP provides more modern, flexible superannuation arrangements than the older Commonwealth defined benefit superannuation schemes, all of which are now closed to new members.

At present PSSAP members are unable to remain as contributory members when they move to non-Commonwealth employment. They must either maintain multiple superannuation accounts or consolidate their superannuation by moving the monies in their PSSAP account to another superannuation account. Both of these options involve additional administration costs for the member. For members who decide to maintain multiple superannuation accounts, these additional costs are ongoing.

The changes in the Bill address this issue by enabling PSSAP members who move to non-Commonwealth employment to maintain contributory membership. These persons will form a new sub-category of ordinary employer-sponsored member of PSSAP, referred to in the Bill as 'former Commonwealth ordinary employer-sponsored members', and their new employers will become 'designated employers'.

The changes will better align PSSAP with superannuation schemes in the superannuation industry, which commonly enable members to remain contributory members when they change employment. They are also consistent with broader government superannuation reforms and initiatives to lower the costs that members incur for the administration and management of their superannuation accounts.

The Bill places some restrictions on maintaining contributory PSSAP membership. A person must have been a Commonwealth employee or office holder for a continuous period of at least 12 months. They must also be engaged in non-Commonwealth employment in respect of which their employer has a Superannuation Guarantee obligation.

Those who move from Commonwealth employment to certain other roles with the Commonwealth - for example, service with the Australian Defence Force - will not be affected by the changes. They will continue to be subject to the Commonwealth superannuation arrangements specifically established for persons in these roles.

The Bill commences on the earlier of proclamation or 6 months after Royal Assent. This flexibility will help to ensure that Commonwealth Superannuation Corporation, the trustee of the Australian Government's main schemes, has sufficient time to arrange necessary changes to the PSSAP systems before the new arrangements take effect.

Overall, the changes are important to maintain contemporary Australian Government superannuation arrangements that are in line with those in the broader superannuation industry. They support workforce mobility and complement broader government initiatives to reduce the administration costs borne by members of superannuation schemes.



Today, I introduce a bill to amend the Corporations, Terrorism Insurance and Income Tax Assessment Acts.

This bill has the complementary objectives of maintaining trust and confidence in the financial system, while also promoting entrepreneurialism - and it does that across three fields.

First, it will provide greater consumer protection for retail client monies held by financial services licensees in relation to over-the-counter - or OTC - derivatives. This will better meet community expectations of consumer protection.

Second, it will limit the requirement to make public the disclosure documents given to employees under an eligible employee share scheme and lodged with the Australian Securities and Investments Commission.

And third, it provides clarity that the terrorism insurance scheme administered by the Australian Reinsurance Pool Corporation covers losses as a result of a declared terrorist incident using chemical, biological or other similar means.

In addition, this bill makes changes to the Income Tax Assessment Acts of 1936 and 1997 to include six new organisations as deductible gift recipients and to provide ongoing tax relief for assistance payments provided to eligible New Zealand special category visa holders who are impacted by disaster events in Australia.

Let me take you through the contents of this bill in some detail.

I'll start with Terrorism Insurance.

Schedule 1: Terrorism Insurance Act 2003

The bill includes an amendment to the Terrorism Insurance Act 2003.

The amendment clarifies the existing provisions to ensure the terrorism reinsurance scheme operates as originally intended, that is, to provide insurance against a declared terrorist incident, including when carried out by chemical, biological or other similar means.

Schedule 2: Employee Share Schemes

This bill also introduces a measure fulfilling the Government's commitment to make it easier for start-up companies to provide incentives to their employees through an Employee Share Scheme, or ESS.

In many cases, under the current law, companies wishing to utilise an ESS must provide a disclosure document to their employees that complies with the Corporations Act.

These documents contain information about the business so that employees are properly informed about their interests.

Under the current law, the company must also lodge these documents with ASIC, who then places them on the public register.

This is discouraging certain small companies and start-ups from implementing an ESS because it could result in the release of commercially sensitive information.

As part of the National Innovation and Science Agenda, we committed to removing the requirement for eligible ESS disclosure documents lodged with ASIC to be made available to the public.

This legislation will amend the Corporations Act so that disclosure documents for ESS will not be made public if all the companies in the group are unlisted, have been incorporated for less than 10 years and have an aggregated turnover of less than $50 million.

This legislation removes an impediment to entrepreneurialism and helps start-ups attract skilled employees at a time when they may be cash-poor. This will benefit both start-up companies and their potential employees and contractors.

Schedule 3: DGR Specific Listings

Schedule 3 to this Bill amends Division 30 of the Income Tax Assessment Act 1997 to add six entities as deductible gift recipient specific listings: The Australasian College of Dermatologists; College of Intensive Care Medicine of Australia and New Zealand Ltd; The Royal Australian and New Zealand College of Ophthalmologists; Australian Science Innovations Incorporated; The Ethics Centre Incorporated; and, for a five year period, Cambridge Australia Scholarships Limited.

Organisations may be specifically listed by name in the tax legislation only in exceptional circumstances where they also provide broad public benefits to the Australian community.

The Australasian College of Dermatologists trains and provides continuing professional development to dermatologists, supports scientific research, is an educator about dermatological matters and an advocate for the field of dermatology.

College of Intensive Care Medicine of Australia and New Zealand Ltd cultivates and encourages high principles of practice, ethics and professional integrity in relation to intensive care medicine practice, education, assessment, training and research.

The Royal Australian and New Zealand College of Ophthalmologists trains and develops ophthalmologists. Through continuing professional training, education, research and advocacy, it leads improvements in eye health care and facilitates the improvement of eye health care internationally, particularly in relation to indigenous populations.

Australian Science Innovations Incorporated organises, fosters and promotes Australian participation in the International Biology, Chemistry, Physics and Earth Science Olympiads and related activities, as well as engaging in other activities designed to encourage science excellence in secondary education.

The Ethics Centre Incorporated's core objective is to relieve the significant distress faced by those struggling with complex ethical decisions and the personal and community suffering resulting from unethical behaviour.

Cambridge Australia Scholarships Limited is established and located in Australia and widens access to the University of Cambridge for outstanding Australian students from all backgrounds.

By obtaining deductible gift recipient status, these entities will be able to attract additional public financial support for their activities, as taxpayers can claim an income tax deduction for certain gifts to deductible gift recipients.

Schedule 4: Ex-Gratia Disaster Recovery Payments

Schedule 4 to this Bill make amendments to the Income Tax Assessment Acts of 1936 and 1997 to provide ongoing income tax relief to ex gratia disaster assistance payments made to eligible New Zealand Special Category Visa (subclass 444) holders.

The Australian Government gives eligible individuals adversely affected by a disaster event a helping hand by providing Disaster Recovery Payments or Income Support Allowances. At this difficult time, it's important that these payments are not subject to tax.

Exempting disaster recovery payments from tax, or providing a rebate for income support allowances, maximises the value of the payments for people whose lives are affected by a disaster event. It also ensures that the payments are treated in the same way as disaster assistance payments made to Australians.

Providing ongoing tax relief will provide recipients with certainty that their payments will be free from tax, or that a rebate is available. This will remove one concern from individuals who have been affected by a disaster event.

Schedule 5: Client Money

Honourable members may recall that, in introducing this bill, the Government is not only implementing a commitment set out in our response to the Financial System Inquiry, we are also responding to a view, long held by ASIC, that the current regime provides inadequate protection for retail client monies.

We know that trust and confidence in the sector have been diminished by the actions of some industry participants.

Once diminished, one has to work hard to restore them.

This Government is prepared to work hard.

This bill is just one part of our agenda to ensure that Australia's financial services regulatory regime can inspire confidence and trust.

And we've consulted extensively on this measure.

While views differed on the best approach to protecting client money, most stakeholders agreed that the regime as it currently stands is inadequate.

And that's why we are working to foster an environment where consumer protection matches the level of risk as it is understood by the client.

Let me explain.

Currently, Australia's regulatory arrangements governing the use of client money by OTC derivatives providers put retail clients at risk of losing their money in the event of the licensee's insolvency.

If client money relating to a derivative, or a dealing in a derivative, continues to be allowed to be used by financial services licensees to meet various obligations, which they themselves have incurred, confidence in our financial system will continue to be undermined.

Once client money has been withdrawn from client accounts by the licensee, it is no longer protected.

Instead, clients are exposed to higher levels of risk, particularly counter-party risk, and they might consequently be unable to recover their money if a licensee becomes insolvent.

Compared to experienced OTC derivatives traders, retail clients (who are usually 'mum and dad' investors or small businesses) often have less experience and may not understand or be able to evaluate the risks associated with their client money being used to meet the licensee's own obligations.

Certainly, for the vast majority of financial products and services, the client money regime already prohibits licensees from using client money and client property for their own purposes - in other words, most of the time, client money is held on trust for the client.

In those cases, client money is returned to clients if the licensee becomes insolvent, rather than being added to the pool that is distributed among all the licensee's creditors, in accordance with the insolvency laws.

By pursuing these reforms, we are closing a loophole, which will ensure that all retail client money is protected, in accordance with the same standards.

Honourable members, the reforms I introduce today will better protect client money provided for retail derivatives by ensuring that retail client money must be held on trust for the client.

The reforms do not ban licensees from hedging or prevent them from managing their own business risks.

Indeed, licensees are required by law to have adequate risk management practices in place.

But licensees' risk management practices need to be self-sustaining - they can't continue to facilitate their own risk management by placing retail client money at risk. And I appreciate that many licensees already choose both to hedge with their own money and respect clients' expectations that their money will be segregated and held on trust.

These reforms also provide ASIC with the power to effectively monitor the limitations on the use of derivative client money by enabling ASIC to make client money reconciliation and reporting rules.

The financial system is certainly more resilient than before the global financial crisis.

Nonetheless, I agree with the Financial System Inquiry's conclusions that, while consumers are ultimately responsible for the consequences of their financial decisions, they must be treated fairly and ethically.

Furthermore, the regulatory regime should engender confidence and trust in the system - because reduced trust represents a barrier to consumers engaging with the Australian financial system and blocks investment in Australian businesses.

That's why the Government has already introduced a number of measures to improve consumer protection within the financial system. We have established a register of financial advisers that allows consumers to verify the credentials of financial advisers and be confident that they are appropriately qualified and experienced.

We're progressing reforms to lift the professional, educational and ethical standards of financial advisers who provide advice on more complex financial products to retail clients.

And, we're progressing reforms to life insurance advice remuneration structures, which are an important step towards addressing concerns that remuneration incentives are affecting the quality of advice provided to consumers and encouraging the unnecessary turnover of policies.

Full details of these measures are contained in the explanatory memorandum.

In closing, I note that these reforms represent necessary and valuable changes to the current regulatory environment, both for the treatment of client monies and the disclosure requirements for Employee Share Schemes.

Not only will they deliver significant benefits to consumers, start-ups and employees, they will also help maintain trust and confidence in the financial system.

I commend this bill to the Senate.

Debate adjourned.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.