Proposals in the pipeline

So often new legislation can become a sledgehammer to crack a walnut.

Author

Melissa Adler

In an attempt to alter attitudes and behaviours, governments often use legislation to intervene. Three recent national proposals look set to affect the residential building industry in the next 12 months:

• limiting the use of cash for transactions of more than $10,000
• compelling businesses to investigate modern slavery risks in their supply chain
• changing the payment of GST on settlement.

The federal government’s intent is to address adverse behaviour. But the proposed regulatory solutions will potentially impose burdensome regulations on the industry without sufficient evidence that the reforms will specifically target the undesirable behaviours.

Proposed legislation: Limits on cash payments

Generally, government action addressing businesses operating outside the tax and regulatory systems (also known as the black economy) is a positive way of curbing illegal activity and creating a level playing field across all industries. Naturally this includes the residential building industry.

However, if the current proposal to limit single cash transactions economy-wide to $10,000 or less is implemented, it will do little to stamp out illegal activity or level the playing field. In fact, this measure is likely to adversely affect legitimate and compliant cash transactions above the limit.

The federal government is consulting on the proposal. HIA has highlighted a number of roadblocks that stand in the way of addressing tax leakage, tax avoidance, and criminal activities associated with large cash payments.

As an example, if two parties agree to transact in cash over the limit, who is liable to report the behaviours? And if reported, who would be penalised: the trader, the consumer, or both? And ultimately why, where all laws have been complied with, should people be unable to choose to use cash for transactions over $10,000?

HIA awaits the outcome and will update members as the consultation process progresses.

Proposed legislation: Modern slavery

The activities encapsulated by the term ‘modern slavery’ are, without question, reprehensible. These include slavery, forced and bonded labour, exploitation, human trafficking, and the worst forms of child labour.

In response to these abuses, the government has introduced legislation that would require that all Australian businesses with an annual revenue of more than $100 million lodge a ‘Modern Slavery Statement’.

The annual statement needs to address a range of mandatory criteria, be signed off by a member of the board of directors, and would be published on a government website.

The statement must identify the reporting entity’s structure, operations and supply chains, in addition to:

• the risks of modern slavery practices in the operations and supply chains (beyond tier one suppliers) of the reporting entity and any entities it owns or controls
• actions taken to assess and address modern slavery risks including due diligence and implementing systems to remedy the incidence (such as developing policies, processes, and staff training that address modern slavery risks)
• how the reporting entity assesses the effectiveness of its actions
• a description of the consultation processes with any entities owned or controlled by the reporting entity.

Similar legislation passed through the NSW Parliament in June and largely mirrors the federal proposal with three key differences:

• entities with an annual turnover of $50 million or more must prepare a modern slavery statement every financial year
• penalties apply for failing to provide a report, failing to make a modern slavery statement public and for providing false and misleading information
• the legislation establishes an Anti-Slavery Commissioner who is, amongst other things, responsible for reporting concerning risks of modern slavery occurring in supply chains.

HIA is concerned that the proposed measures are overly complex and burdensome for residential building businesses.

While the measures propose to target those larger businesses with the capacity and capability to address and respond to risks of modern slavery in their supply chains, HIA has highlighted that the legislation will inappropriately place burdens on smaller businesses. This is because businesses within the supply chains of larger businesses will also be captured by the reporting requirements.

The draft legislation is currently being reviewed by a parliamentary senate committee and no commencement dates have been set.

HIA is working to clarify how residential builders may be impacted by the laws should they proceed.

The changes will apply to the sale of new residential lots, off the plan development, and the sale of house and land packages including spec homes

Now law: Payment of GST on settlement

The final swing of the sledgehammer hit GST payments on the sale of new residential properties on 1 July.

In response to claims that in the past property developers have dissolved their company before remitting the GST collected from purchases to the Australian Tax Office (ATO), purchasers (instead of vendors) are now required to withhold the GST and then remit this directly to the ATO at the time of settlement.

The changes only apply to contracts where a GST liability would normally exist as part of the property transaction, including:

• new homes which include the land within the contract
• land sales.

Therefore the changes will apply to the sale of new residential lots, off-the-plan development, and the sale of house and land packages including spec homes.

The changes do not apply to standalone building or construction contracts which do not include the sale of land.

The changes will apply to all contracts for sale of properties that have a GST liability and:

• are entered into on or after 1 July 2018
• were entered into before 1 July 2018, where the first payment for the supply (other than the deposit) is not made until a time on or after 1 July 2020.

Contracts signed before 1 July 2018 where any payment for the supply (other than the deposit) is made before 1 July 2020 will not be affected by the changes.

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