The Abbott government is pressing ahead with plans to exempt about 1,000 Australian-owned private companies from tax transparency measures after claims wealthy owners could face kidnapping threats.After the kidnapping suggestion was raised at a Coalition party meeting in March, the government confirmed it was looking to amend the disclosure rules in part due to concerns about risks to personal safety.On Thursday the government released an exposure draft of legislation to wind back Labor-era laws that require the publication of basic tax information of corporate entities with at least $100m in annual turnover.
Labor vowed on Friday to oppose the changes, saying the exposure draft was evidence the government was determined “to shield some of Australia’s biggest firms from reasonable disclosure about whether they’re paying their fair share”.
The proposed change would exempt private companies – such as those controlled by the billionaire mining magnate Gina Rinehart – from disclosures that were due to be published by the Australian Tax Office the first time later this year.
But the ATO would still be required to publish details about companies listed on the stock exchange and multinational corporations operating in Australia.
The proposed exemption would spare about 1,000 of the 2,300 companies that were to be subject to the disclosure obligations, according to the latest government estimates. Previously published estimates suggested the exemption would benefit about 700 out of 1,600 affected companies.
The former Labor government’s tax transparency laws required the publication of the total income, the taxable income or net income, and income tax payable of corporate tax entities with $100m or more in total income.
Explanatory notes accompanying the Coalition’s draft bill say the proposed changes are designed to ensure the public release of information “does not affect the privacy and personal security of the ultimate owners of Australian-owned private companies” and does not harm “market environments”.
“The government has a number of concerns with the [existing] laws,” the notes say. “Privacy concerns exist for the Australian owners of closely held companies where the disclosure of the companies’ information effectively discloses information about the owners’ financial affairs.
“Many private companies have raised legitimate concerns about the commercial sensitivity of the information and the impact of disclosure on their personal privacy and security. The nature of the information disclosed can be misleading in that it ignores the residual liability on the owners for personal income tax payable on the company’s distributed after tax profits.
“In some cases, the information to be disclosed may not otherwise be available to the private company’s competition, customers and suppliers. The information may be used in commercial negotiations to the advantage of larger firms and potentially cause loss to the company.”
The notes say many private companies “would bear a disproportionate cost in publishing additional information in order to protect their reputation and provide necessary context to the public about their tax affairs”.
The proposed exemption would be available to private companies that are based in Australia. But the exemption would not be available if the company was a wholly-owned subsidiary of a foreign corporate group, or if more than 50% of the company was foreign owned.
Labor said on Friday it would oppose the proposed changes. The shadow assistant treasurer, Andrew Leigh, said there should be no carve-outs from the Labor-introduced transparency measures.
“What counts in this place is not what you say about tax transparency but what you actually do,” Leigh said, before criticising the prime minister and the treasurer.
“Tony Abbott and Joe Hockey don’t want you to know how much tax big companies are paying. They want to stand on the side of keeping tax a secret rather than on the side of openness and transparency.”
Leigh said transparency played an important role in promoting confidence in the tax system and “if there is any truth to the Abbott government’s rhetoric on corporate tax avoidance, it must drop this bill before it even gets to the parliament”.
The assistant treasurer, Josh Frydenberg, has previously said the changes would not remove the tax obligations that all companies must meet.
“This information, whether it’s a tax payable or taxable income or total income, is already in the hands of the ATO and we are questioning whether there is a real justification for releasing the details about privately owned Australian companies, as opposed to multinationals, into the arena where there could be serious commercial and personal risk,” Frydenberg said in March.
Abbott said the former government’s tax transparency laws “purported to be a way of preventing large multinational companies from hiding their affairs but in fact it’s become, it seems, an invasion of privacy and intrusion for Australian private companies”.
When asked in March whether he was serious about a kidnap threat against wealthy Australians, the prime minister did not respond directly.
“It was pretty clear that there is a lot of antagonism in the community and among members of the Coalition party room about this particular legislation … so, we are looking closely at this,” Abbott said at the time.
The Treasury will accept public submissions on the draft bill until 3 July, after which the government will make a decision on the details.