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CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer and Copyright Details
Taxation Laws (Technical
Amendments) Bill 1997
Date
Introduced: 4
December 1997
House: House of Representatives
Portfolio: Treasury
Commencement: The Act cited as the
Taxation Laws (Technical Amendments) Act 1997, commences
on the day it receives Royal Assent. The date of commencement of
each Schedule is referred to under the main provisions of this
Bills Digest.
The purpose of
this Bill is to make a number of minor amendments and technical
corrections to the Income Tax Assessment Act 1936 (ITAA
1936), the Income Tax Assessment Act 1997 (ITAA 1997), the
Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986), the
Taxation Administration Act 1953 (TAA 1953) and other
tax-related legislation.
Due to the disparate measures in the various
Schedules in the Bill, the background to each of these measures
will be considered under Main Provisions of each of these
measures.
The more significant measures proposed by the
amendments in some of the Schedules in the Bill will be considered
in this section of the Bills Digest. It is recommended that
reference be made to the Explanatory Memorandum to the Bill for an
explanation of the other measures in the Bill.
Schedule 1
Self-assessment measures
In 1986 the self-assessment system was
introduced into the ITAA 1936. In 1992 a number of fundamental
changes were made to the self-assessment system to give certainty
and fairness to taxpayers. The amendments to the TAA 1953 and the
ITAA 1936 proposed in Schedule 1 of the Bill are intended to
correct a number of defects that have become evident in operating
the self-assessment system. The amendments also extend the
operation of the self-assessment system to interest payable under
section 102AAM by instalment taxpayers.
Proposed subsection
102AAM(13A) will provide that interest payable under
section 102AAM on distributions received by companies and
superannuation funds from non-resident trust estates, that are not
taxed at a comparable rate in foreign countries, are to be subject
to the self-assessment process. The amendments will apply in
respect of assessments for 1997-98 and later years of income.
Rulings
Under the provisions of the TAA 1953, taxpayers
can apply for a binding private ruling up to 4 years after the last
day allowed for lodging the return for the year of income to which
that ruling relates. If the Commissioner does not give a private
ruling within the period, allowed under section 170 of the ITAA
1936, the Commissioner is not able to amend the assessment to give
effect to the private ruling. Proposed subsection
170(6A) will enable the Commissioner to amend the
assessment to give effect to the private ruling. This change will
apply to any ruling request made after 30 June 1992 when the
private binding rulings system commenced. The Bill also amends the
TAA 1953 to clarify the definition of 'year of income' for private
ruling purposes.
Elections
The ITAA 1936 allows a taxpayer to decide what
law is to apply to a particular set of facts by way of an election
in writing. On the introduction of the self-assessment system a
number of the previous requirements for elections and notifications
to be in writing were removed. The amendments in Schedule 1 of the
Bill remove the remaining requirements for elections to be in
writing. In the self-assessment environment the application of a
particular provision will be evident in the calculation of taxable
income by the taxpayer, which will be supported by a taxpayer's
working papers and taxation records.
The Explanatory Memorandum(1) to the Bill sets
out clearly the nature of the amendments now proposed as well as
some consequential amendments to the anti-avoidance provisions of
Part IVA.
The amendments to the elections provisions will
apply to elections made on or after the date of the Royal Assent in
respect of any year of income.
Schedule 4 - Company current
year loss rules - film losses
The Tax Law Improvement Project rewrite of the
company prior year and current year loss rules is in the ITAA 1997.
Under the rewrite, a film loss is treated as a separate component
of a tax loss. For the purpose of the current year loss rules, the
film component of a company's tax loss is calculated for the whole
of an income year, irrespective of any change in ownership. This
result was not intended , as it allows a film loss incurred by the
new owners of a company to be offset against film income derived by
the previous owners.
Proposed subsection
375-805(1) amends the company current year loss
provisions in the ITAA 1997, to ensure that the film component of a
company's tax loss for an income year is calculated in the same way
it is calculated under the ITAA 1936. The amendments take effect
from the 1997-98 income year.
The amendment will also apply for the purpose of
the proposed trust loss rules contained in Taxation Laws
Amendment (Trust Loss and Other Deductions) Bill 1997. The
Bill will repeal the existing provision in these rules which
calculates the film component of a tax loss for an income year.
Schedule 5 - Amendments to the
FBTAA 1986
Under the FBTAA 1986 various documents are
required for the substantiation rules, depending on the type of
fringe benefit and the method used for calculating the value of the
fringe benefit. These documents are called statutory evidentiary
documents and include declarations, car records, log book records
and odometer records. Section 123 which deals with the retention of
statutory evidentiary records refers to 'documents given to an
employer' and does not refer to documents made by
an employer. The amendment to subsection 123(1) by
proposed Item 12 of Schedule 5 will take
into account documents made by the employer. These amendments will
apply to fringe benefits tax (FBT) assessments for the FBT year
beginning on 1 April 1998 and later FBT years.
Further, proposed Item
15 will amend subsection 136(1) to reduce the
retention period for statutory evidentiary documents from 6 years
to 5 years in line with the retention period for other records
which was reduced to 5 years from 1 April 1995. This amendment
applies for the FBT year beginning on 1 April 1995 and later FBT
years.
Schedule 6 -
Superannuation
Tax-free status of post-June 1994
invalidity component of an Eligible Termination Payment
(ETP)
Currently, under the ITAA 1936 a post-June 1994
invalidity component of an ETP is 'tax free' if it is taken as a
lump sum. However, if the component (or part of the component) is
rolled over to purchase an annuity or superannuation pension, the
amount of the component is liable to taxation as it cannot be
included in the 'undeducted purchase price' (UPP) of the annuity or
superannuation pension.
The amendment by proposed item
1 of Schedule 6 to the definition of UPP in
subsection 27A(1) of the ITAA 1936 will allow the post-June 1994
invalidity component of an ETP rolled-over to purchase an annuity
or superannuation pension, to be included in the UPP of the annuity
or superannuation pension, and therefore remain 'tax free'. This
amendment takes effect from the date of the Royal Assent.
Administrative review of decisions made
by the Commissioner of Taxation
Section 14ZL of Part IVC of the TAA 1953
provides for administrative review of decisions made by the
Commissioner of Taxation. However, Part IVC applies if a provision
of an Act provides that a person who is
dissatisfied with an assessment, determination, notice or decision
may object against it in the manner set out in Part IVC. Section
14ZL does not allow for a situation where
regulations provide that a person may object and
proposed Item 19 of Schedule 6 will cover
regulations as well.
When the Joint Committee of Public Accounts
(JCPA) considered the Income Tax Assessment Bill 1996 (the
1996 Bill), which became the ITAA 1997, it recommended in Report
345 that technical amendment legislation should become the regular
vehicle for making technical corrections to tax law.(2) This Bill
meets this recommendation and is the first in a series of technical
amendment Bills that may be expected, perhaps, on a yearly
basis.
Report 345 also records that witnesses had
advised the Committee that areas of tax law, including the
provisions covering tax losses for companies, that have been
rewritten in the 1996 Bill require policy simplification or
clarification. It will be noted that the minor amendments and
technical corrections proposed in this Bill includes amendments in
Schedule 4 to remove the unintended consequences of the current
year loss rules for companies included in the ITAA 1997.
The JCPA also noted in Report 345 that unclear
and unworkable sections of the ITAA 1936 are being perpetuated in
the 1996 Bill (now the ITAA 1997) because changing them was beyond
the Tax Law Improvement Project's (TLIP) mandate.(3) The JCPA
accepted that 'small p' policy issues which were beyond TLIP's
mandate included minor content changes that focus on reducing or
eliminating unnecessary complexity, making provisions consistent
and bringing the law into line with current administrative and
commercial practice.(4) Some of the amendments in this Bill would
fall into the category of 'small p' policy issues.
The JCPA's preferred mechanisms for dealing with
'small p' policy issues beyond TLIP's mandate were also considered
in Chapter 7 of Report 345. The JCPA felt the need for a public
forum, such as a separate Committee of Parliament, to gather
evidence on 'small p' policy issues as a response to the public
perception that the Treasury, even if not TLIP and the ATO, is
unresponsive to these concerns when they are raised. The JCPA
therefore recommended that Government should provide sufficient
additional resources to allow for either the JCPA or a Joint
Standing Committee on Revenue or a Joint Select Committee to asses
the minor tax policy simplification issues.(5) As the need to
address 'small p' policy and simplification issues will continue,
notwithstanding the wider tax reform agenda, the JCPA's
recommendation is very much in context as evidenced by this
Bill.
-
- Explanatory Memorandum to the Taxation Laws (Technical
Amendments) Bill 1997, 10-11.
- An Advisory Report on the Income Tax Assessment Bill 1996, the
Income Tax (Transitional Provisions) Bill 1996 and the Income Tax
(Consequential Amendments) Bill 1996; Report 345 by the Joint
Committee of Public Accounts (August 1996); Recommendation 9, xvii.
- ibid., paragraph 7.15, 57.
- ibid., paragraph 7.14, 57.
- ibid., Recommendation 11, paragraph 7.40, 64.
Bernard Pulle
12 March 1998
Bills Digest Service
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ISSN 1328-8091
© Commonwealth of Australia 1997
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1997.
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