Bills Digest No. 7 2003-04
Petroleum
(Timor Sea Treaty)
(Consequential Amendments) Bill 2003
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Petroleum (Timor
Sea Treaty) (Consequential Amendments) Bill
2003
Date Introduced:
5 March 2003
House: Representatives
Portfolio: Industry, Tourism and
Resources
Commencement:
On the day of Royal Assent
but, where relevant, various provisions in the Bill are made
retrospective to coincide with the date of the signing of the Timor
Sea Treaty between Australia and East Timor (20 May
2002).
This Bill is
part of a package of Bills to give effect to the Timor Sea Treaty
between Australia and East Timor and to make consequential
amendments. The Bill also repeals the Petroleum
(Australia-Indonesia Zone of Cooperation) Act 1990.
[This Bill was the subject of urgent passage
and it passed both Houses on 6 March 2003. This Bills Digest has
been prepared after the debate.]
Background details can be found in Bills
Digest No. 6, 2003 04 for the Petroleum (Timor Sea Treaty) Bill
2003.
Most of the amendments made by this Bill are
relatively minor. They change the references in relevant
Commonwealth Acts from the Zone of Cooperation (former Timor Gap
Treaty with Indonesia) to the Joint Petroleum Development Area
(Timor Sea Treaty with East Timor).
The taxation related amendments are more
detailed and the Alert Digest (No. 3 of 2003) of the
Senate Standing Committee for the Scrutiny of Bills notes the
retrospective effect of the civil aspects of the taxation
amendments. The Senate Committee has noted that there is no
assurance that taxpayers will not be adversely affected by
retrospectivity and the Committee has sought the Minister's advice
on the matter.(1)
Items 1 to 33 make minor
amendments to the following Acts to recognise the change from the
Zone of Cooperation to the Joint Petroleum Development Area:
- Crimes at Sea Act 2000
- Customs Act 1901, and
- Fringe Benefits Tax Assessment Act 1986.
Items 34 to 38 make the make
the same consequential amendments to the Income Tax
Assessment Act 1936.
Items 39 to 51 address the
issue of the interaction of the Taxation Code under the Timor Sea
Treaty and the activities of Australian taxpayers who might be able
to shift Australian-based profits into their activities in the JPDA
through mechanisms such as related entity transfer (also known as
international profit shifting or transfer pricing). Unless
amendments are made to the Income Tax Assessment Act 1936,
the end-result would be that all taxable profits for that company
would be taxed differently to that which would apply had the
profits been generated solely in Australia. As a simplification,
the Australian taxable amount in the JDPA is based on only 10 per
cent of business profits from the JPDA with the other 90 per cent
taxable in East Timor.
Without these consequential amendments, the
Commissioner for Taxation is unable to correct any inappropriate
allocation of income and expenses between Australian taxpayer
related parties who operate in the JPDA. These amendments allow the
Commissioner to apply 'transfer pricing rules' to protect
Australia's income tax revenues. The amendments also allow the
treatment of the tax paid in East Timor on income derived in the
JPDA to be classed as a foreign tax credit. Technically, the JPDA
(the source of the income) is not a 'foreign country'. It is
regarded, however, as covered by an international tax sharing
treaty.
Item 53 allows the
recognition of the 'Designated Authority' as an international
organisation for the purposes of the International
Organisations (Privileges and Immunities) Act 1963 for the
period of the Timor Sea Treaty.
Items 54 to 69 make minor
amendments to the following Acts to recognise the change from the
Zone of Cooperation to the Joint Petroleum Development Area:
- Migration Act 1958
- Passenger Movement Charge Collection Act 1978,
and
- Petroleum (Submerged Lands) Act 1967.
Item 70 repeals the whole of
the Petroleum (Timor Gap Zone of Cooperation) Act 1990.
This Act gave effect to the Timor Gap Treaty between Australia and
Indonesia. The treaty is now replaced by the new treaty with East
Timor. (But see the limited continuation of certain provisions at
Item 82, below).
Items 71 to 75 make minor
amendments to the Quarantine Act 1908 to recognise the
change from the Zone of Cooperation to the Joint Petroleum
Development Area.
Items 76 and 77 amend the
Superannuation Guarantee (Administration) Act 1992 so that
it applies to all employers in the JPDA but only in relation to an
Australian resident employee of that employer. The Explanatory
Memorandum indicates that the amendments apply from 1 July
2003 (see paragraph 103).
Items 78 to 79 amend the
Taxation Administration Act 1953 to allow the exchange of
information on taxation matters in connection with obligations
under international agreements such as the Taxation Code that
applies under the Timor Sea Treaty. Without this amendment,
disclosure of information would breach taxpayer secrecy provisions
in taxation legislation.
Item 80 repeals a special
provision (section 5A) in the Workplace Relations Act
1996. That section referred to the now lapsed Timor Gap Treaty
Zone of Cooperation with Indonesia.
Item 82 continues the
operation of limited provisions of the Petroleum (Timor Gap
Zone of Cooperation) Act 1990 to provide a transitional cover
between the period that the Timor Sea Treaty was signed on 20 May
2002 and until this package of Bills giving effect to the Timor Sea
Treaty receives the Royal Assent. These continuing provisions deal
with:
- the recognition of the 'old' Joint Authority under the
International Organisations (Privileges and Immunities) Act
1963
- offences for unauthorised prospecting and development, and
- the powers of inspectors.
Concluding
Comments
Concluding comments can be found
in Bills Digest No. 6, 2003 04 for the Petroleum (Timor Sea Treaty)
Bill 2003.
- Alert Digest, No. 3 of 2003, Senate
Standing Committee for the Scrutiny of Bills, 19 March 2003, pp. 13
14.
Brendan Bailey
28 July
Bills Digest Service
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ISSN 1328-8091
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