WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
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Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage
History
Date Introduced: 2 December 1998
House: House of Representatives
Portfolio: Treasury
Commencement: 1 July 2000
Purpose
This Bill
proposes to amend the Taxation Administration Act 1953
(TAA) to incorporate new provisions concerning the Goods and
Services Tax (GST) relating to:
-
- assessments of GST
-
- recovery of GST owing
-
- penalties for non-compliance with GST obligations
-
- special rules for certain entities such as partners of a
partnership, participants in a joint venture, liquidators and
receivers, and directors of a company
-
- the evidentiary effect of certain documents
-
- reviewable decisions, and
-
- miscellaneous administrative matters.
The Bill will also amend the existing provisions
of the TAA concerning secrecy, prosecutions and offences, and
taxation objections, reviews and appeals, to incorporate certain
matters relating to the GST.
Background
1.0 Recent History
On 13 August 1998 the Government released
details of its long awaited tax reform plan, embodied in the
publication entitled Tax Reform: not a new tax, a new tax
system (Tax Reform Plan).
A key aspect of the Tax Reform Plan is the
introduction of a Goods and Services Tax to replace the current
Wholesale Sales Tax, as well as a number of State indirect taxes.
The Tax Reform Plan as a whole formed a major component of the
Government's policy platform leading up to the Federal election
held on 3 October 1998.
The Tax Reform Plan foreshadowed a targeted
consultation process to assist in determining the final design of
five key matters relating to the proposed GST, they being the
GST-free areas of health, education, religious services and the
non-commercial activities of charities, and the special
transitional arrangements for motor vehicles.
That consultation process was undertaken by the
Tax Consultative Committee, chaired by Mr David Vos, a tax partner
at PricewaterhouseCoopers, which was appointed by the Treasurer on
26 October 1998. The Committee's report was presented to the
Treasurer on 13 November 1998 and the recommendations therein taken
into account in drafting the legislation now before the
Parliament.
Following the Governments re-election, a package
of 16 Bills were introduced on 2 December 1998 to implement a GST
as well as some of the other tax reform measures contained in its
Tax Reform Plan. Six of those Bills introduce the GST, namely:
-
- A New Tax System (Goods and Services Tax) Bill 1998;
-
- A New Tax System (Goods and Services Tax Administration) Bill
1998;
-
- A New Tax System (Goods and Services Tax Transition) Bill
1998;
-
- A New Tax System (Goods and Services Tax Imposition - General)
Bill 1998;
-
- A New Tax System (Goods and Services Tax Imposition - Customs)
Bill 1998; and
-
- A New Tax System (Goods and Services Tax Imposition - Excise)
Bill 1998.
2.0
GST Overview
The GST proposed is a broad-based indirect tax
on final private consumption in Australia. It will tax the
consumption of most goods, services and any other things, including
things imported into Australia, but not to consumption outside
Australia. The GST rate proposed is 10%.
The GST is based on the Value Added Tax (VAT)
system, which has been adopted by nearly all OECD countries and
more than 80 others around the world. The GST concept of taxing
final private consumption is achieved by:
-
- imposing tax on supplies made by entities registered for GST
purposes; and
-
- allowing those entities to claim a full credit for any GST they
have paid on business purchases (or inputs). Such credits will be
known as input tax credits.
Consistent with other GST and VAT regimes, there
will be two types of non-taxable supplies, 'GST-free' and 'input
taxed', known in most other countries with a GST or VAT as 'zero
rated' and 'exempt' respectively.
GST-free supplies will not be taxed and input
tax credits will be allowed on things acquired to make the supply.
The main activities that will be GST-free include exports, certain
expenditure by tourists, health and medical care, education,
childcare, charitable activities and religious services.
Input taxed supplies will similarly not be
taxed, however no input tax credits will be allowed on things
acquired to make the supply. The main activities that will be input
taxed are financial services and residential rents.
The main Bill implementing the GST is the A New
Tax System (Goods and Services Tax) Bill 1998 (GST Bill). The Bills
Digest for that Bill will contain a more detailed history of events
leading up to the introduction of the GST and, naturally, a
detailed account of how the proposed GST will operate.
3.0 Taxation
Administration Act 1953
The TAA and the regulations thereunder contain
important administrative provisions concerning the various taxation
laws administered by the Commissioner of Taxation. They include
those relating to:
-
- providing the statutory authority for the office of the
Commissioner of Taxation, including appointment, tenure of office,
remuneration, delegation of powers, and related matters
-
- secrecy and the provision of taxation information
-
- offences and prosecutions
-
- exchange control
-
- departure prohibition orders
-
- the public and private rulings system, and
-
- the set of generic provisions regulating objections, reviews
and appeals in relation to taxation decisions made under various
Commonwealth tax laws, including income tax, fringe benefits tax
and wholesale sales tax.
Main
Provisions
1.0
Introduction
Clause 3 of this Bill provides
that the amendments to the TAA are as set out in Schedule
1 of the Bill. Items 1 to
6 of Schedule 1 contain proposed
amendments to the existing provisions of the TAA. Item
7 will insert new Part VI into the TAA,
comprising new sections 19 to
70.
1.1 Amendments to the existing
provisions of the TAA
An explanation of the amendments to the existing
provisions of the TAA are adequately and succinctly covered in the
Explanatory Memorandum (EM) at paragraphs 1.8 to 1.13. The
amendments relate to the secrecy provision, the prosecutions and
offences provisions, and the taxation objections, reviews and
appeals provisions of the TAA.
1.2 Insertion of New Part VI into the
TAA
New section 19 provides that
new Part VI of the TAA sets out the administrative
provisions of the GST and should be read in conjunction with the
GST Bill.
New section 21 provides that
the Criminal Code(1) will apply to all offences against
new Part VI.
2.0 Assessments
New Division 2, comprising
new sections 22 to 27, will
enable assessments of GST to be made with or without an entity's
request. The Commissioner of Taxation (the Commissioner) will be
required to notify an entity of an assessment, which will be
reviewable on objection. An assessment which amends an earlier
assessment for a tax period will replace that earlier
assessment.
Liability to GST and entitlements to input tax
credits will not be dependent on an assessment under new
Division 2. Payments and refunds will ordinarily be made
without any formal assessment of liability by the Commissioner.
Chapter 2 of the EM explains in more detail the
operation of each of the proposed provisions of new
Division 2.
3.0 Recovery of GST
Owing
New Division 3, comprising
new sections 28 to 39, deals with
the recovery of any GST owing along with related matters.
3.1 Recovery of Unpaid GST and
Penalty
New section 28 provides that
the Commissioner will be able to recover:
-
- any GST that remains unpaid after the time by which it is
due;
-
- any penalty imposed under new Part VI.
3.2 Recovery of GST Paid on Behalf of
Another Entity
New section 30 provides that
any GST or penalty paid for or on behalf or another entity will be
able to be:
-
- recovered as a debt from that entity; or
-
- retained or deducted from money owing to that entity.
3.2.1 Potential Deficiency with
New Section 30
The recovery options stated in new
section 30 are expressed as alternatives. Where an entity
has funds on hand which would be insufficient to satisfy in full
the amount an entity may recover pursuant to new section
30, it would not seem to be within the strict ambit of the
provision to be able to retain those funds (as provided by
paragraph (b)) and in addition, institute recovery
proceedings (as provided by paragraph (a)) for the
balance. A choice between the recovery options provided by
paragraphs (a) and (b) would seem
to be required.
3.3 Recovery of GST if Jointly
Liable
New section 31 will provide for
situations involving joint liability for GST and penalties.
New subsection 31(1) provides
that where each entity is jointly liable for any GST or penalty,
each of them will be liable for the whole amount. Where an entity
pays an amount owing, new subsections 31(2) and
(3) will provide recovery options, of appropriate
proportions, against the other entities jointly liable.
3.3.1 Potential Deficiency with
New Subsection 31(3)
The discussion in paragraph 3.2.1 above is
equally relevant.
3.4 Recovery of GST from the Trustee of
a Deceased Estate
New section 32 provides that
any GST owing by the deceased at the time of death will be
recoverable from the trustee. The trustee will also be encumbered
with the same GST responsibilities as the deceased would have had
and may also be liable to penalties.
New subsection 32(6) provides
that any amount payable by the trustee will be a charge on all the
deceased person's estate and take priority over all other
encumbrances.
3.4.1 Potential Deficiency with
New Subsection 32(1)
It appears from a reading of new
subsection 32(1) that new section 32 is
not expressed to apply to any penalty owing by the deceased at the
time of death, only to any unpaid GST.
3.5 Recovery of GST from an
Unadministered Estate
New section 33 provides that
where neither a grant of probate nor letters of administration have
been obtained within 6 months after a person's death, the
Commissioner will be able to make an assessment of GST owing in
relation to the deceased person. Such an assessment will be a
reviewable decision and may be objected against.
3.6 Recovery from a Third Party
New section 36 provides that
the Commissioner will be able to collect money owing to an entity,
which is held by a third party, in satisfaction of all or part of
any GST or penalty owing by that entity.
3.7 Time Limit on Recovering Unpaid
GST
New section 35 will impose a 4
year time limit on the ability of the Commissioner to recover any
GST or penalty owing, except in the case of fraud or evasion.
3.8 Time Limit on Claiming Credits and
Refunds
New section 36 will impose a 4
year time limit on the ability of an entity to claim any
entitlements to input tax credits or diesel fuel credits.
3.9 Reliance on the Commissioner's
Ruling
New section 37 will afford
protection to an entity that underpays GST or has been overpaid any
refund by the Commissioner where reliance has been placed upon a
ruling, either private or public, issued by the Commissioner.
3.10 Refunds Unavailable if Earlier GST
Returns not Provided
New section 38 provides that
the Commissioner will be able to withhold a net amount refundable
to an entity where that entity has any earlier outstanding GST
returns, or a further or fuller return has been requested by the
Commissioner.
3.11 Refund of Amounts Overpaid or Owing
to an Entity
New section 39 will provide for
refunds where amounts of GST have been overpaid or net amounts
owing by the Commissioner understated.
Where the discrepancy arises due to a
non-taxable supply being treated as a taxable supply, the
Commissioner will have to be satisfied that the recipient of the
supply has been reimbursed and is neither registered nor required
to be registered for GST purposes.
4.0 Penalties for Non-compliance
with GST Obligations
New Division 4, comprising
new sections 40 to 49, will
impose penalties for failing to comply with various GST
obligations, as follows:
-
- failing to pay any GST payable by the due date, the penalty
being calculated at the rate of 16% per annum - new section
40
-
- failing to make a payment by electronic means if required -
new section 41
-
- failing to register or cancel registration - new
section 42
-
- failing to provide on time a GST return - new
subsection 43(1)
-
- failing to provide on time other information required by the
GST law(2) - new subsections 43(2) and
43(3)
-
- failing to issue a tax invoice or an adjustment note as
required by clauses 29-70 and 29-75 respectively of the GST Bill -
new section 44
-
- issuing separate tax invoices relating to the same taxable
supply or issuing separate adjustment notes for the same decreasing
adjustment by both and entity and its agent - new section
45, and
-
- making a false statement, whether or not known to be false, to
a tax officer or another entity for a purpose in connection with
the GST law, and as a result, GST is underpaid or a refund is
overpaid - new section 46.
New section 48 provides that
the Commissioner will be able to remit some or all of any of the
above penalties.
5.0 Special Rules for Certain
Entities
New Division 5, comprising
new sections 50 to 58, will
provide rules imposing separate obligations on certain entities
where other entities have obligations under the GST law.
5.1 Liability of Partners
New section 50 provides
that:
-
- obligations imposed on a partnership under the GST law will
also be imposed on each of the partners
-
- each of the partners will be jointly and severally liable for
any amounts payable by the partnership under the GST law; and
-
- each of the partners will be taken to have committed any
offences committed by the partnership, subject to certain defences
that will be available to them.
5.2 Liability of Participants in a Joint
Venture
New section 51 provides
that:
-
- each of the joint venture participants in a GST joint venture
will be jointly and severally liable for any amounts payable by the
joint venture operator under the GST law, and
-
- each of the participants will be taken to have committed any
offences committed by the joint venture operator, subject to
certain defences that will be available to them.
5.3 Liability Related to Unincorporated
Associations or Bodies of Persons
New section 52 provides
that:
-
- obligations imposed on an unincorporated association or body of
persons under the GST law will also be imposed on each of the
members of the committee of management of the association or body,
and
-
- each of the member of the committee of management will be taken
to have committed any offences committed by the association or
body, subject to certain defences that will be available to
them.
5.4 Liability of Members of GST
Groups
New section 53 provides
that:
-
- each of the members of a GST group will be jointly and
severally liable for any amounts payable by the representative
member of the GST group under the GST law; and
-
- each of the members will be taken to have committed any
offences committed by the representative member, subject to certain
defences that will be available to them.
5.5 Liability of Representatives of
Incapacitated Entities
New section 54 provides
that:
-
- the representatives of an incapacitated entity (such as a
bankrupt or an entity in liquidation or receivership) will be
jointly and severally liable for any amounts payable in relation to
the incapacitated entity under the GST law; and
-
- each of the representatives will be taken to have committed any
offences committed by any one of them, subject to certain defences
that will be available.
5.6 Obligations of Liquidators and
Receivers
New section 55 will provide
special obligations on a liquidator of a company and a receiver, or
receiver and manager for debenture holders of a company. Such
persons will be required to notify the Commissioner of their
appointment, not pay certain debts and set aside a certain
proportion of the companies assets to satisfy any GST or penalties
payable. Penalties will apply for contravening the provision.
5.7 Public Officer of a Company
New section 56 provides that
the public officer of a company for the purposes of the Income
Tax Assessment Act 1936 will also be that for the purposes of
the GST law. The public officer will therefore be responsible for
ensuring the company meets all of its obligations under the GST
law.
5.8 Liability of Directors and Certain
other Officers of a Company
New section 57 provides that
any notice, process or proceeding that may be given to, served on
or taken against a company or its public officer under the GST law
will, if the Commissioner considers it appropriate, be able to be
served on, or taken against a director, secretary or other officer
of the company, or an attorney or agent of the company. Such a
person will have the same liability as the company or public
officer would have had with respect to such a notice, process or
proceeding.
5.8.1 Explanatory Memorandum
Potentially Misleading
Paragraph 5.18 of the EM is potentially
misleading and further, may have consequences given the effect of
paragraph 15AB(2)(e) of the Acts Interpretation Act
1901(3), because of the wide ambit of operation that is
suggested new section 57 will have. Paragraph 5.18
states:
Directors, company officers and attorneys or
agents of a company will have the same potential liabilities as the
public officer of a company.
A similar provision exists in the form of
paragraph 252(1)(j) of the Income Tax Assessment Act 1936,
which was considered by the Full Federal Court in the case of
Reynolds v DFC of T 84 ATC 4689. That case seems to
suggest that the scope of the provision is limited.
The majority view was that the provision only
exposes a company officer to prosecution for an offence committed
by the company if the officer is under some obligation with respect
to the act or omission which gave rise to the particular offence.
Such an obligation would usually, if not always, be created by the
service upon the officer pursuant to paragraph 252(1)(j) of a
notice requiring performance of a particular duty.
In the course of his judgment, with which Neaves
J agreed, Lockhart J said at page 4699 that paragraph 252(1):
...is designed to ensure the observance by
companies and their public officers of duties which the Act imposes
upon them. The company may fail to appoint a public officer or a
public officer may in some cases have little to do with the
day-to-day affairs of the company (for example, he may be a member
of an independent firm of accountants). The Commissioner is given
the power to select in a particular case, a director or an officer
of the company as the person who is more likely than the public
officer to fulfil an obligation which the Act imposes upon the
public officer or who, because of his position in or association
with the company, will probably ensure observance by the company of
its duties under the Act. The Commissioner may therefore select
that director or officer as the person to whom he should direct a
notice to fulfil some obligation imposed upon the company or its
public officer under the Act: for example, a notice of the kind
mentioned in para. 252(1)(h). In that case the director or officer
upon whom the notice has been served becomes liable in respect of
the notice to the same extent as the company or its public officer
would have been if the notice had been served upon it or him as the
case may be.
5.9 Obligations of an Agent Winding Up a
Business for a Non-resident
New section 58 will provide
special obligations on an agent instructed by a non-resident
principal, who is affected by the GST law, to wind up so much of
the principal's business as is carried on in Australia.
The agent will be required to notify the
Commissioner of his instructions, not part with any of the assets
of the principal and set aside enough assets to cover any GST or
penalties payable. Penalties will apply for contravening the
provision.
6.0 Evidentiary
Provisions
The provisions of new Division
6, comprising new sections 59 to
61, specify the evidentiary effect certain
documents and copies of documents will have, an explanation of
which is adequately and succinctly provided in chapter 6 of the
EM.
7.0 Reviewable GST
Decisions
New Division 7, comprising
new section 62, will provide the mechanism for
reviewing decisions made by the Commissioner under the GST law.
New subsection 62(1) provides that reviewable GST
decisions will be reviewable in the manner set out in existing Part
IVC of the TAA.
New subsection 62(2) specifies
the decisions made under the GST Bill that will be reviewable.
New subsection 62(3) specifies the decisions made
under new Part VI of the TAA that will be
reviewable.
8.0 Other Administrative
Matters
New Division 8, comprising
new sections 63 to 70, deals with
various miscellaneous administrative matters. In summary, the
new Division provides:
-
- that the Commissioner will have the general administration of
the GST law - new section 63
-
- that the Commissioner will be required to prepare an annual
report - new section 64
-
- that the Commissioner will be able to direct a person to
provide information - new section 65
-
- that access to land, premises, documents, goods or other
property will have to be given to officers so authorised by the
Commissioner who will be able to, among other things, inspect, make
copies or take extracts or samples of documents or goods as the
case may be - new section 66
-
- rules relating to an entity's address for service for the
purposes of the GST law, in order to facilitate the service of,
among other things, various notices, documents and legal
proceedings - new section 67
-
- rules for protecting the confidentiality of information -
new section 68
-
- rules relating to the manner in which any notice, approval,
direction, authority or declaration may be given by the
Commissioner - new section 69, and
-
- rules relating to the keeping of records - new section
70.
Concluding Comments
1.0 No Definition of 'amount
of GST'
Throughout this Bill, reference is made to an
'amount of GST', usually in accompaniment with the term 'net
amount'. 'Net amount' is defined in clause 195-1 of the GST Bill,
and has application to this Bill by virtue of new
subsection 20(2).
However, no definition of the term 'amount of
GST' is contained in either this Bill or the GST Bill. It is
presumed that the term has its origins in clause 13-20 of the GST
Bill, which deals with the ascertainment of GST on taxable
importations. This view is supported by the provisions of
new paragraph 31(2)(b).
An explanation of the meaning of 'amount of GST'
may be of assistance if provided in either this or the GST
Bill.
2.0
Naming of GST Bills
Presumably, the titles of the GST Bills have
been used to make it easier for the Parliament to identify those
which form part of the Tax Reform Plan package. From a practical
perspective however, the titles appear to be unnecessarily lengthy
and indeed cumbersome. The words 'A New Tax System' could be
deleted from each title without affecting the relevance of the
title to the particular piece of legislation.
Endnotes
-
- Criminal Code Act 1995.
- 'GST law' is defined in clause 195-1 of the GST Bill to mean:
-
- the GST Bill
-
- any Act that imposes GST
-
- this Bill
-
- the TAA, so far as it relates to any Act covered by paragraphs
(a) to (c)
-
- any other Act, so far as it relates to any Act covered by
paragraphs (a) to (d) (or to so much of that Act as is covered),
and
-
- regulations under any ACT, so far they relate to any Act
covered by paragraphs (a) to (e) (or to so much of that Act as is
covered).
- This provision provides that an explanatory memorandum may be
used as an aid to interpretation of a statutory provision.
Simon Lang
27 January 1999
Bills Digest Service
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ISSN 1328-8091
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