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
Date Introduced: 2 December 1998
House: House of Representatives
Portfolio: Treasury
Commencement:
This Act commences on the day on which the A
New Tax System (Australian Business Number) Act 1998 receives
Royal Assent.
Purpose
This is one of two companion Bills which
implements the Australian Business Number (ABN) scheme with an
Australian Business Register (ABR) to which the public will have
access. It will be referred to as the ABN(CA) Bill in this Digest.
The other Bill to implement the ABN scheme is the A New Tax System
(Australian Business Number) Bill 1998 will be referred to as the
ABN Bill in this Digest. The reader is referred to the Bills Digest
on the ABN Bill for commentaries on that Bill.
The ABN(CA) Bill amends the Taxation
Administration Act 1953 (the TAA 1953) to make the ABN Bill
when enacted, a taxation law. It also provides for the Commissioner
of Taxation (the Commissioner) to be the Registrar of the ABR and
for the Commissioner to delegate his or her powers and functions as
Registrar to a Deputy Commissioner or another person.
Importantly, proposed section 8WA(1A) to the
TAA 1953 enables tax file numbers (TFNs) to be requested in
connection with an application for the registration of an entity
under the ABN scheme.
Background
Implementing the A New Tax
System
This Bill is one of a package of 17 Bills(1)
that was introduced into the House of Representatives in December
1998, to give effect to Government's proposals on 13 August 1998
for a new tax system, which included the introduction of a GST. The
outlines of Government's proposals were contained in the policy
document Tax Reform: not a new tax, a new tax system:
The Howard Government's Plan for a New Tax System,(2)
which will be referred to as the A New Tax System (ANTS) in this
Digest. An Overview of ANTS and further details of the proposals
were contained in Fact Sheets, all of which were available in the
Government's Tax Reform Website: http://www.taxreform.gov.au
Proposed clause 1-3 of the A
New Tax System (Goods and Services Tax) Bill 1998 (the GST Bill)
provides that the Commonwealth will introduce further legislation
to give effect to the Agreement on Principles for the Reform of
Commonwealth-State Financial Relations endorsed at the Special
Premiers' Conference in Canberra on 13 November 1998. In the Second
Reading Speech on the GST Bill, the Treasurer stated that the
Government proposes to enact the whole package by the end of this
financial year and that when the package is enacted, Australia will
have a new tax system from 1 July 2000.(3) The Prime Minister also
stated in Parliament that further tranches of legislation will be
introduced early in 1999 to implement the new tax system.(4)
Outline of proposal for an ABN
scheme in the A New Tax System
The New Tax Plan indicated that the introduction
of a single business identifier would change business registration
and allow business to meet its regulatory obligations and access
information and assistance through one, or as few as possible,
entry points to Government. It added :
With the introduction of the goods and services
tax (GST) the Government will rationalise identification of
business across all regulatory bodies, so that GST will not be an
additional requirement.
The Government will ensure that each
business:
-
- has only one number to identify it for all government purposes,
to be known as the Australian Business Number (ABN)
-
- can deal with, and obtain information and assistance from all
of government through one, or as few as possible, entry points,
and
-
- need notify any changes in their details only once and to only
one authority.
To this end the Tax Office will create and
maintain a register of Australian businesses for all Commonwealth
purposes. This system will be available to State, Territory and
local government regulatory bodies to reduce the multiplicity of
government registration and reporting.
At the Commonwealth level, business will only be
required to quote one number for their public dealings under the
tax and corporations laws. The number will not be the Tax File
Number, ensuring that existing privacy safeguards are maintained.
(5)
The reader is referred to the companion Bills
Digest on the ABN Bill for further information on the background to
the ABN scheme.
Main Provisions
Is the law establishing the Australian
Business Number Scheme a taxation law for the purposes of the
Taxation Administration Act 1953?
Under section 2 of the TAA 1953
taxation law means:
-
- the TAA 1953
- any other Act of which the Commissioner has the general
administration (other than an Act prescribed for the purposes of
this paragraph), and
- regulations under an Act referred to in paragraph (a) or
(b).
Item 1 of Schedule
1 of the ABN(CA) Bill amends the above definition of
taxation law in section 2 of the TAA 1953 by inserting
proposed paragraph (ba) which has the effect of
specifying that the A New Tax System (Australian Business
Number) Act 1998 is a taxation law for the purposes of the TAA
1953. Item 2 of Schedule 1 amends
paragraph (c) so that regulations made under that Act are also
taxation laws under the TAA 1953.
What are the Powers and Functions of the
Registrar of the Australian Business Register?
Subsection 6B(6) of the TAA 1953 provides that a
person acting in the office of Commissioner of Taxation has and may
exercise all the powers, and shall perform all the functions, of
the Commissioner under this Act or any other law. Item
3 of Schedule 1 inserts proposed
subsection 6B(6A) to ensure that a person acting as
Commissioner has all the powers and functions given to the
Commissioner in his or her capacity as Registrar of the ABR.
Can the Commissioner delegate of the
powers and functions of the Registrar of the Australian Business
Register?
Under subsection 8(1) of the TAA 1953 the
Commissioner may, either generally or as otherwise provided by the
instrument of delegation, by writing signed by the Commissioner,
delegate to a Deputy Commissioner or any other person all or any of
the Commissioner's powers or functions under a taxation law or any
other law of the Commonwealth or a Territory, other than this power
of delegation. Item 4 of Schedule
1 inserts proposed subsection 8(1A) to
enable the delegation of the powers and functions of the Registrar
of the ABR.
Is there authority to enable a person to
request the tax file number of another connection with an
application for registration in the Australian Business
Register?
Section 8WA of the TAA 1953 makes it an offence
for a person to request another person to quote the other person's
tax file number (TFN) for the purpose of establishing the other
person's identity, unless in certain circumstances specified in
that section.
Item 5 of Schedule
1 of the ABN (CA) Bill which inserts proposed
subsection 8W(1A) authorises a person to request another
person to quote the other person's TFN if it is for the purpose of
including the TFN in an application for registration of an entity
under the ABN Act.
The term entity under the ABN Act covers all
kinds of legal persons. It also covers groups of legal persons, and
other things, that in practice are treated as having a separate
identity in the same way as a legal person does.
Thus if the entity making application for an ABN
is a trust, the TFNs of the entity, the trustee, the beneficiaries
and associated trusts and entities may be requested by the person
preparing the application without contravening section 8WA of the
TAA1953. The categories of persons whose TFNs will be relevant for
the purpose of an application by an entity for an ABN will only be
known when regulations under proposed section 31
of the ABN Act are made.
Proposed subparagraph 9(2)(a)
of the ABN Bill states that the application for registration in the
ABR must be in the form approved by the Registrar and
proposed subsection 9(3) states that without
limiting the powers conferred on the Registrar under
proposed subparagraph 9(2)(a) the approved form
may require an entity generally to set out in the application:
-
- the name and address of, and other information about an
associate (proposed subparagraph 9(3)(a)(i),
or
-
- any identifying number (other than a TFN) that has been issued
to the entity or to an associate (proposed subparagraph
9(3)(a)(ii)), and
-
- may request, but not compel, an entity to provide the entity's
TFN or that of an associate (proposed paragraph
9(3)(b).
The reader is referred to the Bills Digest on
the companion ABN Bill for a discussion of the powers that will be
conferred on the Registrar under the package of legislation to
require registration in the ABR prior to registration for the GST.
The writer takes the view that the scheme of the proposed
legislation is such that it will have the practical effect of
compelling applicants to disclose their TFNs and that of
associates, notwithstanding the provisions of proposed
paragraph 9(3)(b) which give a contrary impression.
Concluding Comments
Constitutional Issue - Can the taxation
power support the establishment of the ABN scheme?
The scheme for the registration of all business
entities in an Australian Business Register (ABR), as proposed in
the ABN Bill, raises the question of what constitutional powers the
Commonwealth will be relying on to establish the ABN scheme. One of
the purposes of the ABN(CA) Bill is to provide that the ABN Bill is
a taxation law for the purposes of the TAA 1953. It is clear that
there is reliance on the taxation power in section 51(ii) of the
Constitution.
The ABN scheme is central to the administration
of the goods and services tax (GST) as well as improving tax
compliance within the Commonwealth tax system generally. The term
'business' is given a wide meaning in proposed clause
41 of the ABN Bill and includes any profession, trade,
employment, vocation or calling, but not including occupation as an
employee. The term entity is also given a very wide meaning in
proposed clause 37 of the ABN Bill and covers all
kinds of legal person as well as groups of legal persons and other
things that in practice are treated as having a separate identity
as a legal person does. The ABR will therefore be a register with
unique identifying numbers of all entities whether individuals or
otherwise, engaged in any enterprise in Australia. Individuals
whose only source of income is from employment will not be included
in the ABR. The ABR will be administered by the Registrar who will
be the Commissioner of Taxation.
In the section on Main Provisions it was
concluded that although the two Bills setting up the ABN scheme do
not make it mandatory for every entity carrying on business in
Australia to make application for an ABN, the scheme of the
proposed legislation implementing the new tax system and the GST in
particular provides sanctions for not applying for an ABN and
including it in invoices of taxable supplies it makes under the GST
law.
In Fairfax v Federal Commissioner of
Taxation,(6) a law of the Commonwealth deprived superannuation
funds of an exemption from income tax which they had previously
enjoyed, unless a proportion of their funds was invested in
prescribed public securities. The High Court unanimously upheld the
law as one with respect to taxation. In this instance the pivotal
position of the ABN scheme in the implementation of the GST leaves
little doubt that the ABN Act will be a law with respect to
taxation under section 51(ii) of the Constitution.
The ABR could also be said to be a matter
incidental to the taxation of goods and services. Although the
registration of business names of entities other than companies is
a matter for the States and Territories,(7) the assignment of an
ABN to every entity carrying on business will be within
Commonwealth taxation power as it is possible to show a connection
with the GST.
In Melbourne Corporation v. The
Commonwealth Dixon CJ laid the test as follows.
Speaking generally, once it appears that a
federal law has an actual and immediate operation within a field
assigned to the Commonwealth as a subject of legislative power,
that is enough. It will be held to fall within the power unless
some further reason appears for excluding it. That it discloses
another purpose and that the purpose lies outside the area of
federal power are considerations which will not in such a case
suffice to invalidate the law.(8)
Zines in High Court and the
Constitution says that:
By means of this technique the Commonwealth has
been able to use existing heads of power to achieve results which,
as a matter of purpose, lie in areas within State legislative
authority.(9)
However, there may be limits to the extent to
which the taxation power may be used by the Commonwealth to intrude
into areas within State legislative power if account is taken of
the federal nature of the Commonwealth Constitution. Thus, the
taxation power in the Constitution cannot be used by the
Commonwealth to deprive the States of the resources to undermine
their existence. But this may arguably not be the case with the new
tax system where the GST revenue is to be distributed to the States
and Territories, although partly in exchange for the repeal of
certain existing State and Territory indirect taxes.
In the context of the ABN scheme which is
clearly intended to identify entities and their associates the
question arises whether the Commonwealth could set up registers of
births, deaths and marriages to be able to identify all individuals
associated with the entities without the cooperation of the
States.
It must be noted that the Report of the Small
Business Deregulation Task Force (the Bell Report) tilted -
Time For Business - in Recommendations 5 and 43
recommended that a single compliance statement for income tax and
all business taxes as well as a unique business identification
number for all Commonwealth taxation purposes be introduced from
the 1998-99 financial year. The unique business number was to
facilitate the development of the single entry point and
streamlined registration processes for small business.(10)
Chapter 8 of the Bell Report indicated the
extent of cooperation required by the Commonwealth, State and
Territory Governments to achieve the objective of a single entry
point. The proposal for a unique business number it indicated would
require the cooperation or amalgamation of the Business Names
Registries maintained under State and Territory Legislation.(11)
Under current arrangements between the Commonwealth, the States and
the Northern Territory, information regarding State/Territory
business names is provided as from 1991 to the Australian
Securities and Investments Commission (ASIC) for incorporation into
a 'national business names register'.
Under the Corporations Agreement the national
business register is an electronic register which is provided by
and at the expenses of the States.(12) The Corporations Agreement
gives recognition to the High Court decision in New South Wales
v Commonwealth(13) where the incorporation provisions in the
Corporations Act 1989 were held to be invalid. The
majority held that that to construe paragraph 51(xx) of the
Constitution as authorising the incorporation of companies was
supported 'by neither the language of the provision, nor its
history, nor authority'.(14) In this case the High Court was
following the decision in Huddart, Parker & Co Pty Ltd. v
Moorland(15) were the High Court unanimously agreed that the
Commonwealth could not under paragraph 51(xx) create
corporations.
Given that the incorporation of companies which
includes authorising names is a matter for the States under the
Constitution and the authorising of business names for other
entities such as partnerships, trusts and sole proprietors and
other associations and bodies is a matter for the States, the
question arises whether the Commonwealth could under its taxation
power under paragraph 51(ii) and the incidental power under section
51(xxxix) require the registration of all business entities for the
purpose of assigning a unique Australian Business Number.
Any doubt in regard to the constitutional
validity of Commonwealth legislation setting up the ABR may be
overcome by following the route of the Corporations Agreement
between the Commonwealth and the States.
However, if the Registrar of the ABR is to
access the registers of births, deaths and marriages maintained by
the States to establish the identity of individuals connected with
entities on the ABR the cooperation of the States may be required.
This was the view of the Treasury in 1985 when the Companion
Numbering System for identifying entities was proposed together
with the Australia Card. This question is dealt with in the
following paragraph.
Has the Companion
Numbering System for entities which was to be introduced in
association with the Australia Card been resurrected?
The previous attempt by a Commonwealth
Government to develop a numbering system for identifying entities
was tied up with the proposal for the issue of the Australia Card
for identifying individuals. It was referred to as the companion
numbering system. The Australia Card proposal was first announced
by the Treasurer on 19 September 1985 in the Statement -Reform
of the Australian Taxation System.(16) Extracts from the
statement are indicative of the difficulties of disassociating the
identification of entities from the individuals associated with
it.
Summary
The Government has decided to implement a
national identification system involving the issue of a card (the
Australia Card) to individuals as broadly outlined in the draft
White Paper and other related material presented to the Taxation
Summit. A companion numbering system for entities other than
individuals, closely related to the individual system, is also to
be developed.
Commentary
The proposed system utilising an Australia Card
will be administered by the Health Insurance Commission making use
of the network of Medicare offices. The card will utilise a unique
number and the holder's signature but will not include a
photograph. The Commission will hold a central register of
identification details for individuals, eg full name, age, address.
The integrity of the information held on the central register will
be heavily dependent upon information currently held on State and
Territory Registries of Births, Deaths and Marriages and the Prime
Minister will therefore be writing to State Premiers and the Chief
Minister of the Northern Territory to seek their co-operation in
making available to the Commonwealth details held by respective
registries.
A companion, yet separate, system will be
introduced for the wide range of entities and other non-individuals
liable to tax. These include corporations, trusts, partnerships,
various clubs, associations etc. The companion system is designed
to prevent the leakage of revenue gains from individuals to
entities and other non-individuals.(17)
A joint select committee of the House of
Representatives and the Senate was established in November 1985 to
inquire into and report on all aspects of the government's
proposals for an Australia Card. The report of the joint select
committee confirms that according to the Government's submission to
the committee, the companion system for the identification of
entities would require the use of the Australia Card number of a
relevant person associated with an entity to validate a prescribed
transaction of that entity.(18)
The Australia Card Bill 1986(19) included
measures for the establishment of the Australia Card Register and
the Births, Deaths and Marriages Register (BDM Register). It made
it clear that the proposed identification system was intended to
facilitate the administration and execution of Commonwealth laws
relating to taxation, social security, hospital and medical
benefits and immigration, and to prevent the obtaining of certain
Commonwealth benefits falsely.(20)
Whether the Agreement with the States referred
to in proposed clause 1-3 of the A New Tax System
(Goods and Services Tax) Bill 1998 (the GST Bill) will include
access by the Registrar of the ABR to registers of births, deaths
and marriages maintained by the States is left to be seen. In 1985
the Treasury found it necessary to have such access in order to
establish the true identity of individuals as well as the identity
of entities in the Companion Numbering System for entities linked
to the Australia Card Register. There is no obvious reason to
believe that the position is any different today.
Will the Australian Business Number
linked to the Tax File Number raise any privacy concerns?
Pivotal role of the TFN in the ABN scheme
The ABN Bill envisages a role for the tax file
number (TFN) in an application for the registration of an entity in
the ABR. Applicants for ABNs must satisfy the Registrar of their
identities with or without disclosing their TFNs. The Registrar
must take a decision whether he or she is satisfied of the identity
of an entity and if an entity does not disclose the TFN of the
entity it would be reasonable if the Registrar concludes that there
is some doubt of the true identity of that entity. In fact it is
unlikely that an entity which operates in the cash economy and does
not have a TFN would go through the process of applying for an ABN
which might require the application initially for a TFN. Such an
entity would wear the penalty of not having an ABN in the scheme of
the GST. Any such penalty will, in some instances, be recouped by
an adjustment to the prices of goods and services that the entity
deals with. This would appear to be experience of the working of
the value added tax (VAT) in the UK.
Thus in reality the ABR will be a register of
entities whose identities have been established to the satisfaction
of the Commissioner of Taxation and who have been issued with ABNs
which are linked to their TFNs.
While the TFN will be the subject of privacy
protection under the TAA 1953, the ABN being a public registration
number for the GST is incapable of receiving the same privacy
protection as the TFN.
In summary, the two companion Bills set up an
ABR which will identify with a unique number (the ABN) every person
engaged in any form of enterprise in Australia other than
individuals who derive their sole income from employment.
The reader is referred to the Bills Digest on
the ABN Bill for a full discussion on the privacy concerns
associated with the ABNs which may be inevitably linked with the
TFNs.
Endnotes
-
- A list of the Bills is set out below:
-
- A New Tax System (Aged Care Compensation Measures Legislation
Amendment) Bill 1998
-
- A New Tax System (Australian Business Number Consequential
Amendments) Bill 1998
-
- A New Tax System (Australian Business Number) Bill 1998
-
- A New Tax System (Bonuses for Older Australians) Bill 1998
-
- A New Tax System (Compensation Measures Legislation Amendment)
Bill 1998
-
- A New Tax System (End of Sales Tax) Bill 1998
-
- A New Tax System (Fringe Benefits Reporting) Bill 1998
-
- A New Tax System (Goods and Services Tax Administration) Bill
1998
-
- A New Tax System (Goods and Services Tax Imposition-Customs)
Bill 1998
-
- A New Tax System (Goods and Services Tax Imposition-Excise)
Bill 1998
-
- A New Tax System (Goods and Services Tax Imposition-General)
Bill 1998
-
- A New Tax System (Goods and Services Tax Transition) Bill
1998
-
- A New Tax System (Goods and Services Tax) Bill 1998
-
- A New Tax System (Income Tax Laws Amendment) Bill 1998
-
- A New Tax System (Medicare Levy Surcharge-Fringe Benefits) Bill
1998
-
- A New Tax System (Personal Income Tax Cuts) Bill 1998, First
Reading
-
- A New Tax System (Trade Practices Amendment) Bill 1998, First
Reading.
The first 16 of these Bills were introduced on 2
December 1998 and the 17th Bill was introduced on 10
December 1998.
- Circulated by the Hon. Peter Costello MP, Treasurer of the
Commonwealth of Australia (AGPS) August 1998.
- Hansard, House of Representatives, 2 December 1998, p.
1087.
- Hansard, House of Representatives, 3 December 1998, p. 1343.
- Ibid., pp. 133-134
- (1965) 114 CLR 1.
- Business Names Act 1962 (Vic); Business Names Act
1962 (NSW); Business Names Act 1962 (Qld);
Business Names Act 1996 (SA); Business Names Act 1962
WA); Business Names Act 1962 (Tas); Business Names Act
1963 (ACT); Business Names Act 1962 (NT).
- (1947) 74 CLR 31 at 79.
- The High Court and the Constitution, Fourth Edition, p. 40.
- The Report of the Small Business Deregulation Task Force, whose
Chairman was Mr Charlie Bell, was published in November 1996. This
report is generally referred to as the Bell Report.
- Business Names Act 1962 (Vic), Business Names Act
1962 (NSW), Business Names Act 1962 (Qld),
Business Names Act 1996 (SA), Business Names Act
1962 WA), Business Names Act 1962 (Tas); Business
Names Act 1963 (ACT), Business Names Act 1962 (NT).
- Clause 1001 of the Corporations Agreement between the
Commonwealth, States and Northern Territory made on 23 September
1997.
- (1990) 169 CLR 482
- Ibid., p. 503.
- (1908) 8 CLR 330
- Reform of the Australian Taxation System, Statement by the
Treasurer, The Hon. Paul Keating 19 September 1985(AGPS), pp.
28-31.
- Ibid., p.28.
- Report of the Joint Select Committee on an Australia Card (May
1986) (AGPS), paragraph 1.11, pp 7-8.
- The Australia Card Bill 1986, introduced into the House of
Representatives on 22 October 1986, was rejected by the Senate on
10 December 1986. The Australia Card Bill 1986 (No 2) was rejected
by the Senate on 2 April 1987. The Australia Card Bill 1986 (No 3)
was laid aside in the Senate on 9 October 1987. The three Bills
were identical.
- Australia Card Bill 1986, Parts II and III.
Bernard Pulle
28 January 1999
Bills Digest Service
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ISSN 1328-8091
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