Scrutiny of Bills Eighth Report of 1999

A New Tax System (Goods and Services Tax Administration) Bill 1998

Introduction

The Committee dealt with this bill in Alert Digest No. 1 of 1999, in which it made various comments. The Treasurer has responded to those comments in a letter dated 23 April 1999. A copy of the letter is attached to this report. An extract from the Alert Digest and relevant parts of the Treasurer's response are discussed below.

Extract from Alert Digest No. 1 of 1999

This bill was introduced into the House of Representatives on 2 December 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of 16 bills to reform the taxation system, the bill proposes to amend the Taxation Administration Act 1953 to:

establish who is to administer the GST law;
support the collection and recovery of GST;
set maximum penalties for breaching GST obligations;
permit entities to rely on the Commissioner's interpretation of the law;
set time limits on GST liability and on credit entitlements;
adopt existing mechanisms for the review of assessments and other GST decisions;
confer powers on the Commissioner for the gathering of information; and
protect the confidentiality of information disclosed for GST purposes.

Non-reviewable discretions?

Proposed new section 62

Item 7 of Schedule 1 to this bill adds a new Part VI to the Taxation Administration Act 1953. This Part includes proposed new section 62, which provides for the review of the exercise of many of the discretions granted to the Commissioner of taxation under the A New Tax System (Goods and Services Tax) Bill 1998 (“the GST Bill”).

Under proposed section 33-20 of the GST Bill, the Commissioner may extend the time for payment of GST-related amounts, or may allow them to be paid by instalments or on terms determined by him or her.

Under proposed section 33-25 of the GST Bill, if the Commissioner has reason to believe that a person may leave Australia before a particular GST-related payment becomes due, then that amount becomes due for payment on the day the Commissioner fixes.

Neither of these discretions is reviewable under proposed section 62 of the Administration Act. The Committee, therefore, seeks the Treasurer's advice on the reasons for excluding these discretions from review under proposed section 62.

Pending the Treasurer's advice, the Committee draws Senators' attention to the provisions, as they may be considered to make rights, liberties or obligations unduly dependent upon non-reviewable decisions in breach of principle 1(a)(iii) of the Committee's terms of reference.

Relevant extract from the response from the Treasurer

The Committee is concerned that proposed sections 33-20 and 33-25 may make rights, liberties or obligations unduly dependent upon non-reviewable decisions in breach of principle 1(a)(iii) of its terms of reference. This is because decisions by the Commissioner under these provisions are not listed as `reviewable GST decisions' in new section 62 of the Taxation Administration Act 1953 (proposed to be inserted by the A New Tax System (Goods and Services Tax Administration) Bill 1998). Reviewable GST decisions are those to which objection and administrative review rights will be available under Part IVC of the Taxation Administration Act 1953.

The suggestion that decisions under sections 33-20 and 33-25 should be `reviewable GST decisions' is not supported. Administrative review is not available for decisions made under corresponding provisions in other Acts administered by the Commissioner such as sections 206 and 205 Income Tax Assessment Act 1936, sections 66 and 65 Sales Tax Assessment Act 1992 and sections 92 and 91 Fringe Benefits Tax Assessment Act 1986.

Decisions under section 33-20 (to extend the time for payment of GST) are concerned not with imposing obligations or varying rights but rather with suspending action to recover debts that are overdue. The decision is exercised in particular cases where payment by the due date is prevented by circumstances beyond the control of the debtor. Recovery of tax debts is deferred for the period between the original due date for payment of the tax and the date specified in the decision extending the time to pay. Although the Commissioner has published guidelines for the exercise of the discretion under section 206 Income Tax Assessment Act 1936 (Taxation Ruling IT2569) decisions must necessarily be made having regard to the circumstances of each particular case.

If decisions under section 33-20 were subject to administrative review there would be a high risk of abuse of process. This could have the absurd result of deferring recovery of tax in situations where the merits of the case clearly do not warrant an extension of time to pay.

It is considered that such decisions do not fall within a category of decisions for which administrative review is appropriate, and that this is consistent with the guidelines on the administrative law aspects of legislative proposals published by the Attorney-General's Department.

Administrative review in the circumstances in which section 33-25 is designed to apply, that is, persons seeking to escape their tax liabilities by leaving Australia before their liabilities fall due for payment, would be an invitation to abuse. Such action would frustrate the intended object of the provision. The provision is essentially one connected with the recovery of tax liabilities. Decisions made under the provision are concerned with the enforcement of existing obligations, that is, to pay taxes the liability to which has already been established. It is considered that such decisions do not fall within a category of decisions for which administrative review is appropriate and that this is consistent with the guidelines on the administrative law aspects of legislative proposals published by the Attorney-General's Department.

Decisions under sections 33-20 and 33-25 will be subject to judicial review in accordance with the Administrative Decisions (Judicial Review) Act 1977.

The Committee thanks the Treasurer for this response. It accepts that administrative review is currently not available under corresponding provisions in other Acts administered by the Commissioner.

Clearly, the issue of personal rights and liberties is one of principle. Therefore, a diminution of rights under one Act cannot be used as a precedent to diminish rights under other Acts. Similarly, rights and liberties cannot be diminished simply in the interest of administrative convenience.

Under section 33-20 of the GST Bill, the Commissioner has a discretion to extend the time for the payment of certain GST-related amounts. Properly exercised, this provision confers a benefit on taxpayers, and subjecting it to administrative review is probably unnecessary. The Committee notes that guidelines govern the exercise of a similar discretion under section 206 of the Income Tax Assessment Act 1936. Arguably, the discretion under section 33-20 should similarly be governed by guidelines.

Under section 33-25 of the GST Bill, the Commissioner has a discretion to truncate the time for the payment of certain GST-related amounts where the Commissioner believes that a person “may leave Australia”. Such a provision is designed to prevent a person avoiding the payment of a tax to which he or she or it will eventually become liable by leaving Australia before it becomes payable. The Committee acknowledges the public interest that underlies such a provision, and recognises that providing for administrative review may lead to its abuse. However, the language used in section 33-25 would make it applicable to any person leaving Australia, for example on a business venture, or on a holiday, or to visit a sick relative or to go to a funeral, and with every intention of returning. In these circumstances, the Senate may like to consider whether this discretion ought to be available only where the Commissioner considers that persons intend leaving Australia with the intention of escaping their tax liabilities.

Search and entry

Proposed new section 66

As noted above, Item 7 of Schedule 1 to this bill adds a new Part VI to the Taxation Administration Act 1953. This Part includes proposed new section 66, which will allow an officer authorised by the Commissioner of Taxation to enter and search any premises and inspect and analyse any documents, goods and other property. No provision is made for obtaining a judicially sanctioned warrant, which is a generally accepted safeguard in such circumstances.

In addition, the clause does not attempt to limit or categorise those who might be authorised to carry out such searches – for example, by specifying certain required attributes or qualifications. Requiring such attributes or qualifications is an approach adopted in some other statutes (for example, section 258 of the Superannuation Industry (Supervision) Act 1993) and, arguably, provides some reassurance against possible abuses of a power of such width. The Explanatory Memorandum provides no information beyond that included in the clause itself. The Committee, therefore, seeks the Treasurer's advice on the reasons why proposed section 66 authorises entry onto premises without the need to obtain a warrant, and why that provision does not specify certain attributes or qualifications to be possessed by officers before they can become authorised officers.

Pending the Treasurer's advice, the Committee draws Senators' attention to the provision, as it may be considered to trespass unduly on personal rights and liberties in breach of principle 1(a)(i) of the Committee's terms of reference.

Relevant extract from the response from the Treasurer

Proposed section 66 will confer the same powers of access to authorised officers as currently conferred by section 263 Income Tax Assessment Act 1936, section 109 Sales Tax Assessment Act 1992, section 127 Fringe Benefits Tax Assessment Act 1986, and section 38 Superannuation Contributions Tax (Assessment and Collection) Act 1997 among others administered by the Commissioner of Taxation.

The suggestion that a judicially sanctioned warrant be obtained before authorised officers enter premises to inspect documents or goods is not supported. Such a requirement would impose a needless hindrance to the efficient conduct of the activities of the ATO.

The conduct of ATO officers, in a fair and professional manner, is governed by The Taxpayers' Charter and comprehensive guidelines on the use of access and information gathering powers. Both of these documents are publicly available. The ATO also controls the use of these powers through a system of delegation and authorisation of ATO officers.

The ATO has a policy of endeavouring to deal with taxpayers and their advisers co-operatively. This means that advance notice and requests for co-operation are part of the preferred method of obtaining access to taxpayers' premises. Formal approaches to seeking access will be made if taxpayer co-operation is not forthcoming or if the premises are occupied by persons other than the taxpayer. Likewise, urgent access action may be appropriate if an officer reasonably believes that the existence or integrity of documents or information is under threat. The guidelines state that urgent access action requires the approval of a senior officer. Taxpayers are informed that they may have a representative present at any time, and are given reasonable time and opportunity to consult with their representative.

The access powers, as currently framed, provide ATO officers with flexibility in managing the conduct of their activities according to the co-operation they receive. To require the obtaining of a judicially sanctioned warrant before an authorised officer can enter premises would produce an unnecessarily adversarial climate and would not be conducive to a relationship of mutual co-operation between ATO officers and taxpayers. It would undermine the promotion within the taxpaying community of voluntary compliance with the tax laws. Furthermore, delay resulting from the need to obtain a judicially sanctioned warrant could jeopardise the outcome of audits where crucial evidence may be at risk.

The suggestion that the provision should limit or categorise, by certain attributes or qualifications, those officers who might be authorised to exercise the powers is also not supported. The authority to access and gather information and evidence formally is delegated to officers under the relevant taxation laws. When entering premises or seeking documents officers are required to produce their identification and explain the purpose of their visit. The `wallet authority' containing the authorisation for an officer to exercise access powers can only be used in relation to those powers.

The Committee has referred to section 258 of the Superannuation Industry (Supervision) Act 1993 as an example of a provision that allows for the qualifications of an investigator to be specified. This provision concerns the giving of a notice by the Australian Prudential Regulation Authority (APRA) to the trustee of a superannuation entity to appoint an external investigator to investigate and report on the financial position of the entity. Legislative provision for the specification of qualifications is appropriate in these circumstances because the external investigator would be appointed solely by the trustee of the entity being investigated. Such a requirement is not necessary where an investigation is undertaken by APRA staff. For example, section 268 the Superannuation Industry (Supervision) Act 1993 does not specify the qualifications of an APRA inspector when that inspector is exercising the access powers specified in that Act. In essence, the power contained in section 268 is the same as that in proposed section 66 of the Taxation Administration Act 1953.

I trust that the above information is useful in the Committee's deliberations in relation to these matters.

The Committee thanks the Treasurer for this response, and notes that proposed section 66 will, in effect, confer the same powers of access on authorised officers as are currently conferred under other legislation administered by the Commissioner.

The Committee further notes that authorised officers need not be ATO officers as intimated in the Treasurer's response. Proposed section 20 of the Administration Bill states that an authorised officer means “a person the Commissioner has authorised to exercise powers or perform functions”. Elsewhere in the tax legislation, a person may include a company.

The Committee consistently draws attention to provisions which allow the delegation of significant and wide-ranging powers to anyone who fits the all-embracing description of “a person”. Such provisions may make rights and liberties unduly dependent on insufficiently defined administrative powers. Therefore, the Committee seeks the Treasurer's further advice on why the search and entry power is expressed so broadly, and whether it should be restricted to senior ATO officers.

The Committee notes that the Senate has agreed to refer the fairness, purpose, effectiveness and consistency of search and entry provisions in Commonwealth legislation to the Committee for inquiry and report. The desirability of provisions such as these which authorise entry without a warrant is best considered as part of this inquiry.

A New Tax System (Goods and Services Tax) Bill 1998

Introduction

Extract from Alert Digest No. 1 of 1999

This bill was introduced into the House of Representatives on 2 December 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of 16 bills to reform the taxation system, the bill proposes to implement a broad based indirect goods and services tax (GST) to replace the wholesale sales tax and a number of indirect State taxes by establishing:

the basic rules for the GST;
which supplies, acquisitions and importations are GST-free or input taxed;
special rules, which modify the application of the general rules; and
miscellaneous and interpretative provisions relating to the GST.

Apparently excessive powers

Proposed new Division 165

As noted in proposed new subsection 165-1, proposed Division 165 of this bill is intended to deter schemes to give benefits by reducing GST, increasing refunds or altering the timing of payment of GST or refunds. If the dominant purpose or a principal effect of a scheme is to give an entity such a benefit, the Commissioner may negate the benefit an entity gets from the scheme by declaring how much GST or refund would have been payable, and when it would have been payable, apart from the scheme.

In particular, under proposed new subsection 165-55, the Commissioner may, for the purposes of making such a declaration:

treat a particular event that actually happened as not having happened; and
treat a particular event that did not actually happen as having happened; and
treat a particular event that actually happened as having happened at a time different from the time it actually happened, or having involved particular action by a particular entity (whether or not the event actually involved any action by that entity).

These are apparently wide discretionary powers. However, the Committee understands that, in general terms, these powers have been modelled on the Commissioner's existing powers in Part IVA of the Income Tax Assessment Act 1936. The Committee also notes that declarations under proposed section 165 are to be reviewable under amendments to the Taxation Administration Act 1953.

Nevertheless, the Committee would expect that the exercise of such wide powers would be subject to some guidelines or codes of practice. The Committee also expects that such powers would be used infrequently, and considers that the frequency of their use is something that should be brought to the attention of the Parliament. The Committee, therefore, seeks the Treasurer's advice as to whether any guidelines are to be issued to govern the exercise of the Commissioner's powers under Division 165. The Committee also seeks the Treasurer's advice on the feasibility of tabling, in each House of the Parliament, an annual report indicating the frequency with which the Commissioner has used these powers, and outlining in broad terms the general categories of conduct that have prompted their exercise.

Pending the Minister's advice, the Committee draws Senators' attention to the provisions, as they may be considered to make rights, liberties or obligations unduly dependent upon insufficiently defined administrative powers in breach of principle 1(a)(ii) of the Committee's terms of reference.

Relevant extract from the response from the Treasurer

The policy underlying proposed provisions in section 165-55 is considered to be neither new nor exceptional in the context of a general anti-avoidance rule.

Existing general anti-avoidance rules call for a conclusion to be reached about what would “reasonably be expected [to have happened] if the scheme had not been entered into or carried out” - see for example subsection 177C(1) Income Tax Assessment Act 1936, and subsection 93(1) Sales Tax Assessment Act 1992. In other words, they provide a power of reconstruction.

The proposed GST anti-avoidance rule also provides a power of reconstruction. It is not considered that proposed section 165-55 provides any greater discretionary power than already exists in the general anti-avoidance rules in the Income Tax Assessment Act 1936 or the Sales Tax Assessment Act 1992 for example. Proposed section 165-55 expressly sets out powers of reconstruction, and largely mirrors those already existing at subsection 93A(2) of the Sales Tax Assessment Act 1992.

The powers of the Commissioner are not unfettered. They can only be exercised “reasonably” (see proposed section 165-10), and their exercise is, as noted by the Committee, subject to both administrative and judicial review.

The application of a general anti-avoidance rule is a matter for careful case by case decision, as each case necessarily turns on its own facts when conclusions about “dominant purpose” or “principal effect” must be made.

Guidelines as to the scope and operation of the provisions are found in the Explanatory Memorandum. Further guidelines will be considered if any judicial pronouncements are made.

However, the Australian Taxation Office (ATO) has a Panel, involving senior ATO staff as well as external taxation experts engaged as consultants, which considers the application of general anti-avoidance rules to specific cases. The GST general anti-avoidance rule will also be part of that process. This approach ensures the consistent application and development of general anti-avoidance provisions across the range of taxes. It also provides taxpayers with the assurance the use of a general anti-avoidance rule involves an objective consideration of the issues at a senior level.

The Commissioner will report on cases where he has applied the anti-avoidance provisions in his annual report (required by proposed new section 64 of the Taxation Administration Act 1953) which provides the most efficient means of communicating this information.

The Committee thanks the Treasurer for this response.

A New Tax System (Indirect Tax Administration) Bill 1999

Introduction

The Committee dealt with this bill in Alert Digest No. 5 of 1999, in which it made various comments. The Assistant Treasurer has responded to those comments in a letter dated 30 April 1999. A copy of the letter is attached to this report. An extract from the Alert Digest and relevant parts of the Assistant Treasurer's response are discussed below.

Extract from Alert Digest No. 5 of 1999

This bill was introduced into the House of Representatives on 24 March 1999 by the Treasurer. [Portfolio responsibility: Treasury]

The bill proposes to amend the Taxation Administration Act 1953 to provide for the administration and collection of the wine equalisation tax and luxury car tax by the Commissioner of Taxation.

Reviewable decisions?

Schedule 1, item 66

Item 66 of Schedule 1 to this bill proposes to insert a new subsection 62(2A) in the Taxation Administration Act 1953. This subsection provides for review of a number of decisions under the Wine Tax Act. This Act is defined as the A New Tax System (Wine Equalisation Tax) Act 1999 (see item 10 of Schedule 1 to the bill).

However, there seems to be no correlation between the decisions listed in proposed subsection 62(2A) and the nominated provisions of the Wine Tax Act. For example, subsection 62(2A) states that refusing to register a person for wine tax under section 79 of the Wine Tax Act is a reviewable decision. There is no section 79 in the A New Tax System (Wine Equalisation Tax) Bill 1999. Similarly, cancelling a person's registration for wine tax under subsection 80(1) is said to be a reviewable decision. There is no subsection 80(1) in the A New Tax System (Wine Equalisation Tax) Bill 1999.

The Committee, therefore, seeks the Minister's advice as to which decisions are reviewable under proposed subsection 62(2A).

Pending the Minister's advice, the Committee draws Senators' attention to this provision, as it may be considered to make rights, liberties or obligations unduly dependent on non-reviewable decisions in breach of principle (1)(a)(iii) of the Committee's terms of reference.

Relevant extract from the response from the Assistant Treasurer

There was an oversight in the preparation of this Bill which needs to be corrected. As there is no separate registration requirement in the WET Bill Items 1 to 3 in the proposed subsection 62(2A) are not relevant. The only reviewable decision that should be included as part of subsection 62(2A) is the current Item 4 relating to a decision to disallow the whole or part of a claim for a wine tax credit. The reference in the column headed “Provision of Wine Tax Act under which decision is made” should be section 17-45.

The Committee thanks the Assistant Treasurer for this response.

A New Tax System (Luxury Car Tax) Bill 1999

Introduction

Extract from Alert Digest No. 5 of 1999

This bill was introduced into the House of Representatives on 24 March 1999 by the Treasurer. [Portfolio responsibility: Treasury]

The bill proposes to implement a luxury car tax at the rate of 25 per cent on taxable supplies and importations of luxury cars, from 1 July 2000.

Insufficient Parliamentary scrutiny

Subclause 21-1(2)

Proposed subclause 21-1(1) of this bill exempts the Commonwealth and Commonwealth entities from actual liability for the payment of luxury car tax, but imposes on them a notional liability and requires them to notionally have luxury car tax adjustments. Proposed subclause 21-1(2) enables the Minister for Finance to give “such written directions” to give effect to this provision. By virtue of subclause 21-1(3), these directions override “any other Commonwealth law”.

Clearly, such directions permit changes to be made to the application of other laws passed by the Parliament. However, it is not apparent from the bill or the Explanatory Memorandum whether these directions are to be given only to entities which are part of the Commonwealth, or may also be given to entities which are separate from the Commonwealth. The Committee has previously accepted that such directions may be given to Commonwealth entities without qualification. However, where they are given to entities which are separate from the Commonwealth, then they should, at the very least, be disallowable.

The Committee, therefore, seeks the Minister's advice as to whether these directions may be given to non-Commonwealth entities, and, if so, why they should not be tabled and subject to Parliamentary scrutiny.

Pending the Minister's advice, the Committee draws Senators' attention to this provision, as it may be considered to insufficiently subject the exercise of legislative power to parliamentary scrutiny in breach of principle (1)(a)(v) of the Committee's terms of reference.

Extract from the response from the Assistant Treasurer

The concerns raised by the Committee relate to the same provision in each of [the ANTS (Luxury Car Tax) Bill 1999 and the ANTS (Wine Equalisation Tax) Bill 1999]. The provisions relate to the application of the bills to the Commonwealth and Commonwealth entities. This provision is also included in the GST Bill. The proposed section in each of these bills ensures that the Commonwealth and Commonwealth entities are not liable to pay the tax payable under the Acts. However, it is intended that the Commonwealth and Commonwealth entities would be notionally liable to pay the tax and notionally entitled to credits arising under the Acts.

The purpose of the provision is to ensure that where relevant the Commonwealth and Commonwealth entities will pay notional amounts of luxury car tax and wine tax. These provisions will only apply to entities that are part of the Commonwealth. An entity that is not part of the Commonwealth will have an actual liability for any wine tax or luxury car tax payable.

The written directions to be given by the Minister for Finance referred to in these bills will therefore only apply to entities that are part of the Commonwealth.

Background

“Commonwealth entity” is defined in the bills to mean:

(a) an agency (within the meaning of the Financial Management and Accountability Act 1997); or

(b) a Commonwealth authority (within the meaning of the Commonwealth Authorities and Companies Act 1997);

that cannot be made liable to taxation by a Commonwealth law.

The term “agency” is defined in the Financial Management and Accountability Act 1997 (“FMA Act”) to mean:

(a) a Department of State:

(i) including persons who are allocated to the Department (for the purposes of this Act) by regulations made for the purposes of this paragraph; but

(ii) not including any part of the Department that is a prescribed Agency;

(b) a Department of the Parliament, including persons who are allocated to the Department (for the purposes of this Act) by regulations made for the purposes of this paragraph;

The term “Commonwealth authority” is defined in section 7 of the Commonwealth Authorities and Companies Act 1997 (“CAC Act”):

“(1) In this Act, Commonwealth authority means either of the following kinds of body that holds money on its own account:

(a) a body corporate that is incorporated for a public purpose by an Act;

(b) a body corporate that is incorporated for a public purpose by:

(i) regulations under an Act; or

(ii) an Ordinance of an external Territory (other than Norfolk Island) or regulations under such an Ordinance; and is prescribed for the purposes of this paragraph by regulations under this Act.

(2) None of the following are Commonwealth authorities:

(a) Corporations Law companies;

(b) Aboriginal associations incorporated under Part IV of the Aboriginal Councils and Associations Act 1976;

(3) For the purposes of subsection (1), all money that a body holds is taken to be held by it on its own account, unless the money is public money as defined in section 5 of the Financial Management and Accountability Act 1997.”

The above two Acts are concerned with the financial management, accountability and audit of Commonwealth agencies, authorities and companies. The 2 Acts together with the Auditor-General Act 1997 replaced the Audit Act 1901. The meaning of Commonwealth entity in the LCT Bill and the WET Bill does not include a wholly-owned Commonwealth company referred to in the FMA Act.

The FMA Act is concerned with the regulatory/accounting/accountability framework for dealing with and managing the money and property of the Commonwealth. Its scope covers the underlying principles that govern the activities of persons in organisations that, financially, are agents of the Commonwealth - that is Departments' those Statutory Authorities whose enabling legislation does not give them legal ownership of money or property separately from the Commonwealth; and any body, organisation or group of persons prescribed as an Agency on the basis of its dealing with and managing public money or public property on behalf of the Commonwealth.

The CAC Act deals with the financial management, accountability and audit of Commonwealth agencies, authorities and companies.

I trust that these comments address the concerns of the Committee.

The Committee thanks the Assistant Treasurer for this response.

A New Tax System (Wine Equalisation Tax) Bill 1999

Introduction

The Committee dealt with this bill in Alert Digest No. 5 of 1999, in which it made various comments. The Assistant Treasurer has responded to those comments in a letter received on 30 April 1999. A copy of the letter is attached to this report. An extract from the Alert Digest and relevant parts of the Assistant Treasurer's response are discussed below.

Extract from Alert Digest No. 5 of 1999

This bill was introduced into the House of Representatives on 24 March 1999 by the Treasurer. [Portfolio responsibility: Treasury]

The bill proposes to implement a wine equalisation tax at the rate of 29 per cent on assessable dealings and importations of wine made on or after 1 July 2000.

Insufficient Parliamentary scrutiny

Subclause 27-20(2)

Proposed subclause 27-20(2) of this bill exempts the Commonwealth and Commonwealth entities from actual liability for the payment of wine tax, but imposes on them a notional liability and requires them to notionally have wine tax adjustments. Proposed subclause 27-20(2) enables the Minister for Finance to give “such written directions” to give effect to this provision. By virtue of subclause 27-20(3), these directions override “any other Commonwealth law”.

Relevant extract from the response from the Minister

The concerns raised by the Committee relate to the same provision in each of in each of [the ANTS (Luxury Car Tax) Bill 1999 and the ANTS (Wine Equalisation Tax) Bill 1999]. The provisions relate to the application of the bills to the Commonwealth and Commonwealth entities. This provision is also included in the GST Bill. The proposed section in each of these bills ensures that the Commonwealth and Commonwealth entities are not liable to pay the tax payable under the Acts. However, it is intended that the Commonwealth and Commonwealth entities would be notionally liable to pay the tax and notionally entitled to credits arising under the Acts.

The written directions to be given by the Minister for Finance referred to in these bills will therefore only apply to entities that are part of the Commonwealth.

Background

“Commonwealth entity” is defined in the bills to mean:

(a) an agency (within the meaning of the Financial Management and Accountability Act 1997); or

(b) a Commonwealth authority (within the meaning of the Commonwealth Authorities and Companies Act 1997);

that cannot be made liable to taxation by a Commonwealth law.

The term “agency” is defined in the Financial Management and Accountability Act 1997 (“FMA Act”) to mean:

(a) a Department of State:

(i) including persons who are allocated to the Department (for the purposes of this Act) by regulations made for the purposes of this paragraph; but

(ii) not including any part of the Department that is a prescribed Agency;

(b) a Department of the Parliament, including persons who are allocated to the Department (for the purposes of this Act) by regulations made for the purposes of this paragraph;

The term “Commonwealth authority” is defined in section 7 of the Commonwealth Authorities and Companies Act 1997 (“CAC Act”):

“(1) In this Act, Commonwealth authority means either of the following kinds of body that holds money on its own account:

(a) a body corporate that is incorporated for a public purpose by an Act;

(b) a body corporate that is incorporated for a public purpose by:

(i) regulations under an Act; or

(ii) an Ordinance of an external Territory (other than Norfolk Island) or regulations under such an Ordinance; and is prescribed for the purposes of this paragraph by regulations under this Act.

(2) None of the following are Commonwealth authorities:

(a) Corporations Law companies;

(b) Aboriginal associations incorporated under Part IV of the Aboriginal Councils and Associations Act 1976;

The CAC Act deals with the financial management, accountability and audit of Commonwealth agencies, authorities and companies.

I trust that these comments address the concerns of the Committee.

The Committee thanks the Assistant Treasurer for this response.

Barney Cooney

Chairman