Explanatory Memorandum
(Circulated by authority of the Treasurer the Hon. P.J. Keating, M.P.)MAIN FEATURES
The amendment of the Taxation Administration Act 1953 proposed by this Bill is of a safeguarding nature and is designed to overcome the decision of the Full Court of the Queensland Supreme Court on a demurrer to a defence to an action by a Deputy Commissioner of Taxation to recover unpaid tax that had been outstanding for more than 6 years and unpaid penalty tax that had been outstanding for more than 2 years in the event that the High Court affirms that decision on appeal.
The amendment will vary the period during which an action for the recovery of a taxation debt (tax, duty or charge or additional tax, additional duty or additional charge) may be commenced in cases where liability for the debt is, or has been, disputed.
The amendment will, however, not apply if a State or Territory law relating to the limitation of actions for commencement of recovery proceedings in respect of debts is held not to apply to the recovery of Commonwealth taxation debts.
In a majority decision handed down on 3 September 1986 in DCT v Moorebank Pty Ltd, the Full Court of the Supreme Court of Queensland decided that the time limits specified in the Queensland Limitation of Actions Act 1974 for the commencement of proceedings to recover a debt applied, by virtue of section 64 of the Commonwealth Judiciary Act 1903, to the commencement of proceedings to recover taxation debts owed to the Commonwealth. Broadly, section 64 of the Judiciary Act applies to litigation involving the Commonwealth brought in a State or Territory the laws of that State or Territory applicable to litigation between citizens. The effect of the Queensland Supreme Court decision is that, in that State, the commencement of an action for the recovery of tax is subject to a 6 year limitation period and the commencement of an action for the recovery of additional tax for late payment is subject to a 2 year limitation period. The Commissioner of Taxation has sought special leave of the High Court to appeal to that Court from the decision of the Queensland Supreme Court.
If, under the existing law, a State or Territory law has the effect of limiting the period in which an action for recovery of a taxation debt may be commenced, this Bill will, in specified cases, vary the date on which the limitation period ends.
The variation will only occur where a person has lodged an objection against an assessment or decision of the Commissioner of Taxation that gave rise to the taxation debt. In a case where no objection has been taken by a person, the time limits specified in any applicable State or Territory limitation law will operate.
It is proposed that, in a case where an objection has been lodged, any applicable limitation period will be taken to have ended as if it had commenced to run from the time when the objection, or any subsequent appeal proceedings in the Administrative Appeals Tribunal or a court in relation to the decision on the objection became final.
By a further measure contained in the Bill, for the purposes of any application of a State or Territory limitation law, additional tax imposed for the late lodgment of a tax return, the making of a false or misleading statement or participation in a tax avoidance scheme is to be treated as "tax" and not as a "penalty". This will mean that, generally, a longer limitation period will apply to the recovery of such unpaid additional tax.
The amendment proposed in the Bill is to apply to all actions for the recovery of tax debts, whether or not the debts became due and payable before, or become due and payable after, the enactment of the Bill. An exception to this will be where a court has, before the introduction into the Parliament of this Bill, given a decision (including a decision on a demurrer to a defence) in an action to recover unpaid tax where the application of a limitation law was argued before the court that gave the decision.
A more detailed explanation of the provisions of the Bill is contained in the following notes.