House of Representatives

Explanatory Memorandum Part A

(Circulated by authority of the Minister Assisting the Treasurer, The Hon. Chris Hurford MP)

General Outline

The Taxation Laws Amendment Bill 1984 will amend the various Commonwealth taxation laws:

Offence and prosecution provisions

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to increase ten-fold the maximum level of court imposed penalties and implement a tiered structure of penalties for second and subsequent offenders;

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to enable all prosecutions of taxation offences punishable by fine and not imprisonment to be instituted in a court of summary jurisdiction;

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to extend the jurisdiction of summary courts to taxation offences punishable by a term of imprisonment not exceeding 12 months;

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to allow a person prosecuted for an offence punishable by a fine exceeding $5,000 ($25,000 for companies), to elect trial in the Supreme Court;

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to prevent a court of summary jurisdiction from imposing a penalty in excess of $5,000 on a natural person or $25,000 in any other case;

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to make directors and other persons concerned in the management of a company punishable for taxation offences committed by the company, other than where the person can show that he or she was not implicated in the particular act or omission;

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to increase to $1,000, the penalty for failure to comply with a notice (garnishee order) issued by the Commissioner to collect money owing to a taxpayer and empower a court to order payment of the amount specified in the order to the Commissioner;

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to increase the levels of fines for companies to five times those that could be imposed on an individual for taxation offences also punishable by a term of imprisonment;

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to repeal provisions of the various taxation laws containing offences for evasion and create new offences of making false or misleading statements, incorrectly keeping records, or falsifying or concealing identity;

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to repeal the provisions of the income tax, sales tax, A.C.T. pay-roll tax and wool tax laws by which persons may be imprisoned for non-payment of fines imposed by courts for taxation offences, and to enact appropriate transitional provisions;

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to consolidate in the Taxation Administration Act 1953 the new and revised offence and prosecution provisions applicable to the various taxation laws administered by the Commissioner of Taxation.

Penalty tax provisions

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to repeal existing penalty tax provisions in the income tax law relating to income omissions and false deduction and rebate claims - and in corresponding provisions of other taxation laws - and substitute new provisions to impose a penalty where tax is sought to be avoided by furnishing false or misleading information (including the omission of income);

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to extend to the sales tax law provisions comparable to the additional tax provisions of the income tax law applicable to participation in specific tax avoidance schemes;

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to ensure that, where a liability for unpaid tax is reduced (e.g. on objection to an assessment) penalty tax for late payment will be based on the reduced tax;

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to increase the rate of statutory additional tax for late payment of taxes, duties or charges payable under taxation laws (other than the income tax law) from 10% to 20% per annum and limit the circumstances under which the Commissioner of Taxation may remit such late payment penalties;

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to provide clear authority in the law for the recovery in a court of penalty tax, including late payment penalty, imposed under the various taxation laws;

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to provide that penalty tax for late payment continues to accrue after judgment has been obtained, but reduced by the amount of any interest payable in respect of the judgment debt;

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to restrict the right of a taxpayer to have a decision of the Commissioner to remit statutory additional tax reviewed by a Taxation Board of Review to cases where the unremitted amount exceeds 20% per annum of the tax avoided.

Collection and recovery procedure improvements

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to extend the garnishee provisions of the income tax law to amounts payable by an employer to the Commissioner of Taxation in respect of P.A.Y.E. deductions and deductions under the prescribed payments system;

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to extend the garnishee provisions of the various taxation laws to enable deposits to building societies to be called on to meet taxation debts;

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to remedy deficiencies in the law relating to the imposition of additional tax for under-estimation of instalments of company tax;

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to strengthen, in a manner consistent with the additional tax provisions applicable to the prescribed payments system, income tax provisions requiring deduction of P.A.Y.E. tax instalments from salaries or wages and their remittance to the Commissioner or their application to purchase tax stamps;

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to increase the rate of penalty tax for under-estimation of income for provisional tax purposes from 10% to 20% of the provisional tax shortfall;

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to increase the rate of penalty for failure to deduct mining withholding tax from a specified mining payment or to make a deduction from a specified withdrawal from an Australian Film Industry Trust Fund account;

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to authorize the Commissioner of Taxation to prevent, subject to certain appeal rights, the departure from Australia of a person with a taxation liability until the tax has been paid or satisfactory arrangements are made for its payment.

Other amendments

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to remove certain limitations on the jurisdiction of Territory Supreme Courts in taxation appeals;

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to authorise a single special appropriation of the Consolidated Revenue Fund for refunds of taxes, duties and charges and related payments under the various taxation laws;

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to provide a mechanism for the arrest and detention of offenders against the Crimes (Taxation Offences) Act 1980 and extend jurisdiction of the Act to the external territories and off-shore installations;

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to make clear that any pecuniary penalty, additional tax or amount imposed on a person for failure to comply with a provision of a law shall not be an allowable deduction for income tax purposes;

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to remedy deficiencies in the income tax, sales tax, A.C.T. pay-roll tax, tobacco charges and wool tax laws relating to the appointment of public officers of companies and trust estates with non-resident trustees;

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to suspend for a minimum of three months the registration of a tax agent convicted of certain offences under the new provisions;

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to ensure that the established legislative basis for the issue of tax clearance certificates applies to the revised tax screening arrangements that came into effect when new foreign exchange dealers were authorized on 25 June 1984; and

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to authorize the Commissioner of Taxation to pay interest on certain refunds of sales tax, A.C.T. stamp duty, estate duty, gift duty, A.C.T. pay-roll tax, tobacco charges and wool tax following the resolution of a dispute in favour of the taxpayer.