Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello MP)Chapter 2 Technical corrections, amendments and general improvements
Outline of chapter
2.1 Schedule 2 to this Bill makes various technical corrections and amendments to the taxation laws and also makes some general improvements to the law that are of a minor nature.
Context of amendments
2.2 Tax legislation is complex and wide-ranging and it is inevitable that minor errors occur occasionally. These errors detract from the readability of the taxation laws and sometimes confuse or mislead readers and hence require correction.
Summary of new law
2.3 The corrections, amendments and general improvements that Schedule 2 makes to the taxation laws are part of the Government's ongoing commitment to improve the quality of the taxation laws. Errors that are corrected include duplicated definitions, missing asterisks from defined terms and incorrect numbering. Redundant references are also removed.
2.4 A more substantive amendment is the formal transfer of power from the Prime Minister to the Treasurer to appoint a person to act as the Commissioner of Taxation (Commissioner) or Second Commissioner of Taxation (Second Commissioner), during a vacancy in, or absence from, either office.
2.5 The technical amendments generally commence on Royal Assent. However, the amendment explained in paragraph 2.23 will apply retrospectively for the reasons set out in paragraph 2.24.
Australian Taxation Office acting appointments
2.6 Section 6B of the Taxation Administration Act 1953 (TAA 1953) gives the Prime Minister power to appoint a person to act as the Commissioner or Second Commissioner, during a vacancy in, or absence from, either office. Subsection 6B(11) also allows the Treasurer to make acting appointments on the Prime Minister's behalf, but only where the Treasurer is authorised by the Prime Minister to exercise this power. In practice, the Treasurer usually exercises the power so the authorising process is an unnecessary inconvenience.
2.7 The amendment replaces the term 'Prime Minister' with 'Minister' throughout section 6B, making the Treasurer formally responsible for acting appointments. Subsection 6B(11) is repealed as the Prime Minister will no longer need to delegate the power to the Treasurer to make such acting appointments. A transitional provision ensures that appointments made by the Prime Minister continue to have effect. [Schedule 2, items 17 to 19, subsections 6B(1), (2), (5), (8), (9) and (11) of the TAA 1953]
Fixing incorrect references
2.8 Section 12-5 of the Income Tax Assessment Act 1997 (ITAA 1997) lists provisions that contain rules about specific types of deduction. The list of provisions includes a deduction for film income and a guide note suggests that readers 'see also losses' under that heading. There is no specific deduction for films under the heading 'losses' in section 12-5. The guide note should refer to 'tax losses'. Therefore 'see also losses' is replaced with 'see also tax losses'. [Schedule 2, item 11, section 12-5 of the ITAA 1997]
Updating a definition
2.9 Subsection 124K(1) of the Income Tax Assessment Act 1936 (ITAA 1936) defines the term 'Minister' for the purposes of Division 10B of Part III of the Act as 'the Minister for Arts, Sport, the Environment, Tourism and Territories'. There is no longer such a Minister. In the context of Division 10B, the relevant Minister is the Minister who administers the Film Licensed Investment Company Act 2005 , hence the definition is replaced with a reference to the Minister responsible for administering that Act. [Schedule 2, item 3, subsection 124K(1) of the ITAA 1936]
Deleting duplicate definitions
2.10 The ITAA 1936 contains two definitions of 'approved form'. The definition in section 102AAB applies to Division 6AAA in Part III of the Act, whereas the definition in subsection 6(1) applies to the entire Act. The definitions are essentially the same. Therefore the definition of 'approved form' in section 102AAB in the ITAA 1936 is repealed. [Schedule 2, item 1, section 102AAB, definition of 'approved form' in the ITAA 1936]
2.11 A transitional provision preserves any existing forms approved under section 102AAB. [Schedule 2, item 2]
2.12 There are currently two definitions of 'statutory accounting period' in subsection 995-1(1) of the ITAA 1997. The definitions are essentially the same. Therefore one definition is repealed. [Schedule 2, item 16, definition of 'statutory accounting period' in subsection 995-1(1) in the ITAA 1997]
Inserting missing asterisks before defined terms
2.13 Most defined terms in recent tax laws are identified by an asterisk appearing at the start of the term. A footnote on each page of the ITAA 1997 refers readers to the Act's Dictionary of defined terms. Some defined terms are not properly identified by an asterisk. These amendments insert the missing asterisks. [Schedule 2, item 26, subparagraph 43-150(a)(v), subsection 87-40(1) and paragraph 204-30(2)(b) of the ITAA 1997]
Deleting asterisks from terms which do not require an asterisk
2.14 Sections 2-15 of the ITAA 1997 and 3-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) prescribe the conditions where defined terms are not asterisked. The conditions include situations where the defined term appears in non-operative material or in the list of terms used repeatedly throughout an Act. Asterisks in such cases are removed. [Schedule 2, items 25 and 26, subsection 38-50(2) and paragraphs 38-50(7)(b) and 184-1(1)(a), definition of 'individual' in the GST Act and definition of 'apportionable deductions' in subsection 995-1(1) in the ITAA 1997]
Renumbering of provisions
2.15 Some provisions require renumbering and related changes as a result of previous changes and repeals. For example, section 160AO of the ITAA 1936 contains subsections (2) and (3), but subsection (1) has been repealed. To prevent confusion subsection 160AO(2) will be renumbered 160AO(1) and subsection 160AO(3) will be renumbered 160AO(2). [Schedule 2, items 6, 20 and 21, subsections 160AO(2) and (3) of the ITAA 1936 and paragraphs 298-5(c) and (d) of Schedule 1 to the TAA 1953]
Updating the short titles of an Act
2.16 The short title of the Income Tax (International Agreements) Act 1953-1960 has changed to the International Tax Agreements Act 1953 . Therefore, the reference to the Income Tax (International Agreements) Act 1953-1960 in subsection 160AO(2) of the ITAA 1936 is replaced with a reference to the International Tax Agreements Act 1953 . [Schedule 2, item 5, subsection 160AO(2) of the ITAA 1936]
Removing redundant material
2.17 Section 40-145 of the ITAA 1997 applies the Criminal Code to offences covered in Division 40. Section 905-5 provides for a wider application of the Criminal Code to all offences against the ITAA 1997, including those offences in Division 40. Therefore section 40-145 is redundant and is repealed. [Schedule 2, item 12, section 40-145 of the ITAA 1997]
2.18 In defining 'foreign superannuation fund', paragraph 118-520(1)(c) of the ITAA 1997 uses the phrase 'not Australian residents or residents of a Territory' and paragraph 118-520(1)(d) uses 'none of whom is an Australian resident or a resident of a Territory'. Since the definition of 'Australian resident' already includes a resident of an Australian Territory because of subsection 7A(2) of the ITAA 1936, both references to 'resident of a Territory' are redundant and potentially confusing. The amendments remove the words 'resident of a Territory'. [Schedule 2, items 13 and 14, paragraphs 118-520(1)(c) and (d) of the ITAA 1997]
2.19 Subsection 252(2) of the ITAA 1936 deems the public officer of a company duly appointed under the previous Income Tax Assessment Act 1922 (1922 Act) to continue to be the public officer of the company duly appointed under the ITAA 1936. In reality, it is unlikely a public officer appointed under the 1922 Act would still be a public officer today. Therefore, subsection 252(2) is inoperative and is repealed. Consequently, subsections 252(3) to 252(6) are renumbered and the references to these provisions are updated. [Schedule 2, items 7 to 10, subsections 252(2), (3), (4), (4A) and (6) of the ITAA 1936]
Fixing grammatical errors
2.20 There is a minor grammatical error in a note after the definition of 'purpose of producing assessable income' in subsection 995-1(1) of the ITAA 1997. The note says 'these provisions treat use of property as not being for the purpose of producing assessable income' but is followed by only a single dot point that mentions one provision. The plural term 'provisions' implies there should be more than one provision listed. Therefore, the note is amended to use the singular case. [Schedule 2, item 15, definition of 'purpose of producing assessable income' in subsection 995-1(1) in the ITAA 1997]
Fixing technical drafting errors
2.21 Item 3 of Schedule 2 to the Taxation Laws Amendment Act (No. 5) 2001 contains a transitional provision which refers to the ' Legislative Instrument Act 2003'. The correct reference should be to the ' Legislative Instruments Act 2003'. Therefore the reference is replaced with ' Legislative Instruments Act 2003'. [Schedule 2, item 22; Schedule 2 to the Taxation Laws Amendment Act (No. 5) 2001 (item 3)]
2.22 Item 4 in Schedule 7 to the Tax Laws Amendment (2006 Measures No. 3) Act 2006 sought to replace 'Act' with 'Act; or' in paragraph 298-5(b) in Schedule 1 to the TAA 1953, so that it linked to paragraph 298-5(c). However, paragraph 298-5(c) has been supplemented by a paragraph 298-5(d), so the link should instead be between paragraphs 298-5(c) and (d). That link is added by another amendment (see paragraph 3.15). Therefore, item 4 of Schedule 7 to the Tax Laws Amendment (2006 Measures No. 3) Act 2006 is repealed. [Schedule 2, item 23; Schedule 7 to the Tax Laws Amendment (2006 Measures No. 3) Act 2006 (item 4)]
Missed consequential amendments
2.23 Section 49B of the Airports (Transitional) Act 1996 uses the term 'entity' and relies on the definition of that term in section 49A. Section 49A was repealed by the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 but a consequential amendment to section 49B was not made. Therefore, section 49B is amended to define 'entity' in the same way as the former section 49A. [Schedule 2, item 24, subsection 49B(7) of the Airports (Transitional) Act 1996]
2.24 This amendment commences immediately after the commencement of Part 1 of Schedule 2 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 to ensure the definition of 'entity' applies continuously from the date section 49A was repealed. [Clause 2, item 4 in the table]
2.25 Paragraph 159ZR(1)(f) of the ITAA 1936 defines 'eligible income' for Subdivision AB of Division 17 of Part III of the Act, by referring in part, to the Audit Act 1901 . The Audit Act 1901 was repealed in 1997. Therefore, references to it are removed. [Schedule 2, item 4, paragraph 159ZR(1)(f), definition of 'eligible income' in the ITAA 1936]
Application and transitional provisions
2.26 All technical amendments generally commence on Royal Assent except for the amendment set out in paragraph 2.23, which will apply retrospectively for the reasons set out in paragraph 2.24. [Clause 2, item 4 in the table]