House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon. J.S. Dawkins, M.P.)

Administration

A. Introduction

17.1 This chapter covers a number of matters relevant to the administration of sales tax and protection of taxpayers' rights. It deals with the following topics:

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Assessments

•

Objections

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Collection of Information

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General Administration

These matters are dealt with in Part 10 of the Sales Tax Assessment Bill 1992.

B. Explanation and Commentary

Assessments

17.2 In the new law it will be specified that both a taxpayer's liability to sales tax, and the due date for payment of the tax, will arise independently of the making of an assessment. [subclause 103(1)]

Exception: This principle will not apply to an amount payable under the general anti-avoidance provisions. These amounts will not be due for payment until the date stated in a notice of assessment. [subclause 103(2)]

Note:

This is the practical effect of the existing law.

17.3 General power to issue assessments: Sales tax will be a self-assessing tax and taxpayers will be obliged to pay tax without the issue of an assessment. However, in certain situations it will be necessary for the Commissioner to issue assessments. The Commissioner will be able to make assessments at any time in respect of tax payable in relation to any assessable dealing or dealings. [clause 5, definition of 'sales tax' and clause 101]

17.4 Second Assessments: The Commissioner will also be able to make second assessments, as opposed to amended assessments, in respect of dealings which have already been the subject of an assessment. If the Commissioner does make a second assessment, the later assessment will prevail. [clauses 101 and 106]

Exception: The Commissioner will not be able to make second assessments for amounts payable in respect of the cancellation of a tax benefit under the anti-avoidance provisions.

Note:

This is a change from the existing law, to will give the Commissioner flexibility. A sales tax assessment might only deal with one assessable dealing out of all the taxpayer's assessable dealings in a month or quarter and the Commissioner may later wish to issue an assessment for a taxpayer's total liability for that month or quarter, which would cover the dealing for which an assessment has already issued. This will not result in double tax on that dealing because the first assessment will be subsumed by the second and will no longer be of any effect.

17.5 Deceased taxpayer - trustees: The Commissioner will also have power to issue assessments after a taxpayer has died. If tax is unpaid at the time of a taxpayer's death, or has not been assessed, and a trustee of an estate fails to lodge a return or other information, the Commissioner will be able to make an assessment in relation to the deceased taxpayer. 'Trustee' in this context will include an executor, administrator or other personal representative of a deceased person. [clause 5, definition of 'trustee' and subclause 72(4)]

17.6 Deceased taxpayer - unadministered estates: Where probate of a taxpayer's will or letters of administration of the taxpayer's estate have not been granted within 6 months after a taxpayer's death, the Commissioner will be able to make an assessment in relation to the deceased taxpayer. The Commissioner will have to publish notice of the assessment twice in a daily newspaper circulating in the State or Territory in which the taxpayer lived. [clause 73(2)]

17.7 When assessments must be issued: In addition, there will be circumstances in which the Commissioner will be required to issue an assessment. These will be:

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when a taxpayer makes a written request for an assessment in respect of a particular dealing on which tax may be payable by the taxpayer;

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when a penalty for non-compliance under Part 9 of the Bill is payable; and

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when the Commissioner cancels a tax benefit that a taxpayer would have obtained under an avoidance scheme.

These circumstances are discussed in greater detail in the following paragraphs.

17.8 Written request for assessment: With regard to a taxpayer's written request for an assessment in respect of a specific dealing, the Commissioner will be required to issue the assessment to a quarterly remitter if the quarterly remitter lodges the request within 21 days after the close of the quarter (or such further time as the Commissioner allows) in which the dealing occurred. If the taxpayer is not a quarterly remitter, the Commissioner will be required to issue the assessment if the taxpayer has lodged the request for the assessment within 21 days after the end of the month (or such further time as the Commissioner allows), in which the dealing occurred. [clause102]

17.9 Assessment of penalties for non-compliance: The Commissioner will be required to issue assessments for penalties which are payable for non-compliance under Part 9 of the Bill. The penalty will become due for payment on the date stated in the notice of assessment, which date must be at least 14 days after the day on which the assessment was issued. Part 9 is further discussed in Chapter 16, 'Avoidance Schemes and Penalties'. [clause 99]

17.10 Anti-avoidance provisions: The cancellation of a tax benefit under the anti-avoidance provisions in Part 8 of the Bill will be done by means of the making of an assessment. The making of the assessment will play an essential part in the process of applying those provisions. In these cases, the amount payable will become due for payment on the date specified in the assessment. That date will also be required to be also be at least 14 days after the day on which the assessment was issued. Part 8 is discussed in more detail in Chapter 16, 'Avoidance Schemes and Penalties'. [clause 92]

17.11 Notices of assessment: The Commissioner will be required to give a taxpayer written notice of an assessment as soon as possible after it is made. Failure to give the notice will not invalidate assessments, however, with regard to assessments of penalty for non-compliance and amounts payable under the anti-avoidance provisions, the penalty or amount payable will not become due and payable unless a notice is issued. Notices of assessment for amounts payable under the anti-avoidance provisions or penalties for non-compliance will be able to be included in other notices of assessment for the same person. [clauses 92, 99 and 105]

17.12 Amended Assessments: The new law will specify that the Commissioner has the power to amend assessments. This power is implied under the existing law. [clause 104]

17.13 Assessment defined: 'Assessment' will be an assessment made under clauses 92, and 99, and Division 1 of Part 10. The definition will be included in the new law as a convenient means of applying objection and evidentiary provisions to all assessments. [clause 5, definition of 'assessment']

Objections

17.14 The new law will contain provisions which will allow taxpayers or in some cases, other persons, to contest assessments and certain other decisions of the Commissioner by way of objection. An objection is a written request to the Commissioner for him to review assessments or certain specified decisions.

17.15 The actions of the Commissioner which will be able to be challenged by way of objection are:-

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assessments; [clause 107]

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Commissioner's decisions on claims for credits; [subclause 60(2)]

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Commissioner's decision to refuse to register an applicant; and [subclause 79(2)]

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Commissioner's decision to cancel a person's sales tax registration. [subclause 80(3)]

Note 1:

There will be no right to object against decisions concerning security for registration because the Commissioner will no longer have the power to ask for security. Similarly, there will be no right to object against decisions about prohibition of quotation because there will be no equivalent provision in the new law.

Note 2:

It will no longer be necessary to have applied for a credit within 60 days or 120 days (if the applicant is a quarterly remitter) of the claim for the credit arising in order to lodge an objection against a credit decision. Since the Commissioner frequently grants extensions of time for lodging the applications under the existing law, the 60 day and 120 day time-limits will be removed.

17.16 The procedures which a taxpayer or other person will have to follow to lodge an objection (and the Commissioner's duties in relation to objections) are set out in Part IVC of the Taxation Administration Act 1953.

17.17 Who can object? With regard to assessments, the taxpayer will be the person who is entitled to object. If the taxpayer has died and an assessment has been issued under clause 72 (see paragraph 17.5), a trustee of the estate will be able to object against the assessment. A person who claims an interest in a deceased taxpayer's estate or a person who has been granted probate of a will or letters of administration of an estate will be able to object against an assessment made under clause 73 (see paragraph 17.6). With regard to decisions to refuse to register an applicant or to cancel a person's sales tax registration, persons affected by the decisions can object against them. The right to object to these decisions will not be restricted to applicants or persons wanting to be registered.

Collection of Information

17.18 The Commissioner will have powers to compel a person to provide information and to obtain access to premises and documents. These powers will be very similar to powers in the existing law. However, the confidentiality of the information obtained by the Commissioner or his officers will be protected.

17.19 Power to collect Information: The Commissioner will have the power to require a person, by written notice-

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to provide such information as the Commissioner requires;

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to attend and give evidence; and

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to produce documents in the custody or control of the person.

The Commissioner will only be able to use these powers for the purpose of applying the sales tax laws in relation to that person or another person. [subclause 108(1)]

17.20 The Commissioner will be able to require information or answers to questions to be given orally or in writing. The Commissioner will also be able to insist that information or answers to questions be verified or be given under oath or affirmation. Either the Commissioner or an authorised officer will be able to administer the oath or affirmation. The new law will allow for regulations to set out scales of re-imbursement for persons required to attend under these provisions. [subclauses 108(2), (3) & (4)]

17.21 Non-compliance with these provisions will be an offence under the Taxation Administration Act 1953.

17.22 Access: Authorised officers will be able to gain access to premises for the purposes of the sales tax laws. Officers exercising powers under this section will need an authority in writing signed by the Commissioner. 'Authorised officers' will be able to:

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gain access to any land or premises at all reasonable times;

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gain full access to documents, goods or other property at all reasonable times;

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inspect, examine, copy or take extracts from any documents; and

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inspect, examine, count, measure, weigh, gauge, test or analyse any goods or other property and take samples from them. [subclause 109(1)]

Note:

The access provisions will refer to "other property", that is, property which may not be goods. This will allow inspection of property to determine, for example, whether it is goods.

17.23 'Authorised officer', when the term is used in a particular provision, will be defined to mean a person authorised in writing by the Commissioner to exercise powers or perform functions under that provision. [clause 5, definition of 'authorised officer']

17.24 The occupier of the land or premises will be obliged to provide the officer seeking access with reasonable facilities and assistance. If the occupier does not do so, the occupier will be liable to a penalty of $1,000. On the other hand, an officer will not be entitled to remain on land or premises if they fail to produce their written authorisation when requested to do so. [subclauses 109(2) and (3)]

17.25 Confidentiality: The dissemination of information obtained under the sales laws will be restricted. A person who holds protected information or documents obtained in the course of official employment will be prohibited from making a record of the information or disclosing it to anyone else, except in specified circumstances. There will be a penalty of 2 years imprisonment for a breach of this prohibition.

17.26 Protected information will be information obtained under the sales tax laws by a person acting in the course of official employment and relating to the affairs of another person. Protected documents will be documents made or given under, or for the purposes of, the sales tax laws. Official employment will mean, as well as appointment or employment by the Commonwealth, performance of services for the Commonwealth or the exercise of powers or functions under a delegation by the Commissioner. [subclauses 110(1), (2) and (6)]

17.27 The circumstances in which a person will be able to record or disclose protected information or documents are as follows:-

(a)

the recording or disclosure is for the purposes of the sales tax laws;

(b)

it happens in the course of official employment;

(c)

the person is the Commissioner or a Deputy Commissioner, or a person authorised by the Commissioner or a Deputy Commissioner to disclose the information, and the disclosure is to the Comptroller-General of Customs or to another person carrying out functions under a taxation law;

(d)

the person is the Commissioner or a Deputy Commissioner and the disclosure is to the Administrative Appeals Tribunal in proceedings under a taxation law;

(e)

the disclosure or production of a document is to a court and is necessary to give effect to the sales tax laws. A person acting in the course of official employment will not otherwise be required to produce protected information or documents to a court.

There will be no circumstances in which a disclosure of protected information or documents can be made to a Minister. [subclauses 110(3), (4) and(5)]

17.28 The duties of officers with regard to confidentiality will not be changed by the new law. However, the Commissioner will no longer be specifically empowered to require officers to take oaths of secrecy. The power to administer an oath of secrecy will be unnecessary because officers will have to observe the secrecy provisions described above in any event.

General Administration

17.29 Responsibility for administration: The Commissioner of Taxation, referred to as the Commissioner, will have the general administration of the sales tax laws . [clause 111]

17.30 Annual report: Each year the Commissioner will have to prepare an annual report for the Minister on the working of the sales tax laws. The Minister will have to lay a copy of the report before each House of Parliament within 15 sitting days of that House after the Minister has received the report. The report will have to include information about any breaches or evasions of the sales tax law that the Commissioner knows about. [clause 112]

17.31 Returns and other forms: The Commissioner will have the power to prescribe the format of any return, application, notification or other document to be lodged with the Commissioner. The document will have to contain the information requested in the form, and such further information as is required. The form will have to be lodged in the place and manner that the Commissioner requires. [clause 113]

17.32 Any notice, approval, direction or authority which the Commissioner will be required to give to a person under the new law will have to be in writing. [clause 114]

C. Summary of main changes

17.33 The main changes to the existing law discussed in this chapter are: