Explanatory Memorandum
(Circulated by the authority of the Treasurerthe Hon John Dawkins, M.P.)This Memorandum takes account of amendments made by the House of Representatives to the Bill as introduced.Chapter 19 MINOR TECHNICAL AMENDMENTS
Overview
19.1 This Chapter explains provisions in the Bill which propose to make minor technical amendments to the Crimes (Taxation Offences) Act 1980, Income Tax Assessment Act 1936 , and the Taxation (Interest on Overpayments) Act 1983 .
19.2 As the amendments relate to several Acts, the following abbreviations are used:
- Crimes (Taxation Offences) Act 1980 [C(TO)A]; and
- Income Tax Assessment Act 1936 [ITAA];
- Taxation (Interest on Overpayments) Act 1983 [T(IO)A].
Summary of amendments
19.3 Purpose of amendment: This Bill proposes to amend the three Acts as follows:
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- the C(TO)A to correct an omission from the recent amendments to the ITAA which simplified the administration of the Prescribed Payments System (PPS) and the relevant provisions in the ITAA [Clause 4] ;
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- the ITAA so that deductions made from prescribed payments will be in whole dollars [Clause 27] ; and
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- the T(IO)A to remove a reference to a PPS provision which is now redundant following the recent PPS simplification [Clause 158] . The T(IO)A will also be amended to correct an omission from the recent amendments to the ITAA contained in the Insolvency (Tax Priorities) Legislation Act 1993. The amendment will allow for the payment of interest when the penalty, on the non payment of a liability for an estimate of unremitted deductions, is refunded.
19.4 Date of Effect : The amendments explained in this Chapter will apply as follows:
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- the consequential amendment to the C(TO)A to remove the redundant PPS provision will apply to prescribed payments made on or after Royal Assent to the Bill;
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- the amendments in the ITAA relating to the PPS deductions being in whole dollars will apply to prescribed payments made on or after 1 January 1993; and
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- the consequential amendment to the T(IO)A resulting from the recent insolvency legislation will apply to penalties in respect of unremitted amounts that became payable after 30 June 1993.
Background to the legislation
Consequential amendments to Prescribed Payments System provisions
19.5 These are minor technical amendments as a consequence of the recent simplification of the prescribed payments system. These amendments are explained in more detail later in this chapter.
Consequential amendments to Insolvency legislation
19.6 The Insolvency (Tax Priorities) Legislation Act 1993 which received Royal Assent on 16 June 1993 introduced new Division 8 into Part VI of the ITAA. This Division enables the Commissioner to recover amounts not remitted under Divisions 2, 3A, 3B and 4 on the basis of an estimate.
19.7 Where the amount of an estimate is not paid within the required time the person liable to the estimate will also be liable to a penalty for late payment. In addition to a penalty of 16% per annum accruing while the estimate remains unpaid, a person other than a government body will also be liable to a flat penalty of 20% of the amount of the estimate [subsection 222AJA(3)].
19.8 However, the new insolvency legislation provides the Commissioner with powers, similar to those under existing remittance provisions, to remit the penalties imposed on late payment of an estimate [section 222AJC]. Where the Commissioner decides not to remit or to remit only part of the flat penalty, the person will be able to object against that decision under Part IVC of the Taxation Administration Act 1953 [subsection 222AJC(3)].
19.9 To ensure that the penalty is treated consistently with other comparable penalties, the proposed amendment to the T(IO)A will provide that where the amount of penalty is refunded as a result of a successful objection, the applicant will be entitled to interest on any overpaid tax.
Explanation of the amendments
Consequential amendments to Prescribed Payments System (PPS) provisions
19.10 The recent simplification of the PPS administrative arrangements and legislative provisions did not make three necessary consequential amendments to the ITAA, the T(IO)A and the C(TO)A.
19.11 The first amendment was to subsections 221YHD(2), 221YHD(3), 221YHD(5) and 221YHDA(2) of ITAA to provide legislative support for the previous practice of rounding amounts deducted from prescribed payments to whole dollars [Clauses 28 and 29] . To legitimise the existing practice, the amendment will apply in respect of prescribed payments made on or after 1 January 1993 [Clause 30] .
19.12 The second amendment was to the T(IO)A to remove a reference to repealed PPS provision subsection 221YHK(1) [Clause 159] . This provision contained the penalties for when a PPS payer failed to furnish a deduction form as required. The new simplified PPS arrangements removed the need for deduction forms. The amendment will apply in respect of prescribed payments made on or after 1 January 1993 [ Clause 160 ] .
19.13 The third amendment was to paragraph (g) of the definition of "income tax" in subsection 3(1) of the C(TO)A to replace the reference to subsections 221YHD(1) and 221YHD(1D) with a reference to subsection 221YHDC(2). These are the references to the amounts deducted from prescribed payments before and after the simplification measures were introduced. The amendment is technical in nature and will apply in respect of prescribed payments made on or after Royal Assent of the Bill [Clauses 5 and 6] .
Consequential amendments to Insolvency legislation
19.14 The amendment proposes to amend the definition of "relevant tax" in subsection 3(1) of T(IO)A to include an amount payable to the Commissioner under subparagraph 222AJA(3)(b)(i) of the ITAA [Clause 162] . As noted in the Background above, this subparagraph refers to the flat penalty amount in respect of the non remittance of an estimate of an unremitted deduction.
19.15 This amendment ensures that a taxpayer who receives a refund of a penalty imposed under subparagraph 222AJA(3)(b)(i) as a result of a successful objection will be entitled to interest on any overpaid tax.