Second Reading Speech
by the Minister for the Arts and Administrative Services Senator the Hon Bob McMullanI move that the Bill be now read a second time.
The Bill will amend several laws including the income tax legislation and the Corporations Law. It contains the measures foreshadowed in the joint statement by the Treasurer and the former Attorney-General on 2 December 1992.
Those measures included abolishing the existing priority of the Commissioner of Taxation for debts in relation to certain unremitted amounts which become payable after 30 June 1993. They also included measures to enable the Commissioner to recover the unremitted amounts more quickly through an estimation process and to encourage directors to face emerging problems as soon as possible.
I now turn to a more detailed discussion of these measures.
Removal of the Commissioner's priority
The Commissioner's priority currently applies to amounts deducted by employers from the salary or wages of their employees, and deductions of a similar nature, where those deductions are not paid to the Commissioner. The Commissioner's priority ranks debts for those deductions above all other debts of a person or company in a bankruptcy or insolvency.
The Bill will remove the Commissioner's priority for debts in respect of those deductions, as well as certain other deductions such as those made from prescribed payments under the prescribed payments system. The amendments will apply to unremitted amounts which become payable after 30 June 1993.
As a result of the amendments, debts due to the Commissioner, arising because of a failure to remit amounts deducted, will be treated in a similar manner to debts payable to other unsecured creditors.
Estimation of unremitted amounts
The amendments proposed in the Bill will enable the Commissioner to recover unremitted amounts more quickly by estimating those amounts which become payable after 30 June 1993 and by commencing recovery action on the basis of the estimate.
The Commissioner will only make an estimate of the unremitted deductions when the due date has passed and those deductions have not been paid. The main objective of the new regime is to recover the actual deductions made. Ample opportunity will be provided to the person who did not remit the deductions, as required under the tax legislation, to inform the Commissioner of the actual amount deducted.
Directors to be responsible for unremitted amounts
The Bill will also make company directors liable for deductions made by their company and not remitted to the Commissioner. Currently, directors can be convicted in relation to their company's non payment of amounts deducted and can be ordered by a court to pay reparation equal to the deductions not remitted. This new measure will achieve this result more efficiently.
Consistent with the theme of the recent amendments to the Corporations Law, this measure will ensure solvency problems are confronted earlier and the escalation of debts will be prevented. The amendments proposed will result in a company either meeting its obligations to pay amounts deducted to the Commissioner or going into voluntary administration or liquidation. Directors will only become liable for unremitted amounts when those options are not taken by their company.
Another feature of the arrangements will be a requirement on the Commissioner to notify directors who become liable for any unremitted amounts. He will be required to allow those directors a further period of 14 days, during which time the liability can be avoided if one of the options available is exercised.
The Bill contains defences for directors in recovery proceedings by the Commissioner. For example, it will be a defence if a director can prove that because of illness, or some other reason, the director did not take part in the company's management when the company failed to take one of the options available to avoid liability.
Consequential amendments to the Corporations Law, the Bankruptcy Act 1966 and the Crown Debts (Priority) Act 1981
The Bill proposes to amend the Corporations Law. The amendments are relatively minor and technical and support the measures to be included in the taxation law. Broadly, they seek to put the Commissioner in the same position as other creditors so that the Commissioner has clear access to all the remedies enjoyed by other creditors. The amendments to the other Acts are purely technical and consequential.
The removal of the Commissioner's priority is essential to the smooth operation of the proposed scheme of voluntary administration under the new insolvency provisions of the Corporations Law due to commence in June this year.
In accordance with the heads of agreement between the Commonwealth, the States and the Northern Territory on corporate regulation, the Ministerial Council for Corporations has been consulted on the amendments to the Corporations Law which are contained in the Bill and has approved their introduction into Parliament.
Any loss of revenue from abolishing the priority will be offset by the revenue recovered under the new recovery regime. It is important for honourable Senators to recognise the revenue recovered belongs to employees or payees and has been deducted but not remitted to the Commissioner as required by law.
I present the Explanatory Memorandum which contains more detailed explanations of the provisions of the Bill.
I commend the Bill to the Senate.