Senate

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Ralph Willis, MP)

Chapter 14 - Miscellaneous amendments

Overview

14.1 This chapter explains provisions of the Bill which propose to make amendments to the Taxation Administration Act 1953 (TAA):

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to provide for the Gazettal of public rulings; and

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to round down amounts payable to the Commissioner of Taxation.

14.2 The chapter also covers an amendment to the Ombudsman Act 1976 .

14.3 Each of these amendments is covered in a separate section of this chapter.

Section 1 - Notice of rulings

Summary of the amendments

Purpose of the amendments

14.4 The amendments contained in Division 1 of Part 3 of Schedule 2 will remove any uncertainty about when a public ruling is made. Under section 14ZAAJ of the TAA, a public ruling is made when it is published. However, 'published' is not defined and the requirements for publication are uncertain.

14.5 The amendments will change the rules for making a public ruling so that a public ruling is made when it is published and notice of the ruling is published in the Gazette. This means that a public ruling cannot come into effect until it is published and gazetted.

Date of effect

14.6 The amendments will apply to public rulings made on and after 1 July 1995. [Item 18]

Background to the legislation

14.7 The Joint Committee of Public Accounts (JCPA) made two recommendations concerning the publication of public rulings made under Part IVAAA of the TAA in its Report No. 326 'An Assessment of Tax', tabled in November 1993. To remove any uncertainty about when a public ruling is made, the Committee recommended that notice of public rulings be published in the Commonwealth Gazette (Recommendations 32 and 33).

14.8 The Government accepted these recommendations as part of its response to the Report, announced by the Assistant Treasurer in Press Release No. 91 of 9 August 1994.

Explanation of the amendments

How will a public ruling be made?

14.9 Two steps will be necessary to make a public ruling:

(i)

the ruling must be published; and

(ii)

notice of the ruling must be published in the Commonwealth Gazette. [Item 14]

What must a public ruling include?

14.10 A public ruling will include a reference number and a subject heading, so that the ruling can be easily identified [item 15, new paragraph 14ZAAI(2)(b)] . This requirement reflects the current practice of the Australian Taxation Office (ATO).

What must the Gazette notice include?

14.11 The Gazette notice will include the number and subject heading of the ruling and a brief description of the ruling. [Item 15, new subsection 14ZAAI(3)]

When will a public ruling be made?

14.12 A public ruling will be made at the later of the time when the ruling is published and the time when notice of the ruling is published in the Gazette [item 16] . The effect of this amendment is that a public ruling will not be made, and therefore not be effective, until it has been published and gazetted.

Withdrawal notices must be published in Gazette

14.13 If the Commissioner of Taxation withdraws a public ruling, a notice of withdrawal must be published in the Gazette. [Item 17]

Section 2 - Rounding down of tax liabilities

Summary of the amendments

Purpose of the amendments

14.14 The amendments propose to insert a new section 16B into Part V of the TAA. This section will provide the legislative authority for the Commissioner to round down any amount of taxation liability to the nearest multiple of five cents. [Item 19]

Date of effect

14.15 The amendments will apply to tax liabilities arising on or after 1 July 1995. [Item 20]

Background to the legislation

14.16 When copper coins were withdrawn from circulation in 1992 many taxpayers were unable to pay the exact amounts shown on their assessment notices. The ATO has put in place administrative arrangements as a temporary measure to allow amounts of tax payable to be rounded down to the nearest five cents at the time of payment. Any small sums outstanding as a result are written off under sub-section 70C(2) of the Audit Act 1901 . Rounding up has not been carried out as it may amount to the imposition of some additional tax without legislative authority.

14.17 Refunds of tax are not rounded down as these can be negotiated through a payee's bank account.

Explanation of the amendments

14.18 Division 2 of Part 3 of Schedule 2 of the Bill will introduce new section 16B into Part V of the Act. New section 16B contains the provisions for the rounding down of tax liabilities to the nearest multiple of five cents.

14.19 New subsection 16B(1) will enable the Commissioner of Taxation to decrease an amount of tax liability to the nearest multiple of five cents if that amount of liability is not a multiple of five cents. The amount to be rounded down will be the amount ultimately payable after taking into account such amounts as tax instalment deductions, rebates and other credits. This will mean that affected taxpayers will be able to pay the exact liability shown on the assessment notice or other payment notice without being concerned about small amounts which they cannot pay (due to the withdrawal of one and two cent coins from circulation). Refunds, which must be negotiated through a bank account, will not be rounded down.

14.20 New subsection 16B(2) defines tax liability. It encompasses all liabilities to the Commonwealth arising under any Act or Regulation which the Commissioner administers.

Section 3 - Taxation Ombudsman

Summary of the amendments

Purpose of the amendments

14.21 The amendment of the Ombudsman Act 1976 will allow the Commonwealth Ombudsman, if he or she chooses, to be called the Taxation Ombudsman when dealing with concerns from taxpayers about the administrative operations of the ATO.

Date of effect

14.22 The amendment will apply from the date the Bill receives the Royal Assent.

Background to the legislation

14.23 The JCPA made a number of recommendations concerning the establishment of a Taxation Ombudsman in its Report No. 326 'An Assessment of Tax'. These recommendations were generally aimed at redressing a perceived imbalance of power between the ATO and taxpayers.

14.24 In order to provide an independent and easily recognisable avenue of review for taxpayers it was recommended that a statutory position of Taxation Ombudsman be created.

14.25 The Government substantially accepted this recommendation. However, in its response to the Report, the Government announced that the position was not to be a statutory position.

Explanation of the amendments

14.26 The amendment will allow the Commonwealth Ombudsman to be called, or known as, the Taxation Ombudsman when conducting reviews or investigations of the administrative actions of the ATO. [Item 21]