Senate

Explanatory Memorandum

(Circulated by authority of the Treasurer,the Hon. Peter Costello, MP)

Chapter 1 - About the Tax Law Improvement Project

This chapter provides background information on the Tax Law Improvement Project.

Overview of this chapter

•

This chapter discusses briefly:

•

the role of the Tax Law Improvement Project in redressing problems with the structure and expression of the existing law; and

•

how this instalment builds on the resulting improvements developed in the 1997 Act.

About the Tax Law Improvement Project

In November 1993, the Joint Committee of Public Accounts published a report recommending the setting up of a broadly based task force to rewrite the income tax law. In the following month, the Tax Law Improvement Project was established.

This is a project to restructure, renumber and rewrite in plain language Australia's income tax law. It aims to improve taxpayer compliance and reduce compliance costs by making the law easier to use and understand.

In the course of the rewrite, opportunities are being taken to make minor content changes to improve the law. These aim to reduce or eliminate unnecessary complexity and bring the law more into alignment with administrative and commercial practice.

Problems with the existing law

For many years, the income tax law has been criticised as being too difficult to read and understand. When the 1936 Act was introduced, it was under 100 pages long. Now, it is some forty times longer. Sixty years of constant change has produced a body of law that no longer meets the needs of its users. It is hard to understand the framework of the law and to assimilate the detail. The law is far from being reader friendly.

Structure

Originally, the structure of the existing law was a logical arrangement of the sections however the volume of material added in later years has obscured the original structure so that it is no longer readily discernible.

The 1997 Act establishes a new structure, one which reintroduces a logical arrangement of material and provides readers with a framework which will be easier to follow and use. As well, the new structure is designed to be flexible enough to continue to meet its readers' needs well into the future.

This Bill continues the process of progressively rewriting the 1936 Act and placing this material within the structure of the Income Tax Assessment Act 1997 .

Numbering

The Bill adopts the versatile numbering system established in the 1997 Act to overcome problems of over-crowding in the existing law and accommodates expansion.

Language

As well as changes to the structure of the law, the Bill continues to improve the expression of the law by concentrating on the needs of those who read and apply it. The existing law is so complex that even many professional advisers have come to rely on secondary source materials to inform themselves; largely ignoring the statutory expression.

This Bill adopts a style which has been designed for the widest professional audience. Individual taxpayers do not necessarily read the law, but provisions which affect them must be capable of being readily communicated by their advisers.

In order to assist in that task, rewritten provisions that apply to individual taxpayers address the reader directly.

Using a familiar style to most people will make the law less intimidating, more directly engaging and accessible by a wider audience. This helps people make personal sense of the law.

Direct address simplifies the text. It supports proven methods of improving a reader's ability to understand documents (eg. by using active rather than passive voice and using action verbs). Tax advisers and educators should be able to use the words of the law directly when explaining people's rights and obligations.

Layout

The way in which the law is presented is as important to comprehension as its text and structure. Important advances in this area made in the 1997 Act are continued in this Bill.