Scrutiny of Bills Alert Digest No. 8 of 1999


A New Tax System (Closely Held Trusts) Bill 1999

This bill was introduced into the House of Representatives on 13 May 1999 by the Minister for Financial Services and Regulation. [Portfolio responsibility: Treasury]

The bill proposes to amend the following Acts:

Income Tax Assessment Act 1936 to provide that the trustee of a closely held trust with a trustee beneficiary discloses to the Commissioner of Taxation the identify of the ultimate beneficiaries of certain net income and tax-preferred amounts of the trust within a specified period after the end of the year of income; and

Income Tax Assessment Act 1936, Income Tax Assessment Act 1997 and Superannuation Contributions Tax (Assessment and Collection) Act 1997 to make consequential amendments.

The Committee has no comment on this bill.

A New Tax System (Ultimate Beneficiary Non-disclosure Tax) Bill (No. 1) 1999

This bill was introduced into the House of Representatives on 13 May 1999 by the Minister for Financial Services and Regulation. [Portfolio responsibility: Treasury]

Complementary to the A New Tax System (Closely Held Trusts) Bill 1999, this bill proposes to impose taxation at the highest marginal rate plus Medicare levy where trustees fail to correctly identify ultimate beneficiaries of net income of the closely held trust within the specified period.

The Committee has no comment on this bill.

 

A New Tax System (Ultimate Beneficiary Non-disclosure Tax) Bill (No. 2) 1999

This bill was introduced into the House of Representatives on 13 May 1999 by the Minister for Financial Services and Regulation. [Portfolio responsibility: Treasury]

Complementary to the A New Tax System (Closely Held Trusts) Bill 1999, this bill proposes to impose taxation at the highest marginal rate plus Medicare levy where there are no ultimate beneficiaries of net income of the closely held trust.

The Committee has no comment on this bill.

ACIS Administration Bill 1999

This bill was introduced into the House of Representatives on 13 May 1999 by the Minister representing the Minister for Industry, Science and Resources. [Portfolio responsibility: Industry, Science and Resources]

The bill proposes to establish the Automotive Competitiveness and Investment Scheme (ACIS) to commence from 1 January 2001.

Old convictions, continuing consequences

Proposed new paragraphs 29(1)(a) and (2)(b)

Division 5 of this bill deals with the formal requirements for, and procedures for the consideration of, applications for registration under the Automotive Competitiveness and Investment Scheme.

Under proposed section 26(2), the Departmental Secretary must be satisfied that individual and corporate applicants, and the directors of applicant companies, are fit and proper persons. In determining whether such a person is fit and proper, under proposed paragraphs 29(1)(a) and (2)(b), the Secretary must have regard to any conviction for an offence committed within the previous 10 years which was punishable by imprisonment for one year or more.

The Committee has noted previously that such provisions raise a number of issues. First, they invoke an element of retrospectivity. An applicant may have been convicted of an offence up to 10 years before the passing of this bill, and not been affected in any way by that conviction, but may now, years later, come to be denied registration as a consequence.

Secondly, the provision seems somewhat arbitrary. Applicants who apply for registration 10 years and 1 day after having committed such an offence are regarded as fully rehabilitated. Applicants who apply for registration 9 years and 11 months after having committed such an offence are not. While any nominated period may be seen as arbitrary, the Committee seeks advice as to the relationship of this 10 year period and limitation periods in other legislation.

Thirdly, such provisions may be regarded as exposing an applicant to double punishment for the same offence. The view is commonly expressed that, once a person has completed a sentence of imprisonment for an offence, they have paid their debt to society and should not have to continually face the stigma of the sentence served. This provision, however, permits the fact of a conviction to affect aspects of an applicant's life for a further 9 years after that conviction has been dealt with.

Fourthly, the provision is potentially inequitable in referring to offences “punishable” by imprisonment for one year or longer. In its Seventh Report of 1998, in a somewhat different context (the voting rights of prisoners), the Committee referred to the potential unfairness of provisions which exclude rights by reference to the maximum penalty that is provided for, rather than the actual penalty imposed. Under proposed paragraphs 29(1)(a) and (2)(b), a person who was actually fined $50 for an offence punishable by imprisonment for a year must have this conviction taken into account.

Finally, the bill does not make clear how information about past convictions will come to the Secretary's attention. Will inquiries be made of law enforcement authorities around Australia, or will applicants be required to disclose previous convictions? If the latter approach is adopted, what consequences are envisaged should an applicant fail to disclose an old conviction for a relatively minor offence?

The Committee notes that the bill merely requires that past offences be taken into account in considering an application – such offences will not necessarily preclude registration. However, there is a real possibility that such a provision may lead to the rejection of an application in circumstances of apparent unfairness, notwithstanding the review provisions in proposed section 114(d). Therefore, the Committee seeks the Minister's advice about these matters.

Pending the Minister's advice, the Committee draws Senators' attention to this provision, as it may be considered to trespass unduly on personal rights and liberties in breach of principle (1)(a)(i) of the Committee's terms of reference.

 

ACIS (Unearned Credit Liability) Bill 1999

This bill was introduced into the House of Representatives on 13 May 1999 by the Minister representing the Minister for Industry, Science and Resources. [Portfolio responsibility: Industry, Science and Resources]

The bill proposes to impose a liability for unearned credit in relation to unearned duty credit accrued by ACIS participants.

The Committee has no comment on this bill.

Appropriation Bill (No. 1) 1999-2000

This bill was introduced into the House of Representatives on 11 May 1999 by the Treasurer. [Portfolio responsibility: Finance and Administration]

The bill proposes to appropriate money ($36,024 million) out of the Consolidated Revenue Fund to meet payments for the ordinary annual services of the government for the year ending on 30 June 2000.

The Committee has no comment on this bill.

 

Appropriation Bill (No. 2) 1999-2000

This bill was introduced into the House of Representatives on 11 May 1999 by the Minister for Finance and Administration. [Portfolio responsibility: Finance and Administration]

The bill proposes to appropriate money ($5,735 million) out of the Consolidated Revenue Fund to meet payments in relation to grants to the states under section 96 of the Constitution and for payments to the Northern Territory and the Australian Capital Territory; administered expenses on new outcomes and equity injections and loans to agencies, and administered capital funding for the year ending on 30 June 2000.

The Committee has no comment on this bill.

Appropriation (Parliamentary Departments) Bill 1999-2000

This bill was introduced into the House of Representatives on 11 May 1999 by the Minister for Finance and Administration. [Portfolio responsibility: Finance and Administration]

The bill proposes to appropriate money ($159 million) out of the Consolidated Revenue Fund to meet recurrent expenditures of the parliamentary departments for the year ending on 30 June 2000.

The Committee has no comment on this bill.

Customs Tariff Amendment (ACIS Implementation) Bill 1999

This bill was introduced into the House of Representatives on 13 May 1999 by the Minister representing the Minister for Industry, Science and Resources. [Portfolio responsibility: Justice and Customs]

The bill proposes to amend the Customs Tariff Act 1995 to provide:

  • a customs duty reduction on passenger motor vehicles (PMV) and certain PMV parts from 15% to 10% on 1 January 2005; and
  • that customs duty liabilities on eligible imports can be discharged by duty credit earned under the ACIS Administration Bill 1999; and
  • classification clarification of certain components used in the manufacture of a PMV.

The Committee has no comment on this bill.

Employment Security Bill 1999

This bill was introduced into the Senate on 13 May 1999 by Senator Collins as a Private Senator's bill.

The bill proposes to amend the:

Workplace Relations Act 1996 to:

  • enable the Court or Commission, where it has made an order for reinstatement by an employer or employee, and where satisfied that it is just to do so, to make an order with retrospective effect, that a related body corporate shall be deemed to be the employer; and
  • hold liable a “related body corporate” for the payment of legal entitlements of employees; and

Corporations Law to:

  • provide that when a company is in receivership, the liquidator, a creditor or the ASC can apply to the Court for an order requiring a related body corporate to pay to the liquidator the whole or part of a debt of an insolvent company; and
  • enable a corporation, creditor or the ASC to recover, as a due debt either:
    • an amount equal to any profit made by a person or another person; or
    • an amount equal to any loss or damage suffered by the corporation;

as a result of contravening section 1317HD.

The Committee has no comment on this bill.

Taxation Laws Amendment Bill (No. 7) 1999

This bill was introduced into the House of Representatives on 13 May 1999 by the Minister for Financial Services and Regulation. [Portfolio responsibility: Treasury]

The bill proposes to amend the following Acts:

Income Tax Assessment Act 1936 and Taxation Laws Amendment (Company Law Review) Act 1998 to provide that a share capital account does not become tainted by the merger of tainted share premiums with share capital; and

Income Tax (Transitional Provisions) Act 1997 and Income Tax Assessment Act 1997 to provide relief from unintended tax consequences arising from a managed investment scheme restructuring to become a registered scheme in accordance with the Managed Investment Act 1998.

Retrospective application

Schedules 1 and 2

Schedule 1 to this bill seeks to remedy two unintended consequences of previous amendments made by the Taxation Laws Amendment (Company Law Review) Act 1998.

These amendments concern the tax-effects on new share capital accounts where they are merged with `tainted' share premium accounts (which were abolished on 1 July 1998). By virtue of subclause 2(2), Schedule 1 is to commence retrospectively on 1 July 1998.

The Explanatory Memorandum states that the purpose of these amendments is “to prevent the inappropriate tainting of the share capital account”, and that they are designed “to prevent an unintended gain to the revenue”. This suggests that these amendments are beneficial to taxpayers.

Similarly, Schedule 2 to the bill seeks to remedy some unintended tax consequences arising from the restructuring of a managed investment scheme. By virtue of new paragraph 906-105 of the Income Tax (Transitional Provisions) Act 1997, to be inserted by this Schedule, the amendments made are to apply retrospectively from 1 July 1998. Again, these amendments are beneficial to taxpayers.

In these circumstances, the Committee makes no further comment on these provisions.

Provisions imposing criminal sanctions for failure to provide information

The Committee's Eighth Report of 1998 dealt with the appropriate basis for penalty provisions for offences involving the giving or withholding of information. In that Report, the Committee recommended that the Attorney-General develop more detailed criteria to ensure that the penalties imposed for such offences were “more consistent, more appropriate, and make greater use of a wider range of non-custodial penalties”. The Committee also recommended that such criteria be made available to Ministers, drafters and to the Parliament.

The Government responded to that Report on 14 December 1998. In that response, the Minister for Justice referred to the ongoing development of the Commonwealth Criminal Code, which would include rationalising penalty provisions for “administration of justice offences”. The Minister undertook to provide further information when the review of penalty levels and applicable principles had taken place.

For information, the following Table sets out penalties for `information-related' offences in the legislation covered in this Digest. The Committee notes that imprisonment is still prescribed as a penalty for some such offences.

TABLE

Bill/Act Section/Subsection Offence Penalty
ACIS Administration Bill 1999 83(3) Fail or refuse to answer questions or produce documents 6 months