Scrutiny of Bills First Report of 1999

MEMBERS OF THE COMMITTEE

Senator B Cooney (Chairman)

Senator W Crane (Deputy Chairman)

Senator H Coonan

Senator T Crossin

Senator J Ferris

Senator A Murray

TERMS OF REFERENCE

Extract from Standing Order 24

(1) (a) At the commencement of each Parliament, a Standing Committee for the Scrutiny of Bills shall be appointed to report, in respect of the clauses of bills introduced into the Senate, and in respect of Acts of the Parliament, whether such bills or Acts, by express words or otherwise:

(i) trespass unduly on personal rights and liberties;

(ii) make rights, liberties or obligations unduly dependent upon insufficiently defined administrative powers;

(iii) make rights, liberties or obligations unduly dependent upon non-reviewable decisions;

(iv) inappropriately delegate legislative powers; or

(v) insufficiently subject the exercise of legislative power to parliamentary scrutiny.

(b) The Committee, for the purpose of reporting upon the clauses of a bill when the bill has been introduced into the Senate, may consider any proposed law or other document or information available to it, notwithstanding that such proposed law, document or information has not been presented to the Senate.

SENATE STANDING COMMITTEE FOR THE SCRUTINY OF BILLS

FIRST REPORT OF 1999

The Committee presents its First Report of 1999 to the Senate.

The Committee draws the attention of the Senate to clauses of the following bills which contain provisions that the Committee considers may fall within principles 1(a)(i) to 1(a)(v) of Standing Order 24:

Migration Legislation Amendment (Strengthening of Provisions Relating to Character and Conduct) Act 1998

Superannuation Legislation Amendment (Resolution of Complaints) Act 1998

Superannuation Legislation (Commonwealth Employment) Repeal and Amendment Bill 1998

Taxation Laws Amendment Bill (No. 2) 1998

Migration Legislation Amendment (Strengthening of Provisions relating to Character and Conduct) Act 1998

Introduction

The Committee dealt with the bill for this Act in Alert Digest No 10 of 1998, in which it made various comments. The Minister for Immigration and Multicultural Affairs has responded to those comments in a letter dated 13 January 1999. A copy of the letter is attached to this report.

Although this bill has now been passed by both Houses (and received Royal Assent on 11 December 1998) the Minister's response may, nevertheless, be of interest to Senators. An extract from the Alert Digest and relevant parts of the Minister's response are discussed below.

Extract from Alert Digest No 10 of 1998

This bill was introduced into the Senate on 11 November 1998 by the Assistant Treasurer. [Portfolio responsibility: Immigration and Multicultural Affairs]

The bill proposes to amend the Migration Act 1958 to increase control over the entry into, and presence in, Australia of non-citizens who have a criminal background or have criminal associations and to strengthen the procedures used in dealing with such people.

Commencement

Clause 2

By virtue of clause 2 of this bill, all but two items in the Schedule are to commence on proclamation, with no further time specified within which the provisions either must come into force or be repealed.

The Committee notes that paragraph 6 of Office of Parliamentary Counsel Drafting Instruction No 2 of 1989 suggests that such an approach should be used only in unusual circumstances, where commencement depends on an event whose timing is uncertain.

Committee consideration of the provision in its Fourth Report of 1998

In its Fourth Report of 1998, the Committee sought advice from the Minister in relation to a similar commencement provision in a bill of the same name introduced into the House of Representatives on 30 October 1997. In relation to that bill, the Minister advised that the approach of commencement on Proclamation had been adopted because:

. it was desirable for reasons of administrative efficiency and public convenience that the bill should commence at the same time as amendments made by other related bills, however the measures contained in this bill were sufficiently important to justify an earlier commencement should it be passed first; and

. the new administrative procedures which are required by the bill would significantly affect the operations of the Department and the Administrative Appeals Tribunal – these procedures should be fully developed and in place when the legislation commences.

It is unclear whether these reasons remain relevant and the Explanatory Memorandum does not clarify the issue. Accordingly, the Committee seeks the advice of the Minister on the reason for departing from Drafting Instruction No 2 of 1989, issued by the Office of Parliamentary Counsel.

Pending the Minister's advice, the Committee draws Senators' attention to the provision, as it may be considered to delegate legislative power inappropriately, in breach of principle 1(a)(iv) of the Committee's terms of reference.

Relevant extract from the response from the Minister

The Committee has noted that the Act does not contain a specified date or time limit within which the Act must be proclaimed. The Committee believes that this may be considered to delegate legislative power inappropriately.

As a general rule, legislation in the Immigration and Multicultural Affairs portfolio is designed to commence either on Royal Assent or by proclamation. It is also usual to include a clause providing that commencement will take place whichever is the earlier of 6 months after Royal Assent or by proclamation.

The Act does not contain any such provision because the new administrative procedures required by the Act will significantly affect the operations of the relevant areas of my Department and of the Administrative Appeals Tribunal. The best possible level of service to the public will not be possible unless these new procedures are fully developed and in place when the legislation commences.

I assure the Committee that the provisions in the Act will commence as soon as possible once these procedures are in place. I note that the Act gained passage through the Senate on 25 November 1998 and through the House of Representatives on 2 December 1998, and was given the Royal Assent on the 11 December 1998.

I trust that these comments will be of assistance to the Committee.

The Committee thanks the Minister for this advice, which indicates that the reasons for departing from the usual procedure for commencement have not changed with the re-introduction of the legislation. The Minister has advised that open-ended commencement is necessary in the case of this legislation because of its relationship with other migration legislation, and to enable the development of new administrative procedures.

This legislation has been under active consideration by the Parliament since 30 October 1997. In the ordinary course, twelve months would seem ample time to have fully developed new administrative procedures both within the Department and for the Administrative Appeals Tribunal. Most Departments seem able to have their delegated legislation or cognate legislation drafted and in place within the six months referred to in the relevant Drafting Instruction.

The Committee notes that the Act received Royal Assent on 11 December 1998. Even after this, in January 1999, the only indication that was given as to its commencement was “as soon as possible once these [new] procedures are in place”. It is unclear from this whether the Act will commence within months, or not for some years.

Notwithstanding that the bill has been passed, the Committee remains concerned at the precedent that this open-ended approach to commencement may have set.

Superannuation Legislation Amendment (Resolution of Complaints) Act 1998

Introduction

The Committee dealt with the bill for this Act in Alert Digest No 11 of 1998, in which it made various comments. The Minister for Financial Services and Regulation has responded to those comments in a letter dated 19 January 1999. A copy of the letter is attached to this report.

Extract from Alert Digest No 11 of 1998

This bill was introduced into the House of Representatives on 26 November 1998 by the Minister for Financial Services and Regulation. [Portfolio responsibility: Treasury]

The bill proposes to amend the Superannuation (Resolution of Complaints) Act 1993 to enable the Superannuation Complaints Tribunal to arbitrate superannuation complaints with the consent of the parties to the complaints.

Termination by Proclamation

Schedule 1, item 10

Item 10 of Schedule 1 proposes to insert a new section 48F in the Principal Act. This section will allow the operation of the amendments proposed in the bill to terminate on a date to be fixed by Proclamation, with no further limit specified within which such a Proclamation might be made.

The Explanatory Memorandum notes that the bill is a response to two recent Federal Court decisions. These decisions prevent the Superannuation Complaints Tribunal (the Tribunal) from using its review powers, leaving it with only an inquiry and conciliation role. As an interim solution to the growing backlog of cases awaiting review before the Tribunal, the bill proposes to allow the Tribunal to arbitrate disputes by consent.

With specific reference to proposed new section 48F, the Explanatory Memorandum simply notes that “in the light of the interim nature of the Tribunal's arbitration function, Part 7A will cease to have effect on a day to be fixed by Proclamation”.

The Committee has consistently drawn attention to provisions which permit legislation to commence by Proclamation. Such provisions remove from Parliament, as the elected holder of federal legislative power, the responsibility of determining when its laws are to come into force. Provisions which remove from Parliament the responsibility of determining when its laws should cease to have effect raise similar concerns.

The Committee notes that the bill represents an interim solution. However, it does not refer to any timeframe within which a long term solution is to be developed, nor does it provide that the interim solution should cease to have effect on the adoption of the long term solution. Accordingly, the Committee seeks the advice of the Minister on the reason for providing the Executive with an unfettered discretion to determine when the amendments made by this bill will cease to have effect.

Relevant extract from the response from the Minister

The Bill amends the Superannuation (Resolution of Complaints) Act 1993 to enable the Superannuation Complaints Tribunal to arbitrate complaints with the consent of the parties. The bill is a response to two Federal court decisions, in February 1998, which significantly impaired the ability of the Tribunal to meet its objective of providing superannuation fund members with a low cost and informal alternative to the courts for the resolution of complaints.

I note that the Attorney-General has appealed to the High Court against the Federal Court decisions. The High Court heard the appeal on 8 December 1998 and a decision is expected to be handed down early to mid this year.

The Committee has drawn attention to section 48F of the Bill which will allow the amendments proposed by the Bill to terminate on a date to be fixed by Proclamation. The Government considers that it was appropriate to include a provision such as section 48F given the interim nature of the amendments made by the Bill. This is because the Bill is designed to facilitate the continuing effective operation of the tribunal pending the High Court appeal.

If the High Court overturns the Federal Court decisions, and upholds the validity of the Tribunal's powers under the Superannuation (Resolution of Complaints) Act, the arbitration function conferred on the Tribunal by the Bill will be unnecessary. Section 48F will allow the amendments made by the Bill to be terminated without further legislative amendment.

However, if the High Court upholds the Federal Court decisions, the Government will need to consider possible options for achieving a permanent solution to the findings of the Federal Court. These options include replacing the Tribunal with one or more approved industry-based schemes. Alternatively, it may be feasible to restore, as far as possible, the Tribunal's powers through legislative amendments to the Superannuation (Resolution of Complaints) Act. This may include an ongoing arbitration function for the Tribunal. Implementing a permanent solution will necessitate extensive consultation with industry.

In these circumstances, the Government believed that the insertion of a fixed date into the Bill would introduce an element of inflexibility which may hamper future efforts to find a permanent solution. Section 48F will allow the amendments made by the Bill to be terminated when a permanent solution is put in place.

Given the interim nature of the amendments made by the Bill and the difficulty in placing a definitive time on when the amendments should cease to have effect, the Government considered that a termination provision such as section 48F was appropriate.

The Committee thanks the Minister for this response.

Superannuation Legislation (Commonwealth Employment) Repeal and Amendment Bill 1998

Introduction

The Committee dealt with this bill in Alert Digest No 10 of 1998, in which it made various comments. The Minister for Finance and Administration has responded to those comments in a letter dated 27 January 1999. A copy of the letter is attached to this report. An extract from the Alert Digest and relevant parts of the Minister's response are discussed below.

Extract from Alert Digest No 10 of 1998

This bill was introduced into the House of Representatives on 12 November 1998 by the Parliamentary Secretary to the Minister for Finance and Administration. [Portfolio responsibility: Finance and Administration]

The bill proposes to change superannuation arrangements for Commonwealth employees by amending the following Acts:

Superannuation Act 1990 to close the Public Sector Superannuation Scheme (PSS) to new members from 1 July 1999;
Superannuation Act 1976 and Superannuation Act 1990 to allow Commonwealth Superannuation Scheme (CSS) and PSS members to choose to leave those schemes for another scheme offered by, or arranged with, their employer;
Superannuation Act 1976 to:
improve access to superannuation spouse benefits in certain circumstances where the retirement pensioner commenced a marital relationship after age 60 years;
provide an option for age and early age retirees to reduce their pension entitlements and increase reversionary benefits payable to their spouse or to any children of the retiree;
enable certain payments payable from other superannuation funds or schemes to be paid into the CSS Fund; and
restore the original intention in relation to late elections to preserve benefits;
Superannuation Benefits (Supervisory Mechanisms) Act 1990 to provide that a determination made under the Act in relation to agencies meeting certain requirements in setting up superannuation arrangements for their employees will be a disallowable instrument;
Parliamentary Contributory Superannuation Act 1948 to:
improve access to superannuation spouse benefits in certain circumstances where the retirement pensioner commenced a marital relationship after age 60 years;
rectify anomalies and technical errors in relation to orphan benefits;
rectify anomalies and technical errors in relation to the maximum reversionary benefit payable where there is more than one beneficiary;
amend the arrangements relating to transfer values; and
cease the application of the inwards transfer value arrangements to persons who become Members of Parliament after the date Royal Assent is given to this bill;
Administrative Appeals Tribunal Act 1975, Law Officers Act 1964 and Workplace Relations Act 1996 in relation to people who leave the CSS or PSS to join the Judges' Pension Scheme to assist the schemes to comply with the national regulatory system for superannuation schemes;

and repeals the Superannuation Act 1922, Superannuation Act 1976, Superannuation Act 1990, Superannuation (Productivity Benefit) Act 1988 and the superannuation and retirement income provisions of the Papua New Guinea (Staffing Assistance) Act 1973. However, in most circumstances, the repealed legislation will continue to operate through the application of the Superannuation Legislation (Commonwealth Employment–Savings and Transitional Provisions) Act 1998.

Retrospective application

Subclauses 2(3) to 2(5)

By virtue of subclause 2(3) of this bill, the amendments proposed in items 248, 251 and 263 of Schedule 1 will be taken to have commenced on 27 June 1997. The Explanatory Memorandum comments that this date was “the date of announcement of the new scheme”.

The Committee consistently disapproves of legislation by press release. For example, The Work of the Committee during the 37th Parliament (May 1993 – March 1996) contains the following comments:

The Committee draws attention to legislation by press release. The fact that it is to have effect only after the intention to introduce it is made public is no justification for it being given force prior to its enactment. The expectations of its proposer that parliament will subsequently pass the legislation and that the people it is aimed at will comply with its provisions in the meantime are presumptuous.

By virtue of subclauses 2(4) and (5), other provisions will also commence retrospectively. Paragraphs 2(d) and (c) indicate that the amendments referred to here seek to do no more than clarify provisions in existing legislation, and make no substantive changes to the law. It is difficult to confirm this from the provisions in the bill.

Accordingly, the Committee seeks the Minister's advice as to why the provisions referred to in subclauses 2(3) to 2(5) need to commence retrospectively.

Pending the Minister's advice, the Committee draws Senators' attention to the provisions, as they 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.

Relevant extract from the response from the Minister

Subclause 2(3) provides for the commencement date of items 248, 251 and 263 of Schedule 1. Items 248 and 263 remove existing restrictions on the payment of certain benefits from the Commonwealth Superannuation Scheme (the CSS) provided for by the Superannuation Act 1976 (the 1976 Act) to persons who involuntarily retired as a result of a sale of an asset or the transfer of a function. Item 251 provides an additional benefit option to persons who cease their CSS membership in those circumstances but who are not involuntarily retired, that is, they resign from Commonwealth employment in some cases to work for the new owner of the asset or provider of the function.

Subclause 2(4) provides for the commencement date of item 262 of Schedule 1. This item clarifies the original intention of section 155B of the 1976 Act in relation to its application to all CSS members who cease membership through the sale of an asset or the transfer of a function. I have been advised that the section as currently drafted would only apply to a person whose position ceases to exist in those circumstances. However, some persons may continue in their position but cease their CSS membership because an organisation is sold as a going concern to the private sector.

Regulations made under section 155B allow me to make declarations which provide for the early payment of benefits where a person is made redundant within three years of the sale or transfer. The amendment made by item 262 of Schedule 1 is necessary to allow this benefit to apply where a person ceases CSS membership because a body by which they are employed is sold as a going concern.

Because the amendments given retrospective effect by subclauses 2(3) and (4) are beneficial to the individuals concerned and do not trespass on their personal rights and liberties, I consider that the amendments should be made with retrospective effect.

Subclause 2(5) provides for the retrospective effect of items 247, 252, 255 and 256 of Schedule 1. All these items clarify or correct provisions of the 1976 Act that were inserted into the Act or amended with effect from 1 July 1995 by the Superannuation Legislation Amendment Act 1995. Item 247 ensures that the CSS Board can only be indemnified in circumstances permitted by the Superannuation Industry (Supervision) Act 1993 and its regulations (SIS). Items 252 and 256 correct provisions relating to the release of benefits as permitted by SIS. These provisions have already been amended by regulations made under section 155C of the Act. When section 155C was inserted into the Act the then Minister for Finance assured the Committee that the Act itself would be amended in line with any regulations made under that provision on the first possible occasion. The date of effect of item 247 is the same as the date of effect of the regulations under section 155C.

Item 255 corrects an error of drafting relating to the date on which deferred benefits become payable. The error occurred when section 138 was redrafted in 1995 and instead of providing, as had been done by the provision since 1976, that benefits become payable after a particular event, eg, death, it inadvertently provided that the benefit should be payable from the day before the event. This creates a situation where a benefit appears to become payable from a day before the person was eligible for the benefit. As it was not intended that the provision be changed in this way, it has been administered since 1995 as if the error had not been made.

As the amendments given retrospective effect by subclause 2(5) clarify and correct provisions amended or inserted with effect from 1 July 1995 and the Act has been administered as if these amendments were in place from that date I do not consider they trespass unduly on personal rights and liberties.

Retrospective application

Subclause 2(6) and Schedule 1, Part 5

Subclause 2(6) will permit Part 5 of Schedule 1 to this bill to commence retrospectively on 5 December 1997. The Explanatory Memorandum indicates that these amendments will “restore the original intention of the 1976 Act”.

It is unclear whether this retrospectivity will advantage or disadvantage members of the superannuation scheme established by the 1976 Act. Accordingly, the Committee seeks the Minister's advice as to the effect of the amendments referred to in subclause 2(6).

Relevant extract from the response from the Minister

Subclause 2(6) provides for the retrospective effect of Part 5 of Schedule 1 which restores the original intention of the 1976 Act in relation to late elections for preservation. The Courts have, over time, extended the application of the late election provision beyond its original intention. I announced the intention to make the amendments to restore the original intention of those provisions during the second reading speech when this Bill was originally introduced into the House on 3 December 1997. In order to ensure that a large number of late elections was not received prior to the date of effect (if it were to be Royal Assent), I announced that it would take effect at the end of the week in which the Bill was introduced.

Because of the delays in the legislative process, including because of the recent Federal election, and the possibility that the CSS Board may have made some decisions in the intervening period, the Bill has been amended to provide that, if a person asks the CSS Board to accept a late election after 5 December 1997 and the Board accepts that election prior to Royal Assent to this Bill, the 1976 Act will apply as if it had not been amended.

I consider, both because the amendments restore the original intention and because of the savings provision, that the retrospectivity of the amendments does not trespass unduly on personal rights and liberties.

Inappropriate delegation of legislative power

Schedule 1, item 18 and Schedule 3, item 10

Item 18 of Schedule 1 to the bill proposes to insert new subsections 3D(8) and (9) in the Superannuation Act 1976. Item 10 of Schedule 3 to the bill proposes to insert new subsections 3AAA(8) and (9) in the Superannuation Act 1990. Each of these proposed new subsections will permit the Minister to make a declaration as to the status of a Commonwealth authority or body, which declaration may be made “despite the previous provisions of” the relevant legislation.

Apparently, such declarations are not disallowable instruments. Accordingly, the Committee seeks the Minister's advice as to why these provisions are appropriate delegations of legislative power and why they are not subject to Parliamentary scrutiny.

Pending the Minister's advice, the Committee draws Senators' attention to the provisions, as they may be considered to inappropriately delegate legislative power, in breach of principle 1(a)(iv) of the Committee's terms of reference, and insufficiently subject the exercise of legislative power to parliamentary scrutiny, in breach of principle 1(a)(v) of the Committee's terms of reference.

Relevant extract from the response from the Minister

You have also requested advice concerning a possible inappropriate delegation of legislative power contained in the amendments proposed by item 18 of Schedule 1 and item 10 of Schedule 3 to the Bill. In this regard, item 20 of Schedule 1 and item 26 of Schedule 3 ensure that any declarations made under the amending provisions are disallowable instruments and are therefore subject to Parliamentary Scrutiny.

The Committee thanks the Minister for these responses which address its concerns.

Taxation Laws Amendment Bill (No. 2) 1998

Introduction

The Committee dealt with this bill in Alert Digest No 10 of 1998, in which it made various comments. The Assistant Treasurer responded to those comments in a series of letters dated 3 December 1998. In its Eleventh Report of 1998, the Committee sought further advice regarding retrospective application in relation to subclause 2(2) and Schedule 7, Part 3 of the bill. The Assistant Treasurer has responded to those comments in a letter dated 27 January 1999. A copy of that letter is attached to this report. An extract from the Eleventh Report of 1998 and relevant parts of the Assistant Treasurer's further response are discussed below.

Extract from Eleventh Report of 1998

This bill was introduced into the House of Representatives on 12 November 1998 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:
- deny the ability to offset against capital gains certain capital losses created by an arrangement entered into before 3pm on 29 April 1997 and to prevent companies using capital losses artificially created through an arrangement entered into after that time;
- allow instalment taxpayers classified as small to pay their likely tax on 15 December following their income year and the balance, if any, of their tax liability on the following 15 March, and make consequential amendments;
- prevent franking credits or debits arising from the payment or refund of tax where those amounts are attributable to the retirement savings account business of a life assurance company;
- replace the formulae used to determine the passive income of the controlled foreign companies of life and general insurance companies;
- require life companies to use average calculated liabilities, rather than calculated liabilities at the end of the year of income, as the basis for determining income that relates to immediate annuity policies and apportioning income and capital gains;
- clarify the operation of the depreciation provisions in circumstances when an entity the income of which is exempt becomes, for any reason, subject to tax on any part of its income under the provisions of the Act; and
- exclude superannuation funds, approved deposit funds, and pooled superannuation trusts from the grouping provisions contained in the company tax instalment system; and
Fringe Benefits Tax Assessment Act 1986 to:
- exempt certain benefits relating to approved student exchange programs from FBT; and
- introduce new record keeping exemption arrangements; and
Fringe Benefits Tax Assessment Act 1986, Income Tax Assessment Act 1936 and Income Tax Assessment Act 1997 to:
- extend the existing exemption for taxi travel beginning or ending at an employee's place of work;
- introduce a new exemption from FBT for car parking benefits for certain small business owners; and
- simplify “arranger” provisions; and
Income Tax Assessment Act 1936, Income Tax Assessment Act 1997 and Taxation Laws Amendment (Landcare and Water Facility Tax Offset) Act 1998 to ensure that taxpayers must reduce the cost base or indexed cost base of an asset to the extent of any net deductions allowable for expenditures included in the cost base; and
Income Tax Assessment Act 1997 to prevent a taxpayer who has become bankrupt from using a carried forward landcare and water facility tax offset in certain circumstances.

Retrospective application

Subclause 2(2) and Schedule 7, Part 3

By virtue of subclause 2(2) of this bill, the amendments proposed in Part 3 of Schedule 7 are to commence retrospectively on 14 July 1998. This is the commencement date of the Taxation Laws Amendment (Landcare and Water Facility Tax Offset) Act 1998.

The Explanatory Memorandum appears to provide no reason for this retrospectivity. Reference to the associated Act does not clarify matters. Accordingly the Committee seeks the Minister's advice as to the reasons for the retrospective application of the amendments proposed in Part 3 of Schedule 7.

Relevant extract from the response from the Assistant Treasurer

Taxation Laws Amendment (Landcare and Water Facility Tax Offset) Act 1998 (Tax Rebate Act), which is being amended by Part 3 of Schedule 7 of TLAB2, contained provisions which adjusted the cost base and indexed cost base of an asset for capital gains tax purposes (cost base adjustment provisions) where a taxpayer had taken the landcare or water facilities rebate. However, these provisions were not to come into effect until just after the commencement of the cost base adjustment provisions in Taxation Laws Amendment Bill (No. 2) 1998 (TLAB2). These provisions have not commenced.

TLAB2 was introduced into the Senate on 30 November 1998. Part 3 of Schedule 7 of TLAB2 contained provisions which repealed the Tax Rebate Act's cost base adjustment provisions and their commencement provision with effect from 14 July 1998.

I understand that your Committee considers that these provisions may trespass unduly on personal rights and liberties.

TLAB2 does repeal the commencement provision of the cost base adjustment provisions in the Tax Rebate Act but it also goes on to repeal the cost base adjustment provisions too. Additionally, there is a commencement provision for the repeal which is to take effect immediately after the Royal Assent of the Tax Rebate Act - 14 July 1998. Taken together, these provisions prevent taxpayers' rights being adversely affected as the cost base adjustment provisions in the Tax Rebate Act are prevented from coming into operation retrospectively.

TLAB2 contains some replacement cost base adjustment provisions which will commence their operation on Royal Assent and affect expenditure which is eligible for the rebate where the expenditure is incurred on the date of TLAB2's introduction - 12 November 1998.

I trust the above has been of assistance.

The Committee thanks the Assistant Treasurer for this response. The response seems to indicate that the cost base adjustment provisions in the Tax Rebate Act, which were to come into effect after the commencement of the cost base adjustment provisions in the Taxation Laws Amendment Bill (No 2) 1998, are now to be repealed by that bill. This repeal is to take effect retrospectively from 14 July 1998, notwithstanding that the provisions have not yet come into effect. Substitute cost base adjustment provisions are to apply to expenditure incurred after 12 November 1998. The Committee would appreciate the Minister's advice regarding any possible disadvantage to those who may have incurred expenditure prior to 12 November 1998.

Relevant extract from the further response from the Assistant Treasurer

I refer to your letter of 10 December 1998 as it relates to the CGT cost base adjustment provisions and the landcare and water facility tax offset. Your letter has been referred to me for reply.

As I understand the attachment to your letter, the Senate Committee is concerned that taxpayers who incur expenditure before 12 November 1998 could be disadvantaged by the operation of TLAB2.

The cost base adjustment provisions which are contained in TLAB2 operate to prevent a double deduction where expenditure for which a taxpayer can claim a deduction can also be included in the CGT cost base or indexed cost base of an asset. This adjustment also applies where a landcare and water facility tax offset is obtained, for the expenditure, as an alternative to claiming a deduction. However, the CGT cost base or indexed cost base will only be reduced where the relevant landcare and water facility expenditure is incurred on or after TLAB2's introduction - 12 November 1998.

In effect, a taxpayer who incurs landcare and water facility expenditure before 12 November 1998 gets the benefit of the expenditure as a tax offset and as an inclusion in the CGT cost base or indexed cost base of the relevant asset.

I hope this information reassures your Committee that the taxpayers who incur the relevant expenditure before 12 November 1998 are not disadvantaged.

The Committee thanks the Assistant Treasurer for this further response which clarifies the matter.

Barney Cooney

Chairman