Scrutiny of Bills Twelfth Report of 1999


Scrutiny of Bills Twelfth Report of 1999

11 August 1999

ISSN 0729-6258

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

TWELFTH REPORT OF 1999

The Committee presents its Twelfth 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:

A New Tax System (Goods and Services Tax Administration) Act 1998

ACIS Administration Bill 1999

Customs Amendment Bill (No. 1) 1999

A New Tax System (Goods and Services Tax Administration) Act 1998

Introduction

The Committee dealt with the bill for this Act in Alert Digest No. 1 of 1999, in which it made various comments. The Treasurer responded to those comments in a letter dated 23 April 1999.

In its Eighth Report of 1999, the Committee made some further comments in relation to proposed new section 66. The Treasurer responded to those comments in a letter dated 18 June 1999.

In the Committee's Tenth Report of 1999, the Committee sought further confirmation regarding proposed new section 66 and the delegation of powers to `a person'. The Treasurer has further responded in a letter dated 6 August 1999. A copy of the letter is attached to this report. Extracts from the Eighth and Tenth Reports and relevant parts of the Treasurer's further response are discussed below.

Extract from Eighth Report of 1999

This bill was introduced into the House of Representatives on 2 December 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of 16 bills to reform the taxation system, the bill proposes to amend the Taxation Administration Act 1953 to:

  • establish who is to administer the GST law;
  • support the collection and recovery of GST;
  • set maximum penalties for breaching GST obligations;
  • permit entities to rely on the Commissioner's interpretation of the law;
  • set time limits on GST liability and on credit entitlements;
  • adopt existing mechanisms for the review of assessments and other GST decisions;
  • confer powers on the Commissioner for the gathering of information; and
  • protect the confidentiality of information disclosed for GST purposes.

Search and entry

Proposed new section 66

As noted above, Item 7 of Schedule 1 to this bill adds a new Part VI to the Taxation Administration Act 1953. This Part includes proposed new section 66, which will allow an officer authorised by the Commissioner of Taxation to enter and search any premises and inspect and analyse any documents, goods and other property. No provision is made for obtaining a judicially sanctioned warrant, which is a generally accepted safeguard in such circumstances.

In addition, the clause does not attempt to limit or categorise those who might be authorised to carry out such searches – for example, by specifying certain required attributes or qualifications. Requiring such attributes or qualifications is an approach adopted in some other statutes (for example, section 258 of the Superannuation Industry (Supervision) Act 1993) and, arguably, provides some reassurance against possible abuses of a power of such width. The Explanatory Memorandum provides no information beyond that included in the clause itself. The Committee, therefore, seeks the Treasurer's advice on the reasons why proposed section 66 authorises entry onto premises without the need to obtain a warrant, and why that provision does not specify certain attributes or qualifications to be possessed by officers before they can become authorised officers.

Pending the Treasurer's advice, the Committee draws Senators' attention to the 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.

Relevant extract from the earlier response from the Treasurer dated 23 April 1999

Proposed section 66 will confer the same powers of access to authorised officers as currently conferred by section 263 Income Tax Assessment Act 1936, section 109 Sales Tax Assessment Act 1992, section 127 Fringe Benefits Tax Assessment Act 1986, and section 38 Superannuation Contributions Tax (Assessment and Collection) Act 1997 among others administered by the Commissioner of Taxation.

The suggestion that a judicially sanctioned warrant be obtained before authorised officers enter premises to inspect documents or goods is not supported. Such a requirement would impose a needless hindrance to the efficient conduct of the activities of the ATO.

The conduct of ATO officers, in a fair and professional manner, is governed by The Taxpayers' Charter and comprehensive guidelines on the use of access and information gathering powers. Both of these documents are publicly available. The ATO also controls the use of these powers through a system of delegation and authorisation of ATO officers.

The ATO has a policy of endeavouring to deal with taxpayers and their advisers co-operatively. This means that advance notice and requests for co-operation are part of the preferred method of obtaining access to taxpayers' premises. Formal approaches to seeking access will be made if taxpayer co-operation is not forthcoming or if the premises are occupied by persons other than the taxpayer. Likewise, urgent access action may be appropriate if an officer reasonably believes that the existence or integrity of documents or information is under threat. The guidelines state that urgent access action requires the approval of a senior officer. Taxpayers are informed that they may have a representative present at any time, and are given reasonable time and opportunity to consult with their representative.

The access powers, as currently framed, provide ATO officers with flexibility in managing the conduct of their activities according to the co-operation they receive. To require the obtaining of a judicially sanctioned warrant before an authorised officer can enter premises would produce an unnecessarily adversarial climate and would not be conducive to a relationship of mutual co-operation between ATO officers and taxpayers. It would undermine the promotion within the taxpaying community of voluntary compliance with the tax laws. Furthermore, delay resulting from the need to obtain a judicially sanctioned warrant could jeopardise the outcome of audits where crucial evidence may be at risk.

The suggestion that the provision should limit or categorise, by certain attributes or qualifications, those officers who might be authorised to exercise the powers is also not supported. The authority to access and gather information and evidence formally is delegated to officers under the relevant taxation laws. When entering premises or seeking documents officers are required to produce their identification and explain the purpose of their visit. The `wallet authority' containing the authorisation for an officer to exercise access powers can only be used in relation to those powers.

The Committee has referred to section 258 of the Superannuation Industry (Supervision) Act 1993 as an example of a provision that allows for the qualifications of an investigator to be specified. This provision concerns the giving of a notice by the Australian Prudential Regulation Authority (APRA) to the trustee of a superannuation entity to appoint an external investigator to investigate and report on the financial position of the entity. Legislative provision for the specification of qualifications is appropriate in these circumstances because the external investigator would be appointed solely by the trustee of the entity being investigated. Such a requirement is not necessary where an investigation is undertaken by APRA staff. For example, section 268 the Superannuation Industry (Supervision) Act 1993 does not specify the qualifications of an APRA inspector when that inspector is exercising the access powers specified in that Act. In essence, the power contained in section 268 is the same as that in proposed section 66 of the Taxation Administration Act 1953.

I trust that the above information is useful in the Committee's deliberations in relation to these matters.

The Committee thanks the Treasurer for this response, and notes that proposed section 66 will, in effect, confer the same powers of access on authorised officers as are currently conferred under other legislation administered by the Commissioner.

The Committee further notes that authorised officers need not be ATO officers as intimated in the Treasurer's response. Proposed section 20 of the Administration Bill states that an authorised officer means “a person the Commissioner has authorised to exercise powers or perform functions”. Elsewhere in the tax legislation, a person may include a company.

The Committee consistently draws attention to provisions which allow the delegation of significant and wide-ranging powers to anyone who fits the all-embracing description of “a person”. Such provisions may make rights and liberties unduly dependent on insufficiently defined administrative powers. Therefore, the Committee seeks the Treasurer's further advice on why the search and entry power is expressed so broadly, and whether it should be restricted to senior ATO officers.

The Committee notes that the Senate has agreed to refer the fairness, purpose, effectiveness and consistency of search and entry provisions in Commonwealth legislation to the Committee for inquiry and report. The desirability of provisions such as these which authorise entry without a warrant is best considered as part of this inquiry.

Relevant extract from the further response from the Treasurer dated 18 June 1999

Section 66 empowers officers authorised by the Commissioner of Taxation to access documents, goods or other property for the purpose of administering the indirect tax laws (Goods and Services Tax, Luxury Car Tax and Wine Equalisation Tax).

The Committee is concerned that the provision allows the delegation of significant and wide-ranging powers to anyone who fits the all-embracing description of “a person” and that this may make rights and liberties unduly dependent on insufficiently defined administrative powers. The Committee has drawn attention to the fact that new section 66 refers to an `authorised officer', an expression defined in proposed new section 20 of the Taxation Administration Act 1953 as:

`…a person the Commissioner has authorised to exercise powers or perform functions under that provision.'

The Committee notes that elsewhere in the tax legislation a `person' may include a company. It is true that the A New Tax System (Goods and Services Tax) Bill 1998 proposes to define the term `person' as including a company (as does paragraph 22(1)(a) of the Acts Interpretation Act 1901). This meaning is, however, subject to the rider applicable to all defined terms `except so far as the contrary intention appears' (section 195-1). In the context of a provision concerning an `authorised officer' it is clearly apparent that the meaning attributable to the term `person' is intended to be confined to natural persons. Distinguishing between natural persons and artificial persons in such a provision would impose an unnecessary complication and awkwardness to the drafting of the law. Identical constructions occur in other parts of the tax law, for example, section 16 of the Income Tax Assessment Act 1936 (secrecy provision) and section 109 of the Sales Tax Assessment Act 1992 (access provision).

In reply to the question of whether the exercise of the power conferred by proposed new section 66 should be restricted to senior ATO officers the following matters are relevant.

Firstly, the earlier response to the Committee's request for advice about new section 66 set out much of the background to the use of access powers by the Australian Taxation Office (ATO). In promoting compliance with the tax laws the ATO prefers that field officers perform their educative and audit functions by dealing with taxpayers co-operatively, that is, without exercising access powers.

The ATO's published guidelines, as expressed in the Taxpayer's Charter and the Access and Information Gathering Manual, emphasise an informal approach unless there is reason to suspect that the existence or integrity of relevant information is under threat. It is stressed that a rigid formal approach based on indiscriminate exercise of the access power in field activities would not be conducive to the promotion of a relationship of mutual trust and respect between the ATO and the taxpaying community.

It cannot be ignored, however, that dealings with some taxpayers would not be conducted as effectively as at present if it were not for the existence of the access powers as currently framed. The express exclusion of some field officers from authority to exercise the access power would provide non-cooperative taxpayers with a means of resisting the efficient conduct of an audit. The consequent delay in exercising the access power in such circumstances could result in the loss of relevant information to the ATO, and of revenue to the community as a whole through undisclosed tax liability. Alternatively, it could result in higher administrative costs for the ATO and ultimately the community and lower respect for ATO officers who, although not within the senior category suggested, are nevertheless experienced and efficient field officers.

Secondly, new section 66 is consistent with access provisions contained in other taxation laws. The exercise of access powers by ATO officers is subject to a formal system of delegation and authorisation and to both internal and external controls. Authorised officers are subject to a rigorous selection process to ensure their suitability for the duties they perform. An understanding of the policies and procedures articulated in the Taxpayer's Charter and the Access and Information Gathering Manual is acquired by them in the course of their training. In accordance with those guidelines, the exercise of access powers is subject to supervision by, and sometimes the approval of, superior officers. Quality assurance mechanisms apply currently (and would also apply to indirect tax compliance activities) to ensure adherence to best practice in field operations, including when and how access powers should be used. External controls that apply to the use of these powers include judicial supervision through administrative law actions and the requirements of the Privacy Act to respect taxpayers' privacy.

Thirdly, it is proposed that field officers engaged in indirect tax compliance activities will perform audit and educative functions that may also embrace liability to income tax and fringe benefits tax. It would be incongruous and open to ridicule if officers found themselves in a position where they were authorised to seek access to documents for income tax and fringe benefits tax purposes but not for GST purposes. Compliance with the tax laws is best promoted if there is consistency in the application of access powers.

Having regard to these factors, the suggestion that the law provide for exercise of the indirect tax access powers to be expressly limited to a defined category of senior ATO officers is not supported. I trust that the above information is useful in the Committee's deliberations in relation to this matter.

The Committee thanks the Treasurer for this detailed response, and notes that it awaits confirmation that the Commissioner may only authorise “an ATO officer” rather than “a person” to exercise access powers under the bill.

Relevant extract from the further response from the Treasurer dated 6 August 1999

The Committee has sought confirmation that only “ATO officers” may be authorised by the Commissioner of Taxation to exercise the access power conferred by new section 66 of the Taxation Administration Act 1953. New section 66 empowers authorised officers to access documents, goods or other property for the purpose of administering the indirect tax laws (Goods and Services Tax, Luxury Car Tax and Wine Equalisation Tax).

I refer to my letter of 18 June 1999 to the Committee which explained that the meaning of the word `person', in the context of the provision as drafted, was limited to natural persons and would not include companies.

Although it is expected that persons who are to be authorised to exercise the access power will occupy positions within the Australian Taxation Office it would not be appropriate to give the categorical confirmation the Committee has requested. This is because such persons are essentially officers of the Commonwealth, or employees of the Australian Public Service.

It would be inappropriate to deny the possibility, albeit exceptional, that officers of the Commonwealth, or employees of the Australian Public Service, other than those occupying positions within the Australian Taxation Office may at some time be authorised to exercise the access power for the purposes of an indirect tax law. For instance, it is proposed that the Australian Customs Service will perform some functions, under delegation from the Commissioner, in the collection of GST on importations. The possibility is that officers occupying positions in another agency may, in future, be authorised to exercise powers under the direction of the Commissioner.

The Commissioner of Taxation, who is responsible for the administration of our taxation laws, has advised that any such officers who are authorised to exercise access powers will be obliged to observe the relevant guidelines contained in the Taxpayers' Charter and the Access and Information Gathering Manual.

I trust that the above information is of use to the Committee in its deliberations in relation to this matter.

The Committee thanks the Treasurer for this further response.

The issue at the heart of the Committee's concern in relation to this bill is the exercise of search and entry powers. As the Commonwealth Ombudsman has pointed out, these are “highly intrusive powers” and there should be “safeguards, checks and balances, and clearly enunciated legal frameworks to limit the opportunities for [their] abuse”.

The search and entry powers available to the Australian Taxation Office (ATO) may be exercised without the need to first obtain a judicially sanctioned warrant – the most obvious safeguard. This combination of inherently intrusive powers and the absence of any judicial oversight means that the exercise of the powers ought be limited in some other way. One way of ensuring that such powers are not abused is to ensure that those authorised to exercise them are appropriately qualified or trained or otherwise aware of their responsibilities.

The GST Administration Act simply provides that `a person' may be authorised to exercise the ATO's search and entry powers. The Treasurer's response clarifies his expectation that, for the purposes of the indirect tax laws, such `persons' are to be ATO officers, but may otherwise be “officers of the Commonwealth, or employees of the Australian Public Service”. The Committee notes the Commissioner's assurance that any such officers “will be obliged to observe the relevant guidelines contained in the Taxpayers' Charter and the Access and Information Gathering Manual”.

It is clear that the potential class of `authorised persons' is to be limited in practice. It would be helpful if this implicit limitation were made explicit in the legislation itself.

Notably, such a limitation has been made explicit in other legislation administered by the Commissioner of Taxation. For example, proposed section 45 of the Superannuation (Unclaimed Money and Lost Members) Bill 1999 states that “the Commissioner may, by writing, authorise a person who is an officer or employee within the meaning of the Public Service Act 1922 to be an authorised officer for the purposes of a provision or provisions of this Act”. These provisions include search and entry provisions.

There would seem to be no difference in principle, or in practice, between that bill and the GST Administration Act.

Notwithstanding that the GST Administration Act has now been passed, the Committee continues to draw Senators' attention to this provision as it may be considered to make rights, liberties or obligations unduly dependent upon insufficiently defined administrative powers in breach of principle 1(a)(ii) of the Committee's terms of reference. The scope of section 66 of that Act should be addressed when amendments to the Act are next considered.

ACIS Administration Bill 1999

Introduction

The Committee dealt with this bill in Alert Digest No. 8 of 1999, in which it made various comments. The Minister for Industry, Science and Resources has responded to those comments in a letter dated 14 July 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. 8 of 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.

Relevant extract from the response from the Minister

The first concern raised by the Committee is that these provisions involve an element of retrospectivity. On the basis of advice my Department has received from the Attorney General's Department, I believe the requirement to disclose prior convictions is not retrospective. This requirement does not remove, nor replace, any pre-existing immunity from disclosure of prior convictions. Rather, a new entitlement (to register under the Automotive Competitiveness and Investment Scheme) is being created, subject to certain preconditions, including disclosure of certain prior offences. There appears to be no retrospectivity in making prior conduct relevant to a new entitlement, which can be contrasted with making prior conduct the trigger for a new liability.

The second concern raised by the Committee is that the 10 year period referred to in these provisions appears to be arbitrary. I should explain that the Attorney General's Department was consulted on this point when the Bill was being drafted, and that the 10 year limitation period on disclosure of prior offences has been adopted to ensure consistency with existing provisions under the Crimes Act 1914.

Parliament has already expressed its view on this issue through part VIIC of the Crimes Act 1914. This part lays down a `spent convictions' scheme, which sets out the circumstances in which a person is not required to disclose a prior offence. The `spent convictions' scheme applies to the disclosure requirements under the Bill (refer to proposed subsection 29(3) of the Bill). The same 10 year limitation period applies under this scheme, in relation to `adult' convictions after which a conviction need not be disclosed. It is also worth noting that under the spent convictions scheme, a lesser five year limitation period applies to a person convicted as a minor, after which a conviction need not be disclosed. This will apply to the disclosure requirement under the Bill.

The third concern raised by the Committee is that these proposed provisions may be regarded as exposing an applicant to `double punishment' for the same offence. My Department has consulted the Attorney General's Department on this point and I am not persuaded that a requirement for a person to disclose a conviction in the course of applying for a licence or registration under a Commonwealth law is a `double punishment'. It seems to me that people who do not commit serious offences are entitled to expect that their law abiding conduct will count in their favour where the availability of a licence or registration is limited on account of the need to protect the public revenue from dishonesty and fraud. Concern about `double punishment' has greater force where a person has shown, by subsequent law abiding behaviour, that they have put their prior offending in the past. That is why a conviction need not be disclosed more than 10 years after it is imposed. It is also why a lesser disclosure period of five years applies to a person convicted as a minor.

The fourth concern raised by the Committee is the issue of `maximum' versus `actual' punishment being the basis for determining the seriousness of an offence. My Department has also consulted the Attorney General's Department on this point and I am inclined to accept their view that to establish a disclosure threshold relating to the actual punishment imposed rather than the maximum penalty available for an offence, would create too much scope for ambiguity. The sentence that a court imposes may not be the sentence actually serviced (eg. due to early release), which would create doubt as to which offences should be reported. In any case, the Attorney General's Department has advised my Department that a prosecutor is unlikely to pursue a charge for an offence punishable by 12 months or more imprisonment for a trivial offence deserving punishment only by a small fine. I should also point out that even if this does occur, a person who applies for registration under this Bill can put forward arguments as to the perceived triviality of his or her offence.

The Committee's final concern was how information about past convictions would come to the Secretary's attention. In this regard I note that proposed paragraph 23(1)(b) stipulates that an application for registration would be made on an approved form. The approved form would ask an applicant to declare any relevant past convictions (that is, of the kind mentioned in proposed subsections 29(1) and (2)) so that the Secretary could take these into account when deciding whether registration should be granted. While this is the most likely avenue by which information about past convictions would come to the Secretary's attention, it is also possible that past convictions may be brought to the attention of the Secretary by third parties. It is not anticipated, however, that the Secretary would in the normal course of events actively seek out information about past convictions. Rather, the most likely avenue would be through provision of required information at the time of an application for registration. Proposed subsection 27(1) would also enable the Secretary, if necessary, to seek further information from an application before making a decision under proposed subsection 26(1).

I am pleased to respond to the Committee's concerns. Thank you for bringing them to my attention.

The Committee thanks the Minister for this comprehensive response.

Customs Amendment Bill (No. 1) 1999

Introduction

The Committee dealt with this bill in Alert Digest No. 6 of 1999, in which it made various comments. The Minister for Justice and Customs has responded to those comments in a letter dated 19 July 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.

Relevant extract from Alert Digest No. 6 of 1999

This bill was introduced into the Senate on 31 March 1999 by the Parliamentary Secretary to the Minister for Communications, Information Technology and the Arts. [Portfolio responsibility: Justice and Customs]

The bill proposes to address the possible consequences of the recent decision of the Supreme Court of Queensland in the matter of Prechelt by amending the Customs Act 1901 to:

  • make it clear that duty must be paid on imported goods that do not require a formal entry for home consumption before those goods can be delivered into home consumption;
  • provide that the rate of duty is to be fixed at the time information in relation to those goods is given to Customs or the time when the goods were imported into Australia, whichever is the later; and
  • commence these amendments retrospectively from 1 September 1992.

Retrospective application

Subclause 2(2)

By virtue of subclause 2(2), items 4 and 5 of Schedule 1 to this bill are to commence retrospectively on 1 September 1992. As indicated in the Explanatory Memorandum, the reason for this retrospectivity is to correct a mistake in the drafting of earlier amendments to the Customs Act 1901. This mistake came to light in a recent court case in Queensland.

The Committee accepts that a failure to make the amendments retrospective could ultimately jeopardise a significant amount of revenue. However, some aspects of the operation of the bill are not immediately clear. For example, it is not clear whether the bill will affect the rights of the importer or other parties in the Prechelt case, and whether any other cases are pending following the decision in that case.

The Committee, therefore, seeks the Minister's advice on the implications of the bill's retrospective application for the litigants in the Prechelt case, and whether any other litigation is pending following the decision in that case.

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

Relevant extract from the response from the Minister

The Committee has sought clarification on the retrospective operation of items 4 and 5 of Schedule 1 to the Bill. In particular, you have sought my advice on the implications of the Bill's retrospective application on the litigants in the Prechelt case and whether any other litigation is pending following the decision in that case.

The purpose of the Bill is to address the consequences of the decision of the Supreme Court of Queensland in the matter of Prechelt. In that case the Court held that approximately $1400 in customs duty was not payable on a consignment of cigarettes valued at $180. The basis of this decision was that because the terms of section 68 of the Customs Act 1901 (the Act) exempted consignments of a value of less than $250 from formal import entry requirements, and section 132 of the Act fixed the rate of duty by reference to the date of entry of goods, no duty was payable in respect of goods that are not required to be entered (referred to below as “non-entry goods”).

In accordance with the decision of the Court, Customs released the cigarettes to Mr Prechelt without requiring payment of the $1,400 in duty that had previously been considered payable.

The amendment to section 132 of the Act at item 4 of Schedule 1 to the Bill will make it clear that the rate of duty to apply to non-entry goods is the rate in force at the later of the time when the goods arrive in Australia, or the time when information in relation to the goods is given to Customs. This amendment has a retrospective commencement of 1 September 1992 and is expressed to apply to goods imported after that date (item 5 refers).

Item 6 of Schedule 1 to the Bill has the effect of validating all amounts of money paid to Customs as duty on non-entry goods imported between 1 September 1992 and passage of the Bill. It does this by reducing the actual duty liability of the non-entry goods (which can now be ascertained because of the amendment at item 4) by any amount of money that has already been paid to, or collected by, Customs as duty. This method of validating previous payments to Customs will allow corrective action (through the normal refund and recovery provisions of the Act) where there has been a gross over or under-payment of duty.

The retrospective operation of these amendments does apply to the facts of the Prechelt case. That is, after passage of the Bill it will be possible to assert that the $1400 in duty was in fact payable on the $180 consignment of cigarettes the subject of the decision. Customs ability to recover that amount, however, is dependent on the CEO of Customs exercising the statutory discretion in section 165 of the Act to demand the payment of duty short paid within 12 months of the short payment. I am advised the CEO of Customs does not intend to exercise this discretion after the passage of the Bill in a way that will reverse the outcome of the Court's decision in the Prechelt case and that this would continue to be the case if Customs is successful in its appeal of the decision.

Finally, there is no other litigation pending as a result of the Prechelt decision that might be affected by the retrospective operation of these amendments. This is primarily because amendments were made to the Customs Regulations soon after the decision that now make it a requirement for low value consignments of certain tobacco and alcohol to be formally entered. The regulation amendments also introduced a 12 months time limit for refund applications for overpaid duty on non-entry goods (consistent with the time limit for entered goods). Even so, Customs has received no refund applications for duty paid on low value consignments of non-entry goods in reliance on the decision in Prechelt.

Thank you for bringing the Committee's concerns to my attention and I trust that the foregoing has adequately addressed them.

The Committee thanks the Minister for this full and detailed response.

Retrospectively affecting rights or imposing liabilities is a matter which the Committee views with concern. However, given that in this instance the CEO of Customs does not intend to use the retrospective application of this bill to reverse the outcome of the court's decision in the Prechelt case, and given the Minister's assurance that there is no other litigation pending as a result of that decision that might be affected by the retrospective operation of these amendments, the Committee proposes to make no further comment.

Barney Cooney
Chairman