Scrutiny of Bills Nineteenth Report of 1999


Scrutiny of Bills Nineteenth Report of 1999

1 December 1999

ISSN 0729-6258

MEMBERS OF THE COMMITTEE

Senator B Cooney (Chairman)

Senator W Crane (Deputy Chairman)

Senator T Crossin

Senator J Ferris

Senator B Mason

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

NINETEENTH REPORT OF 1999

The Committee presents its Nineteenth 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:

Australian Federal Police Legislation Amendment Bill 1999

New Business Tax System (Integrity and Other Measures) Bill 1999

Australian Federal Police Legislation Amendment Bill 1999

Introduction

The Committee dealt with this bill in Alert Digest No. 16 of 1999, in which it made various comments. The Minister for Justice and Customs has responded to those comments in a letter dated 23 November 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. 16 of 1999

This bill was introduced into the House of Representatives on 30 September 1999 by the Attorney-General. [Portfolio responsibility: Justice and Customs]

The bill proposes to amend the Australian Federal Police Act 1979 to:

  • abolish the rank based structure of the Australian Federal Police;
  • abolish the statutory fixed term appointment regime;
  • clarify the Commissioner's command powers as head of a disciplined force; and
  • empower the Commissioner to amend or revoke a determination in relation to the Australian Federal Police Adjustment Scheme; and

makes consequential amendments to 24 other Acts.

Non-disallowable instruments

Proposed new section 38

Item 46 of Schedule 1 to this bill proposes to insert a new Part IV in the Australian Federal Police Act 1979. This new Part deals with the command powers of the Commissioner and related matters.

Proposed new Part IV includes a new section 38. This authorises the Commissioner to issue written orders with respect to the general administration of, and the control of the operations of, the Australian Federal Police (AFP). Some of these orders would seem to be legislative in character – even though they are to operate only in relation to members of the AFP – but no provision has been made in this bill to make such orders disallowable.

The Committee therefore, seeks the Minister's advice as to why section 38 orders that are legislative in character should not be scrutinised by the Parliament.

Pending the Minister's advice, the Committee draws Senators' attention to this provision, as it may be considered to 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

Commissioner's orders under section 38

The Committee sought advice as to why section 38 orders that are legislative in character should not be scrutinised by the Parliament.

Section 38 replaces the power to issue General Orders and General Instructions in section 14 with Commissioner's Orders. Section 39 replaces the obligation to comply in regulation 3 of the Australian Federal Police (Discipline) Regulations.

There are currently three General Orders:

  • GO1: administration of General Orders;
  • GO5: referral of complaints to the Internal Investigation Division;
  • GO6: allegations and disciplinary matters to which the Complaints (Australian Federal Police) Act 1981 does not apply;

and one General Instruction:

  • Use of force and related matters.

These are procedural guidelines providing for the Australian Federal Police (AFP) operational framework and internal management. As such they are administrative in character. Commissioner's Orders, in replacing General Orders and General Instructions, will retain this administrative character. Even if a contrary view is taken to the effect that some orders would be legislative in character, there are strong policy reasons for not making those orders disallowable.

It may be difficult to draw the line between what constitutes an administrative instrument and a legislative instrument. It is recognised that orders, like regulations, rules and by-laws, may be legislative or administrative in character: Minister for Industry and Commerce v Tooheys Ltd. (1982) 60 FLR 325, 331 approving Tooheys Ltd. v Minister for Business and Consumer Affairs (1981) 54 FLR 421. Generally, instruments that determine the content of the law as a rule of conduct or a declaration as to a power, right or duty are legislative instruments, whereas administrative instruments apply the law: Commonwealth v Grunseit (1943) 67 CLR 58.

It is important to note that the requirement to comply with Commissioner's Orders in section 39 operates with the Australian Federal Police (Discipline) Regulations, which provide for the consequences of a breach of an order. Both the Australian Federal Police Act 1979 (AFP Act) and Regulations are subject to Parliamentary scrutiny. The Parliament has the power to scrutinise the legal obligation to comply with an order and to scrutinise the legal consequences of not complying with an order. The mere making of an order does not, of itself, affect rights and obligations, which might otherwise justify making orders subject to scrutiny.

The power to issue orders with respect to the general administration of, and control of the operations of, the AFP is necessary for the Commissioner's command of a disciplined force. The command power is a common law power recognised by the courts: Police Service Board v Morris (1995) 156 CLR 399 and Anderson v Sullivan 47 ALD 604. Command decisions of the Commissioner are made within the unique backdrop of operational and administrative necessity.

Police forces traditionally operate independently of Parliament. Indeed, under the AFP Act, Parliament operates at arms length from the command of the AFP. There is, however, a power to issue Ministerial directions as to general policy under section 13 (section 37 of the Bill). Under that section, the Minister may also request reports from the Commissioner relating to the administration and the performance of the functions of the AFP.

I advise the Committee that most Commissioner's orders will continue to be administrative in character. However, if an order was classed as legislative in character, such an order should nevertheless continue to not be disallowable. The nature of the Commissioner's power to make orders in the exercise of the command of a disciplined force, the overall administrative and managerial nature of the expected orders and, of significant importance, the independence of the AFP, are sound policy reasons for not providing for Orders to be disallowable instruments.

In ensuring the independence of the AFP, the current Parliamentary scrutiny of the AFP Act and regulations and the Ministers' power to issue directions, provide an appropriate balance between the powers of the Commissioner to command and manage the AFP (by making orders for the control and administration of the AFP), with the important role of Parliament in overseeing the rule making process and the way it affects the rights and obligations of particular citizens.

The Committee thanks the Minister for this response.

Abrogation of the privilege against self-incrimination

Proposed new subsections 40A(1), 40L(5), 40M(3) and 40N(5)

As noted above, Item 46 of Schedule 1 to this bill proposes to insert a new Part IV in the Australian Federal Police Act 1979, dealing with the command powers of the AFP Commissioner. The Explanatory Memorandum states that the bill clarifies the Commissioner's command powers as confirmed by the Federal Court in Anderson v Sullivan (1997) 148 ALR 633, and specifically retains those command powers to the exclusion of the Workplace Relations Act.

The new Part IV includes proposed subsections 40A(1), 40L(5), 40M(3) and 40N(5). Each of these provisions abrogates the privilege against self-incrimination for employees and special members of the Australian Federal Police in certain circumstances. These circumstances include giving information, answering questions and producing documents; providing information about the employee's financial affairs; and undergoing drug testing.

Provisions which abrogate the privilege against self-incrimination are usually a matter of concern to the Committee and, to some extent, this issue is recognised in the bill. Proposed new subsections 40A(2) and 40L(6), and new section 40Q, limit the circumstances in which information obtained under compulsion may be used in evidence. For example, the results of drug and alcohol tests may be admitted as evidence against an AFP employee or special member only in legal proceedings relating to discipline and probity, or by the Commonwealth as a shield in worker's compensation proceedings. Information obtained by compulsion under other provisions may only be used in disciplinary proceedings.

In one sense these provisions may be seen as simply forming part of the conditions of employment of employees and special members of the Australian Federal Police. They do not apply to members of the public generally, and represent an attempt to reconcile the competing interests of obtaining information and protecting individual rights.

However, in another sense, the provisions may be seen as creating a system of control which differs markedly from that which applies to other public servants, or to employees generally, or to members of the public. It seems that information and testing may be compelled whether or not there is a reasonable suspicion of misconduct (unlike the guidelines considered in Anderson's case, which was itself concerned with compulsory drug testing rather than compelling officers to provide personal financial information).

Secondly, it seems that any AFP employee may be ordered to provide information, not only officers engaged in active operations. Finally, it is unclear what protections are available to AFP employees who consider that these powers may have been misused, or used inappropriately, by a future Commissioner.

The Committee is conscious of the need to ensure that the highest standards of probity and conduct apply throughout the AFP. Nevertheless the Committee is also conscious of the need not to trespass unduly on the right and liberties of AFP employees. The Committee therefore, seeks the Minister's advice on the following matters:

  • whether persons should be compelled to incriminate themselves in circumstances where there is no reasonable suspicion of misconduct;
  • why the provisions are expressed to apply to any AFP employee, and are not restricted to AFP officers engaged in active operations;
  • whether any protections are available to ensure that these powers may not be misused; and
  • on what basis the rights to which general members of the public are entitled can be properly restricted in respect of those who are also members of the AFP.

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

Abrogation of the privilege against self-incrimination:

Subsection 40A(1) and section 40L

The Committee sought advice in relation to the provisions of the Australian Federal Police Legislation Amendment Bill 1999 (the Bill) which abrogate the privilege against self-incrimination.

These provisions, in proposed subsections 40A(1) and 40L(5), abrogate the privilege in respect of

  • information given, answers to questions or documents produced as a result of:

- compliance with Commissioner's orders under section 30;

  • compliance (under section 40) with a lawful direction, instruction or order including:

a direction under section 40M related to testing for alcohol and prohibited drugs;

a direction under section 40N related to testing for alcohol and prohibited drugs after certain incidents;

  • giving a financial statement under section 40L.

The Committee noted that proposed subsections 40A(2) and 40L(6) and proposed section 40Q limit the circumstances in which information obtained under compulsion may be used in evidence. Information relating to, or results of, a drug or alcohol test may be used only in proceedings relating to discipline or probity or by the Commonwealth as a shield in worker's compensation proceedings. Information obtained by compulsion under other provisions may only be used in disciplinary proceedings.

The Committee sought advice on the following specific matters:

  • whether persons should be compelled to incriminate themselves in circumstances where there is no reasonable suspicion of misconduct

The Bill replaces the Commissioner's power to issue General Orders and Instructions in section 14 of the AFP Act with a single class of instrument called Commissioner's Orders. The obligation to comply with these Orders, and with any lawful direction instruction or order, presently in the AFP (Discipline) Regulations (regulations 3 and 5) has been moved into the AFP Act (sections 39 and 40). The partial abrogation of the privilege against self-incrimination in proposed section 40A is currently found in regulation 5(2).

The issue of reasonable suspicion significantly arises in relation to an order to undergo a test for alcohol or prohibited drugs. The statutory expression of this power in sections 40M and 40N do not require “reasonable suspicion”, however the circumstances in section 40N are different from those in section 40M. In section 40N the requirement for tests is triggered by a serious incident.

Section 40M provides for general testing of AFP employees for alcohol or prohibited drugs. It is recognised by the police and the general public that the issue is not whether there is a reasonable suspicion that a particular police officer is engaging in criminal activity but that illicit drug use or substance abuse is not compatible with a disciplined police force. In Anderson v Sullivan Finn J referred to the Employment Policy on the Use of Illicit Drugs signed by the Commissioner of the AFP and the AFPA in November 1996. It states:

“The AFP's personnel are routinely called upon to make reasoned, impartial and frequently spontaneous judgements which affect, sometimes significantly and even irrevocably, the rights and freedoms of their fellow citizens. The public and government therefore place considerable faith and trust in law enforcement, conditional always on officials exercising their authorities and powers rationally.

The AFP and AFPA accordingly view the use of illicit drugs by AFP personnel as entirely incompatible with the ethical standards expected of law enforcement. The AFP and AFPA recognise and uphold the fundamental duty of care to all AFP personnel who have the right to be part of a drug-free workplace, safe from the risk of personal threat or compromise posed by the illicit drug trade and drug-using colleagues.

The AFP's drug policy is a complementary part of broader human resource development and management strategies that focus on standards of employment suitability, training and education, and occupational health and safety which, in the context of this policy, encompass rehabilitation and drug testing.”

The judge also referred to the report of the Royal Commission into the New South Wales Police Service. In relation to drug and alcohol testing that report states:

“The problems of substance abuse for police are obvious. They include the circumstances that:

  • the nature of police duties which call for calm and careful decisions, a clear head and a balanced exercise of discretion, and the need to use motor vehicles and weapons are utterly incompatible with the impaired judgement and co-ordination that can result from drug and alcohol use;
  • public respect for the Service, and the maintenance of good order and discipline are impossible in an environment that tolerates the presence of police at clubs, hotels and the like where they are seen to be affected by alcohol or drugs;
  • the bonding influence of long liquid lunches and the shared inappropriate use of drugs is likely to promote the negative aspects of the police culture previously mentioned;
  • the necessary association of any police officer who uses drugs, even for recreational purposes, with a supplier creates opportunities for compromise, blackmail and corruption, particularly if the habit becomes expensive to feed;
  • a user of prohibited drugs is unlikely to approach the enforcement of drug laws with any degree of conviction;
  • participation in any form of criminal offence by a police officer is in fundamental conflict with the sworn duty of the officer to uphold the law;
  • the productivity of officers with a drug and alcohol problem is likely to be substantially reduced and the example they provide to other police is not only unacceptable but is a threat to the Service; and
  • the presence of any significant degree of substance abuse suggests that the welfare programs of the Service are not working and that it is otherwise failing in its responsibility for the occupational health and safety of its employees.”

(Royal Commission into the New South Wales Police Service: Final Report: Volume II: Reform, May 1997 para 8.52)

  • why the provisions are expressed to apply to any AFP employee, and are not restricted to AFP officers engaged in active operations

The Bill establishes the AFP as a unified workforce. The conferral of the status of member which is currently an incident of employment is, under the Bill, separate from the engagement of AFP employees. The significant aspect of being a member is the discretion (and in some respects the duty) to exercise police powers. Employees who are not members either because they have never undertaken duties which require the exercise of police powers or because their member status has been revoked because they are not required to undertake such duties at the present time, will nevertheless, be part of a unified disciplined organisation with the same obligations of discipline and probity.

A primary purpose of the Bill is to provide the AFP with a flexible framework for management of a modern and professional police organisation. The challenges of organised crime on a global scale demand specialist roles which do not always correspond to the traditional duties of community policing. Financial analysts, scientific and computing experts and those who manipulate data are the police of the present and future. It may be computer records rather than suspects that are interrogated. In this framework, the workforce as a whole is engaged in performing the primary functions of the AFP with operational involvement and access to operational information. This is reflected in the new employment framework and in the duties and obligations of the workforce.

Further, experience shows that one of the most valuable opportunities for corruption is in access to information. This access is potentially available to all employees.

  • whether any protections are available to ensure that these powers may not be misused

The following protections exist in relation to these powers:

- provisions in the Bill limit the circumstances in which information obtained by compulsion may be used in evidence;

- the Australian Federal Police (Discipline) Regulations create a disciplinary offence for the improper use of the information (regulation 13);

- the Privacy Act 1988 regulates the collection, use, disclosure and storage of personal information and provides a regime under which the Privacy Commissioner can investigate complaints; and

the Complaints (AFP) Act 1981 provides that a complaint may be made to the Ombudsman concerning action taken by a Deputy Commissioner, an AFP employee or a special member.

  • on what basis the rights to which general members of the public are entitled can properly be restricted in respect of those who are also members of the AFP.

The abrogation of the privilege against self-incrimination in respect of a lawful order to members of the Victoria Police was the subject of the High Court's decision in Police Service Board v Morris. While that case dealt with the interpretation of a provision of the Victorian Police Regulations (Regulation 95A(7)) which required a member to obey a lawful order, the Court drew on the nature of the legislation as relevant to the issue of the availability of the privilege against self-incrimination.

“The provisions of the Act itself are relevant only in so far as they show that the provision now directly in question (reg.95A(7)) is part of a statutory scheme which provides for the regulation and control of a police force – a body upon whose efficiency and probity the State must depend for the security of the lives and property of its citizens and a body which can operate effectively only under proper discipline …"

“…[I]t seems to me that the character of the regulation, which is primarily designed to secure the obedience to orders rather than to compel the answering of questions, indicates both that the application of the privilege would be inappropriate and that the obligation to obey lawful orders is not intended to be subject to the unexpressed qualification. This view is supported by the fact that if it were possible to claim the privilege, a difficulty would arise as to when and by whom it should be decided whether the claim was properly made.“ (per Gibbs CJ at p 404)

“It is essential to bear in mind that the Act and Regulations here are dealing with a disciplined force, the members of which voluntarily undertake the curtailment of freedoms which they would otherwise enjoy. It is in that context that it may be necessary to draw the implication that the privilege is excluded by a provision designed to further the effectiveness of an organisation based upon obedience to command.” (per Wilson and Dawson JJ at p 409)

It is incumbent on the Commissioner, as commander of a disciplined force, to provide a system whereby directions, orders or instructions are followed and to implement a pro-active system of integrity testing to exclude any potential for corruption within the AFP.

The Committee thanks the Minister for this detailed response. The Committee observes that the rights and liberties enjoyed by police officers as members of a “disciplined force” have historically not always corresponded, and may not now correspond, in all situations with the rights and liberties enjoyed by other members of society. However, the Committee notes that this bill does appear to trespass on the rights enjoyed by AFP personnel. It leaves the issue of whether the bill trespasses unduly on those rights for the consideration by the Senate as a whole.

No reasons for dismissal

Schedule 2, item 1

Item 1 of Schedule 2 to this bill amends the Administrative Decisions (Judicial Review) Act 1977. The effect of this amendment is that, should the AFP Commissioner exercise his or her power to dismiss an employee under new section 28 of the Australian Federal Police Act 1979, the Commissioner is not required to give reasons for that dismissal.

As a matter of principle, providing reasons where the employment of an employee is terminated is an issue of natural justice for the person dismissed, and deters capricious action by the person terminating that employment.

Proposed new section 28 concludes with a note that the Workplace Relations Act 1996 has rules which apply to the termination of employment. However, proposed new section 69B of the Australian Federal Police Act 1979 (to be inserted by this bill) states that the operation of the Workplace Relations Act is to be limited in certain circumstances, including in relation to the termination of employment of AFP employees.

There seems to be a lack of clarity in the rules governing dismissed AFP employees and their entitlement to be told why they are being dismissed. There would also seem to be no provisions which prevent proposed section 28 from being used capriciously to terminate the employment of an otherwise efficient and effective AFP employee. The Committee, therefore, seeks the Minister's advice as to the current rights of AFP employees to receive reasons for their dismissal, and to seek a review of such a decision, and how the proposed amendments will affect those rights.

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

Reasons for Dismissal: Schedule 2, Item 1

The Committee sought advice as to the current rights of AFP employees to receive reasons for their dismissal, and to seek a review of such a decision, and how the proposed amendment will affect those rights.

As noted in the Alert Digest, item 1 of Schedule 2 of the Bill amends the Administrative Decisions (Judicial Review) Act 1977 (AD(JR) Act). It repeals paragraphs (z) and (za) of Schedule 2 which provides that the following are classes of decisions that are not decisions to which section 13 of that Act applies:

(z) decisions relating to promotions, transfers, temporary performance of duties, or appeals against promotions or selections for temporary performance of duties, of or by individual members or staff members of the Australian Federal Police;

(za) determinations under section 26E of the Australian Federal Police Act 1979 relating to individual members or staff members of the Australian Federal Police;

and replaces the paragraphs with new paragraph (z)

(z) decisions under section 28, 40F or 40H of the Australian Federal Police Act 1979;

Proposed section 40F is the Commissioner's power to second AFP employees to other police forces and proposed section 40H is the Commissioner's power to assign duties etc.

Proposed section 28 is a power to terminate employment which replaces the power in section 26E to end an appointment before the end of the term of the appointment.

The amendment to Schedule 2 of the AD(JR) Act therefore does not remove a right but re-enacts the current exemption for reasons for termination under section 13 of the AD(JR) Act.

The situation has not changed in relation to reasons under section 13 of the AD(JR) Act. That is, there remains no right to reasons under that section. However the AD(JR) Act continues to apply. That is, an AFP employee has a right under that Act to review of the decision to terminate employment

Moreover, the exclusion of section 13 reasons does not mean that an employee whose employment is terminated under proposed section 28 will not receive reasons for the termination. The preservation of existing rights under the unfair dismissal provisions of the Workplace Relations Act 1996 (WR Act) ensures that employees will be given reasons for dismissal.

Proposed section 69B, in excluding the operation of the WR Act in relation to the termination of employment of AFP employees, specifically preserves the operation of Division 3 of Part VIA of that Act (the unfair dismissal provisions). Section 170CM provides that an employer must give notice. Section 170CE(1)(a) provides that a person may apply to the Australian Industrial Relations Commission for relief where a termination was harsh, unjust or unreasonable. Subsection 170CG(3) establishes the framework within which the Commission must operate to establish whether a termination is harsh, unjust or unreasonable and, therefore, unfair. Within that framework, paragraph 170CG(3)(b) requires that the Commission must have regard to whether an employee is notified of the reason for termination of employment.

“Termination of employment at the initiative of the employer may be `harsh, unjust or unreasonable' on three principal grounds:

  • lack of valid reason for termination of employment; or
  • lack of procedural fairness afforded to an employee; or
  • circumstances surrounding termination of employment.

(The Workplace Relations Handbook: A guide to the Workplace Relations Act 1996 (Cth) Butterworths 1998 para: 7.5.7)

The Attorney-General confirmed in the House of Representatives on 20 October 1999:

“The bill does not take away any rights in relation to unfair dismissal that are available under the Workplace Relations Act 1996. AFP employees will have a right to reasonable notice of termination of employment under the Workplace Relations Act 1996 and also to reasons for termination.”

The Committee thanks the Minister for this response.

New Business Tax System (Integrity and Other Measures) Bill 1999

Introduction

The Committee dealt with this bill in Alert Digest No. 18 of 1999, in which it made various comments. The Treasurer has responded to those comments in a letter dated 29 November 1999. A copy of the letter is attached to this report. An extract from the Alert Digest and relevant parts of the Treasurer's response are discussed below.

Extract from Alert Digest No. 18 of 1999

This bill was introduced into the House of Representatives on 21 October 1999 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to implement the New Business Tax System, this bill proposes to amend the following Acts:

Income Tax Assessment Act 1997 and the Income Tax (Transitional Provisions) Act 1997 to:

  • include an amount in the assessable income of a taxpayer that disposes of an interest in leased plant or a lease of plant;
  • trigger a balancing charge for 100% subsidiaries of wholly-owned groups; and
  • where the balancing charge is triggered, make the subsidiary and all the companies that were members of the group immediately before the time the subsidiary was transferred, jointly and severally liable if the subsidiary does not pay tax arising from the balancing charge within six months of the due date for payment;

Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936 to:

  • deal with CGT value shifting that occurs where, broadly, a debt owed by one commonly owned company to another is forgiven; and
  • remove deduction limits on exploration and prospecting expenditure and allowable capital expenditure on mine development;

Income Tax Assessment Act 1997 to:

  • defer recognition of capital losses or deductions which would otherwise be realised in certain circumstances;
  • remedy defects in the continuity of ownership test, currently applying to tax losses, net capital losses and bad debts of a company, and proposed to apply to companies with unrealised net losses;
  • limit the extent of unrealised loss duplication by applying the same business test to company losses where there has been a substantial change in a company's ownership or control,
  • prevent indexation of the cost base of CGT assets acquired after the start time and freezes the indexation amount of the cost base of CGT assets acquired at or before the start time and disposed of after that time; and
  • provide a CGT discount to individuals, complying superannuation entities and trusts;

Income Tax Assessment Act 1997, the Income Tax (Transitional Provisions) Act 1997, the Income Tax Assessment Act 1936 and the Financial Corporations (Transfers of Assets and Liabilities) Act 1993 to prevent the duplication of a tax loss or a net capital loss which has been transferred between wholly-owned group companies in certain circumstances; and

Income Tax Assessment Act 1936 to remove the “13 month rule” (which allows immediate deductions of prepayments for things to be done within 13 months) and spread the deduction over the period the prepayment occurs.

Legislation by press release

Subclause 2(2) and Schedule 5; Schedule 1, item 18 and Schedule 2, item 5

Some of the amendments proposed by this bill are to commence on 22 February 1999, or will apply from that date. The Explanatory Memorandum notes that this date was chosen because it was the date of the Treasurer's Review of Business Taxation Press Release No 4. The Explanatory Memorandum goes on to note that this was followed by a subsequent press release – No 58 of 21 September 1999.

The Committee has consistently drawn attention to the Senate Resolution of 8 November 1988, which deals with tax legislation and which provides that:

where the Government has announced, by press release, its intention to introduce a Bill to amend taxation law, and that Bill has not been introduced into the Parliament or made available by way of publication of a draft Bill within 6 calendar months after the date of that announcement, the Senate shall, subject to any further resolution, amend the bill to provide that the commencement date of the Bill shall be a date that is no earlier than either the date of introduction of the Bill into the Parliament or the date of publication of the draft Bill.

This bill has been introduced more than 6 months after the date of the Treasurer's press release. The Committee, therefore, seeks the Treasurer's advice as to the time taken in introducing this bill, and as to the effect of the Senate resolution on the proposed commencement date of the bill.

Pending the Treasurer'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 Treasurer

The measures in the Bill which commence on 22 February 1999 were foreshadowed in my Press Release of that date. The Press Release was issued in response to a letter to me from the Chairman of the Review of Business Taxation, Mr John Ralph AO, which accompanied the release of the Review's second discussion paper, A Platform for Consultation. Mr Ralph canvassed with me the need to address abuses of potential deficiencies in the current business tax system in the period between the release of the second discussion paper and when the legislation is enacted. I made my 22 February 1999 announcement to allow the Review to have full and frank discussion of the deficiencies and possible measures to address them.

The Review presented its final report, A Tax System Redesigned, to the Government on 2 August 1999, including recommendations on measures to address the matters raided in my announcement of 22 February 1999. After considering the Review's final report, I announced on 21 September 1999 the measures the Government would take to address the deficiencies.

The commencement of the measures from 22 February is necessary in order to protect the revenue from the identified deficiencies being abused during the period between the release of the second discussion paper and my 21 September 1999 announcement. While the time between the announcement and introduction was greater than 6 months, this was necessary to allow sufficient time for the Review to complete its report and the Government to consider the recommendations of the Review.

If the commencement date of these measures was changed, it could open up the possibility of taxpayers abusing the deficiencies between the release of the second discussion paper and the new commencement date. This could have major revenue implications.

The Committee thanks the Treasurer for this response.

Barney Cooney

Chairman