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A New Tax System (Australian Business Number Consequential Amendments) Bill 1998
Bills Digest No. 96 1998-99
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
This is one of two companion Bills which implements the Australian Business Number (ABN) scheme with an Australian Business Register (ABR) to which the public will have access. It will be referred to as the ABN(CA) Bill in this Digest. The other Bill to implement the ABN scheme is the A New Tax System (Australian Business Number) Bill 1998 will be referred to as the ABN Bill in this Digest. The reader is referred to the Bills Digest on the ABN Bill for commentaries on that Bill.
The ABN(CA) Bill amends the Taxation Administration Act 1953 (the TAA 1953) to make the ABN Bill when enacted, a taxation law. It also provides for the Commissioner of Taxation (the Commissioner) to be the Registrar of the ABR and for the Commissioner to delegate his or her powers and functions as Registrar to a Deputy Commissioner or another person.
Importantly, proposed section 8WA(1A) to the TAA 1953 enables tax file numbers (TFNs) to be requested in connection with an application for the registration of an entity under the ABN scheme.
This Bill is one of a package of 17 Bills(1) that was introduced into the House of Representatives in December 1998, to give effect to Government’s proposals on 13 August 1998 for a new tax system, which in cluded the introduction of a GST. The outlines of Government’s proposals were contained in the policy document Tax Reform: not a new tax, a new tax system : The Howard Government’s Plan for a New Tax System,(2) which will be referred to as the A New Tax System (ANTS) in this Digest. An Overview of ANTS and further details of the proposals were contained in Fact Sheets, all of which were available in the Government’s Tax Reform Website:
Proposed clause 1-3 of the A New Tax System (Goods and Services Tax) Bill 1998 (the GST Bill) provides that the Commonwealth will introduce further legislation to give effect to the Agreement on Principles for the Reform of Commonwealth-State Financial Relations endorsed at the Special Premiers’ Conference in Canberra on 13 November 1998. In the Second Reading Speech on the GST Bill, the Treasurer stated that the Government proposes to enact the whole package by the end of this financial year and that when the package is enacted, Australia will have a new tax system from 1 July 2000.(3) The Prime Minister also stated in Parliament that further tranches of legislation will be introduced early in 1999 to implement the new tax system.(4)
The New Tax Plan indicated that the introduction of a single business identifier would change business registration and allow business to meet its regulatory obligations and access information and assistance through o ne, or as few as possible, entry points to Government. It added :
With the introduction of the goods and services tax (GST) the Government will rationalise identification of business across all regulatory bodies, so that GST will not be an additional requirement.
The Government will ensure that each business:
- has only one number to identify it for all government purposes, to be known as the Australian Business Number (ABN)
- can deal with, and obtain information and assistance from all of government through o ne, or as few as possible, entry points, and
- need notify any changes in their details only once and to only one authority.
To this end the Tax Office will create and maintain a register of Australian businesses for all Commonwealth purposes. This system will be available to State, Territory and local government regulatory bodies to reduce the multiplicity of government registration and reporting.
At the Commonwealth level, business will only be required to quote one number for their public dealings under the tax and corporations laws. The number will not be the Tax File Number, ensuring that existing privacy safeguards are maintained. (5)
The reader is referred to the companion Bills Digest on the ABN Bill for further information on the background to the ABN scheme.
Is the law establishing the Australian Business Number Scheme a taxation law for the purposes of the Taxation Administration Act 1953 ?
Under section 2 of the TAA 1953 taxation law means:
- the TAA 1953
- any other Act of which the C ommissioner has the general administration (other than an Act prescribed for the purposes of this paragraph), and
- regulations under an Act referred to in paragraph (a) or (b).
Item 1 of Schedule 1 of the ABN(CA) Bill amends the above definition of taxation law in section 2 of the TAA 1953 by inserting proposed paragraph (ba) which has the effect of specifying that the A New Tax System (Australian Business Number) Act 1998 is a taxation law for the purposes of the TAA 1953. Item 2 of Schedule 1 amends paragraph (c) so that regulations made under that Act are also taxation laws under the TAA 1953.
Subsection 6B(6) of the TAA 1953 provides that a person acting in the office of Commissioner of Taxation has and may exercise all the powers, and shall perform all the functions, of the Commissioner under this Act or any other law. Item 3 of Schedule 1 inserts proposed subsection 6B(6A) to ensure that a person acting as Commissioner has all the powers and functions given to the Commissioner in his or her capacity as Registrar of the ABR.
Can the Commissioner delegate of the powers and functions of the Registrar of the Australian Business Register?
Under subsection 8(1) of the TAA 1953 the Commissioner may, either generally or as otherwise provided by the instrument of delegation, by writing signed by the Commissioner, delegate to a Deputy Commissioner or any other person all or any of the Commissioner's powers or functions under a taxation law or any other law of the Commonwealth or a Territory, other than this power of delegation. Item 4 of Schedule 1 inserts proposed subsection 8(1A) to enable the delegation of the powers and functions of the Registrar of the ABR.
Is there authority to enable a person to request the tax file number of another connection with an application for registration in the Australian Business Register?
Section 8WA of the TAA 1953 makes it an offence for a person to request another person to q uote the other person’s tax file number (TFN) for the purpose of establishing the other person’s identity, unless in certain circumstances specified in that section.
Item 5 of Schedule 1 of the ABN (CA) Bill which inserts proposed subsection 8W(1A) authorises a person to request another person to quote the other person’s TFN if it is for the purpose of including the TFN in an application for registration of an entity under the ABN Act.
The term entity under the ABN Act covers all kinds of legal persons. It also covers groups of legal persons, and other things, that in practice are treated as having a separate identity in the same way as a legal person does.
Thus if the entity making application for an ABN is a trust, the TFNs of the entity, the trustee, the beneficiaries and associated trusts and entities may be requested by the person preparing the application without contravening section 8WA of the TAA1953. The categories of persons whose TFNs will be relevant for the purpose of an application by an entity for an ABN will only be known when regulations under proposed section 31 of the ABN Act are made.
Proposed subparagraph 9(2)(a) of the ABN Bill states that the application for registration in the ABR must be in the form approved by the Registrar and proposed subsection 9(3) states that without limiting the powers conferred on the Registrar under proposed subparagraph 9(2)(a) the approved form may require an entity generally to set out in the application:
- the name and address of, and other information about an associate ( proposed subparagraph 9(3)(a)(i) , or
- any identifying number (other than a TFN) that has been issued to the entity or to an associate ( proposed subparagraph 9(3)(a)(ii) ), and
- may request, but not compel, an entity to provide the entity ’ s TFN o r that of an associate ( proposed paragraph 9(3)(b) .
The reader is referred to the Bills Digest on the companion ABN Bill for a discussion of the powers that will be conferred on the Registrar under the package of legislation to require registration in the ABR prior to registration for the GST. The writer takes the view that the scheme of the proposed legislation is such that it will have the practical effect of compelling applicants to disclose their TFNs and that of associates, notwithstanding the provisions of proposed paragraph 9(3)(b) which give a contrary impression.
The scheme for the registration of all business entities in an Australian Busi ness Register (ABR), as proposed in the ABN Bill, raises the question of what constitutional powers the Commonwealth will be relying on to establish the ABN scheme. One of the purposes of the ABN(CA) Bill is to provide that the ABN Bill is a taxation law for the purposes of the TAA 1953. It is clear that there is reliance on the taxation power in section 51(ii) of the Constitution.
The ABN scheme is central to the administration of the goods and services tax (GST) as well as improving tax compliance within the Commonwealth tax system generally. The term ‘business’ is given a wide meaning in proposed clause 41 of the ABN Bill and includes any profession, trade, employment, vocation or calling, but not including occupation as an employee. The term entity is also given a very wide meaning in proposed clause 37 of the ABN Bill and covers all kinds of legal person as well as groups of legal persons and other things that in practice are treated as having a separate identity as a legal person does. The ABR will therefore be a register with unique identifying numbers of all entities whether individuals or otherwise, engaged in any enterprise in Australia. Individuals whose only source of income is from employment will not be included in the ABR. The ABR will be administered by the Registrar who will be the Commissioner of Taxation.
In the section on Main Provisions it was concluded that although the two Bills setting up the ABN scheme do not make it mandatory for every entity carrying on business in Australia to make application for an ABN, the scheme of the proposed legislation impl ementing the new tax system and the GST in particular provides sanctions for not applying for an ABN and including it in invoices of taxable supplies it makes under the GST law.
In Fairfax v Federal Commissioner of Taxation ,(6) a law of the Commonwealth deprived superannuation funds of an exemption from income tax which they had previously enjoyed, unless a proportion of their funds was invested in prescribed public securities. The High Court unanimously upheld the law as one with respect to taxation. In this instance the pivotal position of the ABN scheme in the implementation of the GST leaves little doubt that the ABN Act will be a law with respect to taxation under section 51(ii) of the Constitution.
The ABR could also be said to be a matter incidental to the taxation of goods and services. Although the registration of business names of entities other than companies is a matter for the States and Territories,(7) the assignment of an ABN to every entity carrying on business will be within Commonwealth taxation power as it is possible to show a connection with the GST.
In Melbourne Corporation v. The Commonwealth Dixon CJ laid the test as follows.
Speaking generally, once it appears that a federal law has an actual and immediate operation within a field assigned to the Commonwealth as a subject of legislative power, that is enough. It will be held to fall within the power unless some further reason appears for excluding it. That it discloses another purpose and that the purpose lies outside the area of federal power are considerations which will not in such a case suffice to invalidate the law.(8)
Zines in High Court and the Constitution says that:
By means of this technique the Commonwealth has been able to use existing heads of power to achieve results which, as a matter of purpose, lie in areas within State legislative authority.(9)
However, there may be limits to the extent to which the taxation power may be used by the Commonwealth to intrude into areas within State legislative power if account is taken o f the federal nature of the Commonwealth Constitution. Thus, the taxation power in the Constitution cannot be used by the Commonwealth to deprive the States of the resources to undermine their existence. But this may arguably not be the case with the new tax system where the GST revenue is to be distributed to the States and Territories, although partly in exchange for the repeal of certain existing State and Territory indirect taxes.
In the context of the ABN scheme which is clearly intended to identify entities and their associates the question arises whether the Commonwealth could set up registers of births, deaths and marriages to be able to identify all individuals associated with the entities without the cooperation of the States.
It must be noted that the Report of the Small Business Deregulation Task Force (the Bell Report) tilted - Time For Business - in Recommendations 5 and 43 recommended that a single compliance statement for income tax and all business taxes as well as a unique business identification number for all Commonwealth taxation purposes be introduced from the 1998-99 financial year. The unique business number was to facilitate the development of the single entry point and streamlined registration processes for small business.(10)
Chapter 8 of the Bell Report indicated the extent of cooperation required by the Commonwealth, State and Territory Governments to achieve the objective of a single entry point. The proposal for a unique business number it indicated would require the cooperation or amalgamation of the Business Names Registries maintained under State and Territory Legislation.(11) Under current arrangements between the Commonwealth, the States and the Northern Territory, information regarding State/Territory business names is provided as from 1991 to the Australian Securities and Investments Commission (ASIC) for incorporation into a ‘national business names register’.
Under the Corporations Agreement the national business register is an electronic register which is provided by and at the expenses of the States.(12) The Corporations Agreement gives recognition to the High Court decision in New South Wales v Commonwealth(13) where the incorporation provisions in the Corporations Act 1989 were held to be invalid. The majority held that that to construe paragraph 51(xx) of the Constitution as authorising the incorporation of companies was supported ‘by neither the language of the provision, nor its history, nor authority’.(14) In this case the High Court was following the decision in Huddart, Parker & Co Pty Ltd. v Moorland(15) were the High Court unanimously agreed that the Commonwealth could not under paragraph 51(xx) create corporations.
Given that the incorporation of companies which includes authorising names is a matter for the States under the Constitution and the authorising of business names for other entities such as partnerships, trusts and sole proprietors and other associations and bodies is a matter for the States, the question arises whether the Commonwealth could under its taxation power under paragraph 51(ii) and the incidental power under section 51(xxxix) require the registration of all business entities for the purpose of assigning a unique Australian Business Number.
Any doubt in regard to the constitutional validity of Commonwealth legislation setting up the ABR may be overcome by following the route of the Corporations Agreement between the Commonwealth and the States.
However, if the Registrar of the ABR is to access the registers of births, deaths and marriages maintained by the States to establish the identity of individuals connected with entities on the ABR the cooperation of the States may be required. This was the view of the Treasury in 1985 when the Companion Numbering System for identifying entities was proposed together with the Australia Card. This question is dealt with in the following paragraph.
Has the Companion Numbering System for entities which was to be introduced in association with the Australia Card been resurrected?
The previous attempt by a Commonwealth Government to develop a numbering system for identifying entities was tied up with the proposal for the issue of the Australia Card for identifying individuals. It was referred to as the companion numbering system. The Australia Card proposal was first announced by the Treasurer on 19 September 1985 in the Statement - Reform of the Australian Taxation System .(16) Extracts from the statement are indicative of the difficulties of disassociating the identification of entities from the individuals associated with it.
The Government has decided to implement a national identification system involving the issue of a card (the Australia Card) to individuals as broadly outlined in the draft White Paper and other related material presented to the Taxation Summit. A companion numbering system for entities other than individuals, closely related to the individual system, is also to be developed.
The proposed system utilising an Australia Card will be administered by the Health Insurance Commission making use of the network of Medicare offices. The card will utilise a unique number and the holder’s signature but will not include a ph otograph. The Commission will hold a central register of identification details for individuals, eg full name, age, address. The integrity of the information held on the central register will be heavily dependent upon information currently held on State and Territory Registries of Births, Deaths and Marriages and the Prime Minister will therefore be writing to State Premiers and the Chief Minister of the Northern Territory to seek their co-operation in making available to the Commonwealth details held by respective registries.
A companion, yet separate, system will be introduced for the wide range of entities and other non-individuals liable to tax. These include corporations, trusts, partnerships, various clubs, associations etc. The companion system is designed to prevent the leakage of revenue gains from individuals to entities and other non-individuals.(17)
A joint select committee of the House of Representatives and the Senate was established in November 1985 to inquire into and report on all aspects of the government’s proposals for an Australia Card. The report of the joint select committee confirms that a ccording to the Government’s submission to the committee, the companion system for the identification of entities would require the use of the Australia Card number of a relevant person associated with an entity to validate a prescribed transaction of that entity.(18)
The Australia Card Bill 1986(19) included measures for the establishment of the Australia Card Register and the Births, Deaths and Marriages Register (BDM Register). It made it clear that the proposed identification system was intended to facilitate the administration and execution of Commonwealth laws relating to taxation, social security, hospital and medical benefits and immigration, and to prevent the obtaining of certain Commonwealth benefits falsely.(20)
Whether the Agreement with the States referred to in proposed clause 1-3 of the A New Tax System (Goods and Services Tax) Bill 1998 (the GST Bill) will include access by the Registrar of the ABR to registers of births, deaths and marriages maintained by the States is left to be seen. In 1985 the Treasury found it necessary to have such access in order to establish the true identity of individuals as well as the identity of entities in the Companion Numbering System for entities linked to the Australia Card Register. There is no obvious reason to believe that the position is any different today.
Pivotal role of the TFN in the ABN scheme
The ABN Bill envisages a role for the tax file number (TFN) in an application for the registration of an entity in the ABR. Applicants for ABNs must satisfy the Registrar of their identities with or without disclosing their TFNs. The Registrar must take a decision whether he or she is satisfied of the identity of an entity and if an entity does not disclose the TFN of the entity it would be reasonable if the Registrar concludes that there is some doubt of the true identity of that entity. In fact it is unlikely that an entity which operates in the cash economy and does not have a TFN would go through the process of applying for an ABN which might require the application initially for a TFN. Such an entity would wear the penalty of not having an ABN in the scheme of the GST. Any such penalty will, in some instances, be recouped by an adjustment to the prices of goods and services that the entity deals with. This would appear to be experience of the working of the value added tax (VAT) in the UK.
Thus in reality the ABR will be a register of entities whose identities have been established to the satisfaction of the Commissioner of Taxation and who have been issued with ABNs which are linked to their TFNs.
While the TFN will be the subject of privacy protection under the TAA 1953, the ABN being a public registration number for the GST is incapable of receiving the same privacy protection as the TFN.
In summary, the two companion Bills set up an ABR which will identify with a unique number (the ABN) every person engaged in any form of enterprise in Australia other than individ uals who derive their sole income from employment.
The reader is referred to the Bills Digest on the ABN Bill for a full discussion on the privacy concerns associated with the ABNs which may be inevitably linked with the TFNs.
1 A list of the Bi lls is set out below:
A New Tax System (Aged Care Compensation Measures Legislation Amendment) Bill 1998
A New Tax System (Australian Business Number Consequential Amendments) Bill 1998
A New Tax System (Australian Business Number) Bill 1998
A New Tax Syst em (Bonuses for Older Australians) Bill 1998
A New Tax System (Compensation Measures Legislation Amendment) Bill 1998
A New Tax System (End of Sales Tax) Bill 1998
A New Tax System (Fringe Benefits Reporting) Bill 1998
A New Tax System (Goods and Services Tax Administration) Bill 1998
A New Tax System (Goods and Services Tax Imposition—Customs) Bill 1998
A New Tax System (Goods and Services Tax Imposition—Excise) Bill 1998
A New Tax System (Goods and Services Tax Imposition—General) Bill 1998
A New Tax System (Goods and Services Tax Tra nsition) Bill 1998
A New Tax System (Goods and Services Tax) Bill 1998
A New Tax System (Income Tax Laws Amendment) Bill 1998
A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Bill 1998
A New Tax System (Personal Income Tax Cuts) Bill 1998, First Reading
A New Tax System (Trade Practices Amendment) Bill 1998, First Reading.
The first 16 of these Bills were introduced on 2 December 1998 and the 17 th Bill was introduced on 10 December 1998.
2 Circulated by the Hon. Peter Costello MP, Treasurer of the Commonwealth of Australia (AGPS) August 1998.
3 Hansard , House of Representatives, 2 December 1998, p. 1087.
4 Hansard, House of Representatives, 3 December 1998, p. 1343.
5 Ibid., pp. 133-134
6 (1965) 114 CLR 1.
7 Business Names Act 1962 (Vic); Business Names Act 1962 (NSW); Business Names Act 1962 (Qld) ; Business Names Act 1996 (SA); Business Names Act 1962 WA); Business Names Act 1962 (Tas); Business Names Act 1963 (ACT); Business Names Act 1962 (NT).
8 (1947) 74 CLR 31 at 79.
9 The High Court and the Constitution, Fourth Edition, p. 40.
10 The Report of the Small Business Deregulation Task Force, whose Chairman was Mr Charlie Bell, was published in November 1996. This report is generally referred to as the Bell Report.
11 Business Names Act 1962 (Vic), Business Names Act 1962 (NSW), Business Names Act 1962 (Qld), Business Names Act 1996 (SA), Business Names Act 1962 WA), Business Names Act 1962 (Tas); Business Names Act 1963 (ACT), Business Names Act 1962 (NT).
12 Clause 1001 of the Corporations Agreement between the Commonwealth, States and Northern Territory made on 23 September 1997.
13 (1990) 169 CLR 482
14 Ibid., p. 503.
15 (1908) 8 CLR 330
16 Reform of the Australian Taxation System, Statement by the Treasurer, The Hon. Paul Keating 19 September 1985(AGPS), pp. 28-31.
17 Ibid., p.28.
18 Report of the Joint Select Committee on an Australia Card (May 1986) (AGPS), paragraph 1.11, pp 7-8.
19 The Australia Card Bill 1986, introduced into the House of Representatives on 22 October 1986, was rejected by the Senate on 10 December 1986. The Australia Card Bill 1986 (No 2) was rejected by the Senate on 2 April 1987. The Australia Card Bill 1986 (No 3) was laid aside in the Senate on 9 October 1987. The three Bills were identical.
20 Australia Card Bill 1986, P arts II and III.
28 January 1999
Bills Digest Service
Information and Research Services
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