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A New Tax System (Tax Administration) Bill 1999
Bills Digest No. 56 1999-2000
A New Tax System (Tax Administration) Bill 1999
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 lega l status. Other sources should be consulted to determine the subsequent official status of the Bill.
The purpose of the A New Tax System (Tax Administration) Bill 1999 (Bill) is to introduce, among other things, a new oral rulings regime, an identification system to improve compliance with taxation laws and a number of rules which compliment or supplement certain measures associated with the A New Tax System legislation.
- supplements rules which established the Pay As You Go (PAYG) withholding system, particularly in respect of the new labour hire w ithholding arrangements and certain administrative matters including the amount of withholding, registration and annual reporting to the Commissioner of Taxation (Commissioner)
- introduces standardised rules to enable the Commissioner to collect and recover tax-related liabilities
- introduces the new oral rulings regime for simple tax inquiries for taxpayers with simple tax affairs
- introduces a reporting, verification and identification system to improve compliance with taxation laws purportedly in relation to high risk compliance transactions
- introduces a shorter period of review for taxpayers with simple tax affairs and at the same time reduces the time period in which those taxpayers are generally able to lodge objections to assessments
- will require charities and gift deductible entities (apart from those specifically listed by name in the Income Tax Assessment Act 1997 ) to obtain an Australian Business Number (ABN) and be endorsed by the Commissioner by 1 July 2000 in order to be a deductible gift recipient or income tax exempt
- introduces additional administrative provisions in respect of the Business Activity Statement (BAS), which includes the requirement for electronic lodgers to pay all tax debts electronically
- provides for consequential amendments relating to PAYG instalments, in particular, variation of GDP-adjusted notional tax for quarterly instalment payers, and
- insures that the savings rebate which was abolished from the 1999-2000 income year is not taken into account in the calculation of provisional tax for that year.
On 13 August 1998 the Federal Government released proposals for reform of the Australian tax system(1) (ANTS) of which, a goods and services tax (GST) was the centrepiece.
The tax reform plan proposed to:
- introduce a GST which abolished sales tax and nine other indirect taxes
- change Commonwealth-State financial relations by providing States and Territories with an independent revenue base
- implement significant changes to individual marginal t ax rates
- implement a major rationalisation of family assistance
- introduce a new universal business number system
- move toward an entity taxation system which is directed toward the elimination of tax advantages between different business structures, and
- simplify the imputation system and introduce refunds for excess franking credits.
The tax reform plan also proposed to replace the various existing taxation payment and reporting systems of company tax, provisional tax, PAYE(2), PPS(3) and RPS(4) by one quart erly tax payment system, PAYG.
The A New Tax System (Taxation Laws Amendment) Bill (No.1) 1999 (PAYG Bill) introduced the PAYG system which comprises two parts:
- a PAYG withholding system which will replace the existing PAYE, PPS and RPS systems, as well as six other withholding arrangements such as non-resident and TFN(5) withholding, and
- a PAYG instalments system , which will replace the current provisional tax and company tax instalment systems.
PAYG withholding occurs where amounts are collected in respect of particular kinds of payments or transactions (for example a payment of salary or a payment under a labour hire agreement) and then paid to the Commissioner.
PAYG instalments are amounts paid directly to the Commissioner usually on a quarterly basis.
Credits are created for the amounts of income collected under PAYG and applied against tax debits. Any excess is refunded.
The PAYG Bill did not include recovery, procedural and evidentiary provisions for PAYG.
The PAYG Bill is currently in the Senate and has had a change of name to the A New Tax System (Pay As You Go) Bill 1999.
The Australian Business Number (ABN) is a universal business number system.
The tax reform plan included provision for the introduction of the ABN, one number to identify a business for all Comm onwealth purposes. The ABN will rationalise identification of business across all regulatory bodies.
The Australian Taxation Office (ATO) will create and maintain a register of Australian businesses for all Commonwealth purposes. The number will not be a tax file number. The system will be available to State, Territory and local government regulatory bodies to reduce the multiplicity of government registration and reporting.
'The introduction of the ABN was recommended by the Bell Report as part of measures designed to:
- facilitate the introduction of a single tax compliance statement
- streamline business interaction with the Commonwealth
- provide a mechanism for collecting and distributing information through a single entry point, and
- facilitate the developmen t of a single entry point and streamlined registration process.'(6)
The ABN scheme was introduced by the A New Tax System (Australian Business Number) Act 1999 and the A New Tax System (Australian Business Number Consequential Amendments) Act 1999 which received Royal Assent on 8 July 1999.
Every person, whether an individual, the trustee of a trust estate or superannuation fund, a partnership or a company, and whether a resident or a no n-resident of Australia, is entitled to a deduction from assessable income for individual gifts of $2 or more made during the year to nominated funds, authorities, institutions, bodies or specified persons.
There are two main categories of gift deductible entities:
- those that fall within the approved general categories, and
- those that are specifically identified in the Income Tax Assessment Act 1997 (ITAA97).
Tables of gift deductible entities may be found in Subdivision 30-B of the ITAA97. They are essenti ally classified into 12 categories including health, education, research, welfare and rights, environment, the family, sports and recreation, philanthropic trusts and cultural organisations.
A charity that meets certain requirements will gene rally be a tax exempt entity. That is, one whose total ordinary and statutory income is exempt from income tax. Tables of exempt entities may be found in Division 50 of the ITAA97, which includes a category for charity, education, science and religion.
If a charitable organisation or fund is to be exempt on income derived on or after 1 July 1997 it must either have a physical presence in Australia and incur its expenditure and pursue its objects principally here, be listed in one of the deductible gift tables or be a prescribed institution either located outside Australia and exempt in its country of residence or with a physical presence in Australia but which incurs its expenditure and pursues its objects principally outside Australia.
The Commissioner may make public and private rulings that are binding on him. The public rulings system is contained in the Taxation Administration Act 1953 (TAA 1953) in Part IVAAA (sections 14ZAAA to 14ZAAM) and the private rulings system is contained in Part IVAA (sections 14ZAA to 14ZAZC) of the TAA 1953.
Before the introduction of the public and private rulings system, rulings, determinations and advance opinions were not binding on the Commissioner.
Since 1 July 1992 public and private rulings are binding on the Commissioner if they relate to arrangement s that began on or after that date and they deal with the application of a law under which a person's liability to tax is determined. Rulings and determinations on procedural, administrative or tax collection matters are not binding on the Commissioner. Rulings made before 1 July 1992 and those relating to procedural and administrative matters will be treated as administratively binding.
The Commissioner has power to amend an assessment by making such additions or alterations, as he considers necessary.
There are various time limits on this power depending on whether the original assessment relates to the 1989/90 or subsequent income year or whether it relates to an earlier income year.
For those assessments relating to the 1989/90 or later income years, where there has been tax avoidance involving fraud or evasion, the Commissioner can amend an assessment at any time. In any other case the Commissioner can amend the assessment within four years from the date the tax became due and payable under the assessment.
The Commissioner's power to amend assessments for pre-1989/90 income years depends upon whether the taxpayer has made a full and true disclosure of all material facts necessary for the assessment. If full and true disclosure has been made, the assessment may only be amended within three years from the date the tax became due and payable under the assessment.
A taxpayer can effectively 'self-amend' an assessment at any time within four years of the due date for payment.
A taxpayer wishing to challenge an amended assessment must lodge an objection within the prescribed time or such further time as allowed by the Commissioner (generally within 4 years of service of the notice of assessment). If the objection is disallowed the taxpayer may seek review by the Administrative Appeals Tribunal or appeal to the Federal Court.
Schedule 1 of the Bill amends the Taxation Administration Act 1953 (TAA 1953) to insert New Division 15 into Schedule 1.
New Division 15 concerns the calculation of how much an entity must withhold from those payments or transactions that are covered by PAYG and known as withholding payments.
The types of withholding payments are summarised in a table in Division 12 of the TAA 1953 and include:
- a payment of salary etc to an employee
- a payment of remuneration to a director of a company
- a return to work payment to an individual
- a payment under a labour hire arrangement
- a payment of pension or annuity
- a social security or similar payment
- a compensation, sickness or accident payment
- a payment arising from an investment where the recipient does not quote a tax file number, or in some cases, its ABN, and
- a mining payment.
Basically the amount to be withheld is to b e calculated using withholding schedules made by the Commissioner pursuant to new section 15-25 . However, if the regulations prescribe how the amount is to be worked out, then it is to be worked out under the regulations. ( New section 15-10 ).
Pursuant to new section 15-30 , when making a withholding schedule, the Commissioner must have regard to the rates of income tax, Medicare levy, HECS, the family tax benefit and any prescribed tax offsets.
The Commissioner also has the power to vary the amount to be withheld by an entity from a withholding payment. An entity will need to take into account any TFN declaration or declaration under new section 15-50 it may be provided with, because the declaration may affect how to calculate the amount to withhold.
These amendments apply to payments made on or after 1 July 2000 and declarations in effect immediately before 1 July 2000 continue to have effect as if they were declarations under new section 15-50 .
Schedule 10 repeals existing section 12-60 and substitutes new section 12-60 to correct the unintended application of the previous section from occurring.
Former section 12-60 was extremely widely drafted and was not restricted to applying to labour hire arrangements.
As pointed out in the Bills Digest for the A New Tax System (Taxation Laws Amendment) Bill (No.1) 1999 at page 17, the obligation to withhold tax could have occurred in many situations. This included where a solicitor engages a barrister on behalf of a client or where a service trust or company pays an individual for work or services to be performed for a professional partnership.
The Digest concluded that former section 12-60 was a widely drafted provision that would catch activities outside the scope of labour hire arrangements. Indeed the provision provided for further payments for work or services to be specifically included by way of regulation.
The proposed amendments restrict the application of the section to withholding by an entity from a payment it makes to an individual if the entity carries on a labour hire business.
New section 12-60 states that the entity must be carrying on an enterprise that is a 'business of arranging for persons to perform work or services directly for clients of the entity, or the enterprise includes a business of that kind that is not merely incidental to the main activities of the enterprise'.
The notes to the section specifically mention that solicitors will not have to withhold payments made to barristers.
New subsection 12-60(2) retains the ability to significantly expand the application of the section by retaining the concept that an entity that carries on an enterprise must withhold an amount from a payment that it makes to an individual in the course or furtherance of the enterprise if the payment is, in whole or in part, for work or services and is of a kind prescribed by the regulations.
Schedule 14 inserts new Subdivision 16-BA , which imposes an obligation on withholders to be registered.
Withholders must apply to be registered before they are required to make the first withholding. ( New section 16-140 )
A branch of an entity may apply to be registered and if the Commissioner is satisfied that the branch carries on an independent system of accounting, the entity has an ABN and carries on an enterprise through the branch it will be registered and known as a PAYG withholding branch. ( New section 16-142 ) Thus a branch may be both a PAYG withholding branch and a GST branch.
Schedule 5 makes amendments to Part VA of the Income Tax Assessment Act 1936 (ITAA36). Part VA deals with Tax File Numbers (TFN) and its objects include prevention of tax evasion and increasing the effectiveness and efficiency of the matching of information contained in reports given to the Commissioner with information disclosed in income tax returns.
Division 3 of Part VA currently deals with quotation of tax file numbers by employees and thus with employee declarations. This is repealed and the concept of the quotation of tax file numbers by recipients of eligible PAYG payments is introduced in its place.
This is because the PAYG withholding applies to withholding payments that include categories beyond salaries paid to employees.
Recipients may, therefore, under new section 202C make a TFN declaration in respect of a particular payer. The terms 'recipient' and 'payer' replace the former 'employee' and 'employer'.
Payers will also be required under new section 202CF to notify the Commissioner if a recipient has not made a TFN declaration within 14 days of the commencement of the relationship between the payer and the recipient under which a PAYG payment will or will be likely to be made.
This represents a departure from the current TFN provisions in respect of employee declarations. Tax must currently be withheld at the top marginal rate plus Medicare levy, but there is no requirement on an employer to advise the Commissioner of the failure to provide an appropriate declaration.
Schedule 5 also introduces obligations for annual reports concerning withholding payments and reportable fringe benefits to be prepared and given to the Commissioner. Generally these reports must be made before 31 October after the end of a financial year or, if any person employed by the entity has a reportable fringe benefit amount, by 14 August after the end of the financial year.
PAYG replaces several existing reporting and taxation payment systems and the requirements in new section 16-153 for the provision of annual reports replaces the existing provisions.
The provisions relating to annual reports apply for financial years commencing on 1 July 2000.
An employment declaration that is effective immediately before 1 July 2000 continues to have effect as if it were a TFN declaration given on 1 July 2000.
Individuals who are not registe red for GST purposes (and have tax payable greater than $8,000) may choose to have the amount of the quarterly PAYG instalment worked out on the basis of the previous year's income tax liability adjusted by a factor which reflects annual movements in gross domestic product and notified to them by the Commissioner. This is referred to as quarterly instalments on the basis of GDP-adjusted notional tax.
The amendments in Schedule 10 of the Bill replace existing mechanisms for those who choose to pay quarterly instalments on a GDP-adjusted notional tax basis, to vary the amount of the instalment.
Schedule 16 makes consequential amendments to several Acts following the introduction of PAYG instalments including the:
- Crimes (Taxation Offences) Act 1980 to ensure the definition of income tax includes amounts payable under the PAYG instalments system
- Higher Education Funding Act 1988 to allow amounts payable under HECS to be collected under the PAYG instalment system, and
- Income Tax Assessment Act 1936 to replace the term 'instalment taxpayer' with 'full assessment taxpayer' because the term will apply to instalments payable for the last time for the 1999-2000 year.
Schedul e 11 makes consequential amendments to several Acts following the introduction of PAYG withholding including the:
- Aboriginal Land Rights (Northern Territory) Act 1976 to ensure that the new law will operate in the same way as the current law in relation to mining payments covered by the new PAYG system
- Income Tax Assessment Act 1997 , Bankruptcy Act 1966 , Social Security Act 1991 and Veterans' Entitlements Act 1986 to refer to the new summary document in the PAYG withholding system called a 'payment summary' instead of the present group certificate
- Child Support (Registration and Collection) Act 1988 to delete references to the obsolete terms of 'employee', 'employer' and 'salary or wages' and replace them with a reference to 'work and income support related withholding payments' which is defined to basically mean a withholding payment under the new PAYG withholding system
- Defence Act 1903 , Higher Education Funding Act 1988 and Public Service Act 1922 to repeal references to Division 2 of Part VI of the ITAA36 and substitute references to the new PAYG system equivalents in Part 2-5 of Schedule 1 to the TAA 1953(7), and
- Income Tax Assessment Act 1936 to update references to provisions and concepts in the current Part VI of the ITAA36 (collection and recovery of taxes) to also refer to the new provisions and concepts in the PAYG withholding system.
Schedule 2 of the Bill introduces new Part 4-15 into Schedule 1 of the TAA 1953.
The aim is to standardise the rules and deal with the methods by which the Commissioner may collect and recover amounts of taxes and other liabilities.
The rules will apply from 1 July 2000 and the aim is to remove the multiplicity of recovery provisions that currently exist to replace them with one legislative provision.
New Part 4-15 includes:
- the general rules about collection and recovery, which basically state that a tax-related liability is a pecuniary liability to the Commonwealth and a tax-related liabili ty that is due and payable is a debt due to the Commonwealth and is payable to the Commissioner ( New Division 255 )
- an index of each tax-related liability under the ITAA36 (such as ultimate beneficiary non-disclosure tax, withholding tax on dividend, interest or royalty and franking deficit tax), under ITAA97 (such as franking additional tax, income tax and late lodgment penalty) and tax-related liabilities under other legislation (such as the net amount under the GST law, fringe benefits tax and superannuation guarantee charge) ( New section 250-10 )
- the rules concerning recovery proceedings including procedural and evidentiary matters relating to proceedings to recover an amount of tax-related liability ( New Subdivision 255-C )
- the rules dealing with the collection and recovery of an amount from a person who is not personally liable to pay that amount including from a liquidator, receiver, an agent winding up a business for a non-resident principal and from a deceased person's estate ( New Division 260 ), and
- the person's right to recover from another person an amount paid in discharge of a tax-related liability if the person paid the amount for or on behalf of another person. ( New Subdivision 265-A )
The TAA 1953 is also amended to insert new Part 5-1 and in particular new Division 353 which gives the Commissioner wide powers to obtain information and evidence covering matters relevant to the operation of Schedule 1 of the TAA 1953. Schedule 1 is the PAYG system of collecting income tax and other liabilities.
Parts 2 and 3 of Schedule 2 contain provisions which either repeal or modify the application of existing collection and recovery rules and savings provisions so that those repealed provisions continue to have effect in relation to an amount that became due and payable before 1 July 2000. These include provisions relating to fringe benefits, sales tax and the superannuation guarantee.
Schedule 3 amends the TAA 1953 to insert new Part 5-5 in Schedule 1. New Division 360 deals with oral rulings for individuals as outlined in the tax reform plan.
Division 360 is basically divided into sections covering the application for an oral ruling, how the Commissioner is to deal with the application and when the Commissioner must or can refuse the application.
An oral ruling is essentially, a ruling given to an individual on the way in which, in the Commissioner's opinion, an income tax law would apply to a taxpayer in relation to an oral ruling arrangement, that is to an action, course of action or conduct or a transaction that has been or is proposed to be engaged in or carried out.
The basic concepts are:
- an individual needs to follow the correct procedure in applying for an oral ruling
- the Commissioner must be sa tisfied that an individual's tax affairs meet certain tests, and
- there are matters that may prevent the Commissioner from making a ruling including the fact that an individual may be carrying on a business or made payments caught under the PAYG rules.
Pursuant to new section 360-65 the Commissioner must make an oral ruling if the application relates only to basic categories of income (excluding capital gains tax), exempt income, deductions and tax offsets. These basic categories are listed in new sections 360-70 (basic categories of assessable income), 360-75 (basic categories of exempt income), 360-80 (basic categories of deductions) and 360-85 (basic categories of tax offsets).
3.3 The Commissioner must make an oral ruling if satisfied that the tax affairs and inquiry are simple even if the application involves additional categories
Under section 360-100 the Commissioner must make an oral ruling if requirements in respect of the basic categories of income, deductions, exempt income and tax offsets are met except that there may be capital gains or losses involved which would be disregarded because they deal with motor cars etc or the disposal of shares in a listed public company or units in a listed widely held trust.
Under new section 360-140 the Commissioner must not comply with an application during the inquiry period unless:
- the individual is an Australia n resident
- did not carry on a business
- was not a withholder, and
- their assessable income did not include an amount in respect of a non-cash benefit.
There are other reasons under new section 360-145 that prevent the Commissioner from providing an oral ruling including where there is already an oral ruling or private ruling in place or where the application is the subject of a tax audit or an objection against assessment.
In addition, there is a catch-all allowing the Commissioner not to rule where in his opinion the application is frivolous or vexatious or where insufficient information has been provided despite a request for more information.
Consequential amendments inse rting new sections 170BCA , 170BDA , 170BDB and 170BDC provide for priority in the inevitable conflicts between public, private and oral rulings. In addition, where a taxpayer receives an oral ruling and the income tax law applies in a different way which is less favourable to the taxpayer, the Commissioner will be bound by the oral ruling.
Schedule 4 introduces a wide compliance system by inserting Part 5-30 into Schedule 1 of the TAA 1953.
The system has 4 components:
- transaction reporting by purchasers ( new Division 405 )
- transaction reporting by suppliers ( new Division 410 )
- verification of suppliers' ABNs by purchasers ( new Division 415 ), and
- verification of suppliers' identities by purchasers ( new Divi sion 417 ).
Transaction reporting or verification of identity will be required where payments are:
- made or required to be made, received or entitled to be received, for supplies that are supplies specified in regulations, or
- where a supplier has quoted his or her ABN.
The extent of the reporting that will be required by the regulations is as yet unknown and no doubt will change over time. Obviously it is a compliance tool that was intended to provide identification checks etc in relation to high risk compliance transactions(8) but the legislation provides no such restriction or limitation. Any supply whatsoever may be identified as being one that is to become the subject of intensive reporting.
Schedule 6 puts into effect another proposal announced in the tax reform plan, the shorter period of review for taxpayers with simple tax affairs.
Please refer to point 4 of the Background section of this Bills Digest for information in relation to the current review and objection system.
In order to qualify for the shorter period of review, that is the Commissioner may amend the assessment of a SPOR taxpayer within 2 years after the day on which the tax is due and payable, the taxpayer must satisfy three tests set out in new section 6AD :
- the SPOR income test
- the SPOR deduction test, and
- the taxpayer must not be ineligible to be a SPOR taxpayer (for example the taxpayer must be an Australian resident).
These tes ts aim to restrict the SPOR to those taxpayers with simple tax affairs. A diagram explaining the application of the tests may be found at page 89 of the Explanatory Memorandum to the Bill.
If the Commissioner is of the opinion that the avoidance of tax is due to fraud or evasion, the assessment may be amended at any time. ( New paragraph 170(2)(a) )
Part 2 of Schedule 6 of the Bill also makes consequential amendments to reduce from 4 to 2 years the period within which SPOR taxpayers are generally able to lodge objections to their assessments or private binding rulings or to request amendments to their assessments or to seek private binding rulings. ( New paragraphs 14ZAN(f) , 14ZW(1)(aa) and sections 14ZW(1A) and 14ZW(1B) )
These amendments will apply from the 2000-2001 income year.
Schedule 7 inserts new Subdivision 30-BA into the ITAA97, which provides for the Commissioner to endorse as a deductible gift recipient an entity that is, or operates, a fund, authority or institution.
The relevance is that generally, only gifts made to a recipient that is endorsed (or specifically named in Division 30) will be deductible.
One of the main requirements for an entity to be endorsed under new Subdivision 30-BA is that they have an ABN. The ABN must appear on receipts issued by the entity. New Subdivision 30-CA specifies the administrative requirements relating to ABNs.
Where a deductible gift recipient has an ABN, the Australian Business Register must show that the entity is a deductible gift recipient for the specified period.
If an entity is specifically named in Division 30, the requirements for endorsement under Subdivision 30-BA do not apply.
The endorsement provisions apply to gifts made on or after 1 July 2000.
Schedule 8 introduces amendments to Division 50 of the ITAA97, which deals with entities whose ordinary and statutory income is exempt.
Specifically, it states that charities will not be exempt unless the entity is endorsed as exempt from income tax under new Subdivision 50-B .
The following entities must comply with the new provisions before 1 July 2000:
- charit able institutions
- funds established for public charitable purposes by will before 1 July 1997
- testamentary trusts treated as two trusts for purposes of the 1 July 1997 time limit, and
- funds established in Australia for public charitable purposes by will or instrument of trust.
Subdivision 50-B sets out the rules concerning the endorsement of charitable institutions and trust funds for charitable purposes as exempt from income tax.
Once again, one of the main requirements for endorsement is that the entity must have an ABN.
New section 50-52 , which states that a charity is not exempt from income tax unless endorsed as exempt under new Subdivision 50-B , has effect despite all other sections of Division 50. Thus if an entity is covered by any other item of Division 50 as being exempt, if it is a charity it must meet the special conditions in new Subdivision 50-B before it will be exempt from income tax.
Schedule 9 to the Bill amends the A New Tax System (Australian Business Number) Act 1999 to extend the concept of 'government entity'. An organisation, established by the Commonwealth, a State or a Territory for a public purpose or to carry on an enterprise that can be separately identified by reference to the nature of the activities carried on through the organisation can be allocated an ABN.
This enables, for example, a public school to be endorsed as a deductible gift recipient in relation to its school building fund.
BAS means a business activity statement.
The tax reform plan indicated that under the new arrangements all payment and remittance dates would be aligned with the new quarterly GST and PAYG payment dates, ie 21 October, 21 January, 21 April and 21 July. Accordingly, most businesses would be able to complete a single compliance statement once a quarter and make one quarterly payment.
Generally, entities will report tax debts and entitlements to credits in a BAS. The BAS will be an approved form for notification of income tax withholding, income tax instalments, fringe benefits tax instalments deferred company tax instalments and GST, wine equalisation tax and luxury car tax.
Schedule 12 amends the TAA 1953 to:
- require an entity to notify all BAS obligations for the same period in the same manner by ensuring that an entity that chooses or is required to lodge a GST return electronically must also electronically notify the Commissioner of all other BAS amounts electronically ( new section 288-5)
- require an entity that either exceeds the GST electronic lodgment threshold for a period (currently $20 million) or is a large withholder under the PAYG system, to pay all debts electronically ( new section 288-15 ), and
- enable an entity to be entitled to interest where a refund of a running balance account (RBA) surplus(9) that arises on or after 1 July 2000 (following allocation of a BAS amount to the RBA, a request for remission of penalty or a request for a refund after a voluntary payment) is not made within 14 days ( new Part IIIAA ).
Schedule 15 amends the A New Tax System (Goods and Services Tax) Act 1999 and the A New Tax System (Wine Equalisation Tax) Act 1999 , to remove the GST and wine equalisation tax refund rules to the extent that they are covered by the new PAYG generic rules in Division 3 of Part IIB of the TAA 1953. Division 3 was inserted by the A New Tax System (Pay As You Go) Act 1999 and deals with the treatment of payments, credits and RBA surpluses. For a summary of the changes please refer to the Bills Digest for the A New Tax System (Taxation Laws Amendment) Bill (No.1) 1999 at pages 14 and 15.
The savings tax offset is available for resident individuals (not companies, funds or trusts etc) in respect of savings and investment income and undeducted superannuation contributions.
The o ffset was originally intended to apply at the rate of 15% for 1999-2000 and subsequent income years, however, legislation(10) was introduced which terminated the offset with effect from and including, the 1999-2000 income year. Thus the offset will only be available in the 1989-99 year and will be equal to 7.5% of an individual's savings and investment income and superannuation contribution up to a maximum of $3,000. Accordingly the maximum offset that can be claimed is $225.00.
The legislation that terminated the offset purported to ensure that the savings rebate was not taken into account in calculating provisional tax in the 1999-2000 year. The provisions were not entirely effective and so Schedule 17 of the Bill inserts a technical amendment into section 221YCAA(2) (paragraph (m) of the definition of qualifying reductions) of the ITAA36 to rectify the deficiency.
While an oral rulings system seems sensible in its endeavour to promote certainty and relia bility of advice, it may be that practical considerations limit the achievement of its goals and usefulness.
Firstly, in restricting the oral rulings system to 'simple tax affairs' the provisions have necessarily incorporated tests in respect of income and deductions etc in order to clarify those affairs upon which a ruling must be provided. However, the mere existence and administration required in respect of the qualifying tests and the explanation and communication of them to taxpayers may unfortunately prove time consuming and frustrating for taxpayers who fall outside the contemplation of the rulings system.
The usefulness of the system may also be queried given the very narrow spectrum of applications it will cover. However, it would be problematic to suggest that the categories of taxpayer to which the rulings system applies should be expanded, and perhaps this itself speaks to the difficulties inherent in the proposed system.
Further, there may be a legitimate concern that the new measures may substantially impede the free flow of information that currently exists between ATO advisers, taxpayers and practitioners for fear of providing incorrect advice. Ultimately, the result may be that increased pressure will be placed on the private rulings system.
The payment, ABN and identification verification system is a compliance tool that was intended to provide verification of ABNs and identification checks etc in relation to high risk compliance transactions(11) but the Bill provides no such restriction or limitation. Any supply whatsoever may be identified by regulation, as being one that is to become the subject of intensive reporting.
Not only does the Bill go further than was intended, it has the potential to impose yet another compliance burden, in terms of time and money, on business.
The Government has seemingly recognised that business, and small business in particular, need respite from the overwhelming 'paper war' it must wage in order to comply with the myriad of regulations that are imposed upon business generally and most particularly by the revenue laws. Industry may argue that it is inconsistent with both the principle of simplification and the objective of freeing up business to pursue its own objectives, to introduce such a broad ranging compliance system that doesn't impose restriction upon the Commissioner to limit compliance activity to areas of proven high-risk.
1. Treasurer, Tax Reform: not a new tax a new tax system ; Tax Reform Plan, 13 August 1998, Commonwealth of Australia.
2. Pay As You Earn.
3. Prescribed Payments System.
4. Reportable Payments System.
5. Tax File Number.
6. Treasurer, Tax Reform: not a new tax a new tax system ; Tax Reform Plan, 13 August 1998, Commonwealth of Australia, pp 133 and 134.
7. Part 2-5 of the TAA 1953 contains the provisions relating to the PAYG withholding system of payments. Part VI of the ITAA36 deals with the collection and recovery of taxes and Division 2 of that Part concerns the collection by instalments of tax on pers ons other than companies.
8. Explanatory Memorandum to the A New Tax System (Tax Administration) Bill 1999, p 5.
9. RBAs were introduced, with effect from 1 July 1999, to account for and administer debts under PAYE, PPS, RPS and sales tax. The separate RBAs will continue only for account keeping purposes on unpaid amounts arising before 1 July 2000. An RBA surplus arises where the applied payments and credits are greater than the primary tax debt allocated to the RBA.
10. The A New Tax System (Income Tax Laws Amendment) Act 1999 .
11. Explanatory Memorandum to the A New Tax System (Tax Administration) Bill 1999, p 5.
9 September 1999
Bills Digest Service
Information and Research Services
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