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Wednesday, 9 February 2005
Page: 31

Senator ELLISON (Minister for Justice and Customs) (11:41 AM) —In relation to the opposition amendments on sheet 4505, can I say at the outset, and this is covered in the discussion paper, that the government is of the view that these amendments—and I think Senator Ludwig might have said this; I do not want to get what he said wrong—would not be wholly effective on their own. I might just point to the issue that I have in relation to that first part of the amendment, 121A(1). On the advice that I have, that deals with:

(1)   A rebuttable presumption that a person is deemed to be insolvent arises for the purposes of sections 120 and 121 where it is established that the person:

(a)   has made a transfer of property; and

(b)   had an outstanding tax return, or outstanding tax returns, at the time the transfer of property was made.

The scenario I would bring to the attention of the committee is one where a person makes a transfer to a third party—maybe a spouse—then lodges a tax return, all in due course, with appropriate timing, knowing that they are going bankrupt, and sits back and does not pay any further tax. You then have a situation where the taxpayer has no tax return and has not paid tax. On the wording of this amendment, it is the government’s view that the person in that case could avoid this section—that is, a person who has made the transfer, then puts in the tax return and then sits back and does nothing.

Senator Murray —Before bankruptcy.

Senator ELLISON —That is right—before bankruptcy. That is an issue that we have with this. I think that highlights the situation that we are talking about. With the discussion paper we have put out on these anti-avoidance provisions, we need to rinse through these proposals, if you like, and subject them to scrutiny to ensure that they will be comprehensive in their application and not just address one particular aspect.

Senator Murray mentions another aspect: where there is a reasonable explanation and the person can deal directly with the Taxation Office, and once you are insolvent that is the end of it. It cuts down that dialogue, if you like. That is a different aspect and something I think I need to take on notice. I will get back to Senator Murray as to the government’s view there and as to how it is canvassed in the discussion paper that we have put out. If I understand Senator Murray he is saying, ‘Let’s sort out the wheat from the chaff’—that is, if someone has an explanation and it is a reasonable one, don’t send them under, but if they do not have an explanation, or it is not a reasonable one, then of course they go bankrupt. If I understand what Senator Murray was saying you need to have a dialogue to avoid unnecessary bankruptcy, if I can put it that way.

In the first instance, the government does not see its way clear to support this amendment. It believes the better way to go is to engage in the discussion process. There will be an open forum in April on the discussion paper. That will enable these issues to be canvassed in greater detail, rather than looking at this amendment in the committee stage here and saying, ‘Let’s use this as a means of addressing it all.’ We think that there is an ability for someone to slip through the cracks here and avoid the intention of this amendment. Unless there is any further aspect, I cannot take it further than that, other than to say we will look at Senator Murray’s last point about the dialogue between the taxpayer and the tax office and how that situation changes once you have the spectre of bankruptcy. We are still getting those answers on the Bills Digest too.