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Wednesday, 9 November 1983
Page: 2465


Mr KEATING (Treasurer)(11.59) —I move:

That the Bill be now read a second time.

The purpose of this Bill is to make technical amendments to the bank account debits tax legislation to overcome doubts that have been expressed about the constitutional validity of the provisions which enable banks to recover from account holders the amount of tax payable in respect of taxable debits to accounts kept with banks. The bank account debits tax was part of the former Government's 1982-83 Budget. The tax applies, subject to exemptions specified in the legislation, to debits made to cheque accounts kept with banks.

The legislation was enacted in 1982 and the former Government announced before the election last March that 1 April 1983 would be proclaimed as the date of commencement of the tax. Following the election, the necessary formal proclamation was made, but we, as the new Government, announced that the operation of the tax, including the appropriateness or otherwise of exemptions, would be reviewed after approximately six months. That review is now in course and an announcement will be made after the review has been completed and the Government has taken decisions arising out of it.

Bank Account Debits Bill 1983

The present Bill is not intended to pre-empt any decisions which the Government may wish to make as a result of the review, but simply to effect technical changes that ensure the constitutional validity of the provisions under which the tax has in fact been collected since 1 April 1983. Although, as was indicated when the legislation was introduced last year, the banks are primarily responsible for payment of the tax, the legislation is designed so that the incidence of the tax effectively falls on bank customers rather than of the banks. That is intended to be achieved by giving the banks a statutory right to recover from their customers the tax payable on debits made to customers' accounts.

Questions have recently been raised about the constitutional validity of the provision that is expressed to give the banks that right of recovery. If that provision were held to be constitutionally invalid, so that banks would be unable to rely on statutory rights to recover the tax, the operative provisions of the legislation would fail. This would occur because a taxable debit made to a cheque account by law ceases to be a taxable debit if the tax imposed on it cannot be passed on by the bank to the account holder under the recovery provisions of the Administration Act. The Government has received advice that, if amendments were made to the legislation so that liability is imposed jointly and severally upon the bank and the account holder, the constitutional validity of the law would be put beyond doubt. Accordingly, this Bill will formally make the tax a joint and several liability of the bank and the customer concerned. The amendments proposed in this Bill do not introduce any new policy but simply give effect in a constitutionally valid manner to the scheme of the legislation as envisaged by the former Government.

The Commissioner of Taxation will continue to call upon the banks to pay the tax in respect of their several liability with the account holder and, having done so, the banks will be authorised by the law to recover the tax from the account holder. A bank, under contractual arrangements with its customers, will also be at liberty, as it is now, to recover the tax in advance of its actual payment to the Commissioner. It is proposed that the amendments have effect from the formal commencement of the bank account debits tax legislation, namely, 31 December 1982. All of the amendments, including those that are consequential on the main provisions, are explained in an explanatory memorandum being made available to honourable members and I think I need do no more at this stage than commend the Bill to the House.

Debate (on motion by Mr McVeigh) adjourned.