The Commissioner’s ‘Remedial Power’

Tax and Superannuation Laws Amendment (Measures No. 2) Bill 2016 – Schedule 1, will introduce a new Div 370 into the First Schedule to the Taxation Administration Act 1953 (TAA1), subdiv 370-A of which, will give the power the Commissioner to modify the tax law, by legislative instrument, where he thinks it reasonable having regard to the intended purpose of the law to be modified and the attendant compliance costs (and it’s budget impact is ‘negligible’). This is the Bill as introduced on 17.3.16.

[APH website for Bill] [Related Tax Month article]

Extract from EM – General Outline

Schedule 1 to this Bill establishes a Remedial Power for the Commissioner of Taxation (Commissioner) to allow for a more timely resolution of certain unforeseen or unintended outcomes in the taxation and superannuation laws.

The power allows the Commissioner to make, by disallowable legislative instrument, one or more modifications to the operation of a taxation law to ensure the law can be administered to achieve its intended purpose or object. The power can only be validly exercised where:

  • the modification is not inconsistent with the intended purpose or object of the provision;
  • the Commissioner considers the modification to be reasonable, having regard to both the intended purpose or object of the relevant provision and whether the costs of complying with the provision are disproportionate to achieving the intended purpose or object; and
  • the Department of the Treasury or the Department of Finance advises the Commissioner that any impact on the Commonwealth budget would be negligible.

Before exercising the power, the Commissioner must be satisfied that any appropriate and reasonably practicable consultation has been undertaken. This is consistent with section 17 of the Legislation Act 2003. This allows an opportunity to identify and consider all implications from the exercise of the power and to ensure that the exercise of the power is appropriate in the circumstances. This is consistent with the approach to amendments of primary legislation, which are subject to public consultation. In addition, the Commissioner will consult with a technical advisory group (which will include private sector experts) and the Board of Taxation prior to any exercise of the power.

The power is limited in its application and an entity (the first entity) must treat a modification made under the power as not applying to it and any other entity if the modification would produce a less favourable result for the first entity.

[APH website – EM in ‘pdf’]

Extract from the above Bill – Schedule 1 (relating to the ‘Remedial Power’)

370-5   Commissioner’s remedial power

(1)  The Commissioner may, by legislative instrument, determine a modification of the operation of a provision of a taxation law, if:

      (a)  the modification is not inconsistent with the intended purpose or object of the provision; and

      (b)  the Commissioner considers the modification to be reasonable, having regard to:

            (i)  the intended purpose or object of the provision; and

            (ii)  whether the cost of complying with the provision is disproportionate to that intended purpose or object; and

      (c)  any of the following persons advises the Commissioner that any impact of the modification on the Commonwealth budget would be negligible:

            (i)  the Secretary of the Department, or an APS employee in the Department who is authorised by the Secretary for the purposes of this paragraph;

            (ii)  the  * Finance Secretary, or an APS employee in the  * Finance Department who is authorised by the Finance Secretary for the purposes of this paragraph.

(2)  If the Commissioner determines a modification of the operation of a provision of a  * taxation law under subsection (1), the provision operates with the modification.

Scope of determination

(3)  A modification applies generally, unless the determination states that the modification only applies:

      (a)  to a specified class of entities; or

      (b)  in specified circumstances.

(4)  An entity (the  first entity ) must treat a modification as:

      (a)  not applying to the first entity; and

      (b)  not applying to any other entity;

if the modification would produce a less favourable result for the first entity.

(5)  If the Commissioner determines a modification of the operation of a provision of a * taxation law, the modification (as applied by subsection (2)) does not affect a right or liability under an order (including any judgment, conviction or sentence) made by a court before the commencement of the determination.

370-10   Intended purpose or object

In ascertaining the intended purpose or object of a provision of a * taxation law for the purposes of paragraph 370-5(1)(a) or subparagraph 370-5(1)(b)(i):

      (a)  consideration must be given to any documents that may be considered under subsection 15AB(2) of the  Acts Interpretation Act 1901 (or that subsection as applied by section 13 of the  Legislation Act 2003 ) in relation to the provision; and

Example: An explanatory memorandum, second reading speech or report of a parliamentary committee.

      (b)  consideration may be given to any other material (including material not forming part of the provision) that would assist in ascertaining the intended purpose or object of the provision; and

      (c)  primacy is not required to be given to the text of the provision.

Note:          Ascertaining an intended purpose or object for the purposes of paragraph 370-5(1)(a) or subparagraph 370-5(1)(b)(i) is not necessarily the same as ascertaining a purpose or object for the purposes of interpreting a provision of an Act.

370-15   Repeal of determinations

(1)  The Commissioner may, by legislative instrument, repeal a determination made under section 370-5.

(2)  A legislative instrument made under subsection (1) of this section may make an application, saving or transitional provision relating to the repeal.

(3)  Subsection 33(3) of the  Acts Interpretation Act 1901 does not apply in relation to the repeal, rescission or revocation of a determination made under section 370-5 in this Schedule (but does apply in relation to the amendment or variation of such a determination).

370-20   Commencement of determinations

A determination made under section 370-5, or a repeal made under section 370-15, must not commence before the first day it is no longer liable to be disallowed, or to be taken to have been disallowed, under section 42 of theLegislation Act 2003 .

 [APH website – Bill in ‘pdf’ format]
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