House of Representatives
Indirect Tax Laws Amendment (Assessment) Bill 2012
Indirect Tax Laws Amendment (Assessment) Act 2012
Second Reading Speech
This Bill establishes a system of self assessment for the administration of the indirect tax laws and makes other changes to the indirect tax laws which relate to several recommendations arising from the Board of Taxation's Review of the legal framework for the administration of the GST.
Schedule 1 amends the tax law to harmonise the self actuating system for GST, the luxury car tax, the wine equalisation tax and fuel tax credits with the income tax system of self assessment. In doing so, the amendments give effect to Recommendations 19 and 21 of the Board of Taxations review.
These amendments are consistent with the Government's continuing focus on simplifying the tax system, and implement improvements to the tax laws that have been contemplated by governments for nearly two decades.
The amendments in Schedule 1 create an assessment system for indirect taxessuch as GST, largely based on the income tax assessment provisions contained in Part IV of the Income Tax Assessment Act 1936 but written using the Tax Code conventions and drafted generically in a way that could be applied across all taxes. Established income tax self assessment principles have been directly adopted where appropriate, with some modifications to allow for the special features of indirect taxes.
The amendments not only formalise the administration of indirect tax laws, but also bring indirect taxes in line with income tax and other taxes that are already the
subject of self assessment or assessment by the Commissioner. This will decrease the need for advisors and administrators to have specialist knowledge of unique income tax or GST administration provisions and will result in a reduction in compliance and administrative costs in the longer term.
These generic provisions will also apply to the new mining tax, resulting in a reduction in the amount of legislation that would otherwise be in the tax system. In time, it is anticipated that these assessment provisions will apply to income tax, which will enable the repeal of the current income tax assessment provisions contained in the ITAA 1936 Act.
Under the new assessment regime, indirect tax liabilities and entitlements will depend on an assessment. In most cases, lodgment of a business activity statement, or BAS, will trigger a self assessment. The Commissioner will be taken to have made an assessment, and the BAS will be treated as a notice of assessment. The taxpayer is required to pay the assessed net amount (if it is positive) and is entitled to receive a refund if the assessed net amount is negative. The amount payable or refundable is worked out in accordance with the information on the BAS. Similar to income tax, the assessment of a taxpayer's assessable amount for a tax - period or fuel tax return period gives rise to a four-year period of review in which the Commissioner may amend an assessment, and the taxpayer may apply for an amendment. There is no limit to the number of times the assessment may be amended during the period of review, and the period of review may only be extended by Federal Court order or taxpayer consent. An amendment assessment during the period of review will also give rise to an additional four year period of review in relation to the part of the assessment that was amended.
These amendments should not affect the way in which taxpayers currently lodge their returns.
The majority of amendments in this Schedule commence on 1 July 2012. The amendments in Part 2 of Schedule 1, which remove provisions which will no longer be applicable following the introduction of the new assessment regime, commence on 1 January 2017.
Schedule 2 amends the GST law and fuel tax law to legislate the Commissioner's power to make a determination allowing a taxpayer to take into account, on his or her GST or fuel tax return for the current tax period or fuel tax return period, minor errors made in working out net amounts and net fuel amounts for preceding tax periods or fuel tax return periods.
Under the current law, the Commissioner may permit taxpayers to correct, on their current return, errors made in the immediately preceding return, in certain specified circumstances. In addition to this, the Commissioner has exercised his power of general administration to permit taxpayers to correct errors made in other earlier returns on a current return. As a consequence of the amendments in Schedule 1, this exercise of the Commissioner's power of general administration will no longer be possible without a legislative basis. The amendments will ensure that the taxpayer experience does not change.
These amendments commence on 1 July 2012.
Schedule 3 confirms that amounts of luxury car tax and wine equalisation tax are part of the net amount as worked out in the GST Act. The luxury car tax and wine equalisation tax Acts already provide that payments and refunds of amounts under these Acts are to be added to or subtracted from the net amount. Both taxpayers and the Commissioner have treated these amounts as part of the net amount until now. These amendments clarify the law beyond doubt by specifically identifying the definition of 'net amount' in the GST Act.
These amendments commence on 1 July 2012.
Schedule 4 makes some minor amendments to correct anomalies, remove redundant provisions and otherwise tidy up the drafting of the tax laws. This is part of the Governments ongoing commitment to the care and maintenance of the tax system.
The Schedule 4 amendments commence on the day this Bill receives Royal Assent. Full details of the measures in this Bill are contained in the explanatory memorandum.