Explore the process of implementing Australian tax changes and discover how CCH iKnowConnect – Australian Tax Monitor can assist in staying informed about new tax regulations.
Bills
A Bill in Australia is a proposed law or amendment introduced into parliament. It becomes law (an Act) after securing a majority vote in both houses of parliament and receiving royal assent from the Governor-General.
A Bill may aim to amend various income tax legislations, such as the Income Tax Assessment Act 1936 and Income Tax Assessment Act 1997, which govern tax incidence, assessment, and collection. The Income Tax Rates 1986 and Income Tax Act 1986 jointly specify and impose the actual tax on taxable income. The administration of tax laws and powers of the Australian Taxation Office (ATO) are outlined in the Taxation Administration Act 1953 (TAA 1953).
Some Bills are released as exposure draft legislation by the Treasury for public feedback before formal introduction into parliament. While draft legislation lacks legal force, it often provides insights into how a specific tax measure will be legislated. The government may also announce its intention to introduce a Bill amending tax laws through media releases or Budget announcements.
In 2021, the previous government disclosed over 40 tax measures, with 28 introduced as Bills amending tax legislation in parliament.
Legislative instruments
A legislative instrument is a form of delegated legislation created under the authority of an Act. Unlike Bills, these instruments do not undergo parliamentary debate and approval. For instance, the Commissioner is authorized to establish withholding schedules for the PAYG system through a legislative instrument as outlined in section 15-25 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953).
In most cases, creators of legislative instruments must notify their intent and engage in consultations with affected parties. Draft legislative instruments proposing tax changes are typically published on the ATO legal database or made available for consultation by Treasury.
The Commissioner also possesses a statutory remedial power to address unintended outcomes in tax laws under Subdivision 370-A of Schedule 1 to the TAA 1953. This discretionary authority enables the Commissioner to create a legislative instrument modifying the law for all entities or, as specified in the instrument, for a particular class or under specified circumstances. Examples of instances where the Commissioner’s remedial power has been considered, though not applied, can be found on the ATO website.
Common law
Common law refers to legal principles that have evolved from judicial decisions. For instance, in the Taxation Administration Act 1953 (TAA 1953), the term “employee” lacks a specific definition, and its interpretation for PAYG withholding purposes relies on its ordinary meaning. Determining whether an individual qualifies as an employee involves factual considerations based on key principles established in relevant case law.
Occasionally, a court decision may overturn a previously understood interpretation, potentially deviating from the legislative policy intent. In such cases, the government may consider amending legislation to provide clarity or override specific case law. For example, the previous government expressed its intention to consult on reinstating the definition of “commercial parking station” for fringe benefits tax purposes in response to decisions from the Qantas Federal Court and AAT.
Similarly, legislative amendments may be introduced to address unintended negative tax consequences resulting from a court decision. This was evident in the government’s response to the Full Federal Court decision in Douglas, leading to adjustments in the taxation of certain military invalidity benefits. Legislative instruments were crafted to mitigate adverse tax implications stemming from the decision. Additionally, the government announced plans to maintain favorable tax outcomes for invalidity pension recipients affected by the decision through the introduction of a new non-refundable tax offset.
In response to significant tax decisions, the Australian Taxation Office (ATO) may issue decision impact statements. These statements convey the ATO’s perspective on the implications arising from a specific decision, impacting current rulings, determinations, or practice statements. However, it’s crucial to note that decision impact statements do not possess the force of law.
ATO guidance
The Australian Taxation Office (ATO) issues various forms of public advice and guidance, including taxation rulings and determinations. This guidance presents the Commissioner’s interpretation of tax laws and, in certain cases, carries legal binding authority.
When a Bill proposing tax changes is introduced in parliament, the ATO may release a draft law companion ruling for public input. These rulings outline the Commissioner’s perspective on how the amendments or new laws proposed by the Bill will be applied upon enactment. An example is Law Companion Ruling LCR 2021/3, addressing provisions for temporary full expensing of depreciating assets introduced by the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Act 2020 and the Treasury Laws Amendment (2020 Measures No 6) Act 2020. Additional details on the public rulings system can be found in Taxation Ruling TR 2006/10.
While ATO guidance does not constitute tax law, it serves the purpose of interpreting and enforcing tax laws. The ATO updates its guidance to align with relevant tax decisions, acknowledging the judiciary’s role as the ultimate interpreters of laws enacted by parliament. In response to decisions such as those in Qantas on car parking benefits, the ATO issued Taxation Ruling TR 2021/2 to replace its outdated stance expressed in TR 96/26.
Similarly, the ATO adjusts its guidance to accommodate legislative amendments, either by replacing or issuing addenda to update existing rulings. For instance, an addendum to Superannuation Guarantee Determination SGD 2006/2 was released to reflect amendments made by the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No 1) Act 2019 concerning the determination of an employer’s minimum superannuation guarantee contributions.
Keeping track of tax law changes
The foundation of the Australian tax system lies in legislation that addresses and imposes income tax. CCH iKnowConnect – Australian Tax Monitor offers a valuable tool for monitoring both announced and enacted tax legislation. Users can efficiently navigate the online database, utilizing keywords, topics, or specific criteria to verify whether a particular announcement has been enacted into law, with or without amendments, or if it has been abandoned. This platform provides an effective means for staying updated on the evolving landscape of tax legislation in Australia.
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