Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon. John Howard, M.P.)Introductory note
This Bill will give effect, in relation to taxation debts, to the Government's intention, announced by the Minister for Business and Consumer Affairs on 13 September 1979, to abolish the prerogative right, and any statutory priority, of the Commonwealth to receive preferential payment in company insolvencies, other than in relation to debts for tax instalment deductions and withholding tax.
Under the present income tax law, the liquidator of a company that is being wound up is required to pay income tax in priority to all other unsecured debts. A liquidator and a receiver for debenture holders who has taken possession of assets of a company must also set aside some or all of the assets, to the value of an amount notified by the Commissioner of Taxation under each of the various taxation Acts being amended by this Bill, to provide for payment of the relevant tax or charge.
The proposed amendments will give statutory recognition to the decision to withdraw the priority of the Crown, with effect from 1 November 1979. The Minister for Finance, in terms of section 70C of the Audit Act 1901, gave his authority with effect from that date for Crown priority to be postponed so as to rank with unsecured ordinary creditors in cases of company insolvency.
The Bill also provides the opportunity to make a number of purely formal amendments to certain of the taxation Acts that are being amended.
An outline of the main features of the Bill follows.