Explanatory Memorandum(Circulated by authority of the Minister for Financial Services & Regulation the Hon Joe Hockey, MP)
Amendments to the Corporations Act 2001 consequential to income tax remittance provisions
6.1 Proposed items 219 to 222 of Schedule 1 to the Bill will amend provisions of the proposed Corporations Act, which refer to remittance provisions of the income tax law, to make necessary amendments consequential to the introduction of the Division 1AAA of Part VI of the Income Tax Assessment Act 1936 (ITAA) (enacted by Taxation Laws Amendment Act (No.3) 1998 ). The amendments insert references to sections 220AAE, 220AAM and 220AAR of the Income Tax Assessment Act 1936 (the Division 1AAA remittance provisions) into each of sections 443BA, 459E, 588F and 588FGA of the proposed Corporations Act.
6.2 The amendments commence to apply from the date of commencement of the Corporations Act.
6.3 The Taxation Laws Amendment Act (No. 3) 1998 introduced new rules for the remittance of amounts to the Commissioner of Taxation, collected from 1 July 1998 to 30 June 2000 under the pay as you earn (PAYE), prescribed payments system (PPS) and the reportable payments system (RPS) collection systems. The specific provisions are sections 220AAE, 220AAM and 220AAR of the ITAA. Four necessary consequential amendments to the Corporations Law were not made as part of the amendments.
6.4 The provisions of the Corporations Law that were not consequentially amended are subsection 443BA(1) (certain tax liabilities) and sections 459E (creditor may serve statutory demand on company), 588F (certain taxation liabilities to be taken as debts) and 588FGA (directors to indemnify Commissioner of Taxation if certain payments set aside). The Corporations Law is being repealed as part of the process for the introduction of the proposed Corporations Act. This means that the amendments may now only be made to the equivalent provisions of the proposed Corporations Act.
6.5 Subsection 443BA(1) of the proposed Corporations Act provides that an administrator of a company is liable to pay to the Commissioner of Taxation amounts that are payable under a remittance provisions. These remittance provisions are defined in subsection 443BA(2) to be certain withholding provisions of the ITAA. Subsection 443BA(2) of the Corporations Act 2001 is amended to also refer to the remittance provisions in Division 1AAA of Part VI of the ITAA, sections 220AAE, 220AAM and 220AAR (see proposed item 219).
6.6 The amendment to section 443BA will be prospective in order that no retrospective liability is imposed on administrators. It is expected that most administrators would have made the necessary payments to the Commissioner in discharging their duties as adminstrators. Situations where there may have been a failure by an administrator to meet obligations to pay amounts withheld from 1 July 1998 to 30 June 2000, prior to the commencement of the Corprations Act 2001 , are a separate issue that is not addressed by these amendments.
6.7 Section 459E of the proposed Corporations Act provides that a creditor may serve a statutory demand on a company relating to a debt. Section 588F of the proposed Corporations Act provides that a companys liability under a remittance provision to pay the Commissioner of Taxation an amount equal to a deduction from a payment made by the company, is a debt incurred when the deduction was made. Subsections 459E(5) and 588F(2) are clarifying provisions for the avoidance of doubt that list specific provisions to which the rules are to apply, including income tax remittance provisions. Subsections 459E(5) and 588F(2) of the Corporations Act 2001 are amended to also refer to the remittance provisions in Division 1AAA of Part VI of the ITAA (see proposed items 220 and 221).
6.8 As the lists of remittance provisions provided by sections 459E and 588F are not exclusive, the rules the application of which is clarified would apply in the absence of the references. The present amendments will reinstate the clarification of the law from the commencment of the proposed Corporations Act.
6.9 Section 588FGA of the proposed Corporations Act provides that the directors of a company are to indemnify the Commissioner if a Court makes an order under section 588F because of the payment of an amount under certain remittance provisions of the ITAA. Subsection 588FGA(1) of the proposed Corporations Act is amended to also refer to the remittance provisions in Division 1AAA of Part VI of the ITAA. The amendment to section 588FGA will be prospective only in order that no retrospective liability to indemnify the Commissioner is imposed on directors (see proposed item 222).