House of Representatives

Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014

Excess Exploration Credit Tax Bill 2014

Excess Exploration Credit Tax Act 2015

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)

Chapter 2 - Transferring the tax investigation function to the Inspector-General of Taxation

Outline of chapter

2.1 Schedule 2 to this Bill amends the Inspector-General of Taxation Act 2003 (IGT Act) by transferring the tax investigative and complaint handling function of the Commonwealth Ombudsman (Ombudsman) to the Inspector-General of Taxation (Inspector-General) and merging that function with the Inspector-General's existing function of conducting systemic reviews. This provides taxpayers with a specialised complaint handling process for taxation matters and aligns the systemic review role of the Inspector-General with the correlative powers and functions of the Ombudsman.

2.2 Unless otherwise noted, all legislative references in this chapter are to the IGT Act.

Context of amendments

The current regulatory regime of the Inspector-General of Taxation

2.3 The IGT Act commenced on 16 April 2003. It allows the Governor-General to appoint an independent Inspector-General to conduct systemic reviews into the administration of tax laws and to provide recommendations to Government.

2.4 The Inspector-General may review systems which are established by the Commissioner of Taxation (Commissioner) in relation to the administration of the tax laws and systems established by tax laws that deal with administrative matters (known as 'systemic reviews'). The Inspector-General reports findings and recommendations of a review to the Government. The IGT Act does not provide for the investigation of individual taxpayer matters or handling of complaints.

2.5 The Ombudsman Act 1976 (Ombudsman Act) establishes the Ombudsman. The essential function of the Ombudsman is to investigate complaints made by persons aggrieved by administrative actions of Commonwealth agency officials. The Ombudsman has powers to question officials, provide protection to those providing information, and to inspect documents and premises. The Ombudsman may make recommendations to the Department or agency concerned, and provide a report to the responsible Minister.

2.6 The Ombudsman has jurisdiction to investigate any 'matter of administration' of a Department or a prescribed authority, including the administration of a taxation law by the Commissioner. The Ombudsman may do this of his or her own motion or in response to an individual complaint.

2.7 Issues surrounding taxation laws can be complex and specialised. This complexity is compounded as the administration of the taxation laws is scrutinised by both the Inspector-General and the Ombudsman. By concentrating expertise about taxation administration issues, taxpayers are provided with a dedicated body to investigate and handle complaints about all taxation matters.

2.8 The Inspector-General is well-suited to have the sole jurisdiction to investigate individual complaints about the administration of taxation law matters in addition to the current systemic function. Accordingly, the Inspector-General will be given all of the powers and functions necessary to comprehensively investigate and handle complaints relating to the administration of taxation laws (of both a systemic and individual nature).

Summary of new law

2.9 Schedule 2 broadens the Inspector-General's function so that he or she may investigate all individual complaints of maladministration of taxation law matters. This is achieved by transferring the investigative and complaint handling powers and functions that relate to taxation law matters from the Ombudsman to the Inspector-General.

2.10 Schedule 2 to this Bill also makes consequential amendments to the Income Tax Assessment Act 1936 (ITAA 1936), the Taxation Administration Act 1953 (TAA 1953) and the Tax Agent Services Act 2009 (TASA 2009).

Comparison of key features of new law and current law

New law Current law
The Inspector-General may investigate systems established by the Australian Taxation Office (ATO) to administer taxation laws and systems established by taxation laws to the extent that they deal with administrative matters. The Inspector-General may review systems established by the ATO to administer taxation laws and systems established by taxation laws that deal with administrative matters.
The Inspector-General has a number of new investigative powers. The Inspector-General may investigate individual complaints and the administration of taxation law matters. This is achieved through transferring the investigative and complaint handling powers and functions of the Ombudsman to the Inspector-General so far as they relate to taxation law matters. There are no equivalent powers in the IGT Act.
The Inspector-General may request the Tax File Number from a person making a complaint to facilitate or assist in the resolution of their matter with the ATO. There are no equivalent powers in the IGT Act.

Detailed explanation of new law

The current regulatory regime of the Inspector-General of Taxation

2.11 The Inspector-General's jurisdiction is set out in section 7. The Inspector-General may review systems which are established by the Commissioner in relation to the administration of the tax laws and systems established by tax laws that deal with administrative matters. Tax laws are defined as an Act, or part of an Act, which is administered by the Commissioner. The Inspector-General's jurisdiction does not include separate bodies which also form part of the taxation system, such as the Tax Practitioners Board and the regime it administers under the TASA 2009.

2.12 Subsection 8(2) allows the Minister to direct the Inspector-General, in writing, to conduct a review. For example, the Minister has previously directed the Inspector-General to undertake the review into the ATO's Change Program and the review into delayed or changed ATO views on significant issues. The Inspector-General must incorporate the review in his or her work program, which the Inspector-General may set under section 9. The Inspector-General has complete administrative flexibility in setting his or her work program. However, the Inspector-General must consult with the Ombudsman and the Commonwealth Auditor-General at least once each year in setting his or her work program.

2.13 After completing a review, the Inspector-General must make a written report to the Minister under section 10 setting out the subject and outcome of the review and any recommendations that the Inspector-General thinks appropriate concerning how the system reviewed could be improved. The Minister must then cause a copy of each report to be tabled in each House of Parliament within 25 sitting days, under section 11. This happens as a matter of course, irrespective of whether any action is taken by the Commissioner.

2.14 A person who gives evidence to the Inspector-General in response to a request or requirement is immune from criminal and civil liability under section 17.

The current regulatory regime of the Commonwealth Ombudsman

2.15 The Ombudsman may examine any 'matter of administration' by a Department or a prescribed authority. The Ombudsman may do this of his or her own motion or in response to a complaint.

2.16 A 'matter of administration' is not defined to ensure that the Ombudsman is not inadvertently prevented from investigating a matter. There are several express limits on this jurisdiction, which are outlined in subsection 5(2) of the Ombudsman Act, including action taken by a Minister, a Judge, or a Department or prescribed authority to promote, terminate or change the remuneration of individual employees. Other than these limitations, there is no other constraint on the definition.

2.17 In areas where another body has a comparable but more specialised function to the Ombudsman, the Ombudsman Act provides specific mechanisms for the Ombudsman to transfer relevant matters to that specialist body.

2.18 Under subsection 15(2) of the Ombudsman Act, the Ombudsman must make a copy of the report available to either the prescribed authority or Department investigated and the Minister concerned. The Ombudsman may request from the Department that it gives the Ombudsman, within a specified timeframe, a list of any actions the Department is intending to take in response to any of the matters or recommendations in the Ombudsman's report.

2.19 Under section 16 of the Ombudsman Act, where the Ombudsman is of the opinion that reasonable action has not been taken by the Department or prescribed authority, the Ombudsman may inform the Prime Minister in writing. Where the Ombudsman has done this, he or she may also furnish a copy of the report to the Speaker of the House of Representatives, and the President of the Senate. This report must include any comments which the prescribed authority or Department has furnished under subsection 15(5) of the Ombudsman Act concerning the report.

2.20 A person who is compelled to give evidence by the Ombudsman is immune from criminal and civil liability. Furthermore, an individual who provides information to the Ombudsman voluntarily or in relation to a request from the Ombudsman is also immune from criminal and civil liability.

Changing the regulatory regime of the Inspector-General of Taxation

2.21 These amendments wholly transfer all of the investigative and complaint handling powers and functions so far as they relate to matters of administration under a taxation law by a tax official from the Ombudsman to the Inspector-General. The amendments merge those powers and functions with the Inspector-General's existing powers and functions of conducting systemic reviews. Accordingly, some of the provisions in the IGT Act are repealed and substituted. [Schedule 2, item 11]

2.22 The transfer of the Ombudsman function relating to matters of administration of taxation laws to the Inspector-General also includes a range of changes to related machinery provisions. The amendments redefine a number of terms in the IGT Act to make them consistent with the Ombudsman Act. For example, under section 38, the word 'review' is replaced with the expression 'an investigation'.

2.23 The amendments are designed to ensure the IGT Act follows the Ombudsman Act as closely as possible while still ensuring it is appropriate for the purposes of the Inspector-General's functions. However, complete consistency is not always possible. The Ombudsman Act is focused on investigating complaints, so some provisions need to be adapted to appropriately provide for the Inspector-General's systemic functions. Furthermore, the power for the Minister to make a direction to the Inspector-General is retained. [Schedule 2, items 5, 7 and 17]

The functions of the Inspector-General of Taxation

2.24 The Inspector-General will now have four key investigative functions relating to a matter of administration under a taxation law that reflect the existing functions of the Inspector-General and Ombudsman. [Schedule 2, item 11, section 7t]

2.25 The Inspector-General retains his or her systemic powers to investigate systems established by the ATO and taxation laws dealing with administrative matters, and these powers are extended to include the Tax Practitioners Board. [Schedule 2, item 11, paragraphs 7(1)(c) and (d)]

2.26 The Inspector-General may investigate action taken by a tax official affecting entities that relates to administrative matters under a taxation law when the entity makes a complaint. This has a broad application so that the Inspector-General may also investigate action relating to administrative matters under a taxation law. For example, the Inspector-General may investigate the subject of the taxpayer's complaint as well as related action taken by the ATO relating to taxpayer's complaint. Of note, subsection 3(3) of the Ombudsman Act provides that 'action' also includes 'inaction'. [Schedule 2, item 11, paragraph 7(1)(a)]

Example 2.1 Olivia, a taxpayer, alleges in a complaint to the Inspector-General that the ATO has taken too long to process her income tax return and that the ATO failed to provide a satisfactory answer to her queries when she wrote to them about the matter.The Inspector-General may decide to investigate Olivia's complaint that the ATO processed her income tax return late and that it failed to take appropriate actions.

Example 2.2 Martin is a taxpayer who makes a complaint to the Inspector-General that the ATO has incorrectly applied a class ruling to his circumstances.The Inspector-General investigates and recommends that the ATO reverse its decision. Martin then applies to the ATO under the Compensation for Detriment caused by Defective Administration Scheme for compensation for losses suffered as a result of the incorrect administration.Should Martin have a complaint about the ATO's response to his claim for compensation, then the Inspector-General may also investigate this matter as it is action that relates to a matter of administration under a taxation law (that is, the ATO's application of the class ruling to his circumstances).

2.27 The Inspector-General also has the ability to investigate other actions taken by a tax official relating to administrative matters under a taxation law by his or her own motion, such as when the action is not subject to a specific complaint. This ensures that the Inspector-General has the flexibility to investigate a wide range of administrative actions. [Schedule 2, item 11, paragraph 7(1)(b)]

2.28 The Inspector-General may also investigate action that is not in respect of tax administration action when it is transferred to him or her by the Ombudsman upon deciding that that aspect of the complaint could be more appropriately or effectively dealt with by the Inspector-General. Similarly, if the Inspector-General receives a complaint with parts related to tax administration action and parts related to other action within the Ombudsman's jurisdiction, he or she may investigate the parts of a complaint not related to tax administration action if the Ombudsman advises that the Inspector-General does not need to transfer the matter. Such complaints are taken to be made under the IGT Act. [Schedule 2, item 11, paragraph 7(1)(e) and section 10 of the IGT Act and item 35, paragraph 6D(4)(b) and subsection 6D(6) of the Ombudsman Act]

2.29 However, the Inspector-General must not investigate taxation laws imposing or creating an obligation to pay an amount or dealing with the quantification of a tax liability. This is consistent with existing subsection 7(2) of the IGT Act. [Schedule 2, item 11, subsection 7(2)]

Example 2.3 Melissa, a taxpayer, lodges a complaint with the Inspector-General, alleging that the ATO has processed her income tax return incorrectly and that she does not owe as much as is stated in her Notice of Assessment.The Inspector-General may investigate how the ATO has processed Melissa's income tax return but not the quantification of her tax liability.

2.30 The Inspector-General may report on the abovementioned investigations. Investigations into a complaint or actions affecting a particular taxpayer or tax practitioner are maintained confidentially and reported accordingly. Reports recommending changes to the taxation laws must be provided to the Minister and publicly released. [Schedule 2, item 11, subsection 7(1), sections 15 and 18]

Objects clause and definitions

2.31 Reflecting the expanded role of the Inspector-General, the objects clause of the IGT Act is amended to provide for the Inspector-General's new role of investigating and handling complaints of all taxpayers, tax practitioners and other entities so far as they relate to the administration of taxation laws. [Schedule 2, item 1]

2.32 The type of applicant that may raise issues is defined broadly to ensure that all individuals or other persons who may be affected or otherwise have an interest in improving the administration of taxation laws have access to the Inspector-General's processes. The Inspector-General's systemic powers outlined in existing paragraph 3(c) of the IGT Act are altered so that they are expressed consistently with the correlative powers in the Ombudsman Act. [Schedule 2, items 1 and 3]

2.33 A number of terms in the IGT Act are also redefined to reflect the enhanced role of the Inspector-General. For example, the phrase 'tax laws' is substituted with 'taxation laws' to reflect the broadening of the Inspector-General's exclusive jurisdiction in relation to matters of taxation. The phrase 'tax administration action' refers to actions relating to administrative matters under a taxation law that has been taken by a tax official that is either the subject of a complaint or by the Inspector-General's own motion. An 'investigation into a complaint' or 'investigation into a systemic issue' refers to an investigation outlines in the IGT Act. The 'Commissioner of Taxation' means the Commissioner. 'Entity' is defined to have the same meaning as under the Income Tax Assessment Act 1997 (ITAA 1997). Relatedly, in Part 4 of the IGT Act, which relates to information management, 'an entity' also replaces the phrase 'a taxpayer' in existing subsection 37(1) of the IGT Act, which relates to protected information and documents. [Schedule 2, items 2, 4, 6, 7, 9, 12, 13, 14 and 18]

2.34 A 'taxation law' is an existing concept which refers to those Acts (or part of Acts) administered by the Commissioner, as defined in section 995-1 of the ITAA 1997. This wider definition includes all laws (including parts of laws) administered by the Commissioner but also brings the Tax Practitioners Board and the regime it administers under the TASA 2009 into the ambit of the IGT Act. [Schedule 2, items 1, 2, 6, 7 and 9]

2.35 'Tax official' is similar to the current definition but also includes the Chair of the Tax Practitioners Board and members of the Tax Practitioners Board (as provided in section 90-1 of the TASA 2009) as well as related personnel (as provided in section 60-80 of the TASA 2009). It also includes 'ATO official' which defines the Commissioner and related personnel. [Schedule 2, items 4, 8 and 10]

Conducting investigations

2.36 The Inspector-General may conduct an investigation into administrative matters under taxation laws of his or her own initiative. [Schedule 2, item 11, subsection 8(1)]

Example 2.4 The Inspector-General becomes aware of that Sheridan, an ATO official, is improperly processing taxpayers' tax returns.None of the affected taxpayers (or a tax practitioner on their behalf) has lodged a complaint. However, the Inspector-General may decide to investigate Sheridan's actions.

2.37 If so directed by the Minister, the Inspector-General is required to conduct an investigation. This is consistent with existing subsection 8(2) of the IGT Act. In keeping with the existing IGT Act, the Minister can only direct the Inspector-General to investigate systemic issues, namely systems established by the ATO, the Tax Practitioners Board or taxation laws to the extent they deal with administrative matters. The Minister cannot direct the Inspector-General to investigate matters affecting entities. The Inspector-General may decide when to complete an investigation although it would be prudent for the Inspector-General and the Minister to discuss the most efficient way to handle the timing of the investigation. In complying with a direction from the Minister, the Inspector-General should have regard to his or her obligations under the Public Governance, Performance and Accountability Act 2013. [Schedule 2, item 11, subsection 8(2)]

2.38 Similarly, to reflect existing subsection 8(3) of the IGT Act, the Inspector-General may be asked to conduct an investigation into systemic issues by the Minister, Commissioner of Taxation, or by a resolution of either House of Parliament or a Committee of Parliament. Consistent with broader amendments, the Tax Practitioners Board may also request an investigation. However, as this is a request, the Inspector-General has the discretion of deciding whether or not to investigate the matter. [Schedule 2, item 11, subsection 8(3)]

Discretion not to investigate certain complaints

2.39 The Inspector-General's discretion whether to investigate certain complaints is based on subsections 6(1) and (3) of the Ombudsman Act. In addition, under the new provisions the Inspector-General also has the discretion not to investigate a complaint if the complainant has not yet raised the complaint with the Commissioner or the Tax Practitioners Board as the case may be. This additional provision reflects the taxation specific context in which the Inspector-General operates, as compared with the more general role of the Ombudsman. [Schedule 2, item 11, section 9]

Example 2.5 Julian, a taxpayer, alleges in a complaint to the Inspector-General that the ATO has taken too long to process his income tax return.The Inspector-General, upon starting to investigate the complaint, discovers that Julian has not yet raised the complaint with the ATO. The Inspector-General may decide not to continue investigating the matter.

Transferring complaints to the Commonwealth Ombudsman

2.40 Generally, the Inspector-General must transfer a matter to the Ombudsman if he or she receives a complaint that falls entirely within the jurisdiction of the Ombudsman. However, the Inspector-General may instead transfer such a matter to a more appropriate body in accordance with the existing transfer mechanisms in the Ombudsman Act such as transferring a matter to the Australian Public Service Commissioner under subsections 6(9) and 6(10) of the Ombudsman Act. [Schedule 2, item 11, paragraph 10(1)(a) and subsection 10(5)]

2.41 Unless the Ombudsman otherwise advises, the Inspector-General must also transfer part of a complaint that is not about tax administration action to the Ombudsman. In determining this, the Inspector-General will need to consult the Ombudsman in relation to the complaint. In some cases, the Ombudsman may consider it more efficient for the Inspector-General to investigate the matter. [Schedule 2, item 11, paragraph 10(1)(b)]

2.42 The Inspector-General may consult the Ombudsman on either the complaint itself or the kinds of complaints that may be more appropriately or effectively dealt with by the Ombudsman. This provides administrative efficiencies by not limiting the Inspector-General and the Ombudsman to consulting on a case-by-case basis only. However, the Inspector-General and the Ombudsman must consult in good faith.

2.43 In addition, the Inspector-General may transfer a complaint that partially relates to a matter of tax administration action to the Ombudsman if he or she is satisfied that the whole complaint could be more appropriately or effectively dealt with by the Ombudsman. Again, the Inspector-General must consult the Ombudsman in relation to the complaint or complaints of that kind. The Inspector-General must use his or her best judgement to determine if the complaint would be more appropriately dealt with by the Ombudsman. [Schedule 2, item 11, subsection 10(2)]

2.44 These arrangements provide the Inspector-General with administrative flexibility to determine how to best manage the complaints he or she receives.

2.45 If the Inspector-General transfers the complaint to the Ombudsman, any information in the Inspector-General's control or possession relevant to the complaint must also be transferred to the Ombudsman. The Inspector-General is also required to notify the complainant in writing that the complaint has been transferred to the Ombudsman. The effect of a transfer means that the complaint is taken to be made to the Ombudsman under the Ombudsman Act. [Schedule 2, item 11, subsections 10(3) and (4)]

2.46 Of note, the IGT Act and Ombudsman Act both provide for the protection of confidential information, including maintaining legal professional privilege.

Investigative and related powers

2.47 The Inspector-General will, in effect, have equivalent investigative powers to the Ombudsman. Incorporating the relevant investigative powers in the Ombudsman Act by reference and modification in the IGT Act ensures legislative consistency so that any changes to the Ombudsman's powers apply automatically to the Inspector-General. [Schedule 2, item 11, section 15]

2.48 Parts IIA, IIB and IIC of the Ombudsman Act provide a precedent for this design approach.

2.49 The specific provisions in the Ombudsman Act that will apply in the IGT Act are:

·
subsection 3(1), to the extent that it provides for the definitions of Agency Head, authorized person, Commonwealth service provider, disclosable conduct and law enforcement agency, subsections 3(2), (6) and (7) - interpretation;
·
section 3BA - Commonwealth service providers;
·
section 3C - application of the Act;
·
section 3D - application of the Criminal Code;
·
subsections 5(2), (3) and (3A) - relating to functions of the Ombudsman;
·
section 5A - public interest disclosure functions of the Ombudsman;
·
subsections 6(5), (9), (10), (11) and (16) to (19) - relating to a discretion not to investigate certain complaints;
·
section 6C - transfer of complaints to the Information Commissioner;
·
section 7 - complaints;
·
section7A - preliminary inquiries;
·
section 8 except for paragraphs (7A)(b) and 10(ba) to (10)(d) and subsections (8), (9), (10B), (10C) and (12) - relating to investigations;
·
section 9 - power to obtain information and documents;
·
section 10 - unreasonable delay in exercising power;
·
section 10A - Ombudsman may refer questions to the Administrative Appeals Tribunal;
·
section 11 - Ombudsman may recommend that the principal officer refer questions to the Administrative Appeals Tribunal (AAT);
·
section 11A - powers of the Federal Court of Australia;
·
section 12 - complainant and Department to be informed;
·
section 13 - power to examine witnesses;
·
section 14 - power to enter premises;
·
section 15 - reports by Ombudsman;
·
section 16 except for subsections 16(4) and (5) - reports where appropriate action not taken on Ombudsman's report;
·
section 17 - special reports to Parliament;
·
section 18 - Ombudsman may have further discussion with principal officer;
·
section 19 - reports to Parliament;
·
section 35AA - disclosure of information and documents to Integrity Commissioner;
·
section 35A - disclosure of information by Ombudsman;
·
section 35B - disclosure of Australian Crime Commission (ACC) information;
·
section 35C - disclosure of Australian Commission for Law Enforcement Integrity (ACLEI) information;
·
section 36 - offences; and
·
section 37 - protection from civil actions.

[Schedule 2, item 11, paragraphs 15(a) to (j)]

2.50 The specific modifications to these provisions in their application to the IGT Act are:

·
a reference to 'the Ombudsman' applies as a reference to 'the Inspector-General';
·
a reference to 'an investigation under the Ombudsman Act' applies as a reference to 'an investigation under this Act [the IGT Act]';
·
a reference to 'a complaint under the Ombudsman Act 1976' applies as a reference to 'a complaint under this Act [the IGT Act]';
·
a reference to 'a Department', 'a prescribed authority' or a 'Department or a prescribed authority' applies as a reference to either 'the Commissioner', 'the Australian Taxation Office' or 'the Tax Practitioners Board' as the context requires;
·
a reference to 'another person who is not a Department or prescribed authority' applies as a reference to either 'another person who is not a Department of State', 'an authority of the Commonwealth, 'or the Commonwealth' as the context requires;
·
a reference to either a 'principal officer of a Department or prescribed authority' or the 'Secretary of a Department' applies as a reference to either the 'Commissioner' or the 'Chair of the Tax Practitioners Board' as the context requires;
·
a reference to an officer of a Department or prescribed authority other than a principal officer applies as a reference to 'tax official';
·
a reference to 'an officer within the meaning of section 35 of the Ombudsman Act 1976' applies as a reference to either the Inspector-General' or 'a member of the Inspector-General's staff' as the context requires;
·
a reference to 'paragraph 5(1)(b) of the Ombudsman Act 1976' applies as a reference to 'paragraph 7(1)(b) of this Act [the IGT Act]';
·
a reference to an 'enactment' applies as either a reference to an 'Act' or an 'instrument made under an Act' as the context requires;
·
a reference to 'in the Ombudsman Act 1976' applies as a reference to either 'in the Ombudsman Act 1976' or 'in this Act [the IGT Act]';
·
a reference to 'the Minister administering the Ombudsman Act 1976', 'the responsible Minister' or 'the Prime Minister' applies as a reference to 'the Minister administering this Act [the IGT Act]';
·
a reference to either 'a report under Division 2 of Part II of the Ombudsman Act 1976' or to 'a report under that Act [the Ombudsman Act]' also applies as a reference to a 'report under 'that Act' or under 'this Act [the IGT Act]' as the context requires and
·
with the exception of subsection 35(5), a reference to 'section 35 [of the Ombudsman Act]' applies as a reference to 'section 37 of this Act [the IGT Act]'.

[Schedule 2, item 11, table items 1 to 14 in section 15 and section 16]

2.51 The effect of this reference and modification approach, for example, is that references to the 'Ombudsman' in the Ombudsman Act apply as references to the 'Inspector-General' when read into the IGT Act. Similarly, references to a report in the Ombudsman Act may apply as a reference to a report under either the Ombudsman Act or under the IGT Act. [Schedule 2, item 11, table items 1 and 13 in section 15]

2.52 Whilst most of the references outlined in the table items apply to provisions in the Ombudsman Act without further modification or interpretation, situations may arise where the references need to be interpreted and applied in a more flexible manner as the references are described in substance rather than form. For example, under table item 2, a reference to 'an investigation under the Ombudsman Act 1976' would also apply to the phrase 'an investigation under this Act' contained in section 8 of the Ombudsman Act. [Schedule 2, item 11, table item 2 in section 15]

2.53 Similarly, references to a 'Department' or 'prescribed authority' in the Ombudsman Act apply in the IGT Act as a reference to either 'the Commissioner', 'the Australian Taxation Office' or 'the Tax Practitioners Board'. [Schedule 2, item 11, table item 4 in section 15 and section 16]

2.54 By applying section 15, section 3C of the Ombudsman Act provides that the IGT Act applies in and outside of Australia, extending to every external Territory and section 3D of the Ombudsman Act applies Chapter 2 of the Criminal Code to all offences against the IGT Act. [Schedule 2, item 11, paragraph 15(c)]

2.55 Similarly, subsections 5(2), (3) and (3A) of the Ombudsman Act outline certain actions that the Inspector-General cannot investigate, such as action taken by a Minister or Judge. [Schedule 2, item 11, paragraph 15(d)]

2.56 In addition:

·
Section 10 of the Ombudsman Act, which specifies that when a complaint is made that an entity has delayed unreasonably in deciding whether to do an act or thing under their power, the Ombudsman may issue a certificate concluding that there has been an unreasonable delay. This is altered in the IGT Act by items 1 to 3.
·
Section 10A of the Ombudsman Act, which provides that the Ombudsman may refer questions to the AAT, is altered by items 1 to 3.
·
Section 11 of the Ombudsman Act, which specifies that Ombudsman may recommend that the principal officer refer questions to the AAT, is altered by items 1, 4 and 5.
·
Section 11A of the Ombudsman Act, which specifies that Ombudsman may make an application to the Federal Court of Australia for a determination of a question relating to the exercise of power, is altered by items 1, 4 and 5.
·
Section 12 of the Ombudsman Act specifies the action the Ombudsman must take in informing complainants and Departments about investigations and is modified by items 1, 2 and 4.
·
The power to examine witnesses under section 13 of the Ombudsman Act is altered by item 1.
·
Entering premises under section 14 of the Ombudsman Act, is modified by items 1, 2 and 4. This retains the Inspector-General's analogous powers in existing section 21 of the IGT Act, which allows access to ATO premises for the purpose of exercising its investigation powers.

[Schedule 2, item 11, table items 1 to 5 of section 15]

2.57 Sections 35AA to 35C of the Ombudsman Act provides for when the Ombudsman may make disclosures, including to the Integrity Commissioner, the public and disclosures of ACC information and ACLEI information. Section 36 outlines offences under the Ombudsman Act, such as failure or refusal to attend before the Ombudsman or furnishing information. The penalty related to a refusal or failure to appear before or furnish information for an investigation into a systemic issue applies as if it were imprisonment for 6 months. [Schedule 2, item 11, subsection 17(4) and paragraph 15(j)]

2.58 Significantly, section 37 of the Ombudsman Act provides an individual who gives information in 'good faith' to the Ombudsman is immune from civil liability. Under the existing IGT Act, only someone who is compelled to give evidence by the Inspector-General is immune from criminal and civil liability. [Schedule 2, item 11, paragraph 15(j)]

2.59 Not all provisions in the Ombudsman Act will be relevant to the Inspector-General. For example, subsection 6(6) of the Ombudsman Act, which provides that the Ombudsman may decide not to investigate action of a prescribed authority that is a national broadcasting service or where a complaint could have been made to the Australian Communications and Media Authority.

2.60 Generally section 8 of the Ombudsman Act (as modified by table items 1, 2, 4, 5, and 6), will determine how the Inspector-General conducts investigations - although, as noted above, not all provisions in section 8 of the Ombudsman Act will apply in the IGT Act. Notwithstanding subsection 8(2) of the Ombudsman Act which requires investigations to be conducted in private, the Inspector-General may conduct an investigation, or part of an investigation, into a systemic issue in private or public as he or she thinks appropriate. For example, in conducting the systemic investigation the Inspector-General may take private submissions from taxpayers, tax practitioners and other interested entities. He or she may also choose to arrange working groups, public meetings or forums to further canvass opinion and better understand concerns about systemic investigations. This is consistent with the Inspector-General's current practice. [Schedule 2, item 11, section 15 and subsection 17(1)]

2.61 Section 9 of the Ombudsman Act, which specifies the power to obtain information and documents, is modified by table items 1, 2, and 5 in its application to the IGT Act. However, to provide greater administrative flexibility, a person need not only furnish information to the Inspector-General in writing but could instead provide information orally. [Schedule 2, item 11, section 15 and subsections 16(3) and 17(2)]

2.62 Section 15 of the Ombudsman Act provides for when the Ombudsman must make a report, the content of the report and the requirement to furnish a copy of the report to the relevant Minister after the Ombudsman has completed an investigation. Section 16 of the Ombudsman Act specifies recourse the Ombudsman may take if appropriate action is not taken following the completion of the Ombudsman's report and sections 17 to 19 of the Ombudsman Act provides when the Ombudsman may provide reports to Parliament. These provisions apply in relation to reports under the IGT Act.

2.63 Accordingly, the Inspector-General may make the same type of reports as the Ombudsman. However, the Inspector-General may also make reports recommending changes to taxation laws. These reports must be provided to the Minister. [Schedule 2, item 11, section 15, subsection 17(3) and section 18]

2.64 As a result of the addition of these new provisions from the Ombudsman Act, a number of cross-references in various provisions in the IGT Act have been modified so that they correspond to the Ombudsman Act in a newly created part in the IGT Act. For example, under section 39 of the IGT Act, the phrase 'section 14 or 15 is replaced with either 'section 9 of the Ombudsman Act 1976' or 'that section'. Under subparagraphs 39(1)(e)(v) and (vi) and 39(2)(c)(v) and (vi), a person referred to in a report under section 10, section 41 or section 38 is referred to as the subject of a report under 'this Act [IGT Act] or the Ombudsman Act 1976. Under subsection 40(2), the protection of the Minister, the Inspector-General or a person acting under the Inspector-General's authority from civil liability from actions arising from performing their functions under both 'this Act [IGT Act]' or the Ombudsman Act. [Schedule 2, items 16 and 19 to 25]

Reports recommending improvements to taxation laws

2.65 The Inspector-General may make a written report to the Minister after completing an investigation under the IGT Act detailing recommendations to improve the relevant taxation law and the reasons for the recommendations. The Inspector-General may choose to include other material in the report. The Minister must then ensure the report is made publically available by the 25th sitting day of the House of Representatives after the day that the Minister receives the report. This differs slightly to the current arrangements that require a report's release within 25 sitting days of both the House of Representatives and the Senate. The new requirement is easier to calculate and will result in the report having the same release date or, in some cases, a slightly earlier release date.

Example 2.6 The Inspector-General provides a report to the Minister recommending changes to the taxation laws. However, the Inspector-General has also, in a separate report to the Commissioner, identified number of administrative-related recommendations.The report to the Minister may include the recommendations directed to the Commissioner.

2.66 These arrangements do not require the Minister to personally make the report publically available. For example, the Minister could request the Inspector General issue a press and release the report on his or her website. [Schedule 2, item 11, section 18]

Annual report

2.67 These amendments expand the Inspector-General's annual report requirements, such as by listing the number of investigations into action affecting particular taxpayers or the number of investigations into systemic issues. This is consistent with existing subsections 19ZS(6) and (7) of the Ombudsman Act. [Schedule 2, items 26 to 28]

Delegation of certain powers

2.68 The Inspector-General may continue to delegate certain powers to a member of his or her staff, as occurs under existing section 42 of the IGT Act. The Inspector-General may also delegate his or her power to make arrangements and engage consultants. Given the Inspector-General is a relatively small agency, such a delegation power is necessary to ensure administrative efficiencies. This power to delegate excludes the provisions relating to making a report, the content of the report and action to be taken when issuing a report. [Schedule 2, item 29, section 42]

Supporting Regulations

2.69 These amendments provide for the Governor-General to make regulations for fees and allowances to be paid to reimburse for expenses of a person who attends before the Inspector-General or a member of his or her staff. [Schedule 2, item 30, subsection 43(2)]

Other amendments

2.70 These provisions repeal redundant consequential amendments to the Freedom of Information Act 1982 and the National Crime Authority Act 1984 captured in Schedule 1 of the IGT Act. [Schedule 2, items 31 and 32]

Tax File Numbers and sharing information

2.71 The Inspector-General may request a person making a complaint to quote their Tax File Number to facilitate or assist in the resolution of their matter with the Commissioner. The Inspector-General may then provide the Tax File Number to the Commissioner to investigate a complaint and the Commissioner may disclose the relevant tax file number to the Inspector-General. This arrangement provides for the disclosure of Tax File Numbers for the purposes of administering the IGT Act, for example, to verify a person's identity and provide an ongoing identifier for the Inspector-General during an investigation. A Tax File Number has the same meaning as in the ITAA 1997. [Schedule 2, items 6 and 15, sections 4, 37B and 37C]

2.72 This will allow the Inspector-General to provide a more efficient and tailored service by matching the information provided in a complaint with the information held by the ATO.

2.73 Consequential amendments are made to the ITAA 1936 and the TAA 1953 to enable the Inspector-General and the Commissioner to undertake these actions and to allow tax officials to provide taxpayer protected information to the Inspector-General for the purposes of investigating or reporting on a matter under the IGT Act. [Schedule 2, items 36 and 39 to 43]

2.74 Consequential amendments are also made to the TASA 2009 so that members and associated staff of the Tax Practitioners Board may also provide information to the Inspector-General for these purposes. [Schedule 2, items 37 and 38]

Amendments to the Ombudsman Act

2.75 These amendments provide for two main changes. The first ensures action taken by the Inspector-General or action that may be investigated by the Inspector-General is not also investigated by the Ombudsman. [Schedule 2, items 33 to 35]

2.76 The second provides a mechanism for complaints made to the Ombudsman to be transferred to the Inspector-General. This mechanism applies in the same way as the transfer mechanism of the Inspector-General to the Ombudsman as set out in paragraphs 2.40 to 2.46. In addition, the provisions provide that the Ombudsman may investigate complaints that may involve administrative action under the under the Public Interest Disclosure Act 2013 and the Freedom of Information Act 1982 that also relates to administrative matters under a taxation law. [Schedule 2, item 35]

2.77 To provide for situations where the Ombudsman is conferred with jurisdiction to investigate action under another Act that may also relate to administrative matters under a taxation law these amendments allow for the regulations to prescribe such Acts. [Schedule 2, item 35, paragraph 6D(2)(c) of the Ombudsman Act]

Application and transitional provisions

2.78 These amendments commence on the later of the 14th day after this Bill receives Royal Assent or 1 May 2015. These amendments apply to complaints and investigations or reviews conducted by an entity on or after the commencement of the Schedule. [Schedule 2, item 44]

2.79 The regulations in the Ombudsman Act that provide for the payment of fees and allowances to persons for attending or appearing as witnesses also apply as if they were regulations under the IGT Act. The Governor General may still make regulations that provide for the payment of fees and allowances to persons for attending or appearing before the Inspector-General or a member of the Inspector-General's staff. [Schedule 2, item 45]

2.80 After commencement, the Inspector-General may decide not to continue to investigate or to continue an investigation that has been initiated if the Inspector-General believes the complainant has already complained about the action to the Ombudsman. [Schedule 2, item 46]

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014 - Transferring of the tax investigation function from the Commonwealth Ombudsman to the Inspector-General of Taxation

2.81 This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

2.82 This Schedule amends the Inspector-General of Taxation Act 2003 by transferring the investigative and complaint handling function of the Commonwealth Ombudsman relating to taxation law matters to the Inspector-General of Taxation and merging that function with the Inspector-General's existing function of conducting systemic reviews.

Human rights implications

2.83 These amendments provides taxpayers with a specialised complaint handling process for taxation matters and aligns the systemic review role of the Inspector-General of Taxation with the correlative powers and functions of the Ombudsman. By establishing a single entity to investigate both individual complaints about taxation relating to administrative matters and systemic taxation administrative matters, taxpayers can ensure a consistent level of service, in furtherance to the rights to equality and non-discrimination under Article 26 of the International Covenant on Civil and Political Rights as well as the right to an effective remedy, engaging Article 2(3) of the International Covenant on Civil and Political Rights.

2.84 The amendments engage Article 17 of the International Covenant on Civil and Political Rights, as it will interfere with the privacy of individuals. Specifically, Article 17 says that individuals shall not be subject to unlawful or arbitrary interference with their privacy.

2.85 In order to investigate complaints about taxation relating to administrative matters and systemic taxation administrative matters, the Inspector-General may request and be provided with a relevant entity's Tax File Number from the Commissioner. However, if information sharing were not allowed, it would greatly hamper the ability of the Inspector-General to conduct a meaningful investigation. The disclosure mechanism is proportional to achieving this objective, as information is shared for the purposes of the Inspector-General investigating and reporting or otherwise administering the IGT Act.

Conclusion

2.86 These amendments' engage the right to equality and non-discrimination as well as the right to an effective remedy in the progression of human rights. The amendments also engage the right to privacy.

2.87 However, in light of the above, this Schedule is compatible with human rights because, to the extent, it may limit human rights, these limitations are reasonable, necessary and proportionate.


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