Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 3 - Enforcement measures
Overview
3.1 This Chapter explains new Parts 5, 6 and 7 of the Diesel and Alternative Fuels Grants Scheme Act 1999 (DAFGSA). These Parts insert new provisions dealing with disqualification for fraud, contrived schemes and the application of civil penalties.
3.2 The Government gave an undertaking that it would put in place rigorous enforcement measures to police the Diesel and Alternative Fuels Grants Scheme (the Scheme). In accordance with that undertaking new Parts 5, 6 and 7 of the DAFGSA will provide adequate penalties and safeguards to protect public funds and prevent abuse of the scheme.
Summary of the legislation
3.3 New Part 5 contains rules disqualifying claimants because of fraudulent acts of the claimant or an individual or entity closely associated with the claimant. The rules in new Part 5 will broadly disqualify individuals, body corporates, partnerships and trusts.
3.4 New Part 6 introduces provisions to apply to schemes entered into for the sole or dominant purpose of creating an entitlement to a grant where, in the absence of the scheme, there would be no such entitlement.
3.5 New Part 7 introduces civil penalties to apply to unpaid scheme debts and false statements. New Part 7 enables the Commissioner of Taxation (the Commissioner) to make an assessment of those penalties and also to remit some or all of those penalties.
Explanation of the amendments
3.6 The rules in new Part 5 ensure that claimants cannot benefit from the Scheme if they, or a person closely associated with their management have knowingly or recklessly made false statements to a person who is exercising powers, or performing functions under the DAFGSA and that statement results in a greater fuel grant than they were otherwise entitled.
3.7 A claimant will be disqualified, and taken to have been disqualified from receiving a fuel grant if the claimant:
- •
- knowingly or recklessly makes a false statement (including omissions) in a material particular that would have resulted in an increased grant [new subsection 21(1), item 40 of Schedule 1] ; or
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- if a claimant knowingly or recklessly makes a false statement (including omissions) that would have resulted in an increased grant, anyone that aided, abetted, counselled or procured the making of a false statement by an entity, or were in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the making of that false statement will also be disqualified [new subsection 22(1), item 40 of Schedule 1] .
How long will the claimant be disqualified?
3.8 A claimant disqualified under either new sections 21 or 22 will be disqualified from receiving any fuel grant at any time commencing from the beginning of the grant period and ending at the end of 30 June 2002. [New paragraphs 21(d) and 22(e), item 40 of Schedule 1]
3.9 The Commissioner may, however, determine, in writing, that the disqualification period may end earlier than 30 June 2002. [New paragraphs 21(e) and 22(f), item 40 of Schedule 1]
Disqualification of body corporate executive disqualified etc.
3.10 Any body corporate will be disqualified from receiving a fuel grant at a particular time if it has a director, secretary or person who is concerned in, or takes part in, the management of the body corporate that is disqualified under new sections 21 or 22. [New section 23, item 40 of Schedule 1]
Disqualification of partnership - partner disqualified etc.
3.11 A partnership will be disqualified from receiving a fuel grant at a particular time if it has:
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- a partner that is disqualified (including body corporates because a director, secretary or person involved in the body corporates management is disqualified); or
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- an individual employee that is disqualified and is concerned in, or takes part in, the management of the partnership.
[New section 24, item 40 of Schedule 1]
Disqualification of trust trustee disqualified etc.
3.12 A trust will be disqualified from receiving a fuel grant at a particular time if it has:
- •
- a trustee that is disqualified (including a trustee that is a body corporate because a director, secretary or person involved in the body corporates management is disqualified); or
- •
- an individual employee that is disqualified and is concerned in, or takes part in, the management of the trust. [New section 25, item40 of Schedule 1]
Example 3.1
Erin is the Director of Mobbin Pty Ltd. This company is the trustee of the Mobbin Family Trust which operates a large rural transport business.
Mobbin Pty Ltd, acting as trustee, claims a fuel rebate using false information. Trucks which were used solely in metropolitan areas are falsely recorded as being only used in rural areas. Erin prepared the false claim.
Erin is disqualified from claiming fuel rebates because she aided and abetted Mobbin Pty Ltd make the false claim. As she is disqualified, both the Mobbin Family Trust and Mobbin Pty Ltd are also disqualified from receiving fuel grants.
3.13 New Part 6 introduces a provision which enables the Commissioner to disregard arrangements entered into for the sole or dominant purpose of creating an entitlement to a fuel grant.
3.14 A scheme is defined to be any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable by legal proceedings. A plan, proposal, action, course of action or course of conduct will constitute a scheme if its conduct is unilateral or otherwise.
3.15 The provision is directed at arrangements designed for the sole or dominant purpose of enabling:
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- a particular use of diesel fuel or alternative fuel;
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- a particular journey; or
- •
- a particular operation of a vehicle;
to be taken into account for the purposes of calculating an entitlement to the fuel grant.
3.16 The provisions enable the Commissioner to take the following action in relation to the above circumstances:
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- treat that use of the diesel fuel or alternative fuel as if it never happened;
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- treat the particular journey as if it had never taken place; or
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- treat the operation of the vehicle as if it had never happened.
3.17 In deciding to treat a course of conduct as never having happened the Commissioner will make a determination to that effect. [New section 26, item 40 of Schedule 1]
New Part 7 Civil penalties
3.18 For unpaid scheme debts new Part 7 will impose a penalty at the rate of 16% per year on the amount that remains unpaid after the day by which it should have been paid. This represents compensation to the Commonwealth for the time value of the money that you had access to where that money was correctly payable to the Commonwealth.
3.19 A designated scheme debt is a debt resulting from an overpayment or an amount payable by way of penalty for a false statement. The penalty is calculated from the day on which the amount becomes due to be paid. [New subsections 27(1), (2) and (3), item 40 of Schedule1]
3.20 The fact that a judgment is entered or given by a court does not cause the amount of the designated scheme debt to stop being unpaid for the purposes of the penalty for unpaid debts. [New subsection 27(4), item 40 of Schedule 1]
3.21 If the judgment debt bears interest, the penalty is reduced by the following formula:
Interest on judgment debt X (Designated scheme debt component)/Judgment debt
Designated scheme debt component means so much of the judgment debt as consists of a designated scheme debt.
3.22 When working out the day on which the overpayment debt is due to be paid you use the following table:
| Item | Type of overpayment debt | Day on which debt is due to be paid |
|---|---|---|
| 1 | so much of an amount paid, or purportedly paid, to an entity by way of a fuel grant as represents an overpayment | the day on which the fuel grant was paid |
| 2 | an amount that is repayable as a result of an advance | the day on which the advance concerned was paid |
[New subsection 27(6), item 40 of Schedule 1]
3.23 The penalty provisions do not apply to an overpayment debt that arose because of an error made by the Commissioner (provided the grant was received in good faith) or was due to a change in regulations for the purpose of calculating the amount of the fuel grant. [New subsections 27(7) and (8), item 40 of Schedule 1]
3.24 This Bill makes it clear that the imposition of the penalty for unpaid scheme debts does not impose taxation (within the meaning of section 55 of the Constitution). [New subsection 27(9), item 40 of Schedule 1]
Penalty for false statements
3.25 This Bill inserts a penalty for making a false statement that results in the amount of a diesel or alternative fuel grant payable exceeding that which would have been payable if you had not made the false statement. The statement may be considered false irrespective or whether or not you knew it was false. The penalty for such a false statement is double the amount of the excess grant. [New section 28, item 40 of Schedule 1]
3.26 The Commissioner must make an assessment of a penalty for a false statement and give you notice of the assessment as soon as practicable after the assessment is made. However, failure to notify you of the assessment does not affect the validity of the assessment. The Commissioner may notify you electronically or the notification may be included in another type of notice the Commissioner gives you. The penalty becomes due and payable on the day specified in the notice but must be at least 14 days after the notice is given to you. [New section 29, item 40 of Schedule 1]
3.27 The Commissioner may amend an assessment at any time and the production of a notice of assessment is conclusive evidence that the assessment was properly made. The Commissioner is also able to remit some or all of the penalty under new Part 7 if the Commissioner is satisfied that it is fair and reasonable to do so. [New sections 30, 31 and 32, item 40 of Schedule 1]
3.28 Where you are prosecuted for an offence under new Part 7 you will not be liable to further penalty under this Part. [New section 33, item 40 of Schedule 1]