House of Representatives

Tax Laws Amendment (Improvements to Self Assessment) Bill (No. 2) 2005

Second Reading Speech

Mr BROUGH (Longman-Minister for Revenue and Assistant Treasurer)

I move:

That the bill be now read a second time.

This bill represents the major milestone in the implementation of the government's Review of Aspects of Income Tax Self Assessment.

On 16 December 2004, the Treasurer announced the government's response to the Report on aspects of income tax self assessment and released the report to the public. The Treasurer announced that the government would adopt all 30 legislative recommendations made in the report.

Accordingly, the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 1) 2005 amended existing law to implement the recommendations about penalties and shortfall interest charge.

This bill continues the process of reform of self-assessment by implementing the remaining legislative recommendations about Taxation Office advice and periods for reviewing assessments. The measures contained in the bill will move the balance of fairness markedly in favour of taxpayers in two very significant and important ways.

Firstly, this bill will improve certainty through providing a better framework for the provision of Taxation Office advice and introducing ways to make that advice more timely, accessible and binding in a wide range of cases.

Secondly, it ensures that the time during which taxpayers experience uncertainty about whether they have correctly self-assessed their income tax liability more accurately reflects their risk profile and the revenue consequence of an error in their assessment.

In particular, the bill amends existing provisions to:

improve the arrangements for a taxpayer to find out the commissioner's view about how the taxation laws apply so that the risks of uncertainty when they are self-assessing are reduced; and
improve certainty by reducing the periods allowed for the Taxation Office to increase a taxpayer's liability in a wide range of situations. The result will be that about eight million individuals and over 745,000 very small businesses will have a shorter period of review.

The measures contained in this bill will significantly improve taxpayers' experience of the self-assessment aspects of the tax system. These measures represent another major step in this government's ongoing commitment to improving the Australian taxation system.

These amendments apply to rulings and ATO advice from 1 January 2006 or royal assent, whichever is the later. The amendments to the amended assessment rules apply to the 2004-05 and later income years.

Full details of the measures in these bills are contained in the explanatory memorandum.

I commend this bill to the House and present the explanatory memorandum.