Senate

Explanatory Memorandum

(Circulated by the authority of the Treasurer,the Hon John Dawkins, M.P.)

General Outline and Financial Impact

The Insolvency (Tax Priorities) Legislation Amendment Bill 1993 will amend various Acts, in particular, the Income Tax Assessment Act 1936 and the Corporations Law. The amendments proposed will:

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abolish the existing priority of the Commissioner of Taxation for tax debts in relation to certain unremitted amounts which become payable after 30 June 1993 (Chapter 1 of the Explanatory Memorandum).

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establish a new regime to enable the Commissioner to recover those debts earlier and more effectively. The main elements of the new regime are:

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the Commissioner being able to initiate recovery action for an unremitted amount on the basis of an estimate of that amount (Chapter 2 of the Explanatory Memorandum); and

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the imposition of a penalty on company directors equal to their company's unremitted amounts or an estimate thereof (Chapter 3 of the Explanatory Memorandum).

The Bill also contains consequential amendments to the Corporations Law, the Bankruptcy Act 1966 and the Crown Debts (Priority) Act 1981 . These amendments are necessary to place the Commissioner in the same position as other creditors (Part B of the Explanatory Memorandum).

Proposal announced: Aspects of the proposal were announced in a joint statement by the Treasurer and the Attorney General on 2 December 1992.

Date of effect: Apply to unremitted amounts which become payable after 30 June 1993.

Financial impact: Any loss of revenue from abolishing the Commissioner's priority is expected to be offset by revenue collected under the new recovery regime.