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Drafting Direction No. 1.8
Special rules for Tax Code drafting

Parliamentary Counsel

Drafting Direction No. 1.8
Special rules for Tax Code drafting


Document release 1.0

Issued May 2006
Contents


Part 1—Creating the Tax Code

What is already in place

  1. The term “Tax Code” refers to the proposed Integrated Tax Code that was first announced in August 1998 in Tax Reform: not a new tax, a new tax system, and was also the subject of recommendations by the Ralph Review of Business Taxation in Chapter 2 of its Final Report.

  2. The Tax Code does not so far have any formal legislative identity, but a number of its key elements already exist:

      • the rewritten income tax law, comprising:

the Income Tax Assessment Act 1997 (the 1997 Act)

the Income Tax (Transitional Provisions) Act 1997

      • the new indirect tax law, comprising:

the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act)

the A New Tax System (Luxury Car Tax) Act 1999

the A New Tax System (Wine Equalisation Tax) Act 1999

Imposition Acts for those indirect taxes

      • the new collection and recovery provisions and generic administration provisions in:

Schedule 1 to the Taxation Administration Act 1953

the A New Tax System (Australian Business Number) Act 1999 (the ABN Act)

      • the Venture Capital Act 2002.

  1. At present, what distinguishes legislation in the Tax Code from legislation not in the Code are features of design, drafting style and presentation, many of which are documented in this Drafting Direction.

Future additions to the Tax Code

For the income tax law

Enacting new material

  1. For some time now, it has been the practice to enact new provisions of the income tax law as amendments of the 1997 Act and not the Income Tax Assessment Act 1936. New material should only be included in the 1936 Act with the agreement of First Parliamentary Counsel.

Completing the rewrite of the old income tax law

  1. The process for continuing the re write of the income tax law is currently under discussion. One option for the next step in the process is for the “operative” provisions of the Income Tax Assessment Act 1936 to be imported into the 1997 Act, perhaps as a Schedule to that Act.

For the Taxation Administration Act

Enacting new material

  1. New collection, recovery and tax administration provisions are to be included in Schedule 1 to the Taxation Administration Act 1953.

Completing the re-organisation of the old administration provisions

  1. The provisions in the body of the Taxation Administration Act 1953 will over time be brought into the Tax Code, by being either re-enacted as provisions in Schedule 1 to that Act, or amended to make them consistent with the rules applying to Tax Code drafting. At the end of that process, the Act will be reorganised so that:

      • the provisions in Schedule 1 are moved into the body of the Act (without being renumbered); and

      • the provisions already in the body of the Act are renumbered and integrated into the sequence established for the Schedule 1 provisions.

Identifying other laws to become part of the Tax Code

  1. Any new tax legislation will form part of the Tax Code. This will mean that:

      • legislation will need to be drafted in the TLIP style; and

      • terms used in the new legislation will need to be defined in such a way that they work with the other Acts that make up the Code.

  2. If you have any concerns about the appropriateness of including a particular piece of legislation in the Tax Code, you should raise these with the Manager of the Tax Code Unit within the Tax Design Division at the Treasury.

  3. In due course, other existing Acts administered by the Commissioner (such as the Fringe Benefits Tax Assessment Act 1986) may be included in the Tax Code as and when they are rewritten.

Part 2—The purpose of this Drafting Direction

  1. This Drafting Direction contains special rules that apply to Bills that will form part of the Tax Code or that amend Acts that are part of the Tax Code. The rules do not apply to any other Bills. In particular, they do not apply to Bills amending tax legislation that has not yet been brought into the Code.

  2. These rules override rules contained in other Drafting Directions, Word Notes or the Amending Forms Manual.

  3. This Drafting Direction sets out a brief summary of each of the rules and refers to the TLIP Drafting Note in which the rule was originally set out. Extracts from various TLIP Drafting Notes are attached to this Drafting Direction.

Part 3—Acts that make up the Tax Code

  1. The Acts that make up the Tax Code for the purposes of this Drafting Direction are:

      • 1997 Act;

      • Income Tax (Transitional Provisions) Act 1997;

      • GST Act;

      • A New Tax System (Luxury Car Tax) Act 1999;

      • A New Tax System (Wine Equalisation Tax) Act 1999;

      • Schedule 1 to the Taxation Administration Act 1953;

      • ABN Act;

      • Venture Capital Act 2002;

      • Fuel Tax Act 2006;

      • any new tax legislation.

Schedules 2C to 2J of the 1936 Act

  1. In addition, Schedules 2C to 2J (only) of the Income Tax Assessment Act 1936 (the 1936 Act) should be treated as if they formed part of the Code.

  2. These Schedules do not comply with the rules in this Drafting Direction (that is why they were not included in the 1997 Act in the first place), and they will of course need to be rewritten for inclusion in that Act. The work involved in rewriting them will however be reduced if they are treated as part of the Tax Code for the purposes of applying the rules in this Drafting Direction to drafting other Tax Code legislation, and to drafting amendments of those Schedules.

  3. No further Schedules should be added to the Income Tax Assessment Act 1936.

Differences in the indirect tax legislation and the ABN Act

  1. The indirect tax legislation (GST Act, A New Tax System (Luxury Car Tax) Act 1999 and A New Tax System (Wine Equalisation Tax) Act 1999) does not use all of the features set out in this Drafting Direction. A list of the features used, and not used, in those Acts is in Attachment C.

  2. The ABN Act uses only a small subset of the standard features set out in this Drafting Direction. A list of the features used, and not used, in that Act is in Attachment C.

  3. New principal Acts should use either all of the features set out in this Drafting Direction, or only the subset of features used in the ABN Act.

Part 4—Where to locate provisions in Acts forming part of the Tax Code: how to maintain a coherent overall structure

General

  1. Provisions for inclusion in the Tax Code are broadly of these kinds:

      • imposition provisions, which must be in a separate Act to comply with section 55 of the Constitution;

      • liability provisions, which should be in the assessment Act for the particular tax;

      • provisions dealing with collection, recovery or administration, which by and large, should be included in Schedule 1 to the Taxation Administration Act 1953;

      • interpretation provisions, which need to comply with the rules set out in this Drafting Direction about defined terms; they can be located on a “just in time” basis with the provisions they relate to, but must also be signposted in the relevant Dictionary.

Where to put new provisions in the 1997 Act and Schedule 1 to the Taxation Administration Act 1953

  1. Any new instructions to include provisions in the 1997 Act or Schedule 1 to the Taxation Administration Act 1953 should include a statement on where, in your instructor’s view, those provisions are best inserted.

  2. Treasury maintains master plans for the 1997 Act and Schedule 1 to the Taxation Administration Act 1953. A copy of the current version of the master plans is in Folio Office Documents, under Other Drafting Documents. The master plans will be updated on the database whenever we receive new versions.

  3. The master plans include both current provisions and placeholders for provisions that are anticipated. Your instructions should be based upon the plans.

  4. If you believe that the provisions would be better inserted elsewhere, you should initially discuss this with your instructor and then, if you cannot resolve the issue in that way, with the Manager of the Tax Code Unit within the Tax Design Division in the Treasury.

Location of provisions in the GST Act

  1. The GST Act deals separately with provisions of general application (Chapter 2—Basic rules) and provisions of specific application (Chapter 4—Special rules). This is to ensure that the rules covering the vast majority of cases are short and not cluttered with the myriad of qualifications that a GST generates. Avoid inserting detailed rules in Chapter 2. Consider creating new special rules instead.

Application and transitional provisions

  1. The Income Tax (Transitional Provisions) Act 1997 was enacted to house application and transitional provisions arising from the rewrite of the Income Tax Assessment Act 1936. It has since become the practice to include in the Transitional Provisions Act provisions relating to a new Division or Subdivision of the 1997 Act, even if the new material is not a rewrite. In other cases, application and transitional provisions should be included in amending Acts in the traditional manner.

  2. The Income Tax (Transitional Provisions) Act 1997 is numbered in parallel with the 1997 Act. This makes it easy to work out where to include provisions in the Transitional Provisions Act.

Checking whether amendments affect, or are affected by, recent or proposed amendments

  1. Given the volume of tax amendments that sometimes passes through the Office, you should take particular care when checking whether your amendments will affect, or be affected by, recent or proposed amendments. You may find IT Circular No. 38 (currently in draft form) useful in carrying out the necessary searches.

Part 5—Asterisking and other signposting of definitions

  1. Most occurrences of defined terms must be marked with an asterisk. (You can just type a normal asterisk as the Fix document and Finaliser macros will replace them with the special TLIP asterisks.)

  2. The occurrences that do not require an asterisk are:

      • the second or subsequent occurrence in a subsection (for this purpose, each Step in a method statement and each row in a table is treated as a separate subsection);

[The qualification “if it is clear that it is referring back to an earlier (asterisked) occurrence of the same term in the same subsection” (for which TLIP Note 2 provides) no longer applies.]

      • in a heading;

      • in a heading that is quoted in parentheses in a provision;

      • in any Guide material or other non-operative provision;

      • in a note or example;

      • in a table that is only for information or signposting (as opposed to a table that has substantive effect).

  1. If the label for a defined term includes an expression that is also a defined term, that expression should not be asterisked in addition to the asterisking of the full label.

Example: *business travel expense not *business *travel expense.

  1. Special rules apply to asterisking in formulas. See the extract from TLIP Note 2 in Attachment B.

  2. Certain terms are not asterisked at all. So far, the exceptions to asterisking are specific to particular Acts. The non-asterisked terms are those that are used very extensively throughout the Act concerned.

  3. Section 2-15 of the 1997 Act sets out the list of non-asterisked terms for that Act and for Schedule 1 to the Taxation Administration Act 1953. Section 3-5 in each of the GST Act, A New Tax System (Wine Equalisation Tax) Act 1999 and A New Tax System (Luxury Car Tax) Act 1999 sets out the list for that Act. (Note that the lists of terms are not the same.) The ABN Act does not have a list so there are no non-asterisked terms in that Act.

  4. Information about signposts for definitions is contained in the extract from TLIP Note 3 in Attachment B.

Part 6—Defined terms (TLIP Note 3)

  1. The original approach in TLIP drafting was to have “one expression/one meaning” across the Tax Code. To follow this approach, you should not:

      • define the same expression in different parts of the legislation to mean different things (ie setting out the definitions themselves in different parts of the legislation); or

      • define one expression, set out in the Dictionary, to mean different things in different parts of the legislation; or

      • define an expression in one part of the Act that takes its ordinary English meaning in another; or

      • use a relational definition to avoid these rules.

  2. Treasury has expressed its continued, strong commitment to this approach.

  3. It has also expressed support for an approach to policy development and legislative drafting that makes the greatest use of existing concepts, rather than reinventing new ones.

  4. The purpose of this rule is to create conceptual consistency within the Tax Code. It is easiest to explain the problem and the suggested approach using an example.

  5. In drafting provisions dealing with an associate of another entity, you might be asked to develop a definition of associate that differs from that currently used in the Tax Code. One approach is to create a new expression, defined differently from the first and distinguished from the first by the addition of “noise words” (eg: an XYZ associate). There are many examples of this approach in the Tax Code.

  6. On the approach now adopted by Treasury, the drafter would work with instructors to see whether there is really any need, in policy terms, for the group of individuals targeted in the new provision to differ from those targeted as associates in other provisions across the Code. If, after those discussions, there were still concerns about the lack of consistency with other provisions in the Code, those concerns would be raised with the Manager of the Tax Code Unit within the Tax Design Division at the Treasury.

  7. You may encounter difficulty:

      • in deciding on which of the definitions already in the Tax Code is the core definition for a particular concept;

      • finding any core definition at all for some concepts.

  8. If this happens, you should discuss the issue with the Manager of the Tax Code Unit within the Tax Design Division at the Treasury with a view to settling the core definition.

  9. You should also raise with Treasury any cases where standardisation at a higher level may be possible. For example, “tracing” rules involving chains of trusts, partnerships and companies occur in a variety of contexts and take a variety of forms. These rules cover both indirect ownership or control as well as the flow through of indirect distributions. There may be room for consistency in the approach taken in formulating these rules, and it is the sort of issue that could usefully be raised with Treasury.

  10. It is envisaged that, at some time, all of the defined terms in the Tax Code will be brought together in some form of Common Dictionary for the entire Code.

  11. At this stage, each definition (or a signpost to each definition) must be included in the relevant Dictionary:

      • section 995-1 of the 1997 Act for definitions in that Act, Schedule 1 to the Taxation Administration Act 1953 and the Venture Capital Act 2002;

      • section 195-1 of the GST Act for definitions in that Act;

      • section 33-1 of the A New Tax System (Wine Equalisation Tax) Act 1999 for definitions in that Act;

      • section 27-1 of the A New Tax System (Luxury Car Tax) Act 1999 for definitions in that Act;

      • section 41 of the ABN Act for definitions in that Act.

  12. Other fundamental rules are:

      • don’t define a word in a way that conflicts with its ordinary meaning;

      • don’t change the scope of a defined concept by deeming provisions;

      • don’t use a definition to do work more appropriately done by a substantive rule (it might, for example, be more useful to scope a suite of provisions using a substantive provision, rather than creating yet another variation of a core concept).

  13. You should read the edited extract from TLIP Note 3 in Attachment B for a full description of the rules relating to definitions.

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