Nethercott, Les --- "Editorial" [1998] JlATax 13; (1998) 1(3) Journal of Australian Taxation 166

Editorial

Associate Professor Les Nethercott

With the recent decisions handed down by Hill J in Consolidated Press Holdings Ltd & Anor v FC of T 98 ATC 5009 (“Consolidated Press”) and CPH Property Pty Ltd & Ors v FC of T 98 ATC 4983 (“CPH”), the issue of legislative uncertainty and complexity has arisen. The rewrite of the Income Tax Assessment Act 1936 (“ITAA36”) which is encompassed in the Income Tax Assessment Act 1997 (“ITAA97”), was based on the need to simplify the tax provisions. While some may argue as to the success of this objective, the recent decisions in Consolidated Press and CPH very much reflect the difficult and tortuous path that taxpayers, and even the Commissioner, face in interpreting the legislation and applying it to their particular circumstances.

It is contended that the legislative provisions should be capable of interpretation by taxpayers with a degree of certainty to enable taxpayers to know where they stand and to enable them to go about their business activities without fear of uncertainty and penalties caused by unclear or ambiguous legislation.

There has been considerable public comment concerning the Consolidated Press and CPH decisions and the loss of revenue to the Commissioner. Nevertheless, it should be remembered that Hill J was interpreting the law. It is suggested that it is not the role of the judiciary to take on board policy or fiscal issues that may arise from a government perspective. Above all, it should not fall to the judiciary to remedy deficiencies in legislative drafting. However, this is not to say that the use of extrinsic material, pursuant to the Acts Interpretation Act 1901, should be ignored.

The difficulties of legislative interpretation were very much reflected in the Consolidated Press and CPH decisions. One of the cases involved two complex issues:

▪ the interaction between the thin capitalisation and the controlled foreign corporation provisions; and

▪ whether a profit on a debt defeasance transaction should be treated as adjusted tainted or passive income.

After considerable analysis of the first issue, Hill J at 5018 observed:

There is much to be said for the view that it is the duty of Parliament to ensure that legislation designed to extract tax from taxpayers be expressed both in ideas and language that are clear. While it is for the courts to endeavour, where possible, to give effect to the legislative purpose, it should not be expected that the courts will construe legislation to make up for drafting deficiencies which revel in obscurity.

While the ITAA97 is now in operation, it should be remembered that the rewrite of the ITAA36 is far from complete. With the recent introduction of the GST legislation, there has been some debate as to the priority and perhaps revised timetable of the TLIP program. Nevertheless, it should be remembered that many of the complex income tax provisions are still contained in the ITAA36. However, a very significant message which comes from the Consolidated Press and CPH decisions is the need for new legislation to be clear, concise and free from uncertainty. Perhaps the legislature should bear in mind that policy objectives are not achieved by exhaustive, complex and detailed legislation, but rather by a move to broader legislation which focuses on the underlying policy or mischief which is sought to be addressed.