Treasury Laws Amendment (2020 Measures No 1) Bill 2020 [2020] AUSStaCSBSD 37 (26 February 2020)

• Treasury Laws Amendment (2020 Measures No. 1) Bill 2020
• Retrospective application 25

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Treasury Laws Amendment (2020 Measures No. 1) Bill 2020

Purpose	Schedule 1 of this bill seeks to amend the Income Tax Assessment Act 1997 in order to expand the definition of significant global entity in the Act, and to align the rules regarding country by country reporting under tax law with Australia's international commitments. Schedule 2 of this bill seeks to amend various Acts to remove impediments to mergers between complying superannuation funds by permitting the roll-over of both revenue gains or losses and capital gains or losses
Portfolio	Treasury
Introduced	House of Representatives on 12 February 2020

Retrospective application ^[25]

1.54 Schedule 1 to the bill seeks to expand the definition of significant global entity in the tax law to cover additional groups of entities. Item 21 provides that the amendments apply in relation to income years or other periods starting on or after 1 July 2019. However, subitem 21(4) provides that if an entity is a significant global entity due to the amendments made by Schedule 1 to the bill, the entity will not be treated as a significant global entity for the purpose of the penalty provisions in Divisions 284 and 286 of Schedule 1 to the Taxation Administration Act 1953 until 1 July 2020.

1.55 The committee has a long-standing scrutiny concern about provisions that have the effect of applying retrospectively, as it challenges a basic value of the rule of law that, in general, laws should only operate prospectively (not retrospectively). The committee has a particular concern if the legislation will, or might, have a detrimental effect on individuals.

1.56 Generally, where proposed legislation will have a retrospective effect the committee expects the explanatory materials should set out the reasons why retrospectivity is sought, and whether any persons are likely to be adversely affected and the extent to which their interests are likely to be affected.

1.57 In this instance, the explanatory memorandum states:

The measure generally applies retrospectively from 1 July 2019. When this measure was announced in the Budget on 8 May 2018, it applied from 1 July 2018. While the application of the measure has subsequently been deferred by one year recognising the delays in the implementation of the measure, the retrospective application of the measure is consistent with the Government's intention to broaden the scope of the significant global entity definition to ensure that Australia's multinational tax integrity rules apply as intended. Retrospectivity is necessary to minimise, to the extent that is reasonable in the circumstances, the period between the announcement of the measure and the application of the improved integrity rules.
However, to ensure that penalty obligations imposed under the law do not apply retrospectively, the amendments include a transitional provision to ensure the penalties that arise from the measure do not apply until 1 July 2020 for entities that were not previously significant global entities.^[26]

1.58 In light of the detailed explanation provided in the explanatory memorandum regarding the retrospective application of the amendments proposed by Schedule 1 to the bill, the committee draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of applying the amendments in Schedule 1 to the bill on a retrospective basis.

1.1

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[25] Schedule 1, item 21. The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(i).

[26] Explanatory memorandum, p. 21.