Treasury Laws Amendment (2021 Measures No 2) Bill 2021 - Commentary on Ministerial Responses [2021] AUSStaCSBSD 101 (12 May 2021)

• Treasury Laws Amendment (2021 Measures No. 2) Bill 2021
• Significant matters in delegated legislation
• Broad discretionary power28

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Treasury Laws Amendment (2021 Measures No. 2) Bill 2021

Purpose	Schedule 1 to this bill seeks to amend the Income Tax Assessment Act 1997 to require a fund, authority or institution to, as a precondition for deductible gift recipient endorsement, be a registered charity, an Australian government agency, or operated by either of these entities Schedule 2 to this bill seeks to amend Australia's offshore banking unit (OBU) regime to remove the concessional tax treatments for OBUs, remove the interest withholding tax exemption, and close the regime to new entrants by removing the Minister's ability to declare or determine an entity to be an OBU
Portfolio	Treasury
Introduced	House of Representatives on 17 March 2021
Bill status	Before the House of Representatives

Significant matters in delegated legislation
Broad discretionary power^[28]

2.67 In Scrutiny Digest 6 of 2021 the committee requested the Assistant Treasurer's advice as to:

• why it is considered necessary and appropriate to provide the minister with a broad power to determine the criteria and matters that the Commissioner must be satisfied of and have regard to when assessing a request for an extended application date;

• why it is considered necessary and appropriate to leave these matters to delegated legislation; and

• whether the bill can be amended to include additional guidance regarding the relevant criteria and matters, and the exercise of the power by the minister, on the face of the primary legislation.^[29]

Minister's response^[30]

2.68 The minister advised:

Schedule 1 to the Treasury Laws Amendment (2021 Measures No. 2) Bill 2021 inserts a new requirement for non-government deductible gift recipients to be a registered charity. The transitional arrangements in Schedule 1 to the Treasury Laws Amendment (2021 Measures No. 2) Bill 2021 generally provide that affected entities have 15 months after Royal Assent to comply with the new requirements about receiving endorsement as a deductible gift recipient (DGR). Entities that need a longer period to comply with the new requirements can apply to the Commissioner of Taxation for an extended application date. If an extended application date is granted, the entity has an additional three years after the 15 month period to comply with the new requirements.
Before granting an extended application date to an entity, the Commissioner of Taxation must consider whether the prescribed criteria in relation to the application are satisfied and have regard to the prescribed matters in relation to the application. Subitem 16(7) allows the Minister to prescribe the criteria and matters for this purpose by legislative instrument.
The entities that are likely to require an extended application date are generally those with complex structures and arrangements. However, it may not be immediately clear to some of these entities whether they need an extended application date, particularly given the relatively long transitional period of 15 months and the nature of the entities (which are not-for-profit organisations). Therefore, I consider it is necessary and appropriate to leave the criteria and matters to delegated legislation, to ensure they can remain flexible and quickly respond to the needs of affected entities.
I also note the instrument setting out the prescribed matters and criteria is a legislative instrument that is subject to disallowance. Therefore, Parliament will still have the opportunity to scrutinise any criteria and matters that the Commissioner must be satisfied of and have regard to when assessing a request for an extended application date. Additionally, the Legislation Act 2003 requires the rule-maker to be satisfied that there has been appropriate consultation and that a summary of that consultation is included in the explanatory statement to the instrument.
For the above reasons, I consider it is necessary and appropriate to provide the relevant Minister with the power to determine the relevant criteria and matters. In my view, this power is not broad as it is necessarily limited by the fact that it relates to transitional arrangements. In other words, the scope of the power is confined such that it must relate to criteria and matters that are about giving entities more time to comply with the amendments, where reasonable.

Committee comment

2.69 The committee thanks the Assistant Treasurer for this response. The committee notes the Assistant Treasurer's advice that it is both necessary and appropriate to leave to delegated legislation the criteria and matters that the Commissioner must be satisfied of, and have regard to, when assessing a request for an extended application date, on the grounds that it would ensure the criteria and matters can remain flexible and can quickly respond to the needs of affected entities. The Assistant Treasurer has advised that this flexibility is needed because affected entities generally have complex structures and arrangements.

2.70 The committee notes the Assistant Treasurer's further advice that the minister's power to determine relevant criteria and matters is constrained because any decision made by the minister must relate to criteria and matters that are about giving entities more time to comply with the amendments, where reasonable.

2.71 While noting this explanation, the committee reiterates its consistent scrutiny view that a desire for administrative flexibility is unlikely to be a sufficient justification, of itself, for leaving significant matters to delegated legislation. Moreover, it is unclear to the committee where, on the face of the bill, the minister is constrained to only determining criteria or matters which relate to a reasonable need for entities to be granted an extension to comply with the amendments. The committee therefore remains concerned in relation to the broad discretionary power granted to the minister, particularly given that the power to prescribe criteria in subitem 16(7) is itself discretionary; that is, the minister ‘may’, rather than ‘must’, prescribe criteria.

2.72 The committee requests that an addendum to the explanatory memorandum containing the key information provided by the Assistant Treasurer be tabled in the Parliament as soon as practicable, noting the importance of these explanatory materials as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation (see section 15AB of the Acts Interpretation Act 1901).

2.73 The committee otherwise draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of:

• providing the minister with a broad power to determine the criteria and matters that the Commissioner must be satisfied of and have regard to when assessing a request for an extended application date (that is, a request that the amendments set out in Schedule 1 apply to an entity at a later time than the standard ‘transitional application date’); and

• leaving these matters to delegated legislation.

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[28] Schedule 1, subitem 16(7). The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(ii) and (iv).

[29] Senate Scrutiny of Bills Committee, Scrutiny Digest 6 of 2021, pp. 34–35.

[30] The minister responded to the committee's comments in a letter dated 5 May 2021. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 7 of 2021 available at: www.aph.gov.au/senate_scrutiny_digest.