The Government today introduced legislation which represents the major milestone in the implementation of the Government's Review of Aspects of Income Tax Self Assessment.
This bill will amend the taxation laws to provide a better framework for the provision of Tax Office advice and introduces ways to make that advice more timely, accessible and binding in a wide range of cases. This change will take effect from 1 January 2006 or the date of Royal Assent, whichever is the later.
In addition, amendment periods will be reduced for a majority of taxpayers. The measure will ensure that the time during which taxpayers experience uncertainty about whether they have correctly self assessed their income tax liability, more accurately reflects their risk profile and the revenue consequences of an error in their assessment. The changes will reduce amendment periods from four years to two years for most individuals and small business taxpayers. This measure will apply to amendments of assessments for the 2004-05 income year and subsequent years.
The legislation reducing amendment periods provides that taxpayers involved in tax avoidance schemes will be excluded from the two year amendment period. The legislation also provides for exclusions from the two year amendment period for high risk arrangements prescribed in regulations. In both cases, taxpayers involved in these transactions will have a four year amendment period. The Government has identified a number of proposed exclusions from the standard two year amendment period:
- certain specific anti-avoidance provisions,
- certain related party transactions where there is a mismatch in the period of review between the parties involved, and
- some transactions where it will take longer than usual for the Tax Office to collect the information it needs because of delays in obtaining or confirming information from overseas.
The Government wishes to consult publicly on the regulations containing the proposed exclusions. The draft regulations and explanatory notes may be found on the Department of the Treasury website, www.treasury.gov.au. Submissions can be sent to selfassessment@treasury.gov.au by 15 December 2005.