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Taxation Institute of Australia calls on PM to rule out threat of retrospective legislation

Publication date: 22 Nov 01 | Source: THE TAX INSTITUTE

'The Taxation Institute is calling on Mr Howard to back his words with action,' said Ms McCleary. 'We are appealing to the Prime Minister to urgently rule out the prospect of introducing any retrospective legislation regarding trust distributions out of revaluation reserves. Our request follows Australian Tax Office advice of the possibility of legislation retrospective to 22 February 1999, even though the entity tax proposals were abandoned.'

'While retrospectivity is still under possible consideration, there will continue to be uncertainty. How can Australian business continue to operate within an environment surrounded by uncertainty? The Taxation Institute continues to receive a stream of enquiries from members seeking reassurance on this issue as they fear reprisal if they inadvertently contravene the possible amendments,' she said.

Mr Howard also said in his radio interview: 'I think once you’ve been given an assessment and the idea that you can be given another one on essentially the same set of facts is double jeopardy.'

'It is the obligation of the Prime Minister to provide reassurance on this particular issue. As a consequence of the strong views voiced by Mr Howard, the Taxation Institute is calling on the Prime Minister to confirm that the 450,000 family trusts in Australia do not have to worry about retrospective legislation going back nearly three years,' said Ms McCleary.

Editor's Note:

  • On the 22 February 1999 the Treasurer issued a Press Release announcing that 'The Government will address an abuse of deficiencies in the current business tax system.' Trusts were not mentioned, let alone revaluation distributions out of trusts.

  • The Press Release referred to a letter written by John Ralph to the Treasurer. That letter gave several avoidance examples, none involving trusts. The only reference to trusts was very general: 'There are also other possible reforms, including transitional arrangements for the taxation of trusts, that could give rise to strategic exploitation prior to their introduction.'

  • On 21 September 1999, when the Government announced its initial response to the Ralph Report, the Treasurer stated that 'a number of the anti-avoidance measures will begin from 22 February 1999.' Trusts were not mentioned in the body of the Press Release, but tucked away in Attachment P was a reference to non-commercial loans to trusts. Distributions out of revaluation reserves were not mentioned.

  • On 27 February 2001 – two years after the critical date – the Treasurer issued another Press Release announcing that the draft legislation to tax trusts like companies was unworkable, and would be withdrawn. Also, there would be a new round of consultations to among other things 'address any tax abuse in the trust area.'

  • A month later, on 22 March 2001, the Treasurer announced his comprehensive tax reform implementation timetable for 'delivering the remaining elements of the business tax reform package.' The Press Release contained a single, clear message on trusts: 'the current tax law for trusts will continue to apply.'

  • By March 2001, it was thought that all vague rumours of 2 years earlier had been abandoned, but would presumably be re-considered in the new work on trust abuse announced in February 2001. However, for the moment 'the current tax law for trusts will continue to apply.'