New ‘Commissioner’s discretion’ gains momentum

There has been a proposal for the Commissioner of Taxation to be given a ‘statutory remedial power’ (sometimes described as the ‘Commissioner’s Discretion’) to give greater flexibility in dealing with legislative problems which cannot be resolved by way of interpretation (and where legislative change is maybe taking too long).

A recent speech by Second Commissioner Andrew Mills outlined how this might work.

During the course of last year, a working group was set up to examine this proposal comprising the ATO, Treasury and representatives of the tax, accounting and legal professions.

The  consultation  phase  is  now  complete and  the  working  group  has  produced  a joint Statement of Intent about what such a remedial power could try to achieve.

It proposes that the Commissioner may vary the law (in favour of the taxpayer) in two types of circumstances:

  • where the application of the  law produces outcomes which appear to be inconsistent with the reasonably ascertainable policy intent of the law. This may include situations where it is reasonably clear that particular arrangements or transactions were not contemplated at the time of the policy development or the drafting of the law; and;
  • where it results in compliance  costs on taxpayers that are unnecessary or disproportionate to achieve the reasonably ascertainable broader policy intent of the law and those costs can be relieved in a way that is consistent with that intent.

The ATO envisages that a remedial power would provide a mechanism for resolving unintended and anomalous outcomes or disproportionate compliance costs in the tax law more quickly than is possible through the existing legislative amendment  process.
The power may also have a broader benefit for the tax system by allowing minor technical corrections that wouldn’t otherwise  happen.
The proposal now needs to be considered by government to progress this concept.
Whatever form it takes, the exercise of the power must be public and open to scrutiny.
Those issues that may not be  able  to  be dealt with by  the  power  would  continue  to be considered under existing policy and law development processes.