New Bill Proposes Significant Penalties for Tax Information Confidentiality Breaches in NSW

Introduction: The New South Wales (NSW) parliament has recently introduced a groundbreaking Bill, the Revenue, Fines, and Other Legislation Amendment Bill 2023, aimed at imposing substantial penalties for certain confidentiality breaches of tax information. The Bill encompasses a range of tax-related amendments, targeting the Taxation Administration Act 1996 (TAA), the Duties Act 1997, the Land Tax Management Act 1956, and the Payroll Tax Act 2007. This comprehensive legislation seeks to bolster the protection of confidential tax information, streamline tax processes, and uphold the principles of fair taxation practices.

Key Highlights of the Proposed Amendments:

1. Strengthened Offences for Tax Information Breaches: The Bill introduces new offences targeting individuals or corporations who knowingly or recklessly disclose or use confidential tax information. Concealing or attempting to conceal such unlawful disclosure will also attract severe penalties. The maximum fines for these offences will be significantly increased to up to $1,109,900 for individuals and $5,549,500 for corporations.

2. Extended Reassessment Limit: The proposed amendments aim to extend the reassessment limit for a person's tax liability beyond the current 5-year period. This extension will not only apply to the initial assessment but also cover decisions related to objections or reviews of any assessment.

3. Tougher Penalties for Impeding Tax Assessment: The Bill seeks to discourage activities that hinder the proper assessment of tax liabilities. To achieve this, the proposed amendments increase penalties for offences related to taxpayer activities that obstruct the assessment process.

4. Enhanced Powers to Require Property Valuation: The Chief Commissioner of State Revenue will be granted enhanced powers to demand taxpayers to provide property valuations for the purpose of tax assessments. In specific circumstances, the taxpayer will be liable for the valuation costs.

5. Enhanced Information Disclosure: The proposed amendments will allow tax officers under the TAA to share information obtained in relation to taxation law administration with the Chief Executive Officer of Service NSW and the Secretary of the Treasury, fostering a more coordinated approach to tax-related matters.

6. Combatting Tax Evasion: The Bill introduces a new offence targeting tax evasion with a maximum penalty of 500 penalty units or 2 years imprisonment, or both, to bolster efforts in combating tax-related fraud and non-compliance.

7. Extended Objection Lodging Period: The Chief Commissioner may allow objections to assessments or decisions to be lodged for up to 5 years after the initial assessment, extending beyond the current 60-day period.

8. Addressing Tax Avoidance Schemes: The scope of offences related to promoting tax avoidance schemes will be expanded to include "phoenix operations." These operations may lead to the creation of groups under section 74A of the Payroll Tax Act 2007 (NSW).

9. Flexible Tax Payment Methods: The Chief Commissioner will be granted general power to determine various tax payment methods, allowing for more flexibility in tax compliance.

Amendments to the Duties Act 1997:

The proposed amendments to the Duties Act 1997 (NSW) will have a profound impact on various aspects of taxation:

1. Corporation Division as Dutiable Transaction: The Bill will consider the division of a corporation, resulting in a new corporation holding previously owned land, as a dutiable transaction.

2. Time Limit Removal for Dutiable Transactions: The time limit for dutiable transactions to be treated as a single transaction for aggregation purposes will be removed.

3. Applicable Duty Rate for Change in Consideration: The Bill stipulates that the applicable rate of duty will be based on the rate at the time an agreement was first executed, even if the Chief Commissioner assesses or reassesses the duty due to a change in consideration before the property transfer.

4. Concessions for Managed Investment Schemes: The proposed amendments extend duty concessions for property vested in an apparent or real purchaser of dutiable property to the legal personal representative of an apparent or real purchaser. Transfer concessions will also apply to deregistered managed investment schemes.

5. Clarification on Electronic Signature: Electronic instruments lodged under the Electronic Conveyancing National Law (NSW) without digital signatures will be deemed executed when the Chief Commissioner receives related information.

6. Duty Exemption for Indigenous Land Use Agreements: Property transfers to registered native title body corporations in accordance with indigenous land use agreements will be exempt from duty charges.

7. Removal of Duplicate Provision: Section 305 of the Duties Act 1997 (NSW) will be omitted as a similar provision will be inserted into the TAA by the Bill.

Amendments to the Payroll Tax Act 2007:

The proposed amendments to the Payroll Tax Act 2007 (NSW) aim to improve tax enforcement:

1. Payroll Tax Recovery from Influenced Entities: Entities, including corporations in administration, winding up, or deregistration, and their successors, will be considered a group if they were or are sufficiently influenced by the same third party. This measure enables the recovery of payroll tax from these groups, often referred to as phoenix operators or corporations.

Amendments to the Land Tax Management Act 1956:

The proposed amendments to the Land Tax Management Act 1956 (NSW) address exemptions:

1. Exemption for School Land: The Bill introduces a provision that grants land tax exemption for land used as a school site, even if the land is not owned by the school.

Conclusion:

The Revenue, Fines, and Other Legislation Amendment Bill 2023 (NSW) heralds a significant step by the NSW government towards safeguarding confidential tax information and streamlining tax processes. The proposed amendments emphasize the government's commitment to maintaining the integrity of the tax system and ensuring fair taxation practices. As the Bill progresses through the legislative process, taxpayers and businesses in NSW should stay updated on the proposed amendments to ensure compliance with the new provisions when they come into effect.