The Commissioner’s new statutory remedial power, following Budget 2015. What exactly is a disallowable instrument?

The budget announcement

In the recently released 2015-16 Federal Budget, the Government announced that it will provide the Commissioner of Taxation (Commissioner) with a Statutory Remedial Power (SRP). Under the SRP a legislative instrument (called a ‘disallowable instrument’) would be made to modify the operation of taxation and superannuation law to ensure that there are no unforeseen or unintended outcomes for taxpayers when applying the law.

The power can only be used where it has a beneficial outcome for affected taxpayers, and where the exercise of the power is not inconsistent with the purpose or object of the law.

A lesson in legislation

What is a disallowable instrument?

An act of Parliament may delegate to the executive government the power to make delegated legislation. Delegated legislation consists of detailed rules and regulations which supplement primary legislation - for example, the Income Tax Assessment Acts or the Tax Administration Act, and have the same legal force as primary acts.

Delegated legislation is not passed directly by Parliament, but may however be 'disallowed' by either House of Parliament. Parliament's power to 'disallow' delegated legislation come from the Legislative Instruments Act 2003 (LIA).

Disallowable instruments must be tabled in Parliament within six sitting days after registration, and are open to Parliament to veto for a period of up to fifteen sitting days. If Parliament disagrees with the instrument, then it must be disallowed. A motion to disallow must be resolved within fifteen sitting days after notice is given otherwise the instrument is deemed to have been disallowed.

What does this mean for you?

The SRP will provide a useful way for the Commissioner to deal with unforeseen or unintended outcomes of a taxation or superannuation law. It will do this by reducing uncertainty where there are small technical issues, and will assist in the administration of the law, ensuring that it achieves its intended purpose and not an anomalous outcome!

Overall the changes aim to reduce the regulatory burden that currently exists for individual and business taxpayers.

Keeping the Commissioner in check

One last point, the SRP will contain the requirement that the SRP can only be used where there is a beneficial outcome for taxpayers. The Commissioner’s action must also have ‘no more than a negligible revenue impact.’

We will monitor the Commissioner’s use of the SRP powers and hope that they prove to be useful for taxpayers.