A previously unexamined section in the proposed Division 296 tax bill, introducing the new impost on total super balances over $3 million, has the potential to allow the government to change how the measure will be applied without parliamentary approval.
Section 296-60 of the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, which lapsed at the last election, stated regulations will be introduced into the Income Tax Assessment Act 1997 that will allow modifications to calculate withdrawals and contributions.
Specifically, that section stated “the regulations may modify sections 296-50 and 296-55 so that superannuation interests are appropriately valued, and the earnings calculated accurately so that individuals are included or excluded from the scope of the Division 296 tax and to ensure the right amount of tax liability is calculated for every type of superannuation interest”.
The section added the modification by regulation would capture specific superannuation interests, including defined benefit interests, and they “would be subject to disallowance and therefore will be subject to appropriate parliamentary scrutiny”.
However, The Australian has reported this section of the bill may exceed the authority of parliament, with a constitutional lawyer noting it gave Treasurer Jim Chalmers powers that extend beyond his office.
“A clause that allows the executive government to alter an act of parliament or its effects is known as a Henry VIII clause because it bypasses the necessity for parliament to amend its own acts,” Professor Greg Craven said in the newspaper in reference to the English king who passed an act that allowed him to rule by decree.
Craven added the method for calculating superannuation earnings and any subsequent Division 296 liability are set out in the bill and changes to these would need to occur as an amendment to the original bill and not via regulation.
“The argument is that while parliament can delegate a power to make regulations, it cannot altogether abdicate it. If it does so, the law becomes not a law about a subject matter, but a law about making laws for a subject matter. This would be unconstitutional,” he explained.
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