Law Council of Australia

Business Law Section

PRRT amendments and retrospectivity

This submission relates to the measure set out in Part 2 of Schedule 1 to the exposure draft legislation Treasury Laws Amendment (Measures for Consultation) Bill 2023: Capital allowances for mining, quarrying or prospecting rights and clarifying the meaning of exploration for petroleum (Draft Bill). This measure relates to the meaning of ‘exploration for petroleum’ for the purposes of the Petroleum Resource Rent Tax Assessment Act 1987 (Cth) (the PRRT Act), and is referred to below as the Exploration Amendments.

This submission is made by the Taxation Committee of the Business Law Section of the Law Council of Australia (the Committee).

The matter the Committee wishes to raise is the inappropriateness of the retrospective operation of the Exploration Amendments. In particular, we consider:

  1. Retrospectivity is generally inappropriate. It should only be applied in exceptional circumstances, and the Draft Bill does not contemplate an exceptional circumstance which would justify retrospective operation.
     
  2. The Exploration Amendments sit at the extreme end of retrospective law change—they apply not to the date of announcement, but to almost a decade prior to announcement.
     
  3. Retrospectivity is especially inappropriate in circumstances where, as here, it is an offence for a taxpayer to fail to comply with relevant provisions of the PRRT Act dealing with ‘exploration for petroleum’.

Consistent with the rule of law,1 and as a matter of general policy, tax measures should apply prospectively as a general rule. This has been recognised both by Treasury,2 and in case law.3 Prospective and certain laws are integral to the proper functioning of the tax system, allowing taxpayers to, for example, make investment decisions, and strike commercial bargains with certainty.4

Retrospective legislative change, on the other hand, raises the following key issues:

  1. Such laws run counter to the general principle that a citizen has a right to determine the law applicable to them at any given date. If laws cannot be known ahead of time, individuals and businesses may not be able to arrange their affairs to comply with those laws. It potentially exposes individuals and businesses to sanctions and non-compliance.
     
  2. Any retrospective change also has the potential to be unfair with increased potential for unintended consequences from greater regulatory complexity.
     
  3. The process of imposing retrospective laws may create confusion and unpredictability, and goes against the principle of transparency in the process of lawmaking.5

Read the full submission below.


1 Justice Michelle Gordon, ‘The Commonwealth’s Taxing Power and its Limit—Are we there yet?’ (2013) 36 Melbourne University Law Review 1037 at 1061, citing Chief Justice Murray Gleeson, ‘Courts and the Rule of Law’ (Speech delivered at the Rule of Law Series, the University of Melbourne, 7 November 2001).
2 Treasury, Report on Aspects of Income Tax Self Assessment (August 2004) at 70.
3 See, e.g., Stephens v R [2022] HCA 31, which held in a non-tax context that ‘retrospective laws … are capable of defeating reasonable expectations concerning rights’ at [29].
4 See Tax Institute of Australia, Submission to the Australian Law Reform Committee Inquiry ‘Traditional Rights and Freedoms—Encroachment by Commonwealth Laws’, Submission 68 at [18].
5 Law Council of Australia, Submission to the Australian Law Reform Committee Inquiry ‘Traditional Rights and Freedoms—Encroachment by Commonwealth Laws’, Submission 75 at [65].

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