Retrospectivity
11.47. The provisions that have been suggested to overcome the problems for the Revenue of income-splitting have, of necessity, a wide application. If they are adopted, the consequences of their infringement will be, in many cases, to impose a heavy burden of taxation upon those who fall within their purview. For a long period of years there has been no legislation in the Australian taxation system comparable to what is now being proposed. Accordingly, taxpayers have been lawfully enabled and entitled to order their affairs so that the tax for which they become liable was less than it otherwise would have been. The arrangements they made and the documents they executed breached no provision of the law. A great many of these transactions have been long acted upon and the rights and obligations of third parties, who were not the instigators of these schemes, have been regulated and affected by them, and it would not be unreasonable to suppose that in a great many cases what has been done is irrevocable.
11.48. There is a well-established, fundamental and sound principle that legislation, especially fiscal legislation, should
not have a retrospective operation. That which was
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lawfully done should not, after the completion of the act
by which it was done, be made unlawful and subjected to a penalty. There is a strong presumption against retrospectivity
because it manifestly shocks one's sense of justice.note It is, for example,
because of this principle that section 437 (2) of the United Kingdom Income and Corporation Taxes Act 1970 is framed not
to affect an irrevocable settlement made before 22 April 1936, which was the date when section 21 of the Finance Act 1936
came into operation and introduced for the first time provisions similar to those now appearing in the current
legislation. In the opinion of the Committee, it will be proper, therefore, to safeguard any legislation that may be
introduced on the lines discussed in this chapter from the vice of retrospectivity penalising any bona fide transaction
where the rights and obligations of the parties are involved irrevocable.