Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon. Paul Keating, M.P.)MAIN FEATURES
The main features of the Bank Account Debits Tax Administration Amendment Bill 1984 are as follows:
Exemption of accounts of support groups for existing exempt bodies (Clause 3 - paragraphs (1)(d), (e) and (f))
The existing legislation provides that an account held by a public benevolent or religious institution, a public or non-profit hospital or a government or non-profit school, college or university is eligible for exemption from the tax. The Bill will grant a similar tax exemption to an organisation established and operated exclusively for the purpose of raising money for, or otherwise supporting, a specified institution, hospital, school, college or university that is itself exempt from tax.
Parents and citizens associations, mothers' clubs and parents and friends associations will be among the school support bodies eligible for exemption. Separately constituted auxiliaries set up to raise funds for a particular hospital or public benevolent institution will also be within the scope of the proposed exemption.
The proposed exemption will apply to debits made on or after the first day of the month following the month in which this Bill receives the Royal Assent.
Minor business activities of government bodies (Clause 3 - paragraphs (1)(a) and (g))
There is a specific provision in the bank accounts debits tax legislation dealing with the exemption of government bodies. It provides that a government department or authority, a municipal corporation or other local governing body that does not carry out as its sole or principal function an activity in the nature of a business is eligible for exemption from the tax, except in relation to bank account debits resulting from transactions connected with a business undertaking.
The proposed amendment will liberalise this exemption so that such a government body will be eligible for exemption not only in respect of its governmental activities but also in respect of any business activity that forms a minor or insignificant part of its functions. This will mean, for example, that a local municipal council will no longer be subject to the tax in respect of business activities such as a caravan park, child care centre or swimming pool where the activity represents an insignificant part of the council's functions. On the other hand, a council that carries on, for example, a substantial electricity undertaking will not be eligible for exemption in respect of debits relating to that business activity.
The amendment will apply to debits made on or after the first day of the month following the month in which this amending Bill receives the Royal Assent.
Tax exemption provisions in enabling legislation of government bodies (Clause 3 - paragraphs (1)(b) and (c) and Clause 4)
The Bill will clarify the operation of the bank account debits tax legislation in relation to a government department or authority, a municipal corporation or other local governing body whose enabling legislation includes a provision exempting it from Commonwealth taxes.
The existing legislation sets out specific tests for the exemption of government bodies. Those tests are designed to ensure that government bodies are not eligible for exemption from the tax in respect of their business activities. Notwithstanding those specific requirements, it has been contended that certain government bodies are completely exempt from the tax by virtue of a tax exemption provision contained in their enabling legislation.
The amendments proposed by the Bill will make it clear that a government body will only be entitled to exemption from the tax if it satisfies the specific tests for exemption of government bodies contained in the bank account debits tax legislation. These amendments are to apply to debits made on or after 22 August 1984.
More detailed explanations of the clauses of each of the Bills are contained in the notes that follow.