Explanatory Memorandum PART A(Circulated by authority of the Treasurer, the Hon P.J. Keating, MP)
As stated in the May 1988 Economic Statement the proposal to tax formerly exempt superannuation funds and approved deposit funds together with the proposal (also announced in the May 1988 Economic Statement and to be included in another Bill) to tax the superannuation and rollover deferred annuity business income of life insurance companies and registered organisations is expected to generate additional revenue of $980 million in 1989-90 and $1,400 million in 1990-91. The net revenue gain will be smaller though because of proposed reductions in the tax payable on retirement benefits and the increase in the ceiling for deductible contributions by the self-employed and unsupported employees.
The revenue gain from the change to life insurance business taxation is estimated at $70 million in 1988-89, although this will be more than offset by the reduction in the tax rate applicable to such business as proposed in the Income Tax Rates Amendment Bill 1988.
The proposed amendment relating to share cancellation arrangements is of a safeguarding nature. Without the amendment very significant amounts of revenue would be at risk from the deductions, including for capital losses, that the arrangements would generate.
The change to the definition of an approved research institute will have no impact on revenue.
These three Bills will formally impose the tax to be payable on the taxable contributions and other income of complying superannuation funds, approved deposit funds and pooled superannuation trusts. The proposals complement the amendments contained in the Taxation Laws Amendment Bill (No.6) 1988 which will make the abovementioned entities subject to tax. As already noted, these measures are expected to generate additional revenue of $980 million in 1989-90 and $1,400 million in 1990-91.