House of Representatives

Income Tax Rates Amendment (RSAs Provided by Registered Organizations) Bill 1999

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

2

Explanation of items

2.1 The amendments to the Tax Act proposed in the Financial Sector Reform (Amendments and Transitional Provisions) Bill 1999 establish the RSA class of assessable income for friendly societies or other registered organizations. The RSA class of assessable income is split into two components:

the RSA category A component; and
the RSA category B component.

2.2 Items 1,2 and 3 of the Schedule insert definitions of the RSA category A component, the RSA category B component and the RSA combined component into subsection 3(1) of the Rates Act. The terms have the same meaning as in the Tax Act.

2.3 Items 4 and 5 of the Schedule amends subsection 23(4) of the Rates Act to specify that:

the RSA category A component of the RSA combined component of taxable income of a registered organization is taxed at a rate of 15 per cent; and
the RSA category B component of the RSA combined component of taxable income of a registered organization is taxed at a rate of 36 per cent.

2.1 This will ensure that the RSA business of friendly societies or other registered organizations will be taxed at the same rate that applies to the RSA business of competing entities.

2.2 Item 6 of the Schedule makes a consequential amendment to ensure that subsection 23(4BA) of the Rates Act, which specifies the rate of tax on the RSA business of banks and other financial institutions, does not apply to the RSA business of registered organizations.


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