House of Representatives

New Business Tax System (Imputation) Bill 2002

New Business Tax System (Over-franking Tax) Bill 2002

New Business Tax System (Franking Deficit Tax) Bill 2002

Explanatory Memorandum

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

General outline and financial impact

Imputation system

These bills introduce a new simplified imputation system into the taxation law. Like the current imputation system, the new imputation system allows Australian corporate tax entities to pass on to their members credit for income tax that they have paid.

The benefits of the new system include:

the simplification of the current rules which will result in compliance cost savings;
increased flexibility in the method in which companies frank distributions;
consistency of treatment across entities receiving franked dividends; and
improved clarity of the law using clearer and more accessible drafting techniques developed in the tax law improvement project.

Date of effect: Broadly speaking, the measure applies from 1 July 2002.

Proposal announced: The proposal was announced in Treasurers Press Release No. 58 of 21 September 1999 as a component of the unified entity regime. On 14 May 2002, the Minister for Revenue and Assistant Treasurer announced in Press Release No. C57/02, the Governments program for delivering the next stage of business tax reform measures. In that press release, the Minister confirmed that the simplified imputation system will commence on 1 July 2002.

Financial impact: The new imputation system will have no revenue impact.

Compliance cost impact: The new imputation system is designed to reduce compliance costs incurred by business by providing for simpler processes and increased flexibility.

Summary of regulation impact statement

Regulation impact on business

Impact: Low.

Main points:

The changes will simplify the imputation system resulting in both reduced taxpayer compliance costs and ATO administration costs.
The new imputation system will, broadly speaking, provide the same outcome as that provided under the current system.
The changes will also address efficiency and integrity problems in the current imputation system.

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