Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello MP)General outline and financial impact
Fringe benefits tax - improving access for small business
Schedule 1 to this Bill amends the Fringe Benefits Tax Assessment Act 1986 to provide a fringe benefits tax (FBT) exemption to cover the engagement of a relocation consultant to assist in the relocation of an employee.
Schedule 1 also extends the list of work-related items eligible for a FBT exemption and removes the requirement that the provision of remote area housing benefits be 'customary' in an industry to qualify for a FBT exemption.
Date of effect: The amendments will apply in respect of the FBT year following the FBT year in which this Bill receives Royal Assent and in respect of all later FBT years.
Proposal announced: This measure was announced in the 2004-05 Budget and in the Treasurer and Minister for Small Business's joint Press Release No. 36 of 11 May 2004.
Financial impact: The financial impact is unquantifiable but expected to be insignificant.
Compliance cost impact: These amendments will not impose any additional compliance costs.
Effective life of assets declining in value
Under the current capital allowances system, the Commissioner of Taxation (Commissioner) is progressively reviewing and updating the 'safeharbour' effective lives that taxpayers may choose to use in working out the decline in value of assets. The recent Commissioner's Determination, Income Tax (Effective Life of Depreciating Assets) Amendment Determination 2004 (No. 4), provides a significant increase in the 'safeharbour' effective lives of buses, light commercial vehicles, trucks and truck trailers.
Schedule 2 to this Bill amends the Income Tax Assessment Act 1997 to introduce statutory 'caps' that will be the effective life used to calculate the decline in value of those assets if:
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- the taxpayer chooses to adopt the effective life determined by the Commissioner for a particular asset; and
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- the cap (if any) that applies to that asset is shorter than the effective life determined by the Commissioner.
Date of effect: This measure will apply to an asset if its start time is on or after 1 January 2005. In practice, the statutory 'caps' will apply in relation to revised Commissioner determined 'safeharbour' effective lives that have effect from 1 January 2005.
Proposal announced: This measure was announced by the Minister for Revenue and Assistant Treasurer in Press Release No. 003 of 12 August 2004 and reaffirmed in Press Release No. 021 of 15 December 2004.
Financial impact: The effect of this measure is to limit the revenue gain arising from the revised Commissioner's Determination to $1 million for the financial year 2004-05, $10 million for 2005-06, $31 million for 2006-07 and $52 million for 2007-08. If these statutory 'caps' were not introduced, taxpayers could be expected to pay an extra $3 million for the year 2004-05, $30 million for 2005-06, $95 million for 2006-07 and $156 million for 2007-08. This is because the statutory 'caps' provide significantly shorter effective lives than the Commissioner's Determination. The proposed statutory effective life 'caps' will provide a tax benefit to affected taxpayers of $2 million for 2004-05, $20 million for 2005-06, $64 million for 2006-07 and $104 million for 2007-08.
Compliance cost impact: Taxpayers will not incur additional compliance costs where a capped life applies to an asset.
Supplies of rights or options offshore
Schedule 3 to this Bill amends the A New Tax System (Goods and Services Tax) Act 1999 to ensure that the goods and services tax applies to transactions involving non-residents who supply options or rights to things which are connected with Australia.
Date of effect: On or after the date of introduction of this Bill to Parliament.
Proposal announced: This proposal has not been announced.
Financial impact: This measure is expected to result in a gain to revenue as follows:
| 2004-05 | 2005-06 | 2006-07 | 2007-08 |
|---|---|---|---|
| $50 million | $140 million | $140 million | $150 million |
Compliance cost impact: The amendments are not expected to impact significantly on compliance costs of Australian enterprises.
Mature age worker tax offset
Schedule 4 to this Bill amends the Income Tax Assessment Act 1997 to introduce a tax offset for workers aged 55 years and over. Eligibility for the offset will be based on age and net income from working, with a maximum annual tax offset of $500.
Date of effect: These amendments will apply to assessments for income years commencing on or after 1 July 2004.
Proposal announced: This measure was announced by the Government in its election statement Mature Age Worker Tax Offset on 9 September 2004.
Financial impact: This measure will cost the revenue $460 million in 2005-06, $490 million in 2006-07 and $490 million in 2007-08.
Compliance cost impact: This measure is expected to have a minimal impact on compliance costs.