House of Representatives

Tax Laws Amendment (2009 Measures No. 1) Bill 2009

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon Wayne Swan MP)

General outline and financial impact

PAYG instalment reduction for small businesses

Schedule 1 to this Bill amends section 45-400 of Schedule 1 to the Taxation Administration Act 1953 (which provides how the Commissioner of Taxation works out the amount of the pay as you go (PAYG) instalments on the basis of GDP-adjusted notional tax for quarterly payers paying four instalments annually) to provide for:

a 20 per cent reduction of the amount of the PAYG instalment worked out under the section for the quarter that includes 31 December 2008 for certain small business taxpayers; and
a regulation-making power to allow the amount of the PAYG instalment worked out under the section to be reduced in the future in circumstances specified by regulations.

Date of effect: This measure applies in relation to instalment quarters in the 2007-08 income year and later income years.

Proposal announced: This measure was announced in the Treasurer's Media Release No. 140 of 12 December 2008 and the Prime Minister's Media Release '$4.7 Billion Nation Building Package' of 12 December 2008.

Financial impact: This measure will have these revenue implications:

2007-08 2008-09 2009-10 2010-11 2011-12
Nil -$440m $395m $45m Nil
Compliance cost impact: Low. This measure will not require increased compliance activity on behalf of small business taxpayers. There is no ongoing compliance cost impact and a minimal transitional impact.

Temporary residents' superannuation and unclaimed money

Schedule 2 to this Bill amends various Acts as a result of the payment of temporary residents' unclaimed superannuation to the Australian Government and to improve the administration of the broader unclaimed money regime.

The temporary residents' superannuation amendments affect legislation governing small superannuation accounts, superannuation guarantee, the Government superannuation co-contribution and administrative arrangements within the unclaimed money regime.

The changes to the broader unclaimed money regime are intended to make the existing provisions in the Superannuation (Unclaimed Money and Lost Members) Act 1999 (S(UMLM) Act) more compatible with the new temporary residents' superannuation provisions which have been inserted into the S(UMLM) Act.

Date of effect: These amendments commence on the day after Royal Assent subject to the application, transitional and savings provisions outlined in Part 3 of Schedule 2.

Proposal announced: These amendments have not previously been announced.

Financial impact: Unquantifiable, but expected to have a minor or negligible net financial impact (revenue and outlays).

Compliance cost impact: Low.

Reforms to income tests

Schedule 3 to this Bill amends relevant legislation to give effect to measures, announced in the 2008-09 Budget, to amend income tests across the tax and transfer systems. These measures will enhance fairness in the application of income tests and better ensure that government assistance is targeted to those most in need.

Overview of arrangements

Chapter 3 outlines the key concepts and definitions that will be added to income for means-tested government assistance programs as a result of the 2008-09 Budget measures. These concepts are certain 'salary sacrificed' contributions to superannuation, to be known as 'reportable superannuation contributions', and an individual's 'total net investment loss'.

There is also a definition of 'reportable employer superannuation contributions' (RESC) that is to be inserted in Schedule 1 to the Taxation Administration Act 1953 (TAA 1953). RESC are employer contributions that fall within the definition of 'reportable superannuation contributions'.

Further, Chapter 3 inserts a new definition of 'adjusted fringe benefits total' into the Income Tax Assessment Act 1936 (ITAA 1936). The chapter also consolidates the components of income to be assessed for particular tax offsets and the Medicare levy surcharge into two new definitions in section 995-1 of the Income Tax Assessment Act 1997 . These definitions are 'rebate income' and 'income for surcharge purposes' respectively.

Chapter 4 outlines the amendments to payment summary provisions in Schedule 1 to the TAA 1953 to require reporting of RESC on payment summaries and in the annual withholding report for the Commissioner of Taxation (Commissioner).

Chapter 5 outlines the amendments to specific income definitions across tax and transfer legislation for relevant affected programs to include the new components of income as relevant. These components are 'reportable superannuation contributions', RESC, an individual's 'total net investment loss', and an individual's 'adjusted fringe benefits total' in respect of particular tax offsets.

Chapter 6 is the regulation impact statement prepared in respect of the proposal to include particular 'salary sacrificed' contributions to superannuation in income tests.

Chapter 7 outlines amendments to the Farm Household Support Act 1992 to exclude from income, certain superannuation contributions that would have become income for the purposes of the exceptional circumstances relief payment as a result of reforms announced in the 2008-09 Budget.

Chapter 8 outlines amendments to the dependency tax offset provisions in the ITAA 1936 to align the income definitions used for the purposes of those offsets with the 'adjusted taxable income' definition in the A New Tax System (Family Assistance) Act 1999 . As part of these reforms, this chapter repeals the 'separate net income' definition.

Date of effect: These amendments commence the day after Royal Assent and apply in relation to income years starting on or after 1 July 2009.

Proposal announced: The amendments in this Schedule give effect to measures announced on 13 May 2008 as part of the 2008-09 Budget.

Financial impact: These amendments have a fiscal cost of $545.2 million over the forward estimates (including administration costs) as follows:

2007-08 2008-09 2009-10 2010-11 2011-12
Nil -$15.1m $164.0m $192.5m $203.8m

Compliance cost impact: There are likely to be medium implementation costs for employers as a result of the amendments to payment summary requirements and a medium increase in ongoing compliance costs. However, the design of the initiative as reflected in the law sought to minimise compliance costs for employers.

Summary of regulation impact statement

Regulation impact on business - inclusion of reportable superannuation contributions in income

Impact: The amendments to include 'reportable superannuation contributions' in income tests will affect employers, intermediaries, welfare recipients, tax practitioners and the Australian Government.

Main points

The amendments will require entities to report any RESC on individual annual and part-year payment summaries from 1 July 2009, as well as the annual withholding report for the Commissioner.
Intermediaries, such as payroll providers and software developers, will need to update software packages and payroll systems to allow for the reporting of RESC.
The amendments will affect individuals' eligibility for relevant means-tested government assistance programs. Individuals will also be required to declare any 'reportable superannuation contributions' as income when applying for government assistance.

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