House of Representatives

Tax Laws Amendment (2010 Measures No. 1) Bill 2010

Explanatory Memorandum

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

General outline and financial impact

Approved superannuation clearing house

Schedule 1 to this Bill amends various parts of the superannuation legislation to support the Government's 2008-09 Budget measure to provide a free superannuation clearing house service for small businesses. This measure is designed to reduce the cost to small businesses of complying with their superannuation obligations.

These amendments allow employers to meet their obligations to make compulsory superannuation contributions for the benefit of their employees, and to promptly remit superannuation amounts deducted from an employee's salary or wages, by paying to an approved clearing house.

These amendments also:

·
extend the conditions under which superannuation contributions for the benefit of an employee will comply with the choice of fund requirements to accommodate contributions made through an approved clearing house; and
·
allow taxpayer information to be disclosed to an approved clearing house for the purpose of performing its functions.

Date of effect: 1 July 2010.

Proposal announced: This measure was announced in the 2008-09 Budget on 13 May 2008. On 6 November 2009, the Minister for Human Services, Financial Services, Superannuation and Corporate Law announced that the Government's free superannuation clearing house service for small business will be delivered through Medicare Australia (Media Release No. 035 of 6 November 2009).

Financial impact: Nil. However, in the 2008-09 Budget the Government allocated funding of $16.1 million over three years (commencing in 2009-10) for the provision of a free superannuation clearing house service for small businesses.

Compliance cost impact: Low or nil.

Forestry managed investment schemes

Schedule 2 to this Bill amends the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936 to protect the deductions of investors in forestry managed investment schemes where the four-year holding period rules are failed for reasons genuinely outside the investor's control.

This Schedule also amends the Taxation Administration Act 1953 to maintain the capacity of the Commissioner of Taxation to apply for civil penalties against the promoters of affected schemes, notwithstanding the amendments to the four-year rules.

Date of effect: The amendments apply to capital gains tax (CGT) events happening on or after 1 July 2007.

Proposal announced: This measure was announced in the Assistant Treasurer's Media Release No. 074 of 21 October 2009.

Financial impact: Negligible.

Compliance cost impact: This measure is expected to have a low impact on compliance costs.

Managed investment trusts: capital treatment and taxation of carried interests

Schedule 3 to this Bill amends the Income Tax Assessment Act 1997 to allow eligible managed investment trusts (MITs) to make an irrevocable election (that is, choice) to apply the capital gains tax (CGT) provisions as the primary code for the taxation of gains and losses on disposal of certain assets (primarily shares, units and real property). If a MIT is eligible to make an election and it has not done so, then any gains or losses on the disposal of eligible assets (excluding land, an interest in land, or an option to acquire or dispose of such an asset) will be treated on revenue account.

This Schedule also clarifies the taxation treatment of 'carried interest' units in MITs. These units will effectively be treated on revenue account in the hands of the unit holder.

Date of effect: These amendments broadly apply in relation to eligible CGT events that happen on or after the start of the 2008-09 income year.

The amendments which deem certain assets to be on revenue account when an election is not made, apply to disposals of assets, cessations of ownership of assets and other realisations of assets which take place on or after Royal Assent.

The amendments concerning 'carried interests' in MITs apply in relation to entitlements to distributions that arise on or after Royal Assent, or disposals of assets that happen on or after Royal Assent.

Proposal announced: This measure was announced in the then Assistant Treasurer and Minister for Competition Policy and Consumer Affairs' Media Release No. 049 of 12 May 2009.

Financial impact: This measure has unquantifiable revenue implications from the 2009-10 income year.

Compliance cost impact: Low.

Restricting eligibility to the entrepreneurs' tax offset through an income test

Schedule 4 to this Bill amends Subdivision 61-J of the Income Tax Assessment Act 1997 by introducing an income test into the eligibility criteria for the entrepreneurs' tax offset (ETO). The income test will restrict the eligibility of individuals whose income is over a threshold amount of income for ETO purposes ($70,000 if they are single and $120,000 if they have a family).

Date of effect: This measure applies in relation to assessments for income years that commence on or after 1 July 2009.

Proposal announced: This measure was first announced in the Treasurer's Media Release No. 050 of 13 May 2008. The measure was initially announced to commence on 1 July 2008. This was deferred by 12 months and announced in the then Assistant Treasurer and Minister for Competition Policy and Consumer Affairs' Media Release No. 048 of 12 May 2009.

Financial impact: This measure will have the following revenue implications:

2009-10 2010-11 2011-12 2012-13
Nil $22m $22m $22m

Compliance cost impact: This measure is expected to result in a low overall compliance cost impact, comprised of a low implementation impact and a low increase in ongoing compliance costs relative to the affected group.

Consolidation

Schedule 5 to this Bill amends the Income Tax Assessment Act 1997 to

·
clarify the operation of certain aspects of the consolidation regime; and
·
improve interactions between the consolidation regime and other parts of the law.

Date of effect: Many of the amendments apply from 1 July 2002. Others apply from 1 July 2005, 27 October 2006, 8 May 2007, 1 July 2009 or from the date of introduction of this Bill into the House of Representatives. The amendments that are retrospective are beneficial to taxpayers.

Proposal announced: These amendments were announced jointly in the Treasurer's and the then Assistant Treasurer and Minister for Competition Policy and Consumer Affairs' Media Release No. 053 of 13 May 2008.

Financial impact: These amendments, other than those in Part 20, are expected to have a small but unquantifiable cost to revenue. The amendments in Part 20 are expected to result in the following revenue gain:

2009-10 2010-11 2011-12 2012-13
- $25m $50m $75m

Compliance cost impact: Low.

Miscellaneous amendments

Schedule 6 to this Bill makes technical corrections and other miscellaneous amendments to the taxation laws. These amendments are part of the Government's commitment to the care and maintenance of the tax system.

Date of effect: These amendments commence from Royal Assent unless otherwise stated.

Proposal announced: These amendments were foreshadowed by release in draft form on the Treasury website on 30 November 2009.

Financial impact: The amendments to the small business retirement exemption, proposed by items 7 to 11, are expected to result in an unquantifiable but small cost to revenue.

The amendments to the administrative penalties for false or misleading statements, proposed by items 58 to 105, are expected to result in an unquantifiable but small gain to revenue.

The other miscellaneous amendments are expected to have a nil to minimal revenue impact.

Compliance cost impact: Nil to low.


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