Explanatory Memorandum
(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)General outline and financial impact
Primary producers' income averaging and farm management deposits
Schedule 1 to this Bill amends Divisions 392 and 393 of the Income Tax Assessment Act 1997 (ITAA 1997) to allow trust beneficiaries to continue to use the primary production averaging (income averaging) and farm management deposits (FMDs) provisions in an income year where the trust does not have any trust law income (trust income) to which a beneficiary can be presently entitled (for example, because the trust has a loss for trust law purposes).
Date of effect : These amendments, which are favourable for taxpayers, apply where the income year of the trust is the 2010-11 income year or a later income year.
Proposal announced : This measure was announced in the Assistant Treasurer and Minister for Financial Services and Superannuation's Media Release No. 025 of 16 December 2010.
Financial impact : Nil.
Compliance cost impact : Nil to low.
Interim changes to improve the taxation of trust income
Schedule 2 to this Bill amends Subdivision 115-C and Subdivision 207-B of the Income Tax Assessment Act 1997 to ensure that, where permitted by the trust deed, the capital gains and franked distributions (including any attached franking credits) of a trust can be effectively streamed for tax purposes to beneficiaries by making them 'specifically entitled' to those amounts.
Schedule 2 also amends Division 6 of Part III of the Income Tax Assessment Act 1936 , to include specific anti-avoidance rules to address the potential opportunities for tax manipulation that can result from the inappropriate use of exempt entities as beneficiaries.
Date of effect : This measure applies for the 2010-11 income year and later income years.
The Government is implementing a Board of Taxation recommendation that the measure apply from the start of the 2010-11 income year. This provides certainty for taxpayers following the withdrawal of relevant public rulings and practice statements of the Australian Taxation Office with effect from the 2010-11 income year. This measure is generally beneficial to taxpayers.
Proposal announced : This measure was announced in the Assistant Treasurer and Minister for Financial Services and Superannuation's Media Release No. 052 of 13 April 2011.
Financial impact : The financial impact of this measure is unquantifiable but is expected to be small over the forward estimates period.
Compliance cost impact : Low. This measure only impacts upon those trusts that stream capital gains or franked distributions (including any attached franking credits) to specific beneficiaries. There is however an ongoing compliance cost impact and a low transitional impact, reflecting the need for taxpayers to be aware of the amendments, specifically the new specific anti-avoidance rules.
National Rental Affordability Scheme
Schedule 3 to this Bill addresses several technical issues which have arisen from the interaction between the tax law and the National Rental Affordability Scheme Act 2008 and the associated regulations.
These amendments also simplify the operation of the National Rental Affordability Scheme (NRAS) for participants and provide some additional flexibility to NRAS participants in how the incentive is shared between members of consortiums participating in the NRAS.
Date of effect : The amendment to the treatment of state and territory NRAS-related payments applies from the 2008-09 income year. The amendments providing for an optional election apply from the 2010-11 income year. The remaining amendments apply from the 2009-10 income year.
The provision will apply retrospectively for the benefit of affected taxpayers.
Financial impact : This measure does not have any formal financial impact as it is designed to ensure the NRAS incentives are received tax-free by participants in the scheme, as was originally intended.
Compliance cost impact : This measure is expected to reduce compliance costs for affected taxpayers.
Phasing out the dependent spouse tax offset
Schedule 4 to this Bill amends the Income Tax Assessment Act 1936 to implement the 2011-12 Budget measure to phase out the dependent spouse tax offset.
Date of effect : 1 July 2011.
Proposal announced : This measure was announced in the 2011-12 Budget and in the Treasurer's Media Release No. 047 of 10 May 2011.
Financial impact : This measure will have a revenue gain of $755 million over the forward estimates period.
| 2011-12 | 2012-13 | 2013-14 | 2014-15 |
|---|---|---|---|
| $60m | $220m | $230m | $245m |
Compliance cost impact : Low.
Reform of the car fringe benefits rules
Schedule 5 to this Bill amends the Fringe Benefits Tax Assessment Act 1986 to reform the current statutory formula method for determining the taxable value of car fringe benefits by replacing the current statutory rates with a single statutory rate of 20 per cent, regardless of kilometres travelled.
Date of effect : These amendments will apply to commitments made after 7:30 pm, Australian Eastern Standard Time (AEST) on 10 May 2011 and be phased in over four years.
Existing contracts will be grandfathered and therefore subject to existing arrangements.
Proposal announced : This measure was announced in the 2011-12 Budget and in the Treasurer's Media Release No. 050 of 10 May 2011.
Financial impact : The reforms have the following fiscal impact over the forward estimates:
| 2010-11 | 2011-12 | 2012-13 | 2013-14 | 2014-15 |
|---|---|---|---|---|
| $5m | $29.4m | $140.4m | $331.2m | $455.9m |
Compliance cost impact : Ongoing - low.