House of Representatives

Tax Laws Amendment (2011 Measures No. 8) Bill 2011

Pay As You Go Withholding Non-compliance Tax Bill 2011

Pay As You Go Withholding Non-compliance Tax Act 2012

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

General outline and financial impact

Commissioner's discretion for primary production elections

Schedule 1 to this Bill amends the Income Tax Assessment Act 1997 to provide the Commissioner of Taxation with discretion to disregard certain events (for example, when a beneficiary becomes insolvent) that would otherwise trigger the assessment of certain income for a primary production trust, in the year of the event.

Date of effect : These amendments will apply to the 2005-06 income year and later income years.

The retrospective application of these amendments will give taxpayers the benefit of this favourable change for earlier years back to 2005-06.

Proposal announced : This measure was announced in Parliament by the Assistant Treasurer and Minister for Financial Services and Superannuation on 20 June 2011.

Financial impact : This measure is estimated to have a small unquantifiable cost to revenue over the forward estimates period. It is expected that some of that cost is a timing impact and is likely to be recovered in future years.

Compliance cost impact : Minimal.

Petroleum Resource Rent Tax: clarifying the taxing point

Schedule 2 to this Bill amends the Petroleum Resource Rent Tax Assessment Act 1987 to provide certainty regarding how the 'taxing point' is determined for the purposes of the Petroleum Resource Rent Tax (PRRT).

The taxing point is central to the determination of PRRT liabilities, and was recently considered by the Federal Court in Esso Australia Resources Pty Ltd v The Commissioner for Taxation [ 2011 ] FCA 360 .

These amendments provide statutory reinforcement of the Federal Court's decision, affirming the long-established application of the PRRT law.

Date of effect : 1 July 1990.

The amendments apply retrospectively to remove any doubt about the long-established operation of the PRRT.

They do not impose any new tax burden, as the amendments merely clarify and confirm the current application of the PRRT, consistent with the policy intent.

Proposal announced : This measure was announced as part of the 2011-12 Budget.

Financial impact : Nil, as these amendments affirm the established application of the PRRT law.

Compliance cost impact : Nil.

Companies' non-compliance with PAYG withholding and superannuation guarantee obligations

Schedule 3 to this Bill strengthens directors' obligations to cause their company to comply with its existing pay as you go (PAYG) withholding and superannuation guarantee requirements. These amendments reduce the scope for companies to engage in fraudulent phoenix activity or escape liabilities and payments of employee entitlements by:

extending the director penalty regime to make directors personally liable for their company's unpaid superannuation guarantee amounts;
allowing the Commissioner of Taxation (Commissioner) to commence proceedings to recover director penalties three months after the company's due day where the company debt remains unpaid and unreported after the three months passes, without first issuing a director penalty notice; and
in some instances making directors and their associates liable to PAYG withholding non-compliance tax where the company has failed to pay amounts withheld to the Commissioner.

Date of effect : Broadly, these amendments will commence on the day on which this Bill receives Royal Assent.

Proposal announced : These proposals were announced in the 2011-12 Budget, confirming an election commitment of 8 August 2010.

Financial impact : The revenue impact of this measure is as follows:

2011-12 2012-13 2013-14 2014-15
$10m $60m $95m $95m

Compliance cost impact : The compliance costs associated with this measure are estimated to be a small increase in compliance activities for certain directors and their associates. The costs, for the most part, are for companies who would be actively seeking to avoid their tax and superannuation obligations to gain an unfair competitive advantage.

Summary of regulation impact statement

Regulation impact on business

Impact : This Schedule deters companies from engaging in fraudulent phoenix activities and improves the regulatory environment for businesses that comply with the tax law by paying PAYG withholding to the Commissioner and superannuation guarantee for the benefit of employees. This is achieved by providing disincentives for companies and their directors that do not comply with their tax law and employee obligations.

Main points :

These amendments are not expected to increase compliance costs or operating costs for companies or company directors who are already causing their company to comply with its existing tax or superannuation obligations.
These amendments reduce the incentive for companies to engage in fraudulent phoenix activities or to avoid payment of liabilities in order to undercut other companies who are complying with their tax and superannuation obligations.
Expanding the director penalty regime to superannuation guarantee improves the likelihood that employees receive the superannuation contributions they are entitled to.

Consequential amendments for taxation of gaseous fuels

Schedule 4 to this Bill makes minor consequential amendments to the taxation arrangements for gaseous fuels. The changes ensure that the legislation applies as intended and does not impose excessive compliance costs on industry.

Date of effect : These amendments apply from 1 December 2011.

Proposal announced : This measure has not previously been announced.

Financial impact : The revenue impact of this measure is negligible and while not zero, has been rounded to zero in the forward estimates.

Compliance cost impact : These amendments minimise industry compliance costs.

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