House of Representatives

Tax and Superannuation Laws Amendment (2014 Measures No. 2) Bill 2014

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)

General outline and financial impact

Medicare levy low-income threshold for families

Schedule 1 to this Bill amends the Medicare Levy Act 1986 to increase the Medicare levy low-income threshold for families and the dependent child-student component of the threshold.

Date of effect: This measure applies to the 2013-14 income year and later income years.

Proposal announced: This measure was announced in the 2014-15 Budget on 13 May 2014.

Financial impact: This measure has the following revenue implications:

2013-14 2014-15 2015-16 2016-17 2017-18
- -$9m -$13m -$13m -$13m

Human rights implications: This Bill is compatible with human rights. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.18 to 1.22.

Compliance cost impact: Nil.

Protection for anticipation of certain discontinued announcements

Schedule 2 amends the Income Tax Assessment Act 1936 (ITAA 1936) to ensure outcomes are preserved in relation to tax assessments where:

taxpayers have reasonably and in good faith anticipated the impact of identified announcements made by a previous government that the tax law would be amended with retrospective effect; and
the current Government has now decided that the announced proposal to change the law will not proceed.

Date of effect: The availability of protection will be based on statements made by or on behalf of a taxpayer that relate to the period an identified announcement was 'on foot'. An announcement is 'on foot' from the day on which it was originally announced by a previous government until 14 December 2013, which is the day the current Government announced that the measure would not proceed. Accordingly, the amendments have a retrospective impact, although the effect of the amendments can only benefit taxpayers. This is because outcomes under tax assessments will only be preserved where any changes to those outcomes would lead to a less favourable result for the taxpayer. More specifically, the amendments apply to a taxpayer in relation to an identified announcement where:

the taxpayer has given a statement to the Commissioner of Taxation while the announcement was 'on foot' that anticipates the impact of the announcement, provided that the statement is not in a return that was due to be lodged before the announcement was 'on foot'; or
the taxpayer has given an original return to the Commissioner of Taxation which anticipates the impact of the announcement after 14 December 2013, and, on or before 14 December 2013:

-
the events or circumstances that enable the impact of the announcement to be anticipated have happened or existed; or
-
the taxpayer had definitively committed to the happening or existence of events or circumstances that enable the impact of the announcement to be anticipated.

Proposal announced: The measure was announced in the Treasurer's and then Assistant Treasurer's Joint Media Release of 6 November 2013, 'Restoring integrity in the Australian tax system'.

Financial impact: The financial impact of this initiative is minimal.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 2, paragraphs 2.107 to 2.110.

Compliance cost impact: There will be a minor compliance cost saving as a result of these amendments. This is because costs that would have otherwise been borne by taxpayers in revising and adjusting their tax positions in relation to discontinued announcements will not be incurred. The amount of the compliance cost saving is unquantifiable.

Preventing dividend washing

Schedule 3 to this Bill will amend the Income Tax Assessment Act 1997 (ITAA 1997) to introduce an integrity rule to limit the ability of taxpayers to obtain a tax benefit from 'dividend washing'.

Broadly, dividend (or distribution) washing is a form of scheme by which a taxpayer can obtain multiple franking credits in respect of a single economic interest by selling an interest after an entitlement to a franked distribution has accrued and then immediately purchasing an equivalent interest with a further entitlement to a corresponding franked distribution.

Date of effect: This measure applies to distributions made on or after 1 July 2013.

Proposal announced: The former government announced this measure in Media Release No. 70 of 14 May 2013. On 6 November 2013, in a Media Release titled Restoring Integrity in the Australian tax system, the Treasurer and Assistant Treasurer announced the Government intended to proceed with this measure.

Financial impact: This measure has the following fiscal impact ($m):

2013-14 2014-15 2015-16 2016-17
- 20.0 20.0 20.0

Human rights implications: This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 3, paragraphs 3.91 to 3.102.

Compliance cost impact: The additional compliance costs in connection with this measure are minor.


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