Explanatory Memorandum
(Circulated by the authority of the Treasurer, Hon J. B. Hockey MP)General outline and financial impact
Temporary budget repair levy
The following Bills amend the Income Tax Assessment Act 1997 (ITAA 1997), the Income Tax Rates Act 1986 (ITRA 1986), the Income Tax (Transitional Provisions) Act 1997 (IT(TP) Act 1997) and other taxation imposition and ratings Acts to introduce a three-year progressive budget repair levy in the primary form of additional income tax on Australian resident and foreign resident individuals commencing in the 2014-15 financial year:
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- Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014;
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- Income Tax Rates Amendment (Temporary Budget Repair Levy) Bill 2014;
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- Family Trust Distribution Tax (Primary Liability) Amendment (Temporary Budget Repair Levy) Bill 2014;
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- Fringe Benefits Tax Amendment (Temporary Budget Repair Levy) Bill 2014;
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- Income Tax (Bearer Debentures) Amendment (Temporary Budget Repair Levy) Bill 2014;
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- Income Tax (First Home Saver Accounts Misuse Tax) Amendment (Temporary Budget Repair Levy) Bill 2014;
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- Income Tax (TFN Withholding Tax (ESS)) Amendment (Temporary Budget Repair Levy) Bill 2014;
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- Superannuation (Departing Australia Superannuation Payments Tax) Amendment (Temporary Budget Repair Levy) Bill 2014;
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- Superannuation (Excess Non-Concessional Contributions Tax) Amendment (Temporary Budget Repair Levy) Bill 2014;
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- Superannuation (Excess Untaxed Roll-Over Amounts Tax) Amendment (Temporary Budget Repair Levy) Bill 2014;
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- Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 1) Amendment (Temporary Budget Repair Levy) Bill 2014;
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- Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 2) Amendment (Temporary Budget Repair Levy) Bill 2014;
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- Tax Laws Amendment (Interest on Non-Resident Trust Distributions) (Temporary Budget Repair Levy) Bill 2014;
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- Tax Laws Amendment (Untainting Tax) (Temporary Budget Repair Levy) Bill 2014; and
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- Trust Recoupment Tax Amendment (Temporary Budget Repair Levy) Bill 2014.
The temporary budget repair levy will also be reflected in a number of tax rates that are currently based on the top personal marginal tax rate (45 per cent), as well as those based on a calculation comprising the top personal rate and the Medicare levy (currently 1.5 per cent, but legislated to increase to 2 per cent from 1 July 2014), to maintain the integrity and ensure the fairness of the tax system, and minimise opportunities for avoiding the levy.
These changes will ensure that those with a greater capacity to pay make a larger contribution to reducing the budget deficit.
Date of effect: The levy is payable with respect to the 2014-15 financial year and the next two financial years.
Proposal announced: The measure was announced in the 2014-15 Budget.
Financial impact: The measure will have the following revenue impacts:
| 2013-14 | 2014-15 | 2015-16 | 2016-17 | 2017-18 |
| - | $600m | $1,150m | $1,200m | $150m |
Human rights implications: This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.99 to 1.112.
Compliance cost impact: This measure does not alter the existing compliance obligations for individuals, and only has a very minor transitional impact for entities that withhold tax with respect to individuals.