Senate

Treasury Laws Amendment (Tax Integrity and Other Measures No. 2) Bill 2018

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)
This memorandum takes account of amendments made by the House of Representatives to the bill as introduced.

Chapter 5 - Income tax and withholding exemptions for the ICC World Twenty20

Outline of chapter

5.1 Schedule 4 to this Bill amends the ITAA 1997 and the ITAA 1936 to provide an income tax exemption for the IBC and to exempt from withholding tax payments of interest, dividend and royalties made to the IBC. This provides support to the International Cricket Council staging the ICC World Twenty20 in Australia in 2020.

Context of amendments

5.2 The income tax law exempts the ordinary and statutory income of a number of categories of organisations from income tax liability. These are principally contained in Division 50 of the ITAA 1997. Prior to these amendments, the IBC did not qualify for an income tax exemption.

5.3 Payments of interest, dividends and royalties made to non-residents by residents are not subject to withholding tax in some circumstances if the non-resident is exempt from income tax. This exemption is contained in subsection 128B(3) of the ITAA 1936. Prior to these amendments, payments made to the IBC were subject to interest, dividend and royalty withholding tax.

Summary of new law

5.4 Schedule 4 to this Bill amends the ITAA 1997 and the ITAA 1936 to provide an income tax exemption for the IBC and also an exemption from interest, dividend and royalty withholding tax liability for amounts paid to the IBC.

Detailed explanation of new law

5.5 Schedule 4 to this Bill amends the ITAA 1997 to exempt the ordinary and statutory income of the IBC from income tax. The exemption applies for a five year period to support the staging by the International Cricket Council of the ICC World Twenty20 in Australia in 2020. [Schedule 4, item 4, column 1, 2 and paragraph (b) of column 3 of table item 9.3 of section 50-45 of the ITAA 1997]

5.6 Schedule 4 to this Bill also amends the ITAA 1936 to provide an exemption from interest, dividend and royalty withholding tax liability for amounts paid to the IBC. This exemption also applies for the same five year period. [Schedule 4, item 1, subparagraph 128B(3)(a)(i) of the ITAA 1936]

5.7 Schedule 4 to this Bill imposes a special condition in the tax law that the income tax exemption provided by the amendments only applies for the period in which the IBC is a wholly owned subsidiary of the International Cricket Council Limited. The effect of this amendment results in the withholding exemption for the IBC that applies to interest, dividends and royalties also ceasing to apply in any period in which the ownership condition is not met. [Schedule 4, item 4, paragraph (a) of column 3 of table item 9.3 of section 50-45 of the ITAA 1997]

5.8 This ensures that the exemptions achieve their intended purpose of supporting the International Cricket Council in staging the ICC World Twenty20 in Australia in 2020.

Consequential amendments

5.9 The list of entities in the ITAA 1997 that are exempt from income tax on all ordinary and statutory income is updated to include a reference to the IBC. [Schedule 4, item 2, table item headed 'sports, culture or recreation' to section 11-5 of the ITAA 1997]

5.10 Schedule 4 to this Bill makes a minor technical amendment to another exemption in Division 50 so that the provision refers to 'ordinary and statutory income' rather than 'assessable income'. This ensures the language used in Division 50 for different exemptions is consistent and clear. It does not affect the operation of the exemption. [Schedule 4, item 3, table item 8.4 to section 50-40 of the ITAA 1997]

Application and transitional provisions

5.11 Schedule 4 to this Bill applies on and from 1 July 2018 to 30 June 2023 inclusive to:

·
income derived by the IBC; and
·
interest, dividend and royalty withholding tax obligations for payments to the IBC.

[Schedule 4, item 4, paragraph (b) of column 3 of table item 9.3 of section 50-45 of the ITAA 1997]

5.12 Schedule 4 to this Bill commences on the start of the first quarterly period after the day the Bill receives Royal Assent. [Clause 2]


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