Revised Explanatory Memorandum(Circulated by authority of the Assistant Treasurer, the Hon Stuart Robert MP)
Chapter 2 Global Infrastructure Hub Ltd
Outline of chapter
2.1 Schedule 3 to the Bill amends the ITAA 1997 to continue to provide the Global Infrastructure Hub Ltd (the Hub) with an exemption from the liability to pay income tax on its ordinary and statutory income.
Context of amendments
2.2 The Hub was established by G20 Leaders at the 2014 Brisbane Summit. It was initially given a four year mandate to December 2018 to advance international efforts to lift infrastructure investment.
2.3 The Hub is funded by contributions from the Australian Government and other G20 members. To avoid these payments being subject to income tax, the Hub was granted tax exempt status under Division 50 of the ITAA 1997. Unless the law is amended, the exemption will expire on 1 July 2019.
2.4 In July 2018, the G20 Finance Ministers agreed to extend the mandate of the Hub for an additional four years through to December 2022. The Australian Government will continue to contribute funding to the Hub during this period to facilitate its work in helping to advance the G20's infrastructure agenda. It is expected that the Hub will also receive financial contributions from other G20 members. If the Hub's income tax exemption expires on 1 July 2019, these payments would be subject to tax after this date.
Summary of new law
2.5 This Bill will extend the Hub's listing in the ITAA 1997 as an income tax exempt entity until 30 June 2023. Extending the Hub's listing in the ITAA 1997 as an income tax exempt entity provides the Hub with certainty about the tax treatment of contributions made to it. These contributions will continue to be income tax free.
2.6 The exemption from income tax will apply to amounts that would have otherwise have been included in the assessable income of the Hub from 1 July 2019 to 30 June 2023.
Comparison of key features of new law and current law
|New law||Current law|
|The ordinary and statutory income of the Hub will continue to be exempt from income tax until 30 June 2023.||From 1 July 2019, amounts paid to the Hub will be included in the assessable income of the Hub and be subject to income tax.|
Detailed explanation of new law
2.7 Schedule 3 to the Bill makes amendments to Division 50 of the ITAA 1997 to extend the Hub's exemption from income tax for a defined period. [Schedule 3, item 1]
2.8 The Hub will continue to be listed as an income tax exempt entity, meaning that all payments made to it by the Australian Government, foreign governments, non-government organisations and other contributors will not be subject to income tax.
2.9 The exemption in the current law applies from 24 December 2014 until 30 June 2019. The amendments in this Bill will extend the exemption from 1 July 2019 until 30 June 2023 so that all contributions and other income of the Hub received during the period from 24 December 2014 until 30 June 2023 will be exempt from tax. [Schedule 3, item 1]
2.10 Payments to the Hub will be exempt from income tax until 30 June 2023 to ensure that payments made in the 2022-23 income year are exempt from income tax.
Application and transitional provisions
2.11 The amendments apply from the first 1 January, 1 April, 1 July or 1 October after Royal Assent. [Subclause 2(1)]
2.12 On 1 July 2025, the provision will automatically repeal. [Schedule 3, items 2 and 3]