House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP)

General outline and financial impact

Schedule 1 - Digital games tax offset

Outline

Schedule 1 to the Bill introduces a refundable tax offset in relation to eligible expenditure incurred in the development of digital games.

Date of effect

Schedule 1 to the Bill commences on the first 1 January, 1 April, 1 July or 1 October after Royal Assent. The Digital Games Tax Offset applies to qualifying Australian development expenditure incurred in relation to eligible game development from 1 July 2022.

Proposal announced

The Digital Games Tax Offset was announced in the 2021-22 Budget and expanded in the 2021-22 MYEFO.

Financial impact

This measure is estimated to increase payments by $34.9 million over the 4 years from 2021-22.

All figures in this table represent amounts in $m.

Human rights implications

This Schedule does not raise human rights issues. See Statement of Compatibility with Human Rights - Chapter 10.

Compliance cost impact

The measure provides for a tax offset. It is expected that there will be a minor initial compliance cost in the first year of the operation as companies make themselves aware of the new offset and embed the certificate application in their business processes. The compliance cost will decrease over time a s it becomes part of standard reporting requirements and income tax lodgement.

Schedule 2 - Taxation treatment of digital currency

Outline

Schedule 2 to the Bill amends the ITAA 1997 to clarify that digital currencies (such as bitcoin) continue to be excluded from the income tax treatment of foreign currency. For the purpose of these amendments, the term digital currency does not include digital currencies issued by, or under the authority of, a government agency ('government-issued digital currency') which continue to be taxed as foreign currency.

Date of effect

The amendment to the definition of foreign currency in subsection 995-1(1) of the ITAA 1997 applies to income years that include 1 July 2021 and later income years.

The amendments to the GST Act and GST Regulations apply in relation to supplies or payments made on or after 1 July 2021.

Proposal announced

Schedule 2 to the Bill was announced by the Treasurer in a joint media release with the Assistant Treasurer on 22 June 2022.

Financial impact

The measure has no financial impact.

Human rights implications

This Schedule does not raise human rights issues. See Statement of Compatibility with Human Rights - Chapter 10.

Compliance cost impact

Nil.

Schedule 3 - Reducing the compliance burden of record keeping for fringe benefits tax

Outline

Schedule 3 to the Bill amends the FBTAA to reduce compliance costs for employers finalising their FBT returns by empowering the Commissioner to allow them, where it is appropriate to do so, to rely on adequate alternative records holding all the prescribed information instead of seeking that information again by way of statutory evidentiary documents, such as prescribed employee declarations.

This Schedule reduces and simplifies FBT record keeping requirements for employers while producing similar compliance outcomes with lower compliance costs, consistent with the Government's commitment to remove 'red tape' for business.

Date of effect

Schedule 3 applies to FBT years starting on or after the first 1 January, 1 April, 1 July or 1 October to occur after the day the Bill receives the Royal Assent.

Proposal announced

The 'Fringe Benefits Tax - reducing the compliance burden of record keeping' measure was announced in the 2020-21 Budget.

Financial impact

This measure is estimated to result in a small but unquantifiable decrease in receipts over the forward estimates period.

Human rights implications

This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 10.

Compliance cost impact

Overall, the measure is expected to result in an ongoing compliance saving for employers.

Schedule 4 - Skills and Training Boost

Outline

Schedule 4 to the Bill amends the IT(TP) Act to provide small businesses (with aggregated annual turnover of less than $50 million) with access to a bonus deduction equal to 20% of eligible expenditure for external training provided to their employees.

This is a temporary measure to incentivise small businesses to train and upskill their employees, helping to build a more productive workforce.

Date of effect

The amendments apply to eligible expenditure incurred from 7:30pm (by legal time in the Australian Capital Territory) on 29 March 2022 until 30 June 2024. The amendments apply to enrolments or arrangements for the provision of training made or entered into at or after 7.30pm (by legal time in the Australian Capital Territory) on 29 March 2022.

Proposal announced

The 'Small Business - skills and training boost' measure was announced in the March 2022-23 Budget.

Financial impact

This measure is estimated to decrease receipts by $550.0 million over the forward estimates period.

All figures in this table represent amounts in $m.

Human rights implications

This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 10.

Compliance cost impact

The measure is expected to have minimal regulatory impact.

Schedule 5 - Technology investment boost

Outline

Schedule 5 to the Bill amends the IT(TP) Act to provide small businesses (with aggregated annual turnover of less than $50 million) with access to a bonus deduction equal to 20% of their eligible expenditure on expenses and depreciating assets for the purposes of their digital operations or digitising their operations.

This is a temporary measure to support small businesses to operate digitally. The bonus deduction applies to the total of eligible expenditure of up to $100,000 per income year or specified time period, up to a maximum bonus deduction of $20,000 per income year or specified time period.

Date of effect

The amendments apply to eligible expenditure incurred from 7:30pm (by legal time in the Australian Capital Territory) on 29 March 2022 until 30 June 2023.

Proposal announced

The 'Small Business - technology investment boost' measure was announced in the March 2022-23 Budget.

Financial impact

This measure is estimated to decrease receipts by $1.0 billion over the forward estimates period.

All figures in this table represent amounts in $m.

Human rights implications

This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 10.

Compliance cost impact

The measure is expected to have minimal regulatory impact.

Schedule 6 - Financial reporting and auditing requirements for superannuation entities

Outline

Schedule 6 to the Bill amends the Corporations Act, the ASIC Act and the SIS Act to extend and adapt the financial reporting and auditing requirements in Chapter 2M of the Corporations Act to apply to registrable superannuation entities.

Date of effect

The amendments in Schedule 6 commence on 1 July 2023.

Proposal announced

The proposal was announced on 12 August 2021 - coinciding with the public release of the exposure draft legislation.

Financial impact

The measure has no financial impact.

Regulation Impact Statement

The Financial Services Royal Commission Final Report has been certified as being informed by a process and analysis equivalent to a Regulation Impact Statement for the purposes of the Government decision to implement this reform. The Financial Services Royal Commission Final Report can be accessed through the Australian Parliament House website. ^[1]

Human rights implications

Schedule 6 does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 10.

Compliance cost impact

The measure has a low compliance cost impact.

Schedule 7 - Deductible gift recipients

Outline

Schedule 7 to the Bill amends the ITAA 1997 to:

•

list Melbourne Business School Limited, Leaders Institute of South Australia Incorporated, St Patrick's Cathedral Melbourne Restoration Fund, Jewish Education Foundation (Vic) Ltd, Australian Education Research Organisation Limited, and Australians for Indigenous Constitutional Recognition Ltd as deductible gift recipients;

•

extend the deductible gift recipient listings of Sydney Chevra Kadisha and Australian Women Donors Network; and

•

remove the deductible gift recipient listing of the Mt Eliza Graduate School of Business and Government Limited.

Date of effect

The amendments in Schedule 7 apply to gifts made:

•

on or after 1 July 2022 to the Melbourne Business School Limited;

•

in the period 1 July 2022 to 30 June 2027 inclusive to Leaders Institute of South Australia Incorporated;

•

in the period 1 July 2022 to 30 June 2027 inclusive to St Patrick's Cathedral Melbourne Restoration Fund;

•

in the period 1 July 2021 to 30 June 2026 inclusive to Jewish Education Foundation (Vic) Ltd;

•

on or after 1 July 2021 to the Australian Education Research Organisation Limited; and

•

in the period 1 July 2022 to 30 June 2025 inclusive to Australians for Indigenous Constitutional Recognition Ltd.

The amendments extend the period of the listing of Sydney Chevra Kadisha so that it applies to gifts made on or after 31 December 2017 and on or before 30 June 2024.

The amendments extend the period of the listing of Australian Women Donors Network so that is applies to gifts made on or after 8 March 2018 and on or before 8 March 2028.

The amendments remove the listing of Mt Eliza Graduate School of Business and Government Limited apply on and after 1 January 2023.

Proposal announced

Schedule 7 to the Bill partially implements:

•

the measure Philanthropy - updates to specifically listed deductible gift recipients from the March 2022-23 Budget; and

•

the measure Philanthropy - updates to the list of specifically listed deductible gift recipients from the 2021-22 MYEFO.

Schedule 7 to the Bill fully implements the measure Philanthropy - updates to specifically listed deductible gift recipients from the October 2022-23 Budget.

Financial impact

The listing of the Jewish Education Foundation (Vic) Ltd and Australian Education Research Organisation Limited was part of the 2021-22 MYEFO and was estimated to have a negligible cost from 2022-23 to 2025-26.

All figures in this table represent amounts in $m.

.. Not zero but rounded to zero

The listing of the Melbourne Business School Limited, Leaders Institute of South Australia Incorporated, St Patrick's Cathedral Melbourne Restoration Fund, extending the listing for the Sydney Chevra Kadisha and removing the listing of Mt Eliza Graduate School of Business and Government Ltd was part of the March 2022-23 Budget and was estimated to decrease receipts by $6.3 million from 2023-24 to 2025-26.

All figures in this table represent amounts in $m.

The listing of the Australians for Indigenous Constitutional Recognition Ltd and extending the listing of Australian Women Donors Network was part of the October 2022-23 Budget and was estimated to decrease receipts by $0.8 million from 2023-24 to 2025-26.

All figures in this table represent amounts in $m.

Human rights implications

Schedule 7 does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 10

Compliance cost impact

The measure has a low compliance cost impact.

Schedule 8 -Amendment of the Clean Energy Finance Corporation Act 2012

This Schedule was prepared by the Department of Climate Change, Energy, the Environment and Water

Outline

The CEFC, as established by the CEFC Act, is an independent statutory authority with an objective to facilitate increased flows of finance into the clean energy sector and to facilitate the achievement of Australia's greenhouse gas emissions reduction targets. It meets this objective by making investments in clean energy technologies and projects, typically alongside private sector investors and financiers. It also partners with the finance industry to attract, develop and mobilise existing and new sources of capital for the clean energy sector, including climate bonds, equity funds and other financial mechanisms.

The CEFC Act (in conjunction with other legislation such as the PGPA Act) sets out the governance and regulatory frameworks applicable to the agency. This Schedule modifies the CEFC Act to enable the CEFC to receive additional funds to implement Rewiring the Nation, establish the Powering Australia Technology Fund and streamline the ability of the government to provide the CEFC with additional funds in the future. The Schedule also clarifies the CEFC's governance arrangements in specifying its nominated Minister.

Date of effect

Schedule 8 to the Bill commences on the day after the Bill receives Royal Assent.

Proposal announced

This Schedule implements the 'Powering Australia - Rewiring the Nation' measure from the October 2022-23 Budget and the 'Low Emissions Technology Commercialisation Fund' measure from the 2021-22 MYEFO.

Financial impact

The credits to the CEFC Special Account will not have an impact on the underlying cash balance.

Human rights implications

This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter10.

Compliance cost impact

Nil.

Schedule 9 - Taxation of military superannuation benefits: Reversing the Douglas decision

Outline

Schedule 9 to the Bill amends various taxation laws to confirm the tax treatment of certain defined benefit pensions following the Full Federal Court decision in Douglas.

This Schedule also provides a non-refundable tax offset for recipients of invalidity benefits paid in accordance with the MSBS and DFRDBS to ensure they do not pay additional income tax because of the Douglas decision.

Date of effect

Schedule 9 to the Bill commences the day after Royal Assent.

Proposal announced

This Schedule implements the Government's commitment from the announcement made on 25 July 2022 to ensure no veteran is worse off because of the Federal Court decision in Douglas.

Financial impact

This Schedule is estimated to decrease receipts by $60 million from 2022-23 to 2025-26.

All figures in this table represent amounts in $m.

Human rights implications

This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 10.

Compliance cost impact

The ongoing compliance cost is expected to be minimal.