House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon John Dawkins, M.P.)

Income Tax Assessment Act 1936

Summary of the proposed amendments

The amendments will ensure that:

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the superannuation guarantee charge is not deductible for income tax purposes;

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the arrangements for obtaining tax file numbers apply to facilitate the administration of the superannuation guarantee scheme;

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a contribution under clause 60 of the Superannuation Guarantee (Administration) Bill 1992 (ie. broadly the payment of the "shortfall component" of the superannuation guarantee charge to a complying superannuation fund) is a taxable contribution to a complying superannuation fund.

Explanation of proposed amendments

Losses and outgoings

The Bill proposes the addition of a new subsection (9) to section 51 of the Income Tax Assessment Act 1936. Section 51 is the general deductions provision that allows deductions for losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or in carrying on a business for that purpose.

The effect of new subsection 51(9) will be that superannuation guarantee charge will not be deductible for income tax purposes.

Objects of Part VA

Section 202 of the Income Tax Assessment Act 1936 sets out the objects of Part VA of that Act - Tax File Numbers. They are:

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to increase the effectiveness and efficiency of the matching of information reports given to the Commissioner of Taxation with information disclosed in returns by taxpayers;

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through that improved information matching, to prevent evasions of tax; and

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to facilitate the administration of the Higher Education Contribution Scheme, the training guarantee charge and the provision of Commonwealth pensions, allowances, benefits, etc.

With the introduction of the superannuation guarantee charge it is proposed to include a further object in Part VA of the Income Tax Assessment Act 1936. The Bill will include new paragraph (f) in section 202 thereby ensuring that the arrangements for obtaining tax file numbers also apply to facilitate the administration of the legislation enacted by the Parliament to impose a charge based on shortfalls in the amount contributed by employers to superannuation funds for the benefit of their employees.

Taxable Contributions

Section 274 specifies those payments that are taxable contributions in the hands of an "eligible superannuation fund" or an "eligible ADF" (Approved Deposit Fund) as defined in section 267 of the Income Tax Assessment Act. Taxable contributions are included in the assessable income of eligible funds, whether they are complying or non-complying superannuation funds or complying or non-complying ADFs.

The proposed amendment to paragraph 274(1)(b) will ensure that in the case of a complying superannuation fund a contribution under clause 60 of the Superannuation Guarantee (Administration) Bill 1992 qualifies as a taxable contribution in the hands of the fund.

Clause 60 of the Superannuation Guarantee (Administration) Bill 1992 is the provision which sets out how the Commissioner of Taxation is to deal with "the shortfall component" of the superannuation guarantee charge (ie the component of the charge which must be applied for the benefit of employees in respect of whom it was paid). Under that section the Commissioner is required to deal with the shortfall component by either:

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paying the amount of the component to a complying superannuation fund nominated by the employee, in accordance with the regulations, for the benefit of the employee; or

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making arrangements in accordance with the regulations so that the amount of the component may be paid to a complying superannuation fund for the benefit of the employee.

Commencement date

The amendments to the Income Tax Assessment Act 1936 apply from 1 July 1992.