Explanatory Memorandum(Circulated by the authority of the Treasurer,the Hon. John Dawkins, M.P.)
Clauses involved in the proposed amendments
Clause 1: stipulates the short title of the Act as being Taxation Laws Amendment Act (No.6) 1992 .
Clause 2: stipulates the commencement date of the provisions of the Bill.
Clause 3: defines "Principal Act" as meaning the Income Tax Assessment Act 1936 .
Clause 4: proposes to insert new section 51AL to deny a deduction to an employee for expenditure incurred on or after 1 January 1993 in relation to a non-compulsory uniform or wardrobe.
Clause 5: proposes to omit from subparagraph 78(1)(a)(xxxvi) "College of Pathologists of Australia" and substitute "Royal College of Pathologists of Australasia".
Clause 6: states the date of effect of the amendment.
Clause 7: Proposes to insert two new components - LD (proposed linked dividends) and SD (eligible substituted dividends) - into the formula in subsection 160AQE(2) that calculates the provisional required franking amount and will insert definitions for those two components.
Clause 8: Inserts Division 5A of Part III of the Act which will tax limited partnerships in the same way as companies. They are treated as companies for the purposes of the income tax law, and there is corresponding treatment of partners in limited partnerships.
Clause 9: Ensures that the amendments made by Division 5A do not result in a person being guilty of an offence because of any act or omission which occurred before Royal Assent to the amendments.
Clause 10: Proposes to insert a new entry, "family payment advance", in the Table in Section 24AB of the Income Tax Assessment Act 1936 which is an index of payments made under the Social Security Act 1991 which are generally exempt from income tax.
Clause 11: Proposes to insert new section 24 ABX to exempt "family payment advance" from income tax.
Clause 12: Proposes that the amendments in Division 16 of the Bill will apply to payments of "family payment advance" made on or after 1 January 1993.
Clauses 13 & 14: amend sections 202A and 202BD of the Act to introduce the term "eligible paying authority" into the Tax File Number provisions for the purposes of the proposed payee declaration.
Clause 15: Partitions the current PPS provisions contained in Division 3A of Part VI of the Act into two subdivisions. Subdivision A will contain two sections: an objects section [new section 221YHAAF] and a section containing a simplified outline of the operative provisions [new section 221YHAAG] . Subdivision B will contain the current operative provisions as amended by this Bill.
Clause 16: amends section 221YHA of the Act by:
- omitting from subsection 221YHA(1) the definitions of 'deduction form', 'first instalment payment', 'householder notification form', 'instalment series', 'invoice', 'month', 'non-instalment payment', 'non-reportable payment', 'obligation transfer form', 'prescribed certificate', 'reconciliation form', 'reporting exemption declaration' and 'subsequent instalment payment'; and
- inserting in subsection 221YHA(1) the definitions of 'deduction variation certificate percentage', 'eligible paying authority', 'higher deduction percentage election', 'higher deduction percentage election form', 'householder payment summary form', 'non-declaration percentage', 'ordinary percentage', 'owner builder', 'payee declaration', 'payee declaration form', 'payment summary form', 'reconciliation statement form', 'remittance advice form', and 'tax file number'.
Clause 17: repeals sections 221YHAA to 221YHD (inclusive) which cover the furnishing of deduction forms; provision of information to the Commissioner; duties of payees and duties of eligible paying authorities. Continuing requirements from those sections and new requirements are contained in new sections 221YHB to 221YHDE .
Clause 18: proposes to amend section 221YHF of the Act to ensure that, under the new administrative arrangements, credit is given in a payee's assessment for the amount of tax deducted from prescribed payments. Under current arrangements, the credit is equal to the amount shown on deduction forms.
Clause 19: proposes to amend section 221YHJ which concerns failure, on the part of the payer, to remit amounts deducted within the time required to the Commissioner. The amendment replaces the current references to the existing requirements to remit the deductions made with the new references.
Clause 20: repeals section 221YHK which provides penalties for failure to furnish deduction forms to the Commissioner within the required time. Those forms will not be required under the proposals.
Clause 21: proposes to amend section 221YHL of the Act to eliminate the reference to remission of penalties imposed under section 221YHK for failure to furnish deduction forms to the Commissioner within the required time.
Clause 22: amends section 221YHM of the Act to include the new references to deductions made in respect of prescribed payments under the new arrangements.
Clause 23: repeals section 221YHP covering existing deduction variation certificates and substitutes new section 221YHP to allow the deduction variation certificates issued under the new arrangements to remain in force until a lesser rate than that shown on the certificate is required or the Commissioner revokes the certificate under section 221YHS.
Clause 24 : amends section 221YHQ covering deduction exemption certificates so that the section will cover both deduction exemption certificates and reporting exemptions (existing section 221YHR). Deduction exemption certificates issued on or after 1 January 1993 will remain in force indefinitely until revoked under section 221YHS as amended.
Subject to the new revocation arrangements [clause 90: new section 221YHSA] for approvals to quote a reporting exemption number, the new arrangements to quote will remain in force (not exceeding 3 years) until the date specified in the approval .
Clause 25: Repeals section 221YHR which covers reporting exemptions and inserts new 221YHR which will enable a payee at any time before receiving a prescribed payment to elect a higher rate of tax to be deducted from a prescribed payment.
Clause 26: proposes to amend section 221YHS which covers the revocation of deduction variation and exemption certificates (currently defined as a prescribed certificate) to change the way in which the revocation notice is provided. The change is necessary because information concerning the certificates will now be in the payee declaration and not in the deduction form which is no longer required.
Clause 27: inserts new section 221YHSA to allow the Commissioner to revoke an approval given under new paragraph 221YHQ(1A)(b) to quote a reporting exemption number to an eligible paying authority.
Clause 28: amends section 221YHT which covers notification and review of decisions to remove references to existing section 221YHR (reporting exemptions) as reporting and deduction exemptions will be both under 221YHQ. Further, a decision made by the Commissioner under new subsection 221YHB(8) covering tax file numbers will also be reviewable under section 221YHT.
Clause 29: amends section 221YHU which covers offences so that it specifies a number of offences relating to attempts to fraudulently obtain a credit for deductions of tax under the new regime for prescribed payments. The offence descriptions will refer to new forms as the existing references to deduction forms are not relevant.
Clause 30: provides that the amendments made in relation to prescribed payments under the Bill will apply to prescribed payments made on or after 1 January 1993.
Clause 31: inserts transitional provisions necessary to:
- provide that payees who were entitled to receive payments before 1 January 1993 may make a payee declaration in respect of those payments where they are received on or after that date [subclause (2)] .
- ensure that householders whose projects are not completed on 1 January 1993 will be required to provide the householder payment summary form on completion of the project [subclause (4)] ;
- preserve certain aspects of the current arrangements including notification of paying authorities and existing deduction and reporting exemptions until they expire where expiration is after 31 December 1992 [subclauses (3), (5), (7), (8) and (9)] ; and
- ensure certificates issued as deduction variation certificates on or after 1 July 1992 and before 1 January 1993 will remain in force as if they were issued under new section 221YHP [subclause (6)] .
Clause 32: Amendment of assessments.
Subclause 1 (1): cites the amending Act as the Medicare Levy Amendment Act (No. 2) 1992.
Subclause 1 (2): facilitates references to the Medicare Levy Act 1986 which it refers to as the "Principal Act".
Clause 2: provides for the amending Act to commence on the day on which it receives Royal Assent.
Clause 3: amends section 6 of the Principal Act by omitting "1.25%" from subsections (1), (2) and (3) and substituting "1.4%" in each instance.
Subclause 4 (1): amends subsection 8(2) of the Principal Act by:
- omitting "0.1875" and substituting "0.186"; and
- omitting "1.25%" and substituting "1.4%".
Subclause 4 (2): amends subsection 8(6) of the Principal Act by omitting "family allowance" and substituting "family payment".
Subclause 5(1): provides that amendments to section 6 and subsection 8(2) of the Principal Act will apply for the financial years commencing on or after 1 July 1993.
Subclause 5(2): provides that amendments to subsection 8(6) of the Principal Act will apply to payments made on or after 1 January 1993.