Explanatory Memorandum(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)
General outline and financial impact
Amends the Income Tax Assessment Act 1936 and other taxing laws, and introduces specific taxing Bills, to ensure that, broadly speaking, the trustee of a closely held trust with a trustee beneficiary discloses to the Commissioner of Taxation the identity of the ultimate beneficiaries of certain net income and tax-preferred amounts of the trust within a specified period after the end of the year of income.
Where the trustee of the closely held trust fails to correctly identify the ultimate beneficiaries within the specified period the measures specifically impose taxation of that part of the net income of the trust at the top marginal rate plus Medicare levy. For tax-preferred amounts such a failure may produce offences under the Taxation Administration Act 1953 .
Where there are no ultimate beneficiaries of net income of the closely held trust, the measures specifically impose taxation of that part of the net income of the trust at the top marginal rate plus Medicare levy.
Date of effect: The amendments apply to present entitlements created after 4.00p.m. on 13 August 1998 AEST.
Proposal announced: Tax Reform: not a new tax, a new tax system: The Howard Governments Plan for a New Tax System and the Treasurers Press Release No. 77 on 13 August 1998.
Financial impact: This measure was estimated to raise revenue of $30million in each of 1999-2000 and 2000-2001.
Compliance cost impact: Compliance costs will be kept to a minimum, as outlined below.
The policy objective of this measure is to ensure that the assessable income of ultimate beneficiaries correctly includes any required share of net income, and that the net assets of ultimate beneficiaries reflect the receipt of tax-preferred amounts.
Compliance costs will be kept to a minimum because:
a number of trusts have been carved out of the measure; and
in certain circumstances identification of lower level beneficiaries in chains of trusts is sufficient disclosure.