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House of Representatives

Treasury Laws Amendment (2021 Measures No. 3) Bill 2021

Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer, Minister for Housing and Minister for Homelessness, Social and Community Housing, the Hon Michael Sukkar MP)

Glossary

The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation Definition
Bill Treasury Laws Amendment (2021 Measures No. 3) Bill 2021
CPI Consumer price index
Investment Mandate National Housing Finance and Investment Corporation Investment Mandate Direction 2018
ITAA 1997 Income Tax Assessment Act 1997
NHFIC National Housing Finance and Investment Corporation
NHFIC Act National Housing Finance and Investment Corporation Act 2018
SAPTO Seniors and pensioners tax offset
SS Act Social Security Act 1991
Threshold amount Medicare levy and Medicare levy surcharge low-income threshold amount
VEA Veterans' Entitlements Act 1986

General outline and financial impact

Schedule 1 - Medicare levy and Medicare levy surcharge income thresholds

Schedule 1 to the Bill amends the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 to increase:

·
the Medicare levy low-income thresholds for individuals and families (along with the dependent child/student component of the family threshold) in line with movements in the CPI;
·
the Medicare levy low-income thresholds for individuals and families eligible for SAPTO (along with the dependent child/student component of the family threshold), in line with movements in the CPI; and
·
the Medicare levy surcharge low-income threshold in line with movements in the CPI.

Date of effect: This Schedule applies to the 2020-21 income year and later income years.

Proposal announced: This Schedule fully implements the measure to increase the Medicare levy low-income thresholds from the 2021-22 Budget.

Financial impact: The measure is estimated to decrease receipts by $250 million over the forward estimates period comprising:

2020-21 2021-22 2022-23 2023-24 2024-25
- -$100m -$50m -$50m -$50m

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

Compliance cost impact: This Schedule will not have any ongoing compliance cost impact or additional impact on regulatory burden.

Schedule 2 - Family Home Guarantee

Schedule 2 to the Bill amends the NHFIC Act to expand the objects of the Act in establishing NHFIC to improve housing outcomes for Australians by assisting earlier access to the housing market by single parents with dependants. The amendments to the objects of the NHFIC Act enable the Minister to issue directions to NHFIC concerning the Family Home Guarantee through the NHFIC Investment Mandate.

Date of effect: The amendments apply from the later of 1 July 2021 and the day after Royal Assent to allow, subject to timing of passage of the Bill, for the issuing of guarantees as soon as possible from 1 July 2021.

Proposal announced: This Schedule implements the Family Home Guarantee measure from the 2021-22 Budget.

Financial impact: It is not anticipated that guarantees would be called on until at least the 2023-24 financial year. Estimated default claim costs are around $0.3 million over the two financial years from 2023-24 or around $7 million over the life of the program where up to 10,000 guarantees are expected to be issued.

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

Compliance cost impact: Participating in the Family Home Guarantee will involve minor compliance costs for business (lenders and mortgage brokers). Compliance costs have been estimated at $0.4 million per year.

Schedule 3 - Payments to Thalidomide survivors

Schedule 3 to the Bill amends the ITAA 1997, the SS Act and VEA to provide that annual and lump sum payments made by the Commonwealth to thalidomide survivors are exempt from income tax and do not count as income for the purposes of any income support payments.

Date of effect: 1 July 2021.

Proposal announced: This Schedule partially implements the measure Support for Australia's Thalidomide Survivors from the 2020-21 Budget.

Financial impact: The amendments to make the payments exempt from income tax, the social security income test and the veterans' entitlements income test will not have a financial impact.

Human rights implications: This Schedule is compatible with human rights as it supports a person's right to social security. See Statement of Compatibility with Human Rights - Chapter 6.

Compliance cost impact: Nil.

Schedule 4 - Recovery grants for 2021 floods and storms

Schedule 4 to the Bill amends the ITAA 1997 to make disaster recovery grant payments in relation to the storms and floods that occurred in February and March 2021 non-assessable non-exempt income.

Date of effect: This Schedule applies to payments made in the 2020-2021 income year and later income years.

Proposal announced: This Schedule fully implements the measure to make disaster recovery grant payments in relation to the New South Wales storms and floods non-assessable non-exempt income from the 2021-22 Budget.

Financial impact: This measure is estimated to have no impact on receipts over the forward estimates period.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 6.

Compliance cost impact: This Schedule is unlikely to have more than a minor regulatory impact.

Schedule 5 - Deductible gift recipients-new specific recipients

Schedule 5 to the Bill amends the ITAA 1997 to allow the following entities to be deductible gift recipients under the income tax law:

·
Alliance for Journalists' Freedom Ltd;
·
The Andy Thomas Space Foundation Limited;
·
Youthsafe;
·
RAS Foundation Limited;
·
The Judith Neilson Institute for Journalism and Ideas; and
·
The Great Synagogue Foundation.

Schedule 5 to the Bill amends the ITAA 1997 to extend the period in which the following entities are deductible gift recipients under the income tax law:

·
The Centre for Entrepreneurial Research and Innovation Limited; and
·
Sydney Chevra Kadisha.

Date of effect: The amendments apply to gifts made on and after 1 July 2020 to:

·
Alliance for Journalists' Freedom Ltd;
·
The Andy Thomas Space Foundation Limited;
·
Youthsafe;
·
RAS Foundation Limited; and
·
The Judith Neilson Institute for Journalism and Ideas.

The amendments apply to gifts made on and after 1 July 2020 and before 1 July 2025 to:

·
The Great Synagogue Foundation.

The amendments extend the period of the listing of The Centre for Entrepreneurial Research and Innovation Limited so that it applies on and after 2 January 2017.

The amendments extend the period of the listing of the Sydney Chevra Kadisha so that applies on and after 1 January 2018 until 30 June 2022 (inclusive).

Proposal announced: This Schedule partially implements the measure 'Philanthropy - updates to the list of specifically listed deductible gift recipients' from the 2020-21 Budget and the 2019-20 MYEFO.

Financial impact: Specifically listing the Alliance for Journalists' Freedom Ltd, The Andy Thomas Space Foundation Limited, Youthsafe, RAS Foundation Limited, The Judith Neilson Institution for Journalism and Ideas, The Great Synagogue Foundation, and extending the specific listing of The Centre for Entrepreneurial Research and Innovation Limited and Sydney Chevra Kadisha, was part of the 2020-21 Budget measure 'Philanthropy - updates to the list of specifically listed deductible gift recipients'. The measure was estimated to decrease receipts by $4.1 million over the then forward estimates period to 2023-24.

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

Compliance cost impact: Low.

Chapter 1 - Medicare levy and Medicare levy surcharge income thresholds

Outline of chapter

1.1 Schedule 1 to the Bill amends the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 to increase:

·
the Medicare levy low-income thresholds for individuals and families (along with the dependent child/student component of the family threshold) in line with movements in the CPI;
·
the Medicare levy low-income thresholds for individuals and families eligible for SAPTO (along with the dependent child/student component of the family threshold), in line with movements in the CPI; and
·
the Medicare levy surcharge low-income threshold in line with movements in the CPI.

Context of amendments

Medicare levy low-income thresholds

1.2 The Medicare Levy Act 1986 provides that no Medicare levy is payable by low-income individuals and families where their taxable income or combined family taxable income does not exceed the stated threshold amounts.

1.3 The Medicare levy phases in at a rate of 10 cents in the dollar where the taxable income or combined family taxable income exceeds the threshold amounts (section 7 of the Medicare Levy Act 1986).

Medicare levy surcharge low-income threshold

1.4 A Medicare levy surcharge of between one and one and a half per cent applies on taxable income in certain cases where taxpayers do not have appropriate private patient hospital cover (sections 8B and 8G of the Medicare Levy Act 1986). The Medicare levy surcharge also applies to reportable fringe benefits in certain cases where taxpayers do not have appropriate private hospital cover (sections 12 to 16 of the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999).

1.5 A family member who otherwise would be liable for the Medicare levy surcharge is not required to pay the surcharge where the total of that person's income for surcharge purposes does not exceed the individual low-income threshold amount. Unlike the Medicare levy, there is no phase-in of the Medicare levy surcharge above the threshold amount.

Summary of new law

1.6 Schedule 1 amends:

·
subsections 3(1) and 8(5) to 8(7) of the Medicare Levy Act 1986 to increase the threshold amounts and phase-in limits for individuals, families and individual taxpayers and families eligible for the SAPTO;
·
paragraphs 8D(3)(c) and 8G(2)(c) and subparagraphs 8D(4)(a)(ii) and 8G(3)(a)(ii) of the Medicare Levy Act 1986 to raise the threshold below which a family member is not required to pay the Medicare levy surcharge on taxable income; and
·
paragraphs 15(1)(c) and 16(2)(c) of the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 to raise the threshold below which a family member is not required to pay the Medicare levy surcharge on reportable fringe benefits.

Comparison of key features of new law and current law

New law Current law
Medicare levy low-income thresholds
The individual income threshold for the 2020-21 income year is $23,226. The individual income threshold for the 2019-20 income year is $22,801.
The family income threshold for the 2020-21 income year is $39,167. The family income threshold for the 2019-20 income year is $38,474.
The income threshold for individual taxpayers eligible for the SAPTO for the 2020-21 income year is $36,705. The income threshold for individual taxpayers eligible for the SAPTO for the 2019-20 income year is $36,056.
The income threshold for families eligible for the SAPTO for the 2020-21 income year is $51,094. The income threshold for families eligible for the SAPTO for the 2019-20 income year is $50,191.
The child-student component of the income threshold for families (whether eligible for SAPTO or not) for the 2020-21 income year is $3,597. The child-student component of the income threshold for families (whether eligible for SAPTO or not) for the 2019-20 income year is $3,533.
Phase-in limit
The individual phase-in limit for the 2020-21 income year is $29,032. The individual phase-in limit for the 2019-20 income year is $28,501.
The phase-in limit for individual taxpayers eligible for the SAPTO for the 2020-21 income year is $45,881. The phase-in limit for individual taxpayers eligible for the SAPTO for the 2019-20 income year is $45,069.
The phase-in limit for families for the 2020-21 income year is $48,958. The phase-in limit for families for the 2019-20 income year is $48,092.
The phase-in limit for families eligible for the SAPTO for the 2020-21 income year is $63,867. The phase-in limit for families eligible for the SAPTO for the 2019-20 income year is $62,739.
The child-student component of the phase-in limit for families (whether eligible for SAPTO or not) for the 2020-21 income year is $4,496. The child-student component of the phase-in limit for families (whether eligible for SAPTO or not) for the 2019-20 income year is $4,416.

Detailed explanation of new law

1.7 Schedule 1 increases the low-income threshold for individuals and families (including the dependent child-student component of the family threshold) in line with annual movements in the CPI.

1.8 Section 7 of the Medicare Levy Act 1986 states that no levy is payable where a taxpayer has a taxable income at or below the applicable threshold amount as specified in subsection 3(1) of the Medicare Levy Act 1986.

1.9 The individual threshold amount (specified in paragraph (c) of the definition of the 'threshold amount' in subsection 3(1) of the Medicare Levy Act 1986) increases from $22,801 to $23,226. [Schedule 1, item 5, paragraph (c) of the definition of 'threshold amount' in subsection 3(1) of the Medicare Levy Act 1986]

1.10 The level of the 'family income threshold' referred to in subsections 8(5) to 8(7) of the Medicare Levy Act 1986 increases from $38,474 to $39,167. For each dependent child or student, the family income threshold increases by a further $3,597, instead of the previous amount of $3,533. [Schedule 1, items 6, 7 and 8, the definition of 'family income threshold' in subsection 8(5), and subsections 8(6) and (7) of the Medicare Levy Act 1986]

1.11 Schedule 1 also increases the threshold amount for individual taxpayers eligible for the SAPTO for the 2020-21 income year. The increase ensures that these people do not have a Medicare levy liability if they are not liable for income tax.

1.12 The threshold amount for individual taxpayers eligible for the SAPTO (specified in paragraph (a) of the definition of the 'threshold amount' in subsection 3(1) of the Medicare Levy Act 1986) increases from $36,056 to $36,705. [Schedule 1, item 4, paragraph (a) of the definition of 'threshold amount' in subsection 3(1) of the Medicare Levy Act 1986]

1.13 The threshold amount for families eligible for SAPTO increases from $50,191 to $51,094. For each dependent child or student, the income threshold increases by a further $3,597, instead of the previous figure of $3,533. [Schedule 1, item 9, subsection 8(7) of the Medicare Levy Act 1986]

Phase-in limits

1.14 Section 7 of the Medicare Levy Act 1986 also provides that the Medicare levy applies at a reduced rate to taxpayers with taxable incomes above the threshold amount but not more than the 'phase-in limit' specified in subsection 3(1). The rate of Medicare levy payable in these circumstances is limited to 10 per cent of the excess over the threshold amount that is relevant to the particular person.

1.15 The phase-in limit for individuals (specified in paragraph (c) of the definition of 'phase-in limit' in subsection 3(1) of the Medicare Levy Act 1986) increases from $28,501 to $29,032. [Schedule 1, item 3, paragraph (c) of the definition of 'phase-in limit' in subsection 3(1) of the Medicare Levy Act 1986]

1.16 The phase-in limit for individual taxpayers eligible for SAPTO (specified in paragraph (a) of the definition of 'phase-in limit' in subsection 3(1) of the Medicare Levy Act 1986) increases from $45,069 to $45,881. [Schedule 1, item 2, paragraph (a) of the definition of 'phase-in limit' in subsection 3(1) of the Medicare Levy Act 1986]

1.17 There is no phase-in limit for families in the Medicare Levy Act 1986, as the limit changes with the number of dependants. Instead, subsection 8(2) of the Medicare Levy Act 1986 contains a formula that limits the levy payable by persons with families to 10 per cent of the amount of family income that exceeds their family income threshold.

1.18 The increased threshold amounts and phase-in ranges for the 2020-21 income year are as shown in Table 1.1.

Table 1.1: 2020-21 Medicare levy low-income threshold amounts and phasing-in ranges

Category of taxpayer No levy payable in 2020-21 if taxable income or family income does not exceed (figure for 2019-20) Reduced levy in 2020-21 (if taxable income or family income is within range (inclusive) Ordinary rate of levy payable in 2020-21 where taxable income or family income is equal to or exceeds (figure for 2019-20)
Individual taxpayer $23,226 ($22,801) $23,227-$29,032 $29,033 ($28,502)
Individual taxpayers eligible for the SAPTO $36,705 ($36,056) $36,706-$45,881 $45,882 ($45,070)
Families eligible for the SAPTO $51,094 ($50,191) $51,095-$63,867 $63,868 ($62,740)
Families with the following number of children and/or students (family income) (family income) (family income)
0 $39,167 ($38,474) $39,168 -$48,958 $48,959 ($48,093)
1 $42,764 ($42,007) $42,765 -$53,454 $53,455 ($52,509)
2 $46,361 ($45,540) $46,362 -$57,950 $57,951 ($56,925)
3 $49,958 ($49,073) $49,959 -$62,446 $62,447 ($61,341)
4 $53,555 ($52,606) $53,556 -$66,942 $66,943 ($65,757)
5 $57,152 ($56,139) $57,153 -$71,438 $71,439 ($70,173)

Medicare levy surcharge low-income threshold

1.19 References to the individual low-income threshold amount of $22,801 in the Medicare levy surcharge provisions (in sections 8D and 8G of the Medicare Levy Act 1986) in respect of the surcharge payable on taxable income for a person who is married (or both married and a beneficiary of a trust) are also increased to $23,226. [Schedule 1, items 10 to 13, paragraphs 8D(3)(c) and 8G(2)(c) and subparagraphs 8D(4)(a)(ii) and 8G(3)(a)(ii) of the Medicare Levy Act 1986]

1.20 References to the individual low-income threshold amount of $22,801 in the Medicare levy surcharge provisions (in sections 15 and 16 of the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999) in respect of the surcharge on reportable fringe benefits are also increased to $23,226. [Schedule 1, item 1, paragraphs 15(1)(c) and 16(2)(c) of the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999]

Application and transitional provisions

1.21 Schedule 1 commences on the day after it receives Royal Assent. [Clause 2]

1.22 The amendments apply retrospectively from the start of the 2020-21 income year. However, they are beneficial to all affected taxpayers as they retrospectively reduce or remove liability for Medicare levy and the Medicare levy surcharge that would otherwise apply to affected taxpayers.

1.23 Schedule 1 applies to assessments for the 2020-21 income year and later income years. [Schedule 1, item 14]

Chapter 2 - Family Home Guarantee

Outline of chapter

2.1 Schedule 2 to the Bill amends the NHFIC Act to expand the objects of the Act in establishing NHFIC to improve housing outcomes for Australians by assisting earlier access to the housing market by single parents with dependants. The amendments to the objects of the NHFIC Act enable the Minister to issue directions to NHFIC concerning the Family Home Guarantee through the NHFIC Investment Mandate.

Context of amendments

2.2 The NHFIC Act establishes NHFIC and its functions. Directions to NHFIC regarding the performance of its functions are given by the Minister in the Investment Mandate.

2.3 In giving a direction through the Investment Mandate, the Minister must have regard to the object of the NHFIC Act in section 3 of the Act and any other matters the Minister considers relevant. Further, the Minister must not give a direction that is inconsistent with the NHFIC Act, including the object of the Act (see paragraph 14(b) of the Investment Mandate).

2.4 One of NHFIC's functions is to issue guarantees to improve housing outcomes. Directions regarding this function are set out in Part 5A of the Investment Mandate which establishes the First Home Loan Deposit Scheme.

2.5 The Government intends to establish the new Family Home Guarantee to support single parents with dependants seeking to enter, or re-enter, the housing market sooner to build a new home or purchase a new or existing home. The Family Home Guarantee recognises the importance of housing in providing a foundation for social, economic and emotional wellbeing.

2.6 The Family Home Guarantee will allow NHFIC to issue guarantees where the buyer is an eligible single parent with dependants, regardless of whether the single parent is a first home buyer or previous owner occupier. Unlike the First Home Loan Deposit Scheme (including the temporary New Home Guarantee), it is intended that single parents with dependants who have previously owned property in Australia may be eligible. Accordingly, single parents with dependants will be able to qualify for the Family Home Guarantee, subject to satisfying the eligibility criteria including the participating lenders credit and serviceability assessment.

Summary of new law

2.7 Schedule 2 to the Bill expands the objects of the NHFIC Act to make clear that the Minister's power to issue a direction to NHFIC includes the power to issue directions regarding assisting earlier access to the housing market by eligible single parents with dependants. The intent of the amendments is to enable the establishment of the Family Home Guarantee.

Comparison of key features of new law and current law

New law Current law
NHFIC can improve housing outcomes for Australians by assisting earlier access to the housing market by eligible single parents with dependants. No equivalent.

Detailed explanation of new law

New Object

2.8 Schedule 2 to the Bill amends section 3 of the NHFIC Act to expand the objects of the Act to include NHFIC improving housing outcomes for Australians by assisting earlier access to the housing market by single parents with dependants. [Schedule 2, item 1, section 3 of NHFIC Act]

2.9 The purpose of adding this new object to the NHFIC Act is to enable the Minister to issue a direction to NHFIC for guarantees to be issued to eligible single parents with dependants, regardless of whether they are first home buyers or previous owner occupiers. This would include situations where a single parent jointly owned a residence prior to a relationship breakdown and has ceased to own or have an interest in a residence.

2.10 The Family Home Guarantee is designed to support single parents with dependants on a pathway to homeownership. Over recent decades, the average household size has decreased and the number of single parent households has increased, with single parent households tending to have lower home ownership rates than other household types.

2.11 The Family Home Guarantee recognises the importance of housing in providing a foundation for social, economic and emotional wellbeing, and expands current support beyond first home buyers. By establishing the Family Home Guarantee, the Government is providing a pathway to homeownership for single parents with dependants who have struggled to save enough for a deposit while paying rent and/or restarting their lives, allowing them to build or purchase a modest home sooner, subject to their ability to service a loan.

The Investment Mandate

2.12 The Investment Mandate will be amended to establish the Family Home Guarantee to apply to eligible single parents with one or more dependants who live with them either exclusively or on a shared basis. In shared custody arrangements this may enable both individuals in a former couple to separately access the Family Home Guarantee. The Investment Mandate will enable the Family Home Guarantee to assist eligible single parents with dependants who are first home buyers or have previously owned a home but do not currently hold a freehold or leasehold interest in real property in Australia, a lease of land in Australia or a company title interest in land in Australia.

2.13 The Family Home Guarantees will be provided through participating financial institutions to allow eligible single parents with dependants to build a home or purchase a new or existing dwelling with a deposit of at least two percent. Participating financial institutions will be required to assess an applicant's capacity to service their loan according to their lending processes and policies. It is expected that participating lenders will not charge eligible customers higher interest rates than equivalent customers not accessing the Family Home Guarantee.

2.14 The deposit requirement for the Family Home Guarantee will be set at a level that recognises the circumstances faced by single parents with dependants. Accordingly, the Government's guarantee on eligible loans will cover up to 18 per cent of the property purchase price, provided the borrower has a minimum 2 per cent deposit and meets the lender's credit and serviceability criteria.

2.15 The Family Home Guarantee will make available 10,000 guarantees from 1 July 2021 to single parents with dependants to build a new home or purchase a new or an existing dwelling.

2.16 The caps on taxable income of individuals and the property price caps under the Family Home Guarantee Scheme will be consistent with the First Home Loan Deposit Scheme.

2.17 The Investment Mandate will require NHFIC to undertake additional reporting requirements to the Minister and consult with the Minister on any rules or policies related to the Family Home Guarantee.

Application and transitional provisions

Commencement

2.18 Schedule 2 to the Bill commences on the later of 1 July 2021 and the day after Royal Assent. [Clause 2]

2.19 The commencement provision ensures that NHFIC is able to start to issue guarantees under the Family Home Guarantee on 1 July 2021 subject to Royal Assent of the Bill. Where Royal Assent has not occurred by 30 June 2021, guarantees under the Family Home Guarantee can be issued from the later date of commencement of Schedule 2 to the Bill.

Chapter 3 - Payments to Thalidomide survivors

Outline of chapter

3.1 Schedule 3 to the Bill amends the ITAA 1997 and the SS Act and the Veterans' Entitlement Act 1986 to provide that annual and lump sum payments made by the Commonwealth to Thalidomide survivors are exempt from income tax and do not count as income for the purposes of any income support payments.

Context of amendments

3.2 The Senate Community Affairs References Committee inquiry into Support for Australia's Thalidomide Survivors handed down its Final Report on 22 March 2019.

3.3 The Australian Government recognises the plight of victims of Thalidomide, and understands they have suffered from circumstances beyond their control, resulting in a lifetime of pain and hardship.

3.4 Between 1959-1961, Thalidomide was available over the counter as a tranquiliser and pain killer used for treating insomnia and headaches as well as nausea and morning sickness during pregnancy.

3.5 Survivors age at a rapid rate and experience a wide range of secondary health problems, in particular musculoskeletal problems, and depression and anxiety, with multi-morbidity a growing issue. These health problems have had a negative impact on their employment, requiring them to leave the workforce much earlier than other Australians. Additionally, these secondary health issues often prevent them from regulating their body temperature and result in increased levels of fatigue and tiredness that interfere with, and increase the cost of their daily activities.

3.6 The ongoing impact of the Thalidomide tragedy on survivors and their families, combined with the increasing health and support needs of survivors is recognised and is the basis for the Government's provision of financial support.

3.7 The 2020-21 Budget measure Support for Australia's Thalidomide Survivors provides that the Government will provide $44.9 million over four years from 2020-21 (and $3.9 million per year ongoing). The assistance includes a lump sum payment, a tax exempt and income support income test exempt annual payment to assist with daily living expenses, the Extraordinary Assistance Fund to provide support for activities of daily living, and the Health Care Assistance Fund to cover out-of-pocket healthcare expenses. The Government will also establish a support service for Thalidomide survivors and a site of national recognition in consultation with survivors.

3.8 All recognised Australian Thalidomide survivors will be eligible for support under the support package. In addition, currently unrecognised survivors who meet requirements through an eligibility assessment process will also be entitled to receive support.

3.9 The Financial Framework (Supplementary Powers) Regulations 1997, as amended by the Financial Framework (Supplementary Powers) Amendment (Health Measures No. 5) Regulations 2020, provides the legislative authority for government spending on these payments.

3.10 Payments made from the Thalidomide Australia Fixed Trust are tax exempt - see item 5.6 in section 51-30 of the ITAA 1997. These payments are also not considered income for the purposes of the SS Act and VEA - see paragraph 8(8)(vc) of the SS Act and paragraph 5H(8)(xb) of the VEA.

3.11 The annual payments from the Commonwealth are likely to be ordinary income for taxation purposes as they are recurrent, regular and relied upon by the recipients. Therefore these amounts will likely be assessable unless they are made specifically exempt.

3.12 The lump sum payments are unlikely to be ordinary income for taxation purposes as they are not compensation for lost income. Further, to the extent that the lump sum payments are made in relation to the personal injury of survivors these payments will likely be disregarded for capital gains tax purposes under the exemption in section 118-37 of the ITAA 1997.

3.13 Under the SS Act and VEA, an income test is used to determine a person's eligibility for income support payments and the rate of payment that is payable.

3.14 The annual and lump sum payments are likely to be income for the purposes of the SS Act and VEA as they are income amounts earned, derived or received by the person for the person's own use or benefit. Therefore, unless these amounts are specifically exempted from the social security and VEA income tests, they could reduce the amount of pension or payment a person receives.

Detailed explanation of new law

Income tax treatment

3.15 Schedule 3 to the Bill amends the ITAA 1997 to make payments from the Commonwealth to Thalidomide survivors under the Support for Australia's Thalidomide Survivors program exempt income for income tax purposes. [Schedule 3, item 2, table item 5.5 in section 51-30 of ITAA 1997]

3.16 Amendments are also made to the guides and checklists in the ITAA 1997 to include references to the new payments and their exempt income status. [Schedule 3, item 1, section 11-15 of the ITAA 1997]

Income support treatment

3.17 Subsection 8(8) of the SS Act is amended to exclude payments made under the Support for Australia's Thalidomide Survivors program to Thalidomide survivors as income for the purposes of that Act. This means the payments will be exempt from the social security income test. [Schedule 3, item 4, paragraph 8(8)(vd) of SS Act]

3.18 Subsection 5H(8) of the VEA is amended to exclude payments made under the Support for Australia's Thalidomide Survivors program to Thalidomide survivors as income for the purposes of that Act. This means the payments will be exempt from the income test for payments made under the VEA. [Schedule 3, item 5, paragraph 5H(8)(xc) of VEA]

3.19 Currently, lump sum payments made under the Support for Australia's Thalidomide Survivors program are exempt for the purpose of the social security and veterans' entitlement income test by way of an instrument made under paragraph 8(11)(d) of the SS Act - see Social Security (Exempt Lump Sum - Australian Thalidomide Survivors Support Program) Determination 2020. The determination has effect under subsection 5H(12A) of the VEA with the result that lump sum payments made under the program are exempt from the veterans' entitlement income test. Amendments to the SS Act and VEA will facilitate the exemption of all payments under the program on an ongoing basis.

Application and transitional provisions

3.20 The amendments to the ITAA 1997 apply in relation to payments received in the 2021-22 income year and future income years. [Schedule 3, item 3]

3.21 The amendments of the SS Act and the VEA apply in relation to payments under the Support for Australia's Thalidomide Survivors program made on or after the day after the Bill receives Royal Assent. [Schedule 3, item 6]

Chapter 4 - Recovery grants for 2021 floods and storms

Outline of chapter

4.1 Schedule 4 to the Bill amends the ITAA 1997 to make disaster recovery grant payments in relation to the storms and floods that occurred in February and March 2021 non-assessable non-exempt income.

Context of amendments

4.2 The storms and floods that occurred in February and March 2021 had a devastating impact on a number of communities.

4.3 On 26 March 2021, the Prime Minister announced that primary producer recovery grants for primary producers and small businesses would be activated as a Category D measure under the Disaster Recovery Funding Arrangements.

4.4 The Prime Minister has announced that such grant payments would not be subject to income tax.

Summary of new law

4.5 Schedule 4 amends the ITAA 1997 to provide that disaster recovery grant payments in relation to floods caused by rainfall that occurred between 19 February 2021 and 31 March 2021 and storms in the same period are not assessable income and not exempt income.

Comparison of key features of new law and current law

New law Current law
Disaster recovery grant payments to primary producers and small businesses that are in relation to floods that occurred following rainfall and storms between 19 February and 31 March 2021 are non-assessable non-exempt income. Disaster recovery grant payments to primary producers and small businesses that are in relation to floods that occurred following rainfall and storms between 19 February 2021 and 31 March 2021 could be subject to income tax, depending on the circumstances of the recipient.

Detailed explanation of new law

4.6 Schedule 4 amends the ITAA 1997 to provide that payments are not assessable income and not exempt income if:

·
the payments are recovery grants made to small businesses or primary producers (within the meaning of those terms in the Disaster Recovery Funding Arrangements 2018 as set out in a determination made by the Minister for Law Enforcement and Cyber Security on 5 June 2018) as part of a Category D measure under the Disaster Recovery Funding Arrangements 2018; and
·
the payments relate to floods consequent on rainfall events that occurred between 19 February and 31 March 2021 or to storms that occurred in the same period.

[Schedule 4, item 2, section 59-99 of the ITAA 1997]

4.7 Schedule 4 also updates the guide in section 11-55 of the ITAA 1997 which lists particular kinds of non-assessable non-exempt income to include a reference to the new exemption. [Schedule 4, item 1, section 11-55 of the ITAA 1997]

Application and transitional provisions

4.8 The amendment made by Schedule 4 will apply to assessments for the 2020-2021 income year and later income years. [Schedule 4, item 3]

Chapter 5 - Deductible gift recipients-new specific recipients

Outline of chapter

5.1 Schedule 5 to the Bill amends the ITAA 1997 to allow the following entities to be deductible gift recipients under the income tax law:

·
Alliance for Journalists' Freedom Ltd;
·
The Andy Thomas Space Foundation Limited;
·
Youthsafe;
·
RAS Foundation Limited;
·
The Judith Neilson Institute for Journalism and Ideas; and
·
The Great Synagogue Foundation.

5.2 Schedule 5 to the Bill amends the ITAA 1997 to extend the period in which the following entities are deductible gift recipients under the income tax law:

·
The Centre for Entrepreneurial Research and Innovation Limited; and
·
Sydney Chevra Kadisha.

Context of amendments

5.3 The income tax law allows income tax deductions for taxpayers who make gifts of $2 or more to a deductible gift recipient. Deductible gift recipients are entities that fall within one of the general categories set out in Division 30 of the ITAA 1997 or are specifically listed by name in that Division. Legislative references in this Chapter are to the ITAA 1997 unless otherwise specified.

5.4 Deductible gift recipient status helps eligible organisations attract public financial support for their activities.

5.5 Alliance for Journalists' Freedom Ltd (ABN 59 622 234 799) is a charity that promotes media freedom and the right of journalists to report.

5.6 The Andy Thomas Space Foundation Limited (ABN 41 642 332 321) is a charity that promotes space-related education and training.

5.7 Youthsafe (ABN 91 068 371 022) is a charity that provides industry training and community support in the field of youth safety and wellbeing.

5.8 RAS Foundation Limited (ABN 99 637 243 853) is a charity committed to supporting agricultural development and rural communities in Australia.

5.9 The Judith Neilson Institute for Journalism and Ideas (ABN 97 518 065 568) is a charity that supports quality journalism and storytelling through grants, education initiatives and events.

5.10 The Great Synagogue Foundation (ABN 45 147 003 449) is a charity that maintains and preserves the building and facilities of The Great Synagogue.

5.11 The Centre for Entrepreneurial Research and Innovation Limited (ABN 46 606 007 952) is a charity that works with universities and research institutes to promote entrepreneurialism, in addition to commercialising research and innovative ideas.

5.12 Sydney Chevra Kadisha (ABN 65 000 029 541) is a charity that provides and attends to all funeral arrangements and services in accordance with Jewish law.

Summary of new law

5.13 Schedule 5 to the Bill amends the ITAA 1997 to allow the following entities to be deductible gift recipients under the income tax law:

·
Alliance for Journalists' Freedom Ltd;
·
The Andy Thomas Space Foundation Limited;
·
Youthsafe;
·
RAS Foundation Limited;
·
The Judith Neilson Institute for Journalism and Ideas; and
·
The Great Synagogue Foundation.

5.14 Schedule 5 to the Bill amends the ITAA 1997 to extend the period the following entities are deductible gift recipients under the income tax law:

·
The Centre for Entrepreneurial Research and Innovation Limited; and
·
Sydney Chevra Kadisha.

Detailed explanation of new law

5.15 Taxpayers may claim an income tax deduction for gifts made to Alliance for Journalists' Freedom Ltd (ABN 59 622 234 799) provided the gift complies with the existing requirements of the income tax law. This amendment ensures that Alliance for Journalists' Freedom Ltd receives appropriate support through the Commonwealth tax system. [Schedule 5, item 3, table item 4.2.49 in the table in section 30-45(2)]

5.16 Taxpayers may claim an income tax deduction for gifts made to The Andy Thomas Space Foundation Limited (ABN 41 642 332 321) provided the gift complies with the existing requirements of the income tax law. This amendment ensures that The Andy Thomas Space Foundation Limited receives appropriate support through the Commonwealth tax system. [Schedule 5, item 1, table item 2.2.51 in the table in section 30-25(2)]

5.17 Taxpayers may claim an income tax deduction for gifts made to Youthsafe (ABN 91 068 371 022) provided the gift complies with the existing requirements of the income tax law. This amendment ensures that Youthsafe receives appropriate support through the Commonwealth tax system. [Schedule 5, item 3, table item 4.2.50 in the table in section 30-45(2)]

5.18 Taxpayers may claim an income tax deduction for gifts made to RAS Foundation Limited (ABN 99 637 243 853) provided the gift complies with the existing requirements of the income tax law. This amendment ensures that RAS Foundation Limited receives appropriate support through the Commonwealth tax system. [Schedule 5, item 5, table item 13.2.27 in the table in section 30-105]

5.19 Taxpayers may claim an income tax deduction for gifts made to The Judith Neilson Institute for Journalism and Ideas (ABN 97 518 065 568) provided the gift complies with the existing requirements of the income tax law. This amendment ensures that The Judith Neilson Institute for Journalism and Ideas receives appropriate support through the Commonwealth tax system. [Schedule 5, item 1, table item 2.2.52 in the table in section 30-25(2)]

5.20 Taxpayers may claim an income tax deduction for gifts made to The Great Synagogue Foundation (ABN 45 147 003 449) provided the gift complies with the existing requirements of the income tax law. This amendment ensures that The Great Synagogue Foundation receives appropriate support through the Commonwealth tax system. [Schedule 5, item 5, table item 13.2.28 in the table in section 30-105]

5.21 Taxpayers may claim an income tax deduction for gifts made to The Centre for Entrepreneurial Research and Innovation Limited (ABN 46 606 007 952) for a longer period than initially provided when it was first listed as a deductible gift recipient provided the gift complies with the existing requirements of the income tax law. This amendment ensures that The Centre for Entrepreneurial Research and Innovation Limited continues to receive appropriate ongoing support through the Commonwealth tax system. [Schedule 5, item 2, table item 3.2.15 in the table in section 30-40(2)]

5.22 Taxpayers may claim an income tax deduction for gifts made to Sydney Chevra Kadisha (ABN 65 000 029 541) for a longer period than initially provided when it was first listed as a deductible gift recipient provided the gift complies with the existing requirements of the income tax law. This amendment ensures that Sydney Chevra Kadisha continues to receive appropriate support through the Commonwealth tax system. [Schedule 5, item 4, table item 12.2.5 in the table in section 30-100(2)]

Consequential amendments

5.23 Schedule 5 also amends the index for Division 30 of the ITAA 1997 to reflect the new listings. [Schedule 5, items 6 to 11, table items 2ACB, 4AA, 52B, 64AA, 94AC and 129 in the table in section 30-315]

Application and transitional provisions

Commencement

5.24 The amendments commence on the first day of the quarter following Royal Assent. [Clause 2]

Application

5.25 The following listings apply to gifts made on and after 1 July 2020:

·
Alliance for Journalists' Freedom Ltd;
·
The Andy Thomas Space Foundation Limited;
·
Youthsafe;
·
RAS Foundation Limited; and
·
The Judith Neilson Institute for Journalism and Ideas.

5.26 The listing of The Great Synagogue Foundation applies to gifts made on and after 1 July 2020 and before 1 July 2025.

5.27 The following listing of The Centre for Entrepreneurial Research and Innovation Limited applies to gifts made on and after 2 January 2017.

5.28 The listing of the Sydney Chevra Kadisha applies to gifts made on and after 1 January 2018 and before 1 July 2022.

Chapter 6 - Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Schedule 1 - Medicare levy and Medicare levy surcharge income thresholds

6.1 Schedule 1 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

6.2 This Schedule amends the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 to:

·
increase the Medicare levy low-income thresholds for individuals and families (along with the dependent child-student component of the family threshold) in line with movements in the CPI;
·
increase the Medicare levy low-income thresholds for individuals and families eligible for the SAPTO (along with the dependent child-student component of the family threshold), in line with movements in the CPI; and
·
increase the Medicare levy surcharge low-income threshold in line with movements in the CPI.

6.3 This will ensure that low-income individuals, families, seniors and pensioners who were exempt from the Medicare levy in the 2019-20 income year continue to be exempt in the 2020-21 income year if their income has increased in line with, or less than, movements in the CPI.

Human rights implications

6.4 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

6.5 This Schedule is compatible with human rights as it does not raise any human rights issues.

Schedule 2 - Family Home Guarantee

6.6 Schedule 2 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

6.7 This Schedule amends the NHFIC Act to expand the objects of the Act to include NHFIC improving housing outcomes for Australians by assisting earlier access to the housing market by eligible single parents with dependants. The amendments to the objects will enable the Minister to issue directions to NHFIC through its Investment Mandate.

Human rights implications

6.8 This Schedule does not engage any of the applicable rights or freedoms.

6.9 This Schedule amends the NHFIC Act to promote home ownership in Australia without altering the existing objectives of the NHFIC Act. The NHFIC Act enhances the human right to an adequate standard of living. This right to an adequate standard of living includes the right to adequate food, clothing and housing, and the continuous improvement of living conditions as recognised in Article 11 of the International Covenant on Economic, Social and Cultural Rights.

6.10 This Schedule, in promoting home ownership and the understanding of housing affordability in Australia, is compatible with the right to an adequate standard of living.

Conclusion

6.11 This Schedule is compatible with human rights as it does not raise any human rights issues.

Schedule 3 - Payments to Thalidomide survivors

6.12 Schedule 3 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

6.13 This Schedule amends the ITAA 1997, the SS Act and the Veteran's Entitlements Act 1986 to provide that annual and lump sum payments made by the Commonwealth to Thalidomide survivors are exempt from income tax and do not count as income for the purposes of any income support payments.

Human rights implications

6.14 This Schedule engages the right of everyone to social security in Article 9 of the International Covenant on Economic, Social and Cultural Rights.

6.15 The right to social security requires that a system be established under domestic law, and that public authorities must take responsibility for the effective administration of the system. The social security scheme must provide a minimum essential level of benefits to all individuals and families that will enable them to acquire at least essential health care, basic shelter and housing, water and sanitation, foodstuffs, and the most basic forms of education.

6.16 This amendment will operate beneficially as payments made by the Commonwealth to Thalidomide survivors will not be taken into account when assessing a person's payability or rate of social security or veteran's entitlements under both the social security and veteran's entitlement income test. If these payments were not exempted, a person in receipt of these payments may not be payable for a social security payment or, if they are payable, their rate of payment might be reduced. This Schedule is therefore consistent with the promotion of the right to social security.

Conclusion

6.17 This Schedule is compatible with human rights as it supports a person's right to social security.

Schedule 4 - Recovery grants for 2021 floods and storms

6.18 Schedule 4 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

6.19 This Schedule amends the ITAA 1997 to make disaster recovery grant payments in relation to the storms and floods that occurred in February and March 2021 non-assessable non-exempt income.

Human rights implications

6.20 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

6.21 This Schedule is compatible with human rights as it does not raise any human rights issues.

Schedule 5 - Deductible gift recipients-new specific recipients

6.22 Schedule 5 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

6.23 This Schedule amends the ITAA 1997 to allow the following entities to be deductible gift recipients under the income tax law:

·
Alliance for Journalists' Freedom Ltd;
·
The Andy Thomas Space Foundation Limited;
·
Youthsafe;
·
RAS Foundation Limited;
·
The Judith Neilson Institute for Journalism and Ideas; and
·
The Great Synagogue Foundation Trust.

6.24 This Schedule amends the ITAA 1997 to allow the following entities to be extended as deductible gift recipients under the income tax law:

·
The Centre for Entrepreneurial Research and Innovation Limited; and
·
Sydney Chevra Kadisha.

Human rights implications

6.25 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

6.26 This Schedule is compatible with human rights as it does not raise any human rights issues.


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