Explanatory Memorandum(Circulated by authority of the Treasurer, the Hon. P.J. Keating, M.P.)
This Bill will amend the Income Tax Assessment Act 1936, as proposed to be amended by the Taxation Laws Amendment Bill (No. 4) 1985, to provide that capital expenditure by primary producers, incurred after 19 September 1985, on water conservation or conveyance of a kind presently qualifying for immediate income tax deduction is deductible in equal instalments over 3 years.
The potential revenue saving by replacing immediate deductibility of water conservation or conveyance expenditure with write-off in equal instalments over 3 years is estimated at $20m in 1986-87 and $13m in 1987-88.
This Bill will implement the proposal announced on 28 November 1985 and modify amendments of the water conservation and conveyance provisions of the income tax law contained in the Taxation Laws Amendment Bill (No. 4) 1985. Those amendments propose the replacement, with write-off over 5 years, of the immediate income tax deduction for capital expenditure incurred by a primary producer on conserving or conveying water, as announced in the 19 September 1985 Statement on Reform of the Australian Taxation System. This Bill will provide that, where the expenditure is incurred under a contract entered into after 19 September 1985, it is deductible by way of 3 equal annual instalments - that is, a 33 1/3% deduction in the year in which the expenditure is incurred and in each of the subsequent 2 years.
NOTES ON CLAUSES
By sub-clause (1) of this clause, the amending Act is to be cited as the Income Tax Assessment Amendment Act (No. 2) 1985.
Sub-clause (2) facilitates references to the Income Tax Assessment Act 1936, which is the Act being amended by this Bill. That Act is referred to in the Bill as "the Principal Act".
Under clause 2, the amending Act is to come into operation immediately after the amendments being made to section 75B of the Principal Act by the Taxation Laws Amendment Bill (No. 4) 1985 come into operation. But for this clause, the amending Act would, by reason of sub- section 5(1A) of the Acts Interpretation Act 1901, come into operation on the twenty-eighth day after the date of Assent. As the amendments being made by this Bill reflect those being made to section 75B of the Principal Act by the Taxation Laws Amendment Bill (No. 4) 1985, it is also necessary to ensure that they do not come into effect before those other amendments.
Paragraph (c) of clause 11 of the Taxation Laws Amendment Bill (No. 4) 1985 proposes, amongst other things, to insert a new operative provision - sub-section (3B) - into section 75B of the Principal Act. Under that new provision, it is proposed that certain kinds of capital expenditure incurred primarily and principally on conserving or conveying water and incurred under a contract entered into on or after 20 September 1985 by a primary producer, will be deductible in 5 equal annual instalments. The amendments proposed by paragraphs (a) and (b) of sub-clause 3(1) of this Bill will provide for such expenditure to be deductible in 3 equal annual instalments, the first in the year in which the expenditure is incurred and a further instalment in each of the next 2 years.
Sub-clause 3(2), which will not amend the Principal Act, specifies that the amendments being made by sub-clause (1) are to apply to expenditure incurred on or after 20 September 1985.