House of Representatives

Supplementary Explanatory Memorandum

Circulated By the Authority of the Treasurer, the Hon Wayne Swan MP

General outline and financial impact

Amendments to the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008

These amendments will maintain the effect of the existing law for individuals who make a political gift or contribution, but not those individuals who make the gift or contribution in the course of carrying on a business. Those non-business individuals will continue to be able to claim a deduction for political gifts or contributions up to $1,500.

These amendments have the effect of adjusting the Bill so that it only removes deductions for political donations made by businesses or made by individuals in the course of carrying on a business.

Date of effect : The amendments apply from the beginning of the 2008-09 income year.

Proposal announced : Not previously announced.

Financial impact : The amendments have the following revenue impact:

Compliance cost impact : Nil.

Chapter 1
Amendments to the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008

Amendment 1

1.1 Amendment 1 removes the proposed amendments to the A New Tax System (Goods and Services Tax) Act 1999. As the amendments reinstate the ability of non-business individuals to claim deductions for gifts or contributions to political parties and independent members and candidates, the amendments to goods and services tax rules are no longer required. The Income Tax Assessment Act 1997 will retain the definitions and concepts that were being replicated in the A New Tax System (Goods and Services Tax) Act 1999.

1.2 Amendment 1 will also remove a consequential amendment to the Income Tax Assessment Act 1936. These amendments are no longer necessary as non-business individuals will still be able to claim deductions for gifts or contributions to political parties and independent members and candidates.

Amendments 2 to 5

1.3 Amendments 2 to 5 reverse the repeal of Subdivision 30-DA of the Income Tax Assessment Act 1997 (about deductions for political gifts and contributions) and the associated consequential amendments to the Income Tax Assessment Act 1997.

1.4 Amendment 4 amends Subdivision 30-DA to limit its application. Gifts or contributions to political parties and independent members and candidates will only be tax deductible for individuals.

1.5 However, those individuals will not get a deduction if the gift or contribution is made in the course of them carrying on a business. That is, the gift or contribution must be made in their personal capacity.

1.6 Amendment 3 alters the proposed section 26-22 of the Income Tax Assessment Act 1997 (about denying general deductions for political gifts or contributions) to ensure that it does not prevent a deduction that is allowed under the amended Subdivision 30-DA.