House of Representatives

Taxation Laws Amendment Bill (No. 5) 2000

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

General outline and financial impact

Amendment of the Sales Tax Assessment Act 1992

This Bill amends the Sales Tax Assessment Act 1992 to exclude from sales tax that part of the taxable value of a vehicle that represents the additional cost attributable to making the vehicle suitable to be driven by, or used to transport, a person suffering from a physical impairment.

Date of effect: The amendment applies to dealings on or after 26 June 1998.

Proposal announced: The amendment was announced in the Assistant Treasurers Press Release No. 52 on 5 November 1999.

Financial impact: Estimated cost is up to $7.4 million for the period 26June 1998 to 30 June 2000.

Compliance cost impact: Negligible. Manufacturers of affected vehicles will need to determine that part of the taxable value that is not subject to sales tax.

Summary of Regulation Impact Statement

A regulation impact statement is not required for this measure.

Employee share schemes

The employee share scheme (ESS) provisions in Division 13A of the Income Tax Assessment Act 1936 (ITAA 1936) explain how employees are assessed on the shares and rights acquired under an ESS. The concept of market value is used to determine the discount received by the employee and the amount included in the employees assessable income. For example, if the share is a non-qualifying share or if it is a qualifying share and the employee elects to have the discount assessed immediately, the discount equals the market value of the share minus the consideration paid.

This Bill amends Division 13A by inserting an alternative method (public offer price) to determine market value of shares. The amendments will overcome the inequitable and uncertain consequences which result from using the existing weighted average price formula to determine market value. The new rules will apply to shares acquired under an ESS in association with a subsequent public offer of shares in a listed public company.

Date of effect: The amendment will apply from 2 September 1999.

Proposal announced: Treasurers Press Release No. 54 of 2 September 1999.

Financial impact: Negligible.

Compliance cost impact: Negligible.

Summary of Regulation impact statement

Regulation impact on business

Impact: Low

Main points:

·
Employees will receive a cash flow benefit.
·
It will be easier for employers to explain the taxation consequences of participation in an ESS. It is expected that this will increase participation in the schemes.
·
The ATO will not incur any additional administrative costs.
·
There will be a cost to the revenue in situations where the weighted average formula would have resulted in a higher assessable discount than the public offer price.

Closely held trusts

This Bill amends Division 6D of the Income Tax Assessment Act 1936 (ITAA 1936) and other tax laws by:

·
allowing the Commissioner to permit extensions of time for lodgment of ultimate beneficiary statements;
·
allowing ultimate beneficiary statements to be corrected in certain circumstances;
·
providing trustees of closely held trusts with the power to recover the ultimate beneficiary non-disclosure tax they paid (including any additional tax or penalty) from ultimate beneficiaries, trustee beneficiaries or interposed trustees or partnerships whose provision of incorrect information or refusal to provide information, led to the liability to ultimate beneficiary non-disclosure tax, but only where the gross amount has been distributed; and
·
making it clear that section 254 of the ITAA 1936 extends to ultimate beneficiary non-disclosure tax and related interest charge obligations.

Some clarificatory amendments are also being made.

Date of effect: The amendments apply to present entitlements created after 4.00 pm on 13 August 1998 Australian Eastern Standard Time.

Proposal announced: 4 February 2000.

Financial impact: The amendments have no financial impact.

Compliance cost impact: There are no net compliance costs because these amendments are meant to ease the compliance burden on trustees.

Summary of Regulation impact statement

The Office of Regulation Review have advised that a Regulation impact statement is not required for these amendments.


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