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House of Representatives

Taxation Laws Amendment Bill 1993

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon John Dawkins, M.P.)

General Outline and Financial Impact

The Taxation Laws Amendment Bill 1993 will amend various Acts (unless otherwise indicated all amendments refer to the Income Tax Assessment Act 1936 ) by making the following changes:

Fringe Benefits Tax Assessment Act 1986 ("FBTAA")

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Reflects a change of name for the Commonwealth Savings Bank of Australia to the Commonwealth Bank of Australia in subsection 136(1) of the FBTAA.

Date of effect: 1 January 1993.

Proposal announced: Not previously announced.

Financial Impact: Nil

·
Changes the word "subsection" to "section" in paragraph 37(b) of the FBTAA.

Date of effect: The amendment will commence from the day the Bill receives Royal Assent.

Proposal announced: Not previously announced.

Financial impact: Nil

Gifts - Shrine of Remembrance Restoration and Development Trust

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Allows, for a limited period, income tax deductions for gifts made to the Shrine of Remembrance Restoration and Development Trust.

Date of effect: On or after 25 November 1992 and on or before 30 June 1995.

Proposal announced: Treasurer's Press Release No. 183 of 1992.

Financial impact: The impact of the amendment on revenue is not expected to be significant.

Capital Gains Tax - Depreciable Property Installed on Crown Leases

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Amends the capital gains tax provisions to ensure that they treat disposals of interests in plant installed on Crown leases of land consistently with their treatment under the depreciation Crown lease provisions.

The amendment will prevent capital gains and losses from accruing in respect of plant installed on a Crown lease where a lease is terminated but the lessee retains an interest in the plant. It will also prevent capital losses from accruing in respect of plant installed on a Crown lease where the lease is terminated but an associate of the lessee obtains an interest in the plant.

Date of effect: Applies to relevant disposals occurring after 26 February 1992.

Proposal announced: The amendments were foreshadowed in the Explanatory Memorandum to the depreciation Crown lease amendments contained in Taxation Laws Amendment Bill (No.3) 1992 [paragraphs 6.46 to 6.49].

Financial impact: Not capable of accurate estimation. The amendments are to prevent anomalous results.

Dividend Streaming Amendments

·
Ensures the dividend streaming provisions apply to a dividend streaming arrangement that involves the use of an interposed entity between a shareholder and the company or companies carrying out or party to the arrangement.

Date of effect: The amendments will apply to dividends paid by resident companies on or after the date the Bill receives Royal Assent.

Proposal announced: Not announced.

Financial impact: This change will prevent the loss of revenue amounts which cannot be quantified.

Amendments Relating to Accrued Leave Transfer Payments

·
Provides for the assessability and deductibility of payments made between employers in industries where employees regularly transfer from one employer to another.

Where such payments are made in respect of leave entitlements accrued by employees during the course of their employment with a number of employers, and they are made to facilitate the transfer of employees between employers pursuant to, or to accommodate the implementation of, an industrial award, the payments will be assessable to the employer who receives them and deductible to the employer who pays them.

Date of effect: The amendments will come into effect from the date upon which the Bill receives Royal Assent, and will apply retrospectively as if the amendments had been made at the time subsection 51(3) of the Act was enacted in its original form.

Proposal announced: Not previously announced.

Financial impact: The amendments are not likely to have any significant effect on the revenue. In the year in which an accrued leave transfer payment is made, it will be assessable to the employer who receives it and will be an allowable deduction to the employer who makes the payment.

Technical Amendments to Capital Allowances

Depreciation - Broadbanding

·
Amends the depreciation broadbanding measures to make it clear that rates of depreciation determined on an effective life basis that correspond with a broadbanded rate cannot be increased to the next highest broadbanded rate.

Date of effect: The amendment is to apply from the same time as the depreciation broadbanding; that is, in relation to the 1991/92 and later years of income.

Proposal announced: Not previously announced.

Financial impact: The amendment will prevent revenue losses that cannot be quantified.

Depreciation - Crown Leases

·
Amends the plant depreciation Crown lease provisions in relation to disposals of pre-27 February 1992 plant for which the prime cost method of calculating deductions has been used. The amendment will prevent balancing loss deductions being allowed for that portion of the cost of such plant which was only notionally depreciated before 27 February 1992 and ensure tax is imposed on recoupments of previously allowed deductions.

Date of effect: The amendment is to apply in relation to disposals occurring after 26 February 1992.

Proposal announced: Not previously announced.

Financial impact: The amendment will prevent unintended losses to the revenue that cannot be quantified.

Depreciation - Option to Specify Lower Rate

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Replaces an option whereby taxpayers each year may adopt lesser rates of depreciation for individual items of plant with a once-only option to adopt, at the time an asset first becomes depreciable, a lesser rate of depreciation that is not less than the rate based on the asset's effective life.

Date of effect: The change is to apply in relation to taxpayers' current and subsequent years of income.

Proposal announced: Not previously announced.

Financial impact: The amendment eliminates scope for abuse of the law. It is not possible to estimate the effect on the revenue.

Petroleum Mining Rollover Relief

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Extends the petroleum mining rollover relief provisions to pre-18 September 1974 expenditure in relation to property used in petroleum mining activities.

Date of effect: The amendment applies from the same time as petroleum mining rollover relief applies to other expenditure; that is, to relevant disposals of mining property occurring after 6 December 1990.

Proposal announced: Not previously announced.

Financial impact: None. The amendment gives effect to announced Government policy.

Arrangements Relating to Property

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Ensures that section 51AD and Division 16D can apply to property used in relevant arrangements where the taxpayer's entitlement to taxation deductions in relation to the property is not based on ownership.

Date of effect: The amendment is to apply to arrangements entered into after 16 December 1992.

Proposal announced: Not previously announced.

Financial impact: The amendment is a technical correction, the revenue effect of which cannot be quantified.

Pay-As-You-Earn (PAYE) Provisions - Definition of 'Salary or Wages', Variations of Deductions

·
Modifies the current arrangements for variations of tax instalment deductions so that an employee with more than one employer may obtain a single variation in the amount of PAYE deductions to be made from his or her salary or wages.
·
Includes in the definition of salary or wages in the PAYE provisions:

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training allowances paid to participants in the Landcare and Environment Action Program; and
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remuneration and allowances paid to members of certain local governing bodies.

Date of effect: The amendments will apply on or after the date on which the amending Bill receives the Royal Assent.

Proposal announced: Not previously announced.

Financial impact: Nil.

Amendments to the Depreciation Cost Price Limit Rules

·
Indexed annual limits are to apply in relation to financial years rather than years of income.

Date of effect: Applies to vehicles acquired after 16 December 1992.

Proposal announced: Not previously announced.

Financial impact: The amendment is expected to be revenue neutral.

·
Exempts motor cars specially fitted out for the carriage of disabled persons seated in wheel chairs from the depreciation cost price limit rules so that the cost of such vehicles will be fully depreciable when used in earning assessable income.

Proposal announced: Not previously announced.

Date of effect: Applies to vehicles acquired after 16 December 1992.

Financial impact: The cost of the concession is expected to peak at around $1 million a year in 7 years time.

Capital Gains Tax - Concessional Taxing Provisions

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Ensures that the capital gains provisions do not apply inappropriately to tax an amount, or part of an amount, which is concessionally taxed under another provision of the Act. An amount is concessionally taxed where:

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the whole or part of an otherwise assessable amount is specifically not included in assessable income; and
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part of an otherwise non-assessable amount is specifically included in assessable income.

Date of effect: The amendment applies to amounts received as a result of the disposal of an asset which was created after 25 June 1992.

Proposal announced: Not previously announced.

Financial impact: The amendment is not expected to have any significant impact on revenue.

Capital Gains Tax - Cancellation of Statutory Licences

·
Prevents a statutory licensee from being deemed to receive the market value of his/her statutory licence when it is disposed of by way of cancellation for no consideration.

Proposal announced: Not previously announced.

Date of effect: 16 August 1989

Financial impact: The nature of the measure is such that a reliable estimate can not be provided.

Capital Gains Tax - Transfer of Capital Losses

·
Specifies that the amount of the cost base of shares and loans held by group companies in a company seeking to transfer a capital loss is to be determined as at the end of the year of income of the transferee company in which the loss is transferred, rather than when the agreement to transfer the loss is made.

Date of effect: The amendment proposed by Clause 50 will apply to agreements entered into after16 December 1992 .

Proposal announced: Not previously announced.

Financial impact: This amendment will have no impact on revenue.

Capital Gains Tax - Roll-over for the Transfer of Assets Between Group Companies

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Proposes new anti-avoidance provisions in connection with the CGT roll-over available for assets transferred between group companies.

Date of effect: The proposed amendment will apply to disposals of assets occurring after 16 December 1992.

Proposal announced: Not previously announced.

Financial impact: These amendments do not have any significant impact on revenue.

Capital Gains Tax - Principal Residence Exemption

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Amends the CGT principal residence exemption provisions to specify that where a dwelling is acquired under a contract which is executed at a particular time, and under the contract or a collateral contract the purchaser is entitled to occupy the dwelling prior to the passing of legal ownership, the period of ownership will be taken to commence at the time when the right of occupation first arises.

Date of effect: The amendment proposed by Clause 57 will apply to the disposal of assets after 19 September 1985.

Proposal announced: Not previously announced.

Financial impact: This amendment will have no impact on revenue.

Sales Tax Amendment (Transitional) Act 1992

·
Makes a number of minor technical corrections to the amendments contained in the Schedule to the Act which will amend the Australian Maritime Museum Act 1990 and the Crimes (Taxation Offences) Act 1980 .

Date of effect: 28 October 1992.

Proposal announced: No announcement made.

Financial impact: Nil

Amendment of the Taxation Administration Act 1953

·
Includes the Queensland Criminal Justice Commission within the definition of law enforcement agency for the purpose of obtaining access to taxation information.

Date of effect: Date of Royal Assent.

Proposal announced: Not previously announced.

Financial impact: Nil.


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