Explanatory Memorandum
(Circulated by authority of the T reasurer, the Hon Ralph Willis, MP)General outline and financial impact
INCOME TAX RATES AMENDMENT BILL ACT 1995
Amends the Income Tax Rates Act 1986 to increase the rate of company tax from 33 per cent to 36 per cent. The increased rate will apply to most companies taxable in Australia (including non-residents) and extend to public trading trusts, corporate unit trusts, corporate limited partnerships which are taxed as companies, and the non-statutory fund income of non-mutual life assurance companies.
Date of effect: The amendments will apply in respect of taxable income of the 1995-96 and subsequent income years.
Proposal announced: 1995-96 Budget, 9 May 1995.
Financial impact: The estimated gain in revenue is $320 million in 1995-96, $1,570 million in 1996-97, $940 million in 1997-98 and $1,140 million in 1998-99.
Compliance cost impact: The compliance cost impacts of this measure are negligible.
TAXATION LAWS AMENDMENT (BUDGET MEASURES) BILL 1995
Amendment of Taxation (Deficit Reduction) Act (No. 1) 1993
Consequential amendments in relation to the company tax rate change
Makes consequential amendments to the Taxation (Deficit Reduction) Act (No 1) 1993 because the increase in the company tax rate will not apply to the concessional rates of tax that apply to recognised medium credit unions and recognised large credit unions for the 1995-96 and 1996-97 years of income.
Date of effect: 9 May 1995
Proposal announced: 1995-96 Budget, 9 May 1995
Financial impact: The consequential amendments do not, of themselves, have any financial impact. The financial impact of the rate increase is explained above in relation to the Income Tax Rates Amendment Bill 1995.
Compliance cost impact: None
Amendment of Taxation (Deficit Reduction) Act (No. 2) 1993
Taxation of friendly societies and other registered organisations
Amends the income tax law to freeze the rate of tax imposed on the eligible insurance business of friendly societies and other registered organisations at 33% for the 199596 and 199697 years of income. The rebate applying to taxable bonuses paid on life insurance policies issued by friendly societies will increase to 33% from 1 July 1995 as scheduled and will be maintained at that level for the year beginning 1 July 1996.
Date of effect: 1 July 1995.
Proposal announced: 1995-96Budget, 9 May 1995
Financial impact: The cost to revenue is $11 million in 1995-96, $45 million in 1996-97 and $22 million in 1997-98, and a gain to revenue of $4 million in 1998-99.
Compliance cost impact: The proposed amendments are not expected to have any impact on compliance costs.
Amendment of the sales tax laws
Makes consequential amendments to the Sales Tax Assessment Act 1992 because of the increase in the sales tax payable on passenger motor vehicles to the general rate (currently 21 per cent) effected by the Sales Tax (Exemptions and Classifications) Modification Bills.
Date of effect: Applies to dealings with goods after 7.30 pm eastern standard time on 9 May 1995.
Proposal announced: 1995-96 Budget, 9 May 1995
Financial impact: The consequential amendments do not, of themselves, have any financial impact. The financial impact of the rate increase is explained in the explanatory memorandum to the Sales Tax (Exemptions and Classifications) Modification Bills.
Compliance cost impact: The consequential amendments do not, of themselves, impose any new compliance costs for taxpayers. The increased compliance costs associated with the rate increase are explained in the explanatory memorandum to the Sales Tax (Exemptions and Classifications) Modification Bills.
Amends the old and new sales tax legislation to ensure that the only access to credits or refunds of overpaid sales tax is via the provisions of the sales tax law itself.
Date of effect: Applies to liabilities to refund payments arising after 7.30 p.m. eastern standard time on 9 May 1995. With regard to liabilities arising at or before that time, it will apply where legal proceedings were commenced after 7.30 p.m. eastern standard time on 9 May 1995.
Proposal announced: 1995-96 Budget, 9 May 1995
Financial impact: Not quantifiable.
Compliance cost impact: There will be no impact on taxpayer compliance costs.
Tax advantaged computer programs
Amends the Sales Tax Assessment Act 1992 to confine the tax advantaged computer program concession to goods other than microchips except for certain programson microchips in cartridges.
Date of effect: Applies to dealings with goods after 7.30 pm eastern standard time on 9 May 1995.
Proposal announced: 1995-96 Budget, 9 May 1995
Financial impact: Gain to revenue:
| 1994-95 | $10 million |
| 1995-96 | $150 million |
| 1996-97 | $160 million |
| 1997-98 | $170 million |
| 1998-99 | $185 million |
Compliance cost impact: The removal of the tax advantaged computer program concession will take away the costs incurred by taxpayers in valuing programs, identifying qualifying microchips and maintaining the required records of transactions involving goods containing tax advantaged computer programs.
Provisional tax uplift factor
Amends the definition of provisional tax uplift factor in the Income Tax Assessment Act 1936 so that the factor is 8% for the 1995-96 year of income and 10% for later years of income unless the Parliament provides otherwise.
Date of effect: The amendments apply to the calculation of provisional tax (including instalments) for the 1995-96 year of income and later years of income.
Proposal announced: 1995-96 Budget, 9 May 1995
Financial impact: None
Compliance cost impact: None, as uplift factor is unchanged from the previous three years.