Senate

Taxation Laws amendment bill (No. 1) 1996

Supplementary Explanatory Memorandum

Request for amendments to be moved on behalf of the Government(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

General outline and financial impact

Requests that the Bill be amended to insert a new definition of provisional tax uplift factor in item 1, Part 1, Schedule 1. The new definition will provide that its meaning is that set out in new section 221YAAA. The new section will provide the figure for the provisional tax uplift factor for the 1996-97 year of income and contains a new method for calculating the provisional tax uplift factor for years after the 1996-97 year of income.

Date of effect: The requests will commence when the Bill receives Royal Assent.

Proposal announced: Not previously announced.

Financial impact: The requests provide for the use of figures in future years and their impact cannot be determined until the figures are known.

Compliance cost impact: The measures do not have an effect on compliance costs.

Overview

1.1 The requests seek to provide that the provisional tax uplift factor for the 1996-97 year of income will be 6 per cent and, for a year of income after the 1996-97 year of income, a factor determined by reference to the nominal increase in Gross Domestic Product for the 12 months ending 31 December prior to the relevant year of income.

Explanation of the amendments

1.2 The requests omit the definition of provisional tax uplift factor as originally contained in the Bill and proposes a new definition. The new definition provides that the meaning of provisional tax uplift factor is that now given by new section 221YAAA . [Amendment 1]

1.3 New section 221YAAA sets out the meaning of provisional tax uplift factor for a year of income. [Amendment 2 - new subsection 221YAAA(1)]

1.4 The factor for the 1996-97 year of income is stated to be 6 per cent. [Amendment 2 - subsection 221YAAA(2)]

1.5 The factor for a year of income later than the 1996-97 year of income (referred to as the later provisional tax year) is stated to be the percentage worked out using the formula contained in the section. The formula, in new subsection 221YAAA(3) , first determines the percentage increase for the sum of the quarterly GDP amounts for the year to the 31 December preceding the year of income involved (defined as the later calendar year) over the figures similarly determined for the 12 months before that calendar year (defined as the earlier calendar year). The resulting percentage figure, which normally would be a figure slightly over 100 per cent, is then reduced by 100 per cent and rounded to provide the whole number percentage of the provisional tax uplift factor for the relevant year (the later provisional tax year). [Amendment 2]

1.6 New subsection 221YAAA(4) defines GDP amount for a quarter to be the amount published in the document mentioned in new subsection 221YAAA(5) as the original gross domestic product (GDP(I)) at current prices for the quarter. New subsection 221YAAA(5) makes it certain that the document is the first one published by the Australian Statistician after the 31 December before the later provisional tax year and not a subsequent one in which figures may have been revised. It must also contain all the GDP(I) figures necessary for the formula, that is, the figures for the four quarters in the later calendar year and the figures for the four quarters in the earlier calendar year. [Amendment 2]

1.7 A number of the terms used have required definitions. New subsection 221YAAA(6) contains definitions for three such terms. The first and second definitions define the terms earlier calendar year and later calendar year as used in the formula. The last definition explains what is meant by quarter. The definitions are self explanatory. [Amendment 2]

1.8 The remaining provisions of new section 221YAAA are to clarify how the factor is to be determined and applied. New subsections 221YAAA(7), (8), and (9) respectively provide:

·
that the percentage for a year of income applies regardless of any substituted accounting period adopted by a taxpayer;
·
that the percentage is to be rounded to the nearest whole number (or the lower whole number where the amount ends in .5); and
·
that if the percentage is negative then the factor is to be zero per cent. As the various amounts to which the factor is applied are increased by the factor rather than multiplied by it, a zero rate will not change those amounts. [Amendment 2]

1.9 The request contained in amendment 3 is a technical one to reflect that more than one amendment is sought.