Taxation Laws Amendment Bill (No. 3) 1998



I move that the Bill be now read a second time.

This Bill was introduced into the House of Representatives on 4 December 1997 as Taxation Laws Amendment Bill (No. 7) 1997.

The Bill implements two key initiatives of the Coalition Government, namely choice of superannuation funds and the savings rebate. It also builds on the Government's program of reducing compliance costs for small business by introducing a CGT assets register and changes to the withholding tax arrangements.

The Bill also includes a number of other 1997 Budget announcements which enhance the integrity of the tax system relating to franking credit trading and dividend streaming and private company loans.


The savings rebate will reduce the tax paid by Australians on their savings and investment income. Our approach is universal - it is open to all Australians and all types of savings. It will particularly benefit Australian families, older Australians who have saved for their retirement and individuals who have built up their businesses and derive a return.

The rebate will apply from 1 July 1998 to undeducted superannuation contributions made by employees and the self-employed and net personal income from savings and investment (including net business income) up to an annual cap of $3,000. In the first year it will apply at a transitional rate of 7.5% and increase to 15% thereafter. This will deliver a tax saving of up to $450 per year.

The rebate is substantially broader than the Government's 1996 election commitment to provide a savings rebate and replaces Labor's plan for L-A-W tax cuts that were never paid and its complex and inequitable substitute of matching compulsory employee contributions with Government contributions. Labor's proposal would have provided no assistance to those who were retired or were otherwise ineligible to contribute to superannuation.

The rebate will provide an incentive to save in a way which is fair, allowing individuals to choose the form most suited to their needs, recognising that individuals have to save for lifecycle needs as well as for retirement.


The Government announced in the 1997-98 Budget reforms to give employees greater choice over which superannuation fund or Retirement Savings Account will receive superannuation contributions made on their behalf by their employer.

The Government announced enhancements to this policy on 25 November 1997 which significantly reduce the administrative burden on employers and provide more flexible and responsive arrangements to address the retirement income needs of all Australians. These enhancements followed extensive consultation and have met with a positive reaction from industry.

The choice of fund arrangements are designed to give employees greater choice and control over their superannuation savings, which in turn give them greater sense of ownership of these savings. The arrangements will increase competition and efficiency in the superannuation industry, leading to improved returns on superannuation savings.

Amendments were made in the House of Representatives to make improvements to the choice of fund arrangements. These improvements were either identified by the Australian Taxation Office or brought to the Government's attention by interested parties or raised in submissions or evidence to the Senate Select Committee on Superannuation.

On 8 April 1998 I announced that the start date for superannuation choice for new employees would be deferred. This was necessary as it was evident that the Government was unable to secure the passage of the legislation in the Autumn 1998 sitting of the Parliament.

I will be moving a number of requests for amendments to the Bill to defer the commencement of the choice of superannuation fund measures, as they relate to new employees, until 1 July 1999.


The Bill also implements and extends the Small Business Deregulation Taskforce's recommendation to introduce an asset register for capital gains tax purposes. The Bill will allow all taxpayers to transfer all or some of the information they are required to retain for capital gains tax purposes into an asset register that has been certified as correct by a suitably qualified person.

Where information about an asset is entered into an asset register, the original record must be kept for 5 years from the date the entry is certified, rather than for 5 years from the date of disposal as is currently required. This will eliminate the need for taxpayers to keep source documents for lengthy periods of time.

The new rules will apply to entries in an asset register that are certified on or after 1 January 1998.


The Bill introduces a new 3 tiered system for remittance obligations under the Reportable Payments System (RPS), Pay-As-You-Earn (PAYE) and the Prescribed Payments System (PPS) to commence on 1 July 1998. Small remitters (businesses with total deductions not exceeding $25,000) will have the option to remit these payments on a quarterly basis rather than on a monthly basis. This will provide over 300,000 small businesses with the opportunity to defer the remittance of $500 million in withheld amounts in 1998-99.

Under the new simpler system, large remitters (who have total deductions in excess of $1 million) will be required to remit electronically and within an average of 7 days which is in step with commercial trends. Medium remitters (who have total deductions in excess of $25,000 but not exceeding $1 million) will be required to remit monthly.


The Income Tax Assessment Act 1936 is being amended to ensure that payments and loans made by a private company to a shareholder or a shareholder's associate are treated as assessable dividends to the extent that there are realised or unrealised profits in the company. The provisions contain exclusions from this treatment for repayments of genuine debts, payments and loans to other companies, payments that are otherwise assessable, ordinary business loans made on the company's usual terms for arm's length loans of that type and loans meeting minimum interest rate and maximum term criteria. Payments made to or on behalf of a person in their capacity as an employee or an associate of an employee will also be excluded from these provisions.

The payment or loan treated as a dividend will not be frankable but making the payment or loan will result in a debit to the company's franking account in the same way as if the dividend had been franked.

The provisions will also apply to payments and loans made by a private company to a third party as part of an arrangement whereby the third party will advance, loan, or credit a similar amount to a shareholder, or an associate of a shareholder, of the original lender. The provision of a loan guarantee may also be taken to be payments under this provision.

Generally the amendments will apply from 4 December 1997, the date of introduction of the amendments into the Parliament. However, the amendments dealing with loan guarantees and trust distributions will only apply to guarantees or loans made after 4.00 pm AEST, 27 March 1998.


The Bill will implement some of the measures announced by the Government in the 1997-98 Budget to prevent franking credit trading and dividend streaming, namely, the introduction of a general anti-avoidance rule and anti-streaming measures. These measures are designed to protect the integrity of the company tax imputation system.

Subject to a transitional measure explained in the Bill, these amendments apply from 7.30 pm AEST, 13 May 1997.


In the 1997-98 Budget, the Government announced the introduction of a limited tax deduction of up to $1000 for expenses incurred in the course of contesting election to the Constitutional Convention. The deduction will be available from 1 July 1997 for the 1997-98 year of income only.


The Bill amends the Income Tax Assessment Act 1997 to provide for income tax deductions for donations to the National Nurses' Memorial Trust which are made after 3 September 1997 and before 4 September 1999.


This Bill amends the sales tax legislation to give effect to sales tax aspects of the Status of Forces Agreement between the Government of Australia and the Government of Malaysia which was entered into on 3 February 1997. The amendment will apply to any dealing from Royal Assent of the amendment.

The agreement allows visiting force members, civilian component and their dependants to import a number of items into Australia, free from duty.

Full details of the measures in the Bill are contained in the explanatory memorandum circulated to honourable senators.

I commend the Bill to the Senate.