House of Representatives

Tax Laws Amendment (2012 Measures No. 3) Bill 2012

Second Reading Speech

Senator Wong (Minister for Finance and Deregulation)

This Bill amends various taxation laws to implement a range of improvements to Australia's tax laws.

Schedule 1 will reduce the marginal tax rate that applies to non resident workers employed under the Government's Seasonal Labour Mobility Program to 15 per cent, administered as a final withholding tax. The change will apply with effect from 1 July 2012.

The Seasonal Labour Mobility Program is an important element of the Government's Pacific Engagement Strategy, a whole of government strategy designed to advance Australia's engagement in the Pacific. It builds on the successful Pacific Seasonal Worker Pilot Scheme, which concludes on 30 June 2012. This measure will significantly reduce compliance costs for seasonal workers participating in the program and simplify administration for the Australian Taxation Office by removing the requirement to lodge a tax return.

The changes introduced in this Bill will not impact Australian workers or non-residents who are not seasonal workers.

Schedule 2 amends the excise law, which currently treats the blending of fuels taxed at different rates as excise manufacture, which can only occur in licensed premises and requires payment of additional duty, unless an exemption applies.

The amendments specify the circumstances where blending the same types of gaseous fuels, which have been taxed at different rates, is not treated as excise manufacture.

The amendments also specify the circumstances where blending the same types of aviation fuels, which have been taxed at different rates, is not treated as excise manufacture.

The blending issues were unintended consequences of two sets of legislation. First, the alternative fuels legislation, which provided for the phase-in of duty on gaseous transport fuels. The phase-in provided the possibility of inadvertent excise manufacture when fuel taxed at one rate is delivered into a tank containing fuel taxed at another rate.

Second, the clean energy legislation applied an effective carbon price on aviation fuels and non-transport gaseous fuels using the fuel tax system. This provided the possibility of inadvertent excise manufacture when the carbon price, and hence the fuel tax, changed.

The amendments ensure that the law works as intended. They have not been previously announced. They have nil revenue impact.

These amendments are intended to commence on 1 July 2012.

Schedule 3 amends the Income Tax Assessment Act 1997 to ensure that the Government's policy to deny access to the low income tax offset for the unearned income of minors - such as dividends and interest - operates as intended. This measure was originally announced in the 2011-12 Budget and applies from the 2011-12 income year.

The amendments contained in this schedule will clarify that trust beneficiaries who are minors (that is, children aged under 18) cannot receive the benefit of the low income tax offset for unearned income earned through trust distributions. This will ensure consistency of treatment for all minors' unearned income - irrespective of whether it is earned directly or indirectly.

Schedule 4 provides income tax exemptions for clean energy advance payments for recipients of ABSTUDY; the Veterans' Children's Education Scheme; and the Military Rehabilitation and Compensation Act Education and Training Scheme.

This Schedule will also implement income tax exemptions for payments in lieu of the clean energy advance and supplements to recipients of Transitional Farm Family Payments; and Exceptional Circumstances Relief Payments.

An exemption for clean energy payments to other income support recipients, such as those to pensioners and Newstart recipients, have already been legislated and it is appropriate that all income support recipients be treated in the same manner.

Schedule 5 makes the taxation of employment termination payments fairer by scaling back concessions for large termination payments that are not linked to hardship, such as golden handshakes. These large termination payments are typically received by senior executives as part of their overall remuneration.

These amendments mean that, from 1 July 2012, the employment termination payment tax offset will only be available for that part of a termination payment that takes a person's total annual taxable income (including the termination payment) up to $180,000.

Payments related to hardship, such as genuine redundancy, invalidity or the death of an employee, are not affected by this measure.

Full details of the measures in this Bill are contained in the explanatory memorandum.