Senate

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)

General outline and financial impact

Schedule 1 – Luxury car tax

Outline

Schedule 1 to the Bill amends A New Tax System (Luxury Car Tax) Act 1999 to tighten the definition of a fuel-efficient vehicle, and to align the indexation rates for luxury car tax (LCT) thresholds.

Date of effect

Schedule 1 to the Bill commences on the first 1 January, 1 April, 1 July or 1 October to occur after the day the Bill receives Royal Assent.

Proposal announced

Schedule 1 to the Bill fully implements the 'Luxury Car Tax – modernising the luxury car tax for fuel-efficient vehicles' measure announced in the 2023-24 MYEFO.

Financial impact

Schedule 1 to the Bill is estimated to increase receipts by $155.0 million over the five years from 2022-23.

All figures in this table represent amounts in $m.

Human rights implications

Schedule 1 to the Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 5.

Compliance cost impact

Schedule 1 to the Bill is expected to have a minimal impact on compliance costs comprising of a small initial impact and no ongoing impact.

Schedule 2 - Denying deductions for interest charges

Outline

The Government will deny deductions for Australian Taxation Office (ATO) interest charges, specifically the general interest charge (GIC) and shortfall interest charge (SIC), incurred in income years starting on or after 1 July 2025.

Removing these deductions will enhance incentives for all entities to correctly self-assess their tax liabilities and pay on time, and level the playing field for individuals and businesses who already do so.

Date of effect

Schedule 2 to the Bill commences on the first 1 January, 1 April, 1 July or 1 October to occur after the day the Bill receives Royal Assent

Proposal announced

Schedule 2 to the Bill fully implements the 'Denying deductions for interest charges' measure in the 2023-24 MYEFO.

Financial impact

Schedule 2 to the Bill is estimated to increase receipts by $500.0 million over the five years from 2022-23.

All figures in this table represent amounts in $m.

Human rights implications

Schedule 2 to the Bill does not raise human rights issues. See Statement of Compatibility with Human Rights — Chapter 5.

Compliance cost impact

Schedule 2 to the Bill does not create any new compliance cost impacts or savings.

Schedule 3 - Extending ATO notification period for retaining refunds

Outline

Schedule 3 to the Bill amends the TAA 1953 to extend from 14 to 30 days the period within which the Commissioner must notify a taxpayer of their decision to retain a refund amount arising from a BAS or another notification under the BAS provisions for verification of information. The extension of this mandatory notification period aims to strengthen the ATO's ability to combat fraud during periods of increased risk of fraudulent activity.

Date of effect

Schedule 3 to the Bill commences on the first 1 July to occur after the day the Bill receives Royal Assent.

Proposal announced

Schedule 3 to the Bill partially implements the 'Strengthening Tax Compliance – Australian Taxation Office Counter Fraud Strategy' measure in the 2024-25 Budget.

Financial impact

Schedule 3 to the Bill is estimated to have a small but unquantifiable financial impact.

Human rights implications

Schedule 3 to the Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 5.

Compliance cost impact

Low compliance cost impact.

Schedule 4 - $20,000 instant asset write-off for small business entities

Outline

Schedule 4 to the Bill amends the IT(TP) Act to extend the $20,000 instant asset write-off by 12 months until 30 June 2025. This will allow small businesses (with an aggregated annual turnover of less than $10 million) to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use on or before 30 June 2025. The extension will improve cash flow and reduce compliance costs for small businesses.

Date of effect

Schedule 4 to the Bill commences on:

•

the first 1 January, 1 April, 1 July or 1 October to occur after the day the Bill receives the Royal Assent.

Proposal announced

Schedule 4 to the Bill fully implements the 'Small Business Support – $20,000 instant asset write-off' measure in the 2024-25 Budget.

Financial impact

Schedule 4 to the Bill is estimated to decrease receipts by $290.0 million over the five years from 2023-24.

All figures in this table represent amounts in $m.

Human rights implications

Schedule 4 to the Bill does not raise human rights issues. See Statement of Compatibility with Human Rights — Chapter 5.

Compliance cost impact

Schedule 4 to the Bill is expected to have a minimal regulatory impact.