Senate

Supplementary Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

General outline and financial impact

Conservation covenants

Amendment 1 inserts Schedule 7 to this bill. Schedule 7 introduces measures into the ITAA 1997 to provide concessional taxation treatment of conservation covenants entered into by certain taxpayers in order to protect areas of high conservation value.

Deductions

Date of effect: Conservation covenants entered into on or after 1 July 2002.

Proposal announced: The proposal was announced by the Prime Minister on 20 August 2001.

Financial impact: Less than $1 million per year.

Compliance cost impact: Taxpayers will incur tax deductible compliance costs associated with obtaining a valuation of the conservation covenant from the AVO. Taxpayers may also incur compliance costs in seeking approval for the conservation covenants from the Minister for the Environment and Heritage.

Capital gains tax

Date of effect: 15 June 2000.

Proposal announced: The proposal was announced in Treasurers Press Release No. 44 of 15 June 2001.

Financial impact: $2.3 million over 4 income years, starting in the 2000-2001 income year.

Compliance cost impact: There will be a small increase in compliance costs associated with seeking approval for permanent conservation covenants from the Minister for the Environment and Heritage.

Summary of regulation impact statement

Regulation impact on business

Impact: These measures will increase participation in conservation programs that may result in Australias areas of environmental significance being maintained into the future.

Main points:

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These measures only apply to taxpayers entering into a conservation covenant or program approved by the Minister for the Environment and Heritage.

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The cost to taxpayers to familiarise themselves with the proposed amendments cannot be reliably quantified. Taxpayers may use a variety of means to familiarise themselves with the proposed amendments.

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In order to claim an income tax deduction for a conservation covenant, the Commissioner will require the taxpayer to obtain a tax deductible valuation from the AVO.

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Most of the administrative costs associated with implementing this measure will be associated with Environment Australia setting up and maintaining the register of accredited conservation programs. Short term costs are outweighed by the increased incentive to enter into conservation covenants.

Spreading deductions for property gifts and conservation covenants

Amendment 2 inserts Schedule 8 to this bill. Schedule 8 introduces a measure into the ITAA 1997 to allow deductions for gifts of property valued at more than $5,000 to be spread over a period of up to 5 years. This measure will also apply to deductions for perpetual conservation covenants entered into with certain deductible gift recipients.

Date of effect: The amendments apply to gifts of property valued at more than $5,000, or conservation covenants entered into, on or after 1 July 2002.

Proposal announced: The measure was announced by the Prime Minister on 30 March 2001 and 20 August 2001.

Financial impact: The financial impact of the proposed amendment will be $2 million in 2003-2004 rising to $10 million in 2007-2008 and later income years.

Compliance cost impact: Taxpayers will incur tax deductible compliance costs in obtaining a valuation of the conservation covenant from the AVO.