House of Representatives

Explanatory Memorandum PART A

(Circulated by authority of the Treasurer, the Hon. P.J. Keating, M.P.)

GENERAL OUTLINE

Taxation Laws Amendment Bill (No.2) 1985

This Bill will amend -

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the Income Tax Assessment Act 1936 -

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to effectively treat as loan arrangements certain non-leveraged finance leases (and similar arrangements) by governments and tax-exempt government authorities (proposal announced at 5:00pm Eastern Standard Time on 15 May 1984) and by residents or non-residents who are not subject to Australian tax on income derived from the use outside Australia of the leased property (proposal announced at 5:00pm Eastern Summer Time on 16 December 1984);

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to introduce statutory investment rules so that income tax concessions applicable to the income of, and contributions to, employer-sponsored superannuation funds will be conditional upon - under the basic rule - not more than 10% of the fund's assets (measured at cost) being invested with the employer or an associate of the employer (proposal announced on 11 March 1985);

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to increase from $1,200 to $1,500 the annual deduction limit for contributions to qualifying superannuation funds by self-employed persons and employees not covered by employer-sponsored superannuation schemes (1985-86 Budget announcement);

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to increase from $50,000 to $55,000 the maximum amount of the "post-June 1983" component of lump sum termination payments that is subject to tax at a rate of not more than 15% where made to a taxpayer aged 55 or more (1985-86 Budget announcement);

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to abolish, for the year of income that commenced on 1 July 1985 and subsequent years of income, the general concessional expenditure rebate (proposal announced on 17 July 1985);

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to provide a medical and hospital expense rebate at the standard rate of tax - presently 30 per cent - for net expenditure (which presently qualifies for the general concessional rebate) in excess of $1,000 incurred by taxpayers on their own or their dependants' behalf with effect from the year of income that commenced on 1 July 1985 (proposal announced on 17 July 1985);

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to exempt from tax the income of animal racing clubs for the 1985-86 and subsequent years of income (1985-86 Budget announcement);

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to allow, with effect from 1 July 1985, a deduction for expenses incurred by candidates in seeking election to local governments or the Australian Capital Territory House of Assembly, subject to an upper limit of $1,000 per election (1985-86 Budget announcement);

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to increase from $75 to $220 for married (legally or de facto) taxpayers and from $50 to $170 for other taxpayers the existing rebates of tax (and the income levels above which they shade out) available for taxpayers wholly or mainly dependent on social security unemployment, sickness or special benefits (1985-86 Budget announcement);

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to allow income tax deductions for gifts to the Australian Academy of the Humanities and the Royal Australian and New Zealand College of Psychiatrists (1985-86 Budget announcement);

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to provide the method of calculating provisional tax for the 1985-86 income year.

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the Taxation Administration Act 1953 -

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to provide for the conduct of investigations in the Australian Capital Territory by or for State and Northern Territory revenue authorities, and to permit Commonwealth taxation information to be provided to State and Territory revenue authorities for the purposes of the administration of their revenue laws (proposal announced on 20 December 1983); and

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the Taxation Administration Act and various other Commonwealth taxation laws -

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to extend the operation of the secrecy provisions of taxation laws to persons who, although not appointed or employed by the Commonwealth, perform services for the Commonwealth.

Income Tax (Individuals) Bill 1985

This Bill will -

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formally impose tax payable for the 1985-86 financial year by individuals, and by trustees generally, at the rates declared by the Income Tax (Rates) Act 1982; and

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formally impose provisional tax for the 1985-86 year of income.

Income Tax (Companies, Corporate Unit Trusts and Superannuation Funds) Bill 1985

This Bill will declare and impose the rates of tax payable for 1985-86 by companies and registered organizations, by trustees of corporate unit trusts, superannuation funds and ineligible approved deposit funds, and by trustees in respect of trust income of non- resident company beneficiaries of trust estates.

Medicare Levy Bill 1985

This Bill will -

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declare and impose the basic rate of levy of 1 per cent for 1985-86 and, until the Parliament otherwise provides, for 1986-87;

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exempt from levy individuals with taxable incomes of $7,526 or less and families and sole parents with family income of $12,504 or less; the family or sole parent threshold to be raised by a further $1,530 for each dependent child or student; and

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reduce the levy otherwise payable by veterans, war widows, Defence Force personnel, holders on a non-income tested basis of pensioner health benefits cards, health benefits cards and health care cards, and other "prescribed persons" who are exempt from the levy for part of a year, or who are required to pay levy because they have dependants eligible for Medicare benefits.