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. 3) 1985

This Bill will amend -

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the Income Tax Assessment Act 1936 -

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to provide for an annual election by general mining and petroleum companies to have undeducted exploration and development expenditure treated as transferable carry-forward losses (September 1985 Tax Reform announcement);

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to withdraw the rebate of tax available in respect of share capital subscribed to petroleum exploration, prospecting or mining companies (September 1985 Tax Reform announcement);

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to withdraw the income tax deduction allowable for one-third of calls paid on shares in an afforestation company (September 1985 Tax Reform announcement);

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to impose on householders who are owner-builders a liability to make deductions of tax from prescribed payments made in connection with domestic building projects, the cost of which exceeds $10,000, that are commenced on or after 1 July 1986 (September 1985 Tax Reform announcement);

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to reduce the special income tax concessions for investments in the production of Australian films (September 1985 Tax Reform announcement);

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to provide an additional live stock valuation option for horse breeders so that, under the trading stock provisions applicable to live stock, the cost of stallions may be written down at the rate of 50% per annum on a diminishing value basis and the cost of mares may be written down either at the rate of 33 1/3% per annum on a diminishing value basis or, depending on a mare's age, over a minimum period of 3 years (1985-86 Budget announcement);

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to remove, with effect from 1 January 1986, the present exemption from income tax of payments received under the Tertiary Education Assistance Scheme (TEAS) and the Adult Secondary Education Assistance Scheme (ASEAS) (1985-86 Budget announcement); and

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to ease the existing restrictions on the use of information that, under the income tax secrecy provisions, may be provided to a Royal Commission (proposal announced on 21 May 1985);

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the Taxation Administration Act 1953 -

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to permit the National Crime Authority to examine, in a private hearing, any director or officer of a company in relation to taxation information that relates to the affairs of the company;

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the Income Tax (International Agreements) Act 1953-

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to give the force of law in Australia to a comprehensive taxation agreement and protocol between Australia and Finland covering all forms of income flowing between the two countries. The agreement and protocol were signed on 12 September 1984; and

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to specify that interest and royalties derived by residents of Australia from sources in Finland and in respect of which, under the agreement, Finland is required to limit its tax to an amount not exceeding 10% will not, by reason of the payment of the limited tax, be exempt from Australian tax; and

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the Australian Capital Territory Taxation (Administration) Act 1969 -

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to treat transfers of units in unit trusts as transfers of marketable securities subject to Australian Capital Territory stamp duty (1985-86 Budget announcement); and

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to set down the rules governing liability for stamp duty on loan securities that is to be imposed by the accompanying Australian Capital Territory Stamp Duty Amendment Bill 1985 (1985-86 Budget announcement).

The Bill will also validate the regulation-making power under the following Acts -

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the Australian Capital Territory Tax (Hire-Purchase) Business Act 1969;

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the Australian Capital Territory Tax (Insurance Business Act) 1969;

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the Australian Capital Territory Tax (Purchases of Marketable Securities) Act 1969; and

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the Australian Capital Territory Tax (Sales of Marketable Securities) Act 1969.

Australian Capital Territory Stamp Duty Amendment Bill 1985

This Bill will amend the stamp duty law applicable in the Australian Capital Territory (including Jervis Bay) -

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to impose duty at specified rates on loan securities (1985-86 Budget announcement);

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to increase the rates of duty on conveyances of real property (1985-86 Budget announcement); and

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to validate the regulation-making power under the Australian Capital Territory Stamp Duty Act 1969.

Bank Account Debits Tax Amendment Bill 1985

This Bill will double the rates of the bank account debits tax applicable in the Australian Capital Territory, including Jervis Bay (1985-86 Budget announcement).