Explanatory Memorandum
(Circulated by authority of the Minister for Primary Industries and Energy, the Honourable John Kerin MP).FINANCIAL IMPACT STATEMENT
9. The tax deductibility of IEDs will result in a reduction in income tax revenue in the year of deposit. The extent of this reduction will depend on the usage of the scheme, which it is not easy to estimate. For example, usage will be influenced by the level of farm incomes generally in any year as well as the attractiveness of the IED scheme relative to other investments available to primary producers.
10. Part of the income tax revenue foregone in the year of deposit will be recovered when IEDs are withdrawn in later years. These income tax revenues are likely to be less, though, as withdrawals are expected to be made in low income years when lower tax rates will apply.
11. Nevertheless, the reintroduction of the tax-linked income equalization deposits scheme is estimated to cost the revenue $20 million in 1989-90 and $40 million in subsequent years.
12. The administration of the scheme is expected to cost $80,000 per annum. However, this cost will be fully recovered by a charge of $20 which will be levied when deposits are made.