Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon. P.J. Keating, M.P.)FINANCIAL IMPACT
The consequential amendments proposed to the occupational superannuation provisions of the income tax law are not expected to have any significant effect on revenue.
Small but not readily quantifiable gains are expected from the measures relating to the taxing of certain private company dividends and other excessive non-arm's length income derived by approved deposit funds.
Extension of the income tax gift provisions to admit the Ninth Australian Division Memorial of Participation (Alamein) Fund will cost about $100,000 in each of the years 1988-89 and 1989-90. Admission of the Korean and South East Asian and Vietnam War Memorials Anzac Square Trust Fund will cost about $50,000 in the same years.
A negligible impact on the revenue is likely from the various amendments proposed to enable the satisfaction of the common ownership test by a shelf company.
Extension of the cut-off date for the investment allowance will transfer to 1988-89 an estimated revenue cost of $30 million that had been expected to be incurred in the 1987-88 financial year.
Termination of the so-called "negative gearing" provisions that limited deductions for interest on rental investment borrowings is estimated to cost $24 million in 1987-88, $80 million in 1988-89 and $47 million in 1989-90. The cost is expected to decline sharply after that.
The proposed reduction in the write-off rate for capital expenditure on new income-producing buildings is estimated to produce revenue savings of $3m in 1988-89, $10m in 1989-90, $29m in 1990-91 and $54m in 1991-92, eventually exceeding $500 million per annum after 25 years.
The estimated revenue cost of granting income averaging for authors, inventors, sportspersons, performing artists etc is nil in 1986-87 and $2m in 1987-88.
The amendment of Division 16E which relates to certain discounted and other deferred interest securities to eliminate tax deferral advantages offered by certain financial instruments will result in unquantifiable gains to revenue.
Amendments to deny deductions for interest incurred on excessive debt to foreign investors engaged in thin capitalisation practices are expected to prevent a loss of revenue of at least $50 million per annum.