Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon. P.J. Keating, M.P.)FINANCIAL IMPACT
TAXATION LAWS AMENDMENT ACT (NO.4) 1988
The proposed changes to the depreciation arrangements are estimated to result in a revenue saving of $190m in 1989-90, $450m in 1990-91, $1,030m in 1991-92 and $1650m in 1992-93. The savings are expected to settle at an annual gain of around $1,250m in the mid to late 1990's.
The revenue gain from the new write-off arrangements that are to apply to prepaid expenditure is estimated to be $35 million in 1989-90 and $20 million in subsequent income years.
The denial of the intercorporate dividend rebate in respect of dividends paid by tax-exempt entities will prevent the loss to revenue from equity capital raisings by such entities. However, it is not possible to provide any revenue estimates.
The gain to revenue from the denial of the intercorporate dividend rebate in respect of the unfranked part of dividends received by private companies is estimated at $50 million in 1989-90, $55 million in 1990-91 and $60 million in 1991-92.
The cost to revenue of the amendment to abolish the provision which taxes profits on the sale on property within 12 months of purchase, and so tax those gains under the capital gains provisions, is estimated to be $5 million in 1988-89 and $30 million in 1989-90.
The amendment of the concession for mains electricity connections is expected to produce revenue savings of $5 million in 1988-89 and subsequent years.
The amendments of the live stock valuation provisions will have minimal effect on revenue.
The estimated cost of the increase in the level of the pensioner rebate is estimated to be $55m in 1988-89 and $210m in 1989-90.
The increase in the level of the beneficiary rebates available for recipients of certain social security benefits and of certain educational allowances is expected to cost $20m in 1988-89 and each subsequent income year.
The revenue cost of exempting the special temporary allowance will be negligible in 1988-89 and is estimated at $5m in 1989-90 and $6m in 1990-91.
The adoption of a 12% uplift factor for the calculation of 1988-89 provisional tax will result in an estimated gain to revenue of $105 million in 1988-89.
The nature of the proposed amendments in relation to public trading trusts and those to tax non-convertible non-cash benefits and to exclude from business expenditure the 'arm's length' value of any private benefit is such that a reliable estimate of the potential revenue effect cannot be made.
The amendments to deny deductions for interest incurred under debt creation arrangements involving non-residents are expected to prevent significant but unquantifiable revenue losses.
The amendments to the substantiation rules and gift provisions will have no effect on revenue.
The amendments of the Fringe Benefits Tax Assessment Act 1986 concerning remote area housing schemes are expected to cost less than $1m in relation to the fringe benefits tax (FBT) transitional year that commenced on 1 July 1986 and for all subsequent FBT years.
The repeal of Section 14ZKA of the Taxation Administration Act 1953 will have no effect on revenue.
INCOME TAX AMENDMENT BILL 1988
This Bill will formally impose tax payable for the 1988-89 financial year.
MEDICARE LEVY AMENDMENT BILL 1988
The increase in the Medicare levy low income thresholds is estimated to cost $11m in 1988-89, $27m in 1989-90 and $23m in 1990-91.