Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Goods and services tax amendments relating to first aid or life saving courses
Schedule 1 to this bill amends the GST Act to:
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- enable the supplier of an education course that is an eligible life saving course to treat the supply as GST-free if the supplier uses instructors for the course that are suitably qualified; and
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- remove the requirement that a supplier must be an entity that is a 'body' to be eligible to treat the supply of an education course that is a first aid or life saving course as a GST-free supply.
Date of effect: 1 July 2000.
Proposal announced: These measures have not been previously announced.
Financial impact: The revenue cost of this measure is expected to be $9 million in 2003-2004, $3 million in each of 2004-2005, 2005-2006 and 2006-2007.
Compliance cost impact: These measures are expected to reduce compliance costs.
Value shifting: transitional exclusion for certain indirect value shifts relating mainly to services
Schedule 2 to this bill amends the IT(TP) Act 1997 to modify the General Value Shifting Regime so that, to ease compliance costs on the transition to consolidation, the consequences arising under that regime do not apply to most indirect value shifts involving services.
Date of effect: This measure will apply to relevant indirect value shifts that occur before:
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- the beginning of a losing entity's 2003-2004 income year; or
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- if a losing entity's 2002-2003 income year ends before 30 June 2003, the beginning of the entity's 2004-2005 income year.
Proposal announced: This measure was announced by the Minister for Revenue and Assistant Treasurer's Press Release No. C14/03 of 6 March 2003. The measure was previously introduced in Taxation Laws Amendment Bill (No. 6) 2003.
Financial impact: The amendments will have a cost to revenue of $5 million in 2003-2004 and a negligible cost to revenue in 2004-2005.
Compliance cost impact: The measure will reduce compliance costs for affected taxpayers.
Amendments relating to personal services income
Schedule 3 to this bill inserts section 61G in the FBTAA 1986 to reduce the taxable value of a fringe benefit by the same amount as is made non-deductible to the provider by virtue of the personal services income provisions.
The Schedule also amends the personal services income provisions in Part 2-42 of the ITAA 1997 to ensure that an individual, working through a personal services entity, can deduct a net personal services income loss in an income year.
Date of effect: The amendments to the FBTAA 1986 apply to fringe benefits provided after 30 June 2000. The amendments to the ITAA 1997 apply to assessments made for the 2000-2001 income year and each subsequent income year.
Proposal announced: The measure was announced on 13 May 2003 in the 2003-2004 Federal Budget.
Financial impact: Nil
Compliance cost impact: Nil
Sugar industry exit grants
Schedule 4 to this bill amends the ITAA 1997 to specify the taxation treatment of sugar industry exit grants made under the Sugar Industry Reform Program. The amendments will:
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- exempt from income tax sugar industry exit grants that are paid to taxpayers who leave the agricultural industry altogether; and
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- include in assessable income sugar industry exit grants that are paid to taxpayers who leave the sugar industry but continue to carry on another agricultural enterprise.
Date of effect: The amendments will apply to sugar industry exit grants received on or after 1 February 2003.
Proposal announced: This measure was announced by the Minister for Agriculture, Fisheries and Forestry's Press Release No. AFFA02/300WT of 29 October 2002.
Financial impact: This measure is expected to have a revenue cost of $1 million in 2003-2004, $3 million in 2004-2005, $3 million in 2005-2006 and $2 million in 2006-2007.
Compliance cost impact: The compliance cost impact of this measure is expected to be negligible.
Foreign resident withholding - application to alienated personal services payments
Schedule 5 to this bill amends the TAA 1953 so that the foreign resident withholding rules will apply to alienated personal services payments that are payments of a kind prescribed in the regulations to be covered by foreign resident withholding.
Date of effect: The amendments will commence on Royal Assent.
Proposal announced: The measure has not been announced.
Financial impact: The amendment will have no impact on revenue.
Compliance cost impact: Nil. The measure merely ensures the original intent of the foreign resident withholding rules is achieved.
Demutualisation of friendly societies
Schedule 6 to this bill amends the ITAA 1936 to ensure that mutual friendly societies that are life insurance companies can benefit from the taxation framework that applies to other mutual life insurance companies that demutualise.
Date of effect: The amendments will commence from 1 July 2000.
Proposal announced: This measure was announced in the Minister for Revenue and Assistant Treasurer's Press Release No C97/03 of 16 October 2003.
Financial impact: The revenue impact of this measure is expected to be insignificant.
Compliance cost impact: The compliance cost impact of this measure is expected to be negligible.
Roll-over relief for partnerships that are simplified tax system taxpayers
Schedule 7 to this bill amends Division 328 of the ITAA 1997 to allow, under certain circumstances, balancing adjustment roll-over relief for partnerships that are STS.
Date of effect: These changes will be effective from 1 July 2001, the start date of the STS.
Proposal announced: This measure was announced in the Minister for Revenue and Assistance Treasurer's Press Release C13/03 of 4 March 2003.
Financial impact: The measure will have a cost to revenue of $1 million in 2003-2004 and $2 million in each of 2004-2005, 2005-2006 and 2006-2007.
Compliance cost impact: Taxpayers will only incur a small increase in their compliance costs where they elect for roll-over relief.
Summary of regulation impact statement
Main points:
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- As roll-over relief is optional, taxpayers will be required to make a choice for roll-over relief to apply. The choice must be made in writing, and be made within 6 months after the end of the relevant income year. In addition, they will be required to retain the choice, or a copy of it, for 5 years after the relevant year.
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- There will also be a cost to taxpayers that have already lodged their tax returns, but who wish to request amendments to enter the STS as a result of the change.
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- As roll-over relief is optional, taxpayers will only make a choice for roll-over relief if the benefits exceed the compliance costs.
This measure is favourable to taxpayers as it will remove a disincentive for entry into the STS.
Consolidation: revocation of certain choices and R & D tax offset
Schedule 8 to this bill amends the IT(TP) Act 1997 to allow certain choices under the consolidation regime to be revoked prior to 1 January 2005.
Amendments to the ITAA 1936 will ensure that the rules dealing with eligibility for the R & D tax offset apply appropriately in cases where companies join or leave a consolidated group part-way through an income year.
Date of effect: 1 July 2002.
Proposal announced: The changes to the R & D provisions were announced in Minister for Revenue and Assistant Treasurer's Press Release C67/03 of 30 June 2003.
Financial impact: The amendments are expected to have an insignificant effect on revenue.
Compliance cost impact: The ability to change certain choices will provide taxpayers with additional flexibility. The R & D measures are intended to ensure that the rules apply to consolidated groups in a way that is consistent with the existing policy. As such, there is not expected to be a significant compliance cost impact.