Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 5 Income tax exemption for the Commonwealth Games Federation
Outline of chapter
5.1 Schedule 5 to this bill provides an income tax exemption to the Commonwealth Games Federation for the period 1 January 2000 to 30 June 2007. The Commonwealth Games Federation is an unincorporated association established in 1932 that organises and promotes the staging of the Commonwealth Games.
Context of amendments
5.2 The income tax exemption is granted to the Commonwealth Games Federation in their role of organising and promoting the staging of the Commonwealth Games. The organising committee for the Games, Melbourne Commonwealth Games Pty Ltd, makes certain payments to the Federation, largely relating to the sale of television broadcasting rights. It is principally in respect of this income that the exemption will apply.
5.3 In addition, a technical amendment will be made to the withholding tax provisions.
Comparison of key features of new law and current law
| New law | Current law |
|---|---|
| The Commonwealth Games Federation will be exempt from income tax and withholding tax for the period 1 January 2000 to 30 June 2007. | Under the current law, the Commonwealth Games Federation would be required to pay income tax or be subject to withholding tax on income received from the organising and promoting of the Melbourne Commonwealth Games 2006. |
Detailed explanation of new law
5.4 The measure contained in this bill includes the Commonwealth Games Federation as an exempt entity under section 50-45 of the ITAA 1997, allowing the Commonwealth Games Federation to receive income that would otherwise have been subject to income tax. The Commonwealth Games Federation receives income from Melbourne Commonwealth Games Pty Ltd. It is largely with respect to this Australian sourced income that the exemption will apply. [Schedule 5, item 3]
5.5 As the Commonwealth Games Federation is exempt from income tax under Division 50 of the ITAA 1997, section 128B(3) of the ITTA 1936 is amended to also provide a withholding tax exemption. [Schedule 5, item 2]
5.6 This measure will apply from 1 January 2000 to 30 June 2007.
5.7 This measure also corrects a typographic error to replace the word 'and' with the word 'or'. This amendment is purely technical in nature and does not adversely affect the rights and liabilities of taxpayers. [Schedule 5, item 1]
5.8 The cost to revenue is estimated to be less than $1 million over the period of the exemption.