Explanatory Memorandum
Circulated By the Authority of the Treasurer, the Hon Wayne Swan MP)General outline and financial impact
Removal of capital gains tax trust cloning exception and provision of limited fixed trust roll-over
Schedule 1 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to repeal the exception to capital gains tax (CGT) events E1 and E2 widely known as the 'trust cloning' exception. Schedule 1 also provides a limited CGT roll-over for the transfer of assets between trusts with the same beneficiaries each of which has the same interests in each trust.
Schedule 1 clarifies that a mere change of the trustee of a trust does not change the entity that is the trustee for the purposes of the ITAA 1997 and the A New Tax System (Goods and Services Tax) Act 1999 .
Date of effect: The amendments apply to CGT events happening on or after 1 November 2008.
Proposal announced: The then Assistant Treasurer and Minister for Competition Policy and Consumer Affairs announced the repeal of the trust cloning exception in Media Release No. 092 of 31 October 2008. He subsequently announced in Media Release No. 048 of 12 May 2009 that the Government would provide a limited CGT roll-over for fixed trusts.
Financial impact: Unquantifiable, but expected to be small.
Compliance cost impact: Low.
Loss relief for merging superannuation funds
Schedule 2 to this Bill removes significant income tax impediments to mergers between complying superannuation funds by permitting the roll-over of capital losses and transfer of revenue losses (including losses realised under the merger and previously realised losses). The loss relief will be available for complying superannuation funds and approved deposit funds that merge with a complying superannuation fund with five or more members. The loss transfer and asset roll-over will preserve the offsetting value of the losses, thereby removing a potential barrier to superannuation fund consolidation.
Date of effect: This measure is available for mergers that occur on or after 24 December 2008 and before 1 July 2011.
Proposal announced: These amendments were announced in the then Minister for Superannuation and Corporate Law's Media Release No. 101, 'Optional CGT Loss Roll Over for Complying Super Funds' on 23 December 2008 and Media Release No. 042, 'Expansion of the Optional CGT Loss Roll Over for Complying Super Funds that Merge' on 29 April 2009.
Financial impact: This measure will have an unquantifiable but small revenue cost.
Compliance cost impact: This measure is expected to have a low overall compliance cost impact, comprised of a low implementation impact and a low decrease in ongoing compliance costs.
Exempt annuity business of life insurance companies
Schedule 3 to this Bill amends the Income Tax Assessment Act 1997 to clarify the circumstances in which income derived by life insurance companies in respect of immediate annuity business qualifies as non-assessable non-exempt income.
Date of effect: The amendments to rewrite the annuity conditions apply from 1 July 2000. The amendments to ensure that the annuity conditions do not apply to immediate annuity policies that provide for superannuation income streams apply from the 2007-08 income year.
Proposal announced: These amendments were announced in the then Assistant Treasurer and Minister for Competition Policy and Consumer Affairs' Media Release No. 048 of 12 May 2009.
Financial impact: These amendments are expected to have a small but unquantifiable revenue impact.
Compliance cost impact: Low.
Deductible gift recipients
Schedule 4 to this Bill amends the Income Tax Assessment Act 1997 to update the list of deductible gift recipients (DGRs) to include two new organisations and change the name of one organisation.
Tax deductions are provided to donors to organisations that are endorsed as DGRs, subject to certain conditions. Organisations which do not fall under the general DGR categories may seek specific listing in the income tax law.
Date of effect: The dates of effect for these amendments are listed in Table 4.1 and Table 4.2.
Proposal announced: These amendments were announced in the Mid-Year Economic and Fiscal Outlook 2009-10 .
Financial impact: This measure will have the following revenue implications.
| Organisation | 2009-10 | 2010-11 | 2011-12 | 2012-13 |
| The Green Institute Limited | -$15,000 | -$30,000 | -$45,000 | -$60,000 |
| United States Studies Centre Limited | -$1,500,000 | -1,537,500 | -$1,575,938 | -$1,615,336 |
| Total | -$1,515,000 | -$1,567,500 | -$1,620,938 | -$1,675,336 |
Compliance cost impact: Negligible.
Income Recovery Subsidy for the North Western Queensland floods
Schedule 5 to this Bill amends the Income Tax Assessment Act 1997 to ensure that the Income Recovery Subsidy for the North Western Queensland floods is not subject to income tax.
Date of effect: This measure applies retrospectively to amounts received in the 2008-09 income year. The payment could be claimed after 24 February 2009.
Proposal announced: The payment was announced as an emergency measure by the Minister for Families, Housing, Community Services and Indigenous Affairs in Parliament on 25 February 2009. The measure was announced in the Mid-Year Economic and Fiscal Outlook 2009-10 .
Financial impact: Nil.
Compliance cost impact: Low.
Excise manufacture and spirits
Schedule 6 to this Bill amends the Excise Act 1901 (the Excise Act) to deem the blending of spirits to produce spirit as excise manufacture for the purposes of the Excise Act. This is necessary for imported high strength neutral spirit, as it currently derives its concessional duty treatment (that is, a 'free' rate of excise duty) from being blended with domestic high strength neutral spirit and entering the excise system. These amendments will preserve the status quo for the concessional spirits regime.
Date of effect: This legislation will apply from the date of Royal Assent.
Proposal announced: This measure was announced in the Mid-Year Economic and Fiscal Outlook 2009-10 statement released on 2 November 2009.
Financial impact: Nil.
Compliance cost impact: Nil.