House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

General outline and financial impact

Electronic portability form

Schedule 1 to this Bill amends the Retirement Savings Accounts Act 1997 and the Superannuation Industry (Supervision) Act 1993 to enable certain superannuation fund members to electronically request the consolidation of their superannuation benefits through the Australian Taxation Office.

Date of effect: These amendments commence from the day after Royal Assent.

Proposal announced: This measure was announced in the Assistant Treasurer and Minister for Financial Services and Superannuation's Media Release No. 134 of 23 September 2011.

Financial impact: Nil.

Compliance cost impact: Low to nil.

CGT and business restructures - Part 1: Share or interest sale facilities for foreign interest holders in a restructure

Part 1 of Schedule 2 to this Bill amends the Income Tax Assessment Act 1997 to ensure entities in a restructure can use a share or interest sale facility to deal with foreign held interests without Australian tax residents automatically failing a key requirement of certain capital gains tax (CGT) roll-overs.

Date of effect: This measure applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010.

The amendments are either beneficial to taxpayers or do not disadvantage them. For more details see paragraphs 2.31 to 2.33 in this explanatory memorandum.

Proposal announced: This measure was announced in the then Assistant Treasurer's Media Release No. 090 of 11 May 2010 and in the 2010-11 Budget.

Financial impact: This measure is expected to have an unquantifiable, but expected to be negligible, revenue impact.

Compliance cost impact: Low. This is comprised of a low implementation impact and no change in ongoing compliance costs relative to the affected group.

CGT and business restructures - Part 2: CGT demerger relief

Part 2 of Schedule 2 to this Bill excludes an entity from being a member of a demerger group if the entity is a corporation sole or a complying superannuation entity.

Date of effect: The amendments in Part 2 apply to capital gains tax events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010.

This date of effect ensures that any transactions occurring from the time of announcement are covered by the amendments so that taxpayers can benefit from the measure. These amendments are beneficial to taxpayers.

Proposal announced: This measure was announced in the then Assistant Treasurer's Media Release No. 090 of 11 May 2010 and in the 2010-11 Budget.

Financial impact: This measure is expected to have an unquantifiable but negligible revenue cost.

Compliance cost impact: Low. This is comprised of a low implementation impact and no change in ongoing compliance costs relative to the affected group.

CGT and business restructures - Part 3: Roll-overs for change of incorporation

Part 3 of Schedule 2 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to expand the existing capital gains tax (CGT) roll-over for the change of a body to an incorporated company. The expanded roll-over applies to entities that change incorporation to become a Corporations (Aboriginal and Torres Strait Islander) Act 2006 corporation. The expanded roll-over also covers a taxpayer's rights associated with a body, as well as their ownership interests, and situations where a body is wound up and replaced by a new company incorporated under a different law.

Part 3 also amends the ITAA 1997 to allow for tax neutral consequences for CGT, depreciating, revenue and trading stock assets of a body that is wound up and replaced by a new company incorporated under a different law, and these assets are transferred to the new company.

Date of effect: The expansions to the CGT roll-over for interests in a body that changes incorporation applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010.

The roll-over for the CGT, depreciating, revenue and trading stock assets of a body that changes its incorporation by winding up and transferring its assets to a new company applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010.

The dates of effect of these roll-overs are retrospective so that any transactions occurring since the time of announcement are covered by the amendments so that taxpayers can benefit from the measure.

Proposal announced: This measure was announced in the then Assistant Treasurer's Media Release No. 090 of 11 May 2010 and in the 2010-11 Budget.

Financial impact: This measure is expected to have an unquantifiable but negligible revenue cost.

Compliance cost impact: Low. This is comprised of a low implementation impact and no change in ongoing compliance costs relative to the affected group.

GST financial supply provisions

Schedule 3 to this Bill amends the A New Tax System (Goods and Services Tax) Act 1999 to implement three of the seven recommendations agreed to by the Government arising out of Treasury's Review of the GST financial supply provisions . The measures requiring legislative change and included in this Bill:

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increase the first limb of the financial acquisitions threshold from $50,000 to $150,000;

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exclude financial supplies consisting of a borrowing made through the provision of a deposit account by an Australian authorised deposit-taking institution from the current concession for borrowings; and

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allow taxpayers who account on a cash basis to treat an acquisition made under a hire purchase agreement as though they do not account on a cash basis.

Implementation of the remaining measures require changes to the A New Tax System (Goods and Services Tax) Regulations 1999 .

Date of effect: 1 July 2012.

Proposal announced: The Government announced on 11 May 2010 that it would enact a package of seven measures in response to Treasury's Review of the GST financial supply provisions .

Financial impact: The package of financial supply measures is expected to be revenue neutral when taken as a whole.

Compliance cost impact: Low.

GST treatment of new residential premises

Schedule 4 to this Bill amends the A New Tax System (Goods and Services Tax) Act 1999 to ensure that sales or long-term leases of new residential premises by a registered entity are taxable supplies and that sales or long-term leases of residential premises (other than new residential premises) are input taxed supplies.

Date of effect: Except for item 2 (clarifying the definition of 'new residential premises') which applies on or after the day this Schedule commences, the provisions take effect from 27 January 2011 (the date of the Government's announcement). This start date will reduce the risk to revenue that might otherwise arise from behavioural change. These amendments contain a transitional provision to ensure that developers who were 'commercially committed' to arrangements to develop premises before 27 January 2011 are not disadvantaged by the measure.

Proposal announced: This measure was announced in the Assistant Treasurer and Minister for Financial Services and Superannuation's Media Release No. 020 of 27 January 2011.

Financial impact: This measure results in an ongoing gain to goods and services tax (GST) revenue which is estimated to be $60 million over the forward estimates period, with cash receipts from this measure paid to the States and Territories. This results in additional payments of $55 million to the States and Territories over the forward estimates period, with the difference between payments due to a timing delay between the accrual of GST revenue and cash collections.

Compliance cost impact: Low.

Deductible gift recipients

Schedule 5 to this Bill amends the Income Tax Assessment Act 1997 to update the list of deductible gift recipients (DGRs) by adding one entity as a DGR, and changing the name of another entity previously specifically listed.

Date of effect: The listing of Rhodes Trust in Australia applies to gifts made after 20 October 2011. The name change from 'Playgroup Australia Incorporated' to 'Playgroup Australia Limited' applies from 25 October 2010.

Proposal announced: The addition of Rhodes Trust in Australia has not previously been announced.

Financial impact:

Compliance cost impact: Nil.

Miscellaneous amendments to the tax laws

Schedule 6 to this Bill makes technical corrections and other minor and miscellaneous amendments to the taxation laws. These amendments are part of the Government's commitment to the care and maintenance of the tax system.

Date of effect: These amendments commence from Royal Assent unless otherwise stated.

Proposal announced: These amendments were all foreshadowed by release in draft form on the Treasury website on 11 October 2011.

Financial impact: The amendment to gives the Commissioner of Taxation discretion to extend the two-year period that applies to the capital gains tax exemptions on the disposal of a dwelling (or an interest in it) by a trustee of a deceased estate (Part 8, comprising items 94 to 96) is expected to result in a small but unquantifiable cost to revenue.

The other amendments are expected to have a minimal to nil revenue impact.

Compliance cost impact: Low to nil.