SENATE

Revised Explanatory Memorandum

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

General outline and financial impact

Reform of the taxation treatment of living-away-from-home allowances and benefits

Schedule 1 to this Bill amends the Fringe Benefits Tax Assessment Act 1986 to limit the concessional tax treatment of living-away-from-home (LAFH) allowances and benefits to those provided to employees (other than those working on a 'fly-in fly-out' or 'drive-in drive-out' basis) for a maximum period of 12 months who:

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maintain a home in Australia (at which they usually reside) for their immediate use and enjoyment at all times while living away from that home for their work; and

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have provided their employer with a declaration about living away from home.

Special rules apply to employees who are working on a fly-in fly-out or drive-in drive-out basis. Certain conditions must be satisfied to be one of these employees, and to receive the concessional tax treatment, the employee must provide their employer with a declaration about living away from home. These employees do not have to maintain a home in Australia and the 12-month limit on concessional tax treatment does not apply.

Date of effect : The reforms apply from 1 October 2012.

Transitional rules apply to permanent residents who have employment arrangements for LAFH allowances and benefits in place prior to 7.30 pm (AEST) on 8 May 2012. These employees are not required to maintain a home in Australia for their immediate use and enjoyment at all times for the concessional treatment to apply and the concession is not limited to a maximum period of 12 months until the earlier of 1 July 2014 or the date a new employment contract is entered into, or the existing contract is varied in a material way.

Transitional rules also apply to temporary residents who maintain a home in Australia for their immediate use and enjoyment at all times, and have employment arrangements for LAFH allowances and benefits in place prior to 7.30 pm (AEST) on 8 May 2012. These employees will have until the earlier of 1 July 2014 or the date a new employment contract is entered into or the existing contract is varied in a material way before the concessional treatment is limited to a maximum period of 12 months.

Proposal announced : These amendments were announced in the 2011-12 Mid-Year Economic and Fiscal Outlook and the 2012-13 Budget.

Financial impact : The reforms have the following fiscal impact over the forward estimates:

Human rights implications : Schedule 1 to this Bill is compatible with the recognised human rights and freedoms. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.169 to 1.176.

Compliance cost impact : Low. Employers will have some compliance costs in familiarising themselves with the reforms, particularly during the transitional period. There will be some on-going compliance costs for employers in line with their existing obligations under the fringe benefits tax law.

GST supplies by representatives who are creditors

Schedule 2 to this Bill amends the A New Tax System ( Goods and Services Tax ) Act 1999 (GST Act) to ensure that in circumstances where a representative of an incapacitated entity is a creditor of that entity, the correct provision of the GST Act is applied.

Date of effect : This measure applies from the first quarterly tax period on or after Royal Assent.

Proposal announced : This measure was announced in the 2011-12 Budget.

Financial impact : This measure is expected to be revenue neutral.

Human rights implications : This measure does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 2, paragraphs 2.21 to 2.24.

Compliance cost impact : Low.

Consolidation

Schedule 3 to this Bill amends Schedule 3 to the Tax Laws Amendment ( 2012 Measures No. 2 ) Act 2012 to ensure that:

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no interest is payable if an overpayment of income tax arises because of a deduction under the pre-rules in Part 1 of Schedule 3 to that Act (which apply, broadly, to corporate acquisitions in the period before 12 May 2010); and

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no shortfall interest or administrative penalty is payable if additional tax becomes payable because an amendment to an assessment is made, to the extent that the amendment is attributable to a deduction under the pre-rules in Part 1 of Schedule 3 to that Act or under the interim rules in Part 2 of Schedule 3 to that Act (which apply, broadly, to corporate acquisitions in the period between 12 May 2010 and 30 March 2011).

Date of effect : The measure commences on the day that the Tax Laws Amendment ( 2012 Measures No. 2 ) Act 2012 receives Royal Assent.

Proposal announced : The measure was announced in the then Assistant Treasurer and Minister for Financial Services and Superannuation's Media Release No. 159 of 25 November 2011.

Financial impact : The measure has a nil revenue impact. However, it does protect a significant amount of revenue that would otherwise be at risk.

Human rights implications : This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 3, paragraphs 3.27 to 3.30.

Compliance cost impact : Low.