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

Documentaries and film tax offsets

Schedule 1 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to define 'documentary'. It also clarifies that the exclusion of light entertainment programs from eligibility for the film tax offsets does extend to game shows.

Date of effect: The definition of 'documentary' applies to films that started principal photography on or after 1 July 2012. The exclusion of game shows from eligibility for the film tax offsets applies to films that start principal photography on or after the Royal Assent.

Proposal announced: 8 May 2012.

Financial impact: Nil.

Human rights implications: This Schedule is compatible with human rights. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.44 to 1.59.

Compliance cost impact: Low.

Tax exemption for ex-gratia payments for natural disasters

Schedule 2 to this Bill amends the Income Tax Assessment Act 1997 to exempt from income tax the Disaster Income Recovery Subsidy for people who have lost income as a result of ex-Tropical Cyclone Oswald and related flooding in Queensland. It also exempts from income tax the ex-gratia payment for eligible New Zealand special category visa holders, equivalent to the Australian Government Disaster Recovery Payment, made in relation to the natural disasters occurring across Australia during the 2011-12 and 2012-13 financial years.

Date of effect: This measure applies to payments relating to disasters occurring in the 2011-12 and 2012-13 income years.

Proposal announced: Not previously announced.

Financial impact: Nil.

Human rights implications: This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 2, paragraphs 2.27 to 2.30.

Compliance cost impact: Nil.

GST instalment system

Schedule 3 to this Bill amends the goods and services tax (GST) law to enable entities that are paying their GST by instalments, and that subsequently move into a net refund position, to continue to pay their GST by instalments if they choose to do so. This addresses an issue in the current law which leads to otherwise eligible entities being excluded from the GST instalment system when they move into a net refund position and therefore lose the compliance cost advantages of submitting their Business Activity Statements (BAS) annually.

Date of effect: The first 1 July after Royal Assent.

Proposal announced: In the 2011-12 Budget on 10 May 2011, the Government announced reforms to the GST instalment system.

Financial impact: The financial impact of this measure is unquantifiable but is expected to be minimal.

Human rights implications: This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 3, paragraphs 3.20 to 3.23.

Compliance cost impact: This policy is minor in nature. The measure affects only a very small proportion of the business and not-for-profit sector. This measure reduces compliance costs for affected entities. These entities are able to remain in the GST instalment system and submit their BAS annually, rather than incur compliance costs when submitting their BAS quarterly.

There is a minor transitional impact, reflecting the need for some taxpayers to be aware of the amendment and apply it when paying GST by instalments.

Deductible gift recipients

Schedule 4 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to update the list of deductible gift recipients (DGRs) by adding six entities as DGRs.

Date of effect: The following dates of effect apply to each specifically listed entity:

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the listing of The Conversation Trust applies to gifts made after 21 November 2012;

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the listing of National Congress of Australia's First Peoples Limited applies to gifts made after 30 June 2013;

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the listing of National Boer War Memorial Association Incorporated applies to gifts made after 31 December 2012 and before 1 January 2015;

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the listing of the Anzac Centenary Public Fund applies to gifts made after 30 November 2012 and before 1 May 2019;

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the listing of the Australian Peacekeeping Memorial Project Incorporated applies to gifts made after 31 December 2012 and before 1 January 2015; and

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the listing of Philanthropy Australia Inc. applies to gifts made after 27 February 2013.

Proposal announced: The listings have not been previously announced.

Financial impact: The revenue implications of this measure are as follows:

..: denotes financial impact has been rounded to zero.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 4, paragraphs 4.21 to 4.25.

Compliance cost impact: Nil.

Merging multiple accounts in a superannuation entity

Schedule 5 to this Bill amends the Superannuation Industry (Supervision) Act 1993 (SIS Act) to expand the duties of trustees of particular superannuation funds to establish and implement procedures to consolidate accounts where a member of the fund has multiple accounts within a fund and consolidation is in the member's best interest.

This measure will facilitate a reduction in the number of unnecessary accounts. This will boost superannuation balances by ensuring members avoid paying unnecessary fees, including insurance premiums, on multiple accounts and reduce the number of lost accounts.

Date of effect: 1 July 2013.

Proposal announced: This measure was announced by the Minister for Financial Services and Superannuation in a media release No. 131 of 21 September 2011.

Financial impact: Nil.

Human rights implications: This Schedule raises human rights issues. See Statement of Compatibility with Human Rights - Chapter 5, paragraphs 5.50 to 5.56.

Compliance cost impact: This measure is expected to have a moderate compliance impact.

Summary of regulation impact statement

Regulation impact on business

Impact: This Schedule expands the duties of superannuation trustees to establish and implement procedures to identify and, where appropriate, merge multiple accounts of a member.

Main points:

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A regulation impact statement has been finalised for the implementation of the Stronger Super reforms and can be found on the Department of Finance and Deregulation website.

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The relevant information is contained in section 3 'Consolidation of Superannuation Accounts' within the SuperStream chapter of the regulation impact statement.

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Individuals are often not aware that they have multiple accounts. Where they are aware of the existence of multiple accounts they often fail to act to consolidate as this process can be time consuming and cumbersome.

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Consolidation generally will reduce the number of unnecessary accounts.

Superannuation Co-contribution

Schedule 6 to this Bill amends the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 to make changes to the superannuation co-contribution.

Date of effect: These amendments will commence from the date of Royal Assent and apply from the 2012-13 income year.

Proposal announced: This measure was announced in the 2011-12 Budget (additional one year freeze of the indexation of the lower income threshold) and in the 2011-12 Mid-Year Economic and Fiscal Outlook (MYEFO) (other changes).

Financial impact: This measure will have the following implications on the underlying cash balance:

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 6, paragraphs 6.27 to 6.31.

Compliance cost impact: Minimal.

Consolidating the dependency tax offsets

Schedule 7 of the Bill amends:

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the Income Tax Assessment Act 1997 to create a new consolidated dependency tax offset for taxpayers maintaining certain classes of dependants who are genuinely unable to work;

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the Income Tax Assessment Act 1936 (ITAA 1936) to preserve the existing dependency tax offsets for taxpayers eligible for the zone, overseas forces and overseas civilian tax offsets; and

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the ITAA 1936 to reflect the impact of the consolidation of the dependency tax offsets on the net medical expenses tax offset.

Date of effect: These changes will apply for the 2012-13 and later income years.

Proposal announced: This measure was announced in the 2012-13 Budget.

Financial impact: This measure will have the following revenue implications:

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 7, paragraphs 7.71 to 7.83.

Compliance cost impact: Negligible.

Taxation of Financial Arrangements

Schedule 8 amends Division 230 of the Income Tax Assessment Act 1997 and the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 to clarify and refine the operation of certain aspects of the Taxation of Financial Arrangements (TOFA) regime.

Date of effect: The amendments effectively apply from the commencement of the TOFA regime (that is, 26 March 2009). The TOFA regime applies for income years commencing on or after 1 July 2010, unless a taxpayer has elected to apply the Division for income years commencing on or after 1 July 2009.

These amendments are the outcome of the ongoing monitoring of the implementation of the TOFA reforms, and have been developed following extensive consultation with industry. The amendments are generally beneficial to taxpayers. They refine and clarify the operation of the TOFA provisions, lower compliance costs and provide additional certainty to affected taxpayers.

Proposal announced: These amendments were announced in the then Assistant Treasurer's Media Release No. 145 of 29 June 2010.

Financial impact: The revenue impact of these amendments is unquantifiable but is not expected to be significant. However, the amendments are expected to protect a significant amount of revenue which 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 8, paragraphs 8.159 to 8.162

Compliance cost impact: Low.