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

Strengthening scrip for scrip roll-over, small business and other concessions

Schedule 1 to this Bill amends the Income Tax Assessment Act 1997 to ensure that certain integrity rules in the small business concessions and the scrip for scrip roll-over apply to life insurance companies, superannuation funds and trusts in the same way that they apply to other types of entities.

Schedule 1 to this Bill also ensures that these integrity rules (and the capital gains tax (CGT) provisions more generally) are applied as if absolutely entitled beneficiaries, bankrupt individuals, companies in liquidation and security providers are the owners of relevant assets. That is, under these provisions, the nominal owners are looked through to the underlying owners of such assets.

Date of effect: The integrity rule changes that affect the CGT provisions take effect for CGT events that happen after 7:30 pm on 10 May 2011.

The look-through treatment provisions apply, to the extent they affect the CGT provisions, automatically from the commencement of these provisions and from the 2008-09 and later income years at the option of taxpayers.

The integrity rule changes are retrospective to align with the date when these changes were announced. This provides certainty for transactions that occur from the time of announcement. The look-through treatment provisions, whilst potentially retrospective, do not disadvantage taxpayers as they are optional until the commencement of these provisions.

For details on the application date of these amendments for non-CGT provisions, see paragraphs 1.35 to 1.42 in this explanatory memorandum.

Proposal announced: The integrity rule changes were announced on 10 May 2011 as part of the 2011-12 Budget. The look-through treatment provisions were announced on 8 May 2012 as part of the 2012-13 Budget.

Financial impact: This measure has these revenue implications:

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.45 to 1.50.

Compliance cost impact: These amendments have a low compliance cost impact, comprised of a low implementation impact and a low change in ongoing compliance costs for the affected group.

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 disasters occurring across Australia during the period 3 January 2013 to 30 September 2013.

Date of effect: This measure applies to payments relating to disasters occurring during the period starting on 3 January 2013 and ending on 30 September 2013.

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 2.19 to 2.22.

Compliance cost impact: Nil.

Extending gift deductibility to ethics education

Schedule 3 to this Bill adds a new general deductible gift recipient (DGR) category into the Income Tax Assessment Act 1997 .

This measure extends tax deductibility to donations to public funds established solely for providing education in ethics in government schools in Australia as an alternative to religious instruction, where the ethics education to be provided is in accordance with State or Territory law.

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

Proposal announced: This measure was announced in the Assistant Treasurer's Media Release No. 043 of 8 April 2013.

Financial impact: This measure is estimated to 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 3, paragraphs 3.45 to 3.49.

Compliance cost impact: Low.