Senate

Revised Explanatory Memorandum

(Circulated by the authority of the Minister for the Environment, the Hon Greg Hunt MP and the Treasurer, the Hon J.B. Hockey MP)

Chapter 7 - Specific repeal issues

Outline of chapter

7.1 Chapter 7 describes the provisions necessary to:

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repeal the Steel Transformation Plan Act 2011 (STP Act);

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repeal the Steel Transformation Plan 2012;

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repeal the refundable tax offset for conservation tillage (conservation tillage offset); and

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adjust funding for the Australian Renewable Energy Agency (ARENA).

Context of amendments

Repeal of the Steel Transformation Plan

7.2 The STP Act was introduced to establish the legislative framework and administrative details for the STP. The STP is a self-assessment entitlement scheme designed to encourage investment, innovation and competitiveness in the Australian steel manufacturing industry in order to assist the industry to transition to a low carbon economy. Industry assistance is no longer required due to the repeal of the carbon tax, and steel manufacturers no longer face a cost burden associated with the production of greenhouse gas emissions.

Repeal of the conservation tillage offset

7.3 The conservation tillage offset was introduced as part of the Clean Energy Legislation.

7.4 Under the ITAA 1997, from 2012-13 a taxpayer is eligible to claim the conservation tillage offset for an income year if:

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during the income year the taxpayer used for the first time, or installed ready for use, a new eligible no-till seeder that they held for the purposes of carrying on a primary production business; and

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the taxpayer held a Research Participation Certificate for the income year.

7.5 The amount of the offset is 15 per cent of the cost of the eligible no-till seeder and the offset was refundable. The offset was legislated to be a temporary measure and was to only be available from 2012-13 to 2014-15 (inclusive) and only for seeders first used or installed between 1 July 2012 and 30 June 2015.

7.6 Research Participation Certificates are issued by the Secretary of the Department of Agriculture in respect of an income year. Before issuing a certificate, the Secretary must be satisfied that the taxpayer has completed a conservation tillage survey during the relevant income year.

Adjusting funding for the Australian Renewable Energy Agency

7.7 The Main Repeal Bill changes the future funding for the ARENA as a result of a 2013 Budget measure to re-profile funding and the decision to reduce funding to partially offset the costs associated with repealing the carbon tax.

7.8 Changes to the ARENA's future funding require amendment to the Australian Renewable Energy Agency Act 2011 (ARENA Act), which outlines the maximum amounts payable to the ARENA for each financial year up to 2019-2020.

Comparison of key features of new law and current law

Detailed explanation of new law

Repeal of the Steel Transformation Plan

7.9 The STP Act is repealed in its entirety, with effect from 1 July 2014. The legislative instrument under the STP Act, the Steel Transformation Plan 2012, also ceases to have effect from 1 July 2014. [Schedule 4, item 1]

7.10 The consequences for the STP participants is that after 30 June 2014:

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no further STP payments are payable;

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any conditions associated with previous payment of competitiveness assistance advances, under Part 2 of the STP Act, including reporting requirements relating to the half-year ending on 30 June 2014, no longer apply; and

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any conditions, such as document retention obligations, under Part 3 of the STP Act and the Steel Transformation Plan 2012 are no longer enforceable. [Schedule 4, item 2]

7.11 From 1 July 2014 the Department of Industry is no longer required to include details in its annual report regarding aspects of the STP. This includes details of the total amount of STP payments paid to the STP participants and information about the progress of the Australian steel manufacturing industry towards improved environmental outcomes and workforce skills development. [Schedule 4, item 2]

7.12 Definitions for 'old Act' and 'old Plan' are provided to clearly identify and differentiate references to the STP Act and the Steel Transformation Plan 2012, respectively. [Schedule 4, item 2, 2]

Conservation tillage offset

Repealing the offset

7.13 The conservation tillage offset provisions set out in the ITAA 1997 are repealed for 2014-15 and subsequent years. As a result, taxpayers will no longer be able to claim the tax offset when they first use or install an eligible no-till seeder. [Schedule 3, item 4, Subdivision 385-J, ITAA 1997]

7.14 References to the offset in the general rules for offsets, the Dictionary and the explanatory and guidance material for the Act are also repealed. [Schedule 3, items 3 and 5, table item 24 in sections 67-23 and section 995-1(1), ITAA 1997]

7.15 A sunset clause was included when the offset was introduced to repeal the provisions after the offset ceased to be available from 1 July 2015. As this sunset clause is no longer needed it is repealed. [Schedule 3, items 1 and 2, table item 6 in section 2(1) and Part 3 of Schedule 2, Clean Energy (Consequential Amendments) Act 2011]

Application date and transitional arrangements

7.16 This repeal applies to 2014-15 and later income years. [Schedule 3, item 6]

7.17 Taxpayers who have claimed, or who are eligible to claim, the offset for prior income years will not lose their entitlements as a result of this change. Further, related administrative processes will continue to operate. For example, Research Participation Certificates may still be issued in respect of income years prior to 2014-15, and the Secretary of the Department of Agriculture may revoke a Research Participation Certificate issued before or after the repeal if it is demonstrated that the certificate was issued as a result of fraud or misrepresentation. [Schedule 3, item 7]

7.18 The Main Repeal Bill also includes a transitional provision, which ensures that the new end date for the offset (30 June 2014) is treated in the same way as the old end date for the offset (30 June 2015). The transitional provisions are not subject to the application provision for the repeal and so apply from the commencement of the Main Repeal Bill. [Schedule 3, items 6 and 7]

Adjusting funding for the Australian Renewable Energy Agency

7.19 The Main Repeal Bill repeals the table at section 64(1) of the ARENA Act and inserts a revised table of yearly maximum payments to the ARENA. [Schedule 5, item 1, section 64(1)(table), ARENA Act] The yearly maximum payments listed in the amended table include:

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a 2013 Budget measure to re-profile $370 million in funding for the ARENA over the forward estimates (2014-15 to 2016-17) into later years (2019-20 to 2021-22); and

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a reduction in funding for the ARENA by $434.9 million over the forward estimates (2014-15 to 2016-17).

7.20 The new table does not include the 2012-13 year, which has passed. In relation to the amount originally specified in the ARENA Act, the unspent funds for the 2012-13 year have been carried over into the amended forward year figures, consistent with section 64(2) of the ARENA Act.

7.21 The Main Repeal Bill repeals section 64(3) to 64(6) of the ARENA Act, as it is now redundant. [Schedule 5, items 2 and 3, sections 64(3)-(6) and 65(4)(note), ARENA Act]

7.22 The transfers of the credit balance of the Clean Energy Initiative Special Account and additional money from ASI Limited to the ARENA have already occurred and these funds have been incorporated into the funding amounts included the table in section 64(1) of the ARENA Act.

7.23 To provide clarity, the Main Repeal Bill includes an application provision to ensure the amendments do not affect funding for the ARENA prior to commencement of the Main Repeal Bill. Funding carried over from 2012-13 into 2013-14 has been factored into the amended table in section 64(1) of the ARENA Act. [Schedule 5, item 4]

7.24 The new amount specified for 2013-14 includes funds already spent by the ARENA in 2013-14.