Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)Chapter 4 - Personalised tax receipts
Outline of chapter
4.1 Schedule 4 to this Bill amends the tax law to provide greater transparency to taxpayers about how their tax money is spent, by requiring the Commissioner of Taxation (Commissioner) to issue a tax receipt to individuals for the income tax assessed to them.
4.2 This measure is part of the Government's commitment to ensuring greater transparency of how taxpayers' money is spent.
Context of amendments
4.3 Prior to the 2013 Federal Election, the Government announced that it would improve transparency on taxes, by introducing a tax receipt for taxpayers. Individual taxpayers will receive a receipt that will inform them about how their taxes are notionally spent, as well as information on the level of Australian Government debt and its interest cost.
4.4 This initiative will ensure that governments are held accountable for whether tax revenues are spent wisely and for the levels of government debt they maintain.
4.5 For the 2013-14 income year, the Commissioner will issue tax receipts under his existing administrative powers. These amendments will make tax receipts an ongoing feature of the tax system.
Summary of new law
4.6 For the 2014-15 income year and future income years, the Commissioner will be required to provide every applicable taxpayer with a tax receipt, setting out the notional distribution of the individual's assessed income tax liability to different types of government expenditure.
4.7 The receipt will also show the current level of gross government debt compared with the previous financial year, and the amount of interest paid on that debt.
Comparison of key features of new law and current law
| New law | Current law |
| The Commissioner will be required to provide every applicable taxpayer with a tax receipt, setting out the notional distribution of the individual's assessed income tax liability to different types of government expenditure, and information on the level of Australian Government debt and its interest cost. | For the 2013-14 income year, the Commissioner will issue tax receipts under his existing administrative powers. |
Detailed explanation of new law
4.8 The amendments are designed to impose a general obligation on the Commissioner to issue tax receipts that inform taxpayers about how their tax money is notionally spent and other information relevant to the financial performance of the Government.
4.9 The amendments are intended to give the Commissioner a sufficient degree of flexibility to prepare the tax receipts in a way that best meets these objectives.
4.10 In utilising this flexibility and subject to the other requirements of the amendments, the Commissioner must consult with the Treasurer on the form of the tax receipt and take into account the Treasurer's views. [Schedule 4, item 2, subsection 70-5(5)]
Requirement to issue a receipt
4.11 The amendments apply to every individual (natural person) taxpayer assessed to have an income tax liability for an income year that exceeds a threshold determined by the Commissioner. [Schedule 4, item 2, paragraphs 70-5(1)(b) and (c) and subsection 70-5(2)]
4.12 The Commissioner has this discretion not to provide tax receipts to certain taxpayers where, because of the low level of income tax assessed to them, the tax receipt is likely to be confusing. Under the Commissioner's current administrative arrangements, and until the Commissioner makes an alternative determination, the threshold is $100.
4.13 The tax receipt will be issued to around 10 million individual taxpayers.
4.14 An individual's 'income tax liability' is the result of applying the method statement in subsection 4-10(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and generally reflects the total amount of the individual's income tax liability for the year. This is to be distinguished from the taxpayer's outstanding liability at the end of the year as the annual liability is reduced by credits, including amounts withheld during the year that are not refunded.
4.15 Where an individual receives multiple assessments for an income year, a receipt will be provided only for the first assessment. Subsequent assessments with respect to the same income year will not trigger the requirement to issue a receipt. [Schedule 4, item 2, paragraph 70-5(1)(a)]
4.16 The Commissioner will not be required to issue a receipt where the assessment is made more than 18 months after the end of the relevant income year. This limitation is intended to ensure that receipts are issued with timely information, which may not be possible where there has been a delay in making the assessment, for example where the individual has lodged their tax return late. [Schedule 4, item 2, paragraph 70-5(1)(d)]
4.17 The Commissioner is also not required to issue a tax receipt where assessment is made prior to the end of the income year. In these rare instances, the administrative cost of producing the tax receipt is likely to be excessive. [Schedule 4, item 2, paragraph 70-5(1)(d)]
4.18 Where the Commissioner is required to issue a tax receipt to an individual, the receipt must be provided as soon as practicable after the income tax assessment is made. It is envisaged that, for the majority of applicable taxpayers, the receipt will be issued at the same time as the notice of assessment; however, the receipt does not form part of the notice. [Schedule 4, item 2, subsection 70-5(6)]
Contents of the receipt
Government Expenditure
4.19 The primary purpose of the receipt is to convey information on the different categories of government expenditure, expressed in a way that relates to the individual's income tax liability. To achieve this, the receipt will generally show the notional dollar amounts of the individual's income tax distributed to a number of categories of government expenditure. [Schedule 4, item 2, subsection 70-5(3)]
4.20 Expenditure in the form of payments to the States and Territories that notionally relates to goods and services tax revenue is excluded from the notional distribution calculation. Other, less significant, items of government expenditure that are notionally hypothecated, in whole or in part, to revenue sources other than personal income tax, are not excluded. [Schedule 4, item 2, paragraph 70-5(3)(c)]
4.21 The calculation of the notional distributions will based on aggregate budget expenditure figures for the relevant financial year. For example, an individual who receives an income tax assessment for the 2014-15 income year in November 2015 would receive a tax receipt based on the Budget estimates for the 2014-15 financial year released in May 2015. In the 2014-15 Budget, Australian Government general government sector expenses were reported by function in Statement 6 of Budget Paper No. 1.
4.22 The calculation would not be updated to reflect subsequent budget updates or the final budget outcome even if those statements are released prior to the preparation of a receipt.
Government Debt
4.23 The receipt will include information on the level of Australian Government general government sector gross debt (total face value of Commonwealth stock and securities on issue) for the relevant financial year and the previous financial year. [Schedule 4, item 2, paragraphs 70-5(3)(d) and (e)]
4.24 The receipt will also show the estimated level of interest to be paid on government debt during the relevant year. [Schedule 4, item 2, paragraph 70-5(3)(f)]
4.25 Again, these figures will be based on estimates published in the Budget before the end of the relevant year. In the 2014-15 Budget, the level of government debt and interest to be paid were published in Statement 7 of Budget Paper No. 1. [Schedule 4, item 2, subsection 70-5(4)]
Consequential amendments
4.26 A consequential amendment is made to include the definition of a 'tax receipt' in the dictionary to the ITAA 1997. [Schedule 4, item 1, ITAA 1997 , definition of 'tax receipt' in subsection 955-1(1)]
Application and transitional provisions
4.27 The amendments made by Schedule 4 commence on the date this Bill receives Royal Assent.
4.28 The amendments apply to notices of assessment issued from 1 July 2015 with respect to assessments for the 2014-15 income year and future income years. [Schedule 4, item 3]
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Tax and Superannuation Laws Amendment (2014 Measures No. 4) Bill 2014 - Schedule 4: Personalised tax receipts
4.29 This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
4.30 This Schedule to this Bill amends the tax law to provide greater transparency to taxpayers about how their tax money is spent, by requiring the Commissioner of Taxation to issue a tax receipt to individuals for the income tax assessed to them.
Human rights implications
4.31 This Schedule engages the right to take part in the conduct of public affairs provided for in Article 25 of the International Covenant on Civil and Political Rights.
4.32 By providing additional information to taxpayers on the decisions and fiscal performance of government, individuals' capacity to engage in public debate is increased. This supports the right in Article 25.
Conclusion
4.33 This Schedule is compatible with human rights as it promotes, but does not inhibit, the fulfilment of human rights.