House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)

General outline and financial impact

Abolishing the mature age worker tax offset

Schedule 1 to this Bill amends the Income Tax Assessment Act 1997 and the Taxation Administration Act 1953 to abolish the mature age worker tax offset.

Date of effect: This measure applies to the 2014-15 income year and later income years.

Proposal announced: This measure was announced in the 2014-15 Budget.

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

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.19 to 1.33.

Compliance cost impact: As the measure impacts only on an individual's ability to claim a tax offset, there is no impact on business or the not-for-profit sector. The compliance costs for individuals will be reduced by $0.55 million per year.

Abolishing the seafarer tax offset

Schedule 2 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to abolish the seafarer tax offset.

Date of effect: This measure applies to assessment for 2015-16 and later income years.

Proposal announced: This measure was announced in the 2014-15 Budget.

Financial impact: This measure will have the following fiscal impact over the forward estimates:

Human rights implications: This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 2, paragraphs 2.14 to 2.19.

Compliance cost impact: This measure was assessed as resulting in a compliance cost reduction of around $4,000 each year.

Research and development tax incentive: reducing the tax offset rates

Schedule 3 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to reduce the rates of the tax offset available under the research and development tax incentive by 1.5 percentage points. The higher (refundable) rate of the tax offset will be reduced from 45 per cent to 43.5 per cent and the lower (non-refundable) rates of the tax offset will be reduced from 40 per cent to 38.5 per cent.

The reduction in the tax offset rates is consistent with the Government's commitment to cut the company tax rate from 1 July 2015, with the gain to revenue and savings from this measure to be redirected to repairing the budget.

Date of effect: This measure applies to income years starting on or after 1 July 2014.

Proposal announced: This measure was announced in the 2014-15 Budget on 13 May 2014.

Financial impact: This measure has the following fiscal impact over the forward estimates period:

Human rights implications: This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 3, paragraphs 3.25 to 3.32.

Compliance cost impact: This measure does not affect compliance costs.

Deductible gift recipients

Schedule 4 to this Bill amends the Income Tax Assessment Act 1997 to update the list of specifically listed deductible gift recipients.

Date of effect: The listing of The Minderoo Foundation Trust applies to gifts made on or after 1 January 2014. The listing of Australian Schools Plus Ltd applies to gifts made on or after 1 April 2014. The East African Fund applies to gifts made on or after 1 July 2014.

Proposal announced: The listing of Australian Schools Plus Ltd was announced in the 2013 Economic Statement as the 'Schools Philanthropy Fund'. The listing of The Minderoo Foundation Trust was announced in the Mid-Year Economic and Fiscal Outlook 2013-14. The listing of the East African Fund was announced in the 2014-15 Budget.

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

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights -paragraphs 4.17 to 4.20.

Compliance cost impact: Nil.