Explanatory Memorandum
(Circulated by the authority of the Treasurer, Hon J. B. Hockey MP)Statement of compatibility with human rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014
Income Tax Rates Amendment (Temporary Budget Repair Levy) Bill 2014
Family Trust Distribution Tax (Primary Liability) Amendment (Temporary Budget Repair Levy) Bill 2014
Fringe Benefits Tax Amendment (Temporary Budget Repair Levy) Bill 2014
Income Tax (Bearer Debentures) Amendment (Temporary Budget Repair Levy) Bill 2014
Income Tax (First Home Saver Accounts Misuse Tax) Amendment (Temporary Budget Repair Levy) Bill 2014
Income Tax (TFN Withholding Tax (ESS)) Amendment (Temporary Budget Repair Levy) Bill 2014
Superannuation (Departing Australia Superannuation Payments Tax) Amendment (Temporary Budget Repair Levy) Bill 2014
Superannuation (Excess Non-Concessional Contributions Tax) Amendment (Temporary Budget Repair Levy) Bill 2014
Superannuation (Excess Untaxed Roll-Over Amounts Tax) Amendment (Temporary Budget Repair Levy) Bill 2014
Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 1) Amendment (Temporary Budget Repair Levy) Bill 2014
Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 2) Amendment (Temporary Budget Repair Levy) Bill 2014
Tax Laws Amendment (Interest on Non-Resident Trust Distributions) (Temporary Budget Repair Levy) Bill 2014
Tax Laws Amendment (Untainting Tax) (Temporary Budget Repair Levy) Bill 2014
Trust Recoupment Tax Amendment (Temporary Budget Repair Levy) Bill 2014
1.99 These Bills are 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
1.100 The Bills amend the Income Tax Assessment Act 1997 (ITAA 1997), the Income Tax Rates Act 1986 (ITRA 1986), the Income Tax (Transitional Provisions) Act 1997 (IT(TP) Act 1997) and other taxation imposition and ratings Acts to introduce a three-year progressive budget repair levy in the primary form of additional income tax on Australian resident and foreign resident individuals commencing in the 2014-15 financial year.
1.101 The levy will also be reflected in a number of tax rates that are currently based on the top personal marginal tax rate (45 per cent), as well as those based on a calculation comprising the top personal rate and the Medicare levy (currently 1.5 per cent, but legislated to increase to two per cent from 1 July 2014), to maintain the integrity and ensure the fairness of the tax system and minimise opportunities for avoiding the levy.
1.102 These changes will ensure that those with a greater capacity to pay make a larger contribution to repairing the budget.
1.103 The amount of levy payable is at the rate of two per cent for each dollar of a taxpayer's taxable income in excess of $180,000. No levy is payable where the taxpayer has a taxable income of $180,000 or less except in cases where a tax law integrity rules applies to apply the top personal marginal tax rate to certain types of income.
Human rights implications
1.104 These Bills do not engage any of the applicable rights or freedoms.
1.105 However, the Committee has previously raised comments around the engagement of the right to an adequate standard of living with regard to taxation measures. For the purpose of completeness, the assessment against that right has been included below.
Right to an adequate standard of living
1.106 The person's right to an adequate standard of living is contained in article 11 of the International Covenant on Economic, Social and Cultural Rights. Article 11 ensures the realisation of this right, recognising the essential importance of an adequate standard of living.
1.107 The Committee has commented that a change in tax rates could limit the standard of living available to Australians.
1.108 The Bills achieve a legitimate objective in that they will start the process of repairing the nation's finances. The introduction of a temporary budget repair levy will mean that high-income individuals will contribute to the task of repairing the Budget based on their ability to pay.
1.109 The temporary budget repair levy's design retains progressivity in the tax system. Taxpayers with annual taxable income in excess of $180,000 will directly incur the levy. In 2014-15, around 400,000 taxpayers (less than 4 per cent of taxpayers) will directly incur the levy on their personal taxable income.
1.110 The levy's design is reasonable, necessary and proportionate to the task of repairing the nation's finances, being payable by those with a greater ability to pay. The two per cent rate is modest relative to the higher incomes of those taxpayers who will be required to pay the levy.
Conclusion
1.111 The Bills are compatible with human rights as they do not raise any human rights issues.
1.112 If the Bills did engage the right to an adequate standard of living, the Bills are nonetheless compatible with human rights because to the extent that it could be argued they may limit human rights, those limitations are reasonable, necessary and proportionate.