House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Revenue and Financial Services, Minister for Women and Minister Assisting the Prime Minister for the Public Service, the Hon Kelly O'Dwyer MP)

Chapter 8 Miscellaneous amendments

Outline of chapter

8.1 Schedule 8 to this Bill makes a number of miscellaneous amendments to the taxation, superannuation and other laws. These amendments are part of the Government's commitment to the care and maintenance of the Treasury portfolio legislation including the taxation and superannuation systems.

8.2 These amendments make minor technical changes to correct spelling errors, bring provisions in line with drafting conventions, repeal inoperative provisions and update references in the tax law to reflect changes to the names of State and Territory legislation and specifically listed deductible gift recipients. The Schedule also makes consequential amendments as a result of other recent changes to the law, makes minor technical amendments to remove administrative inefficiencies, clarifies the law ensuring the law operates in accordance with the policy intent and rewrites certain provisions to standardise rules across various types of tax, improving efficiency, coherency and simplicity in tax administration.

Context of amendments

8.3 Miscellaneous amendments to the taxation and superannuation laws such as those contained in Schedule 8 are periodically made to remove anomalies, correct unintended outcomes and improve the quality of Treasury laws. Progressing such amendments gives priority to the care and maintenance of the tax system, a process supported by a recommendation of the 2008 Tax Design Review Panel, which was appointed to examine how to reduce delays in the enactment of tax legislation and improve the quality of tax law changes.

Summary of new law

8.4 These miscellaneous amendments address technical deficiencies and legislative uncertainties within the taxation, superannuation and other laws.

8.5 Schedule 8 contains the following Parts:

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Part 1-Amendments to commencement provisions of amending Bills;

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Part 2-Amendments to application provisions of amending Bills;

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Part 3-Road user charge;

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Part 4-Seasonal Workers Program;

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Part 5-Offshore information notices;

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Part 6-Various amendments; and

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Part 7-Transitional arrangements relating to the disclosure of information.

Detailed explanation of new law

Part 1-Amendments to commencement provisions of amending Bills

Unclear commencement dates for amendments in the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012

8.6 Items 2 to 13 in Schedule 1 to the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012 were to commence on a single day to be fixed by Proclamation. The Superannuation Legislation Amendment (MySuper Core Provisions) Proclamation 2012 provided for the commencement of items 3 to 14 in Schedule 1 to the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012 on 1 January 2013. The items in the Proclamation were incorrectly identified, as there is no item 14 in Schedule 1 to the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012, and item 2 in that Schedule was not proclaimed to have commenced.

8.7 A number of superannuation-related amendments made by the Fair Work Amendment Act 2012 and by Schedule 4 of the Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Act 2012 are contingent on the commencement of item 2 in Schedule 1 to the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012.

8.8 These amendments amend the commencement table of the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012 to clarify that item 2 in Schedule 1 to the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012 commenced on 1 January 2013. This also clarifies the commencement of amendments contingent on item 2 in Schedule 1 to the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012. [Schedule 8, item 1, item 3 in the table in subsection 2(1) of the Superannuation Legislation Amendment (MySuper Core Provisions Act 2012]

8.9 The 1 January 2013 commencement date for item 2 is the date that the item was intended to commence through the original Proclamation. Amending the commencement table in this way is appropriate now that the exact day of commencement is known.

8.10 These amendments commence immediately after the commencement of sections 1 to 3 of the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012 (that is, immediately after 28 November 2012). Although, this change retrospectively corrects the technical issues with the commencement of the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012, it does not have a negative impact on taxpayers or other individuals as the law was intended to apply, and has always been applied, on the basis that item 2 in Schedule 1 to the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012 commenced from 1 January 2013.

Part 2-Amendments to application provisions of amending Bills

Ensuring that Australian financial institutions are required to report in accordance with the policy intent

8.11 The Tax Laws Amendment (Implementation of the Common Reporting Standard) Act 2015 amended the taxation law to require certain financial institutions in Australia to report information to the Commissioner about financial accounts held by foreign tax residents. In order to identify relevant reportable accounts, financial institutions need to carry out the due diligence procedures outlined in the Standard for Automatic Exchange of Financial Account Information in Tax Matters, commonly known as the Common Reporting Standard (CRS). A copy of this document is available on the OECD website (www.oecd.org).

8.12 A 'Lower Value Account' is one category of accounts, amongst others, specified and defined in the CRS. Subitem 14(2) of the Tax Laws Amendment (Implementation of the Common Reporting Standard) Act 2015 requires Australian financial institutions to carry out due diligence on 'Lower Value Accounts' by 31 July 2019.

8.13 Subitem 15(3) of the Tax Laws Amendment (Implementation of the Common Reporting Standard) Act 2015 requires Australian financial institutions to provide statements to the Commissioner about 'Lower Value Accounts' held by foreign residents no later than 31 July 2019. Essentially, this provision was designed to modify the standard rule in subsection 396-105(6) in Schedule 1 to the TAA that would otherwise require financial institutions to provide a statement in relation to these accounts identified in a particular calendar year by 31 July of the following year. The intention was to allow financial institutions the full period up to 31 July 2019 to carry out due diligence on Lower Value Accounts, while preserving the requirement that any such accounts found to be Reportable Accounts are also reported by 31 July 2019.

8.14 However, subitem 15(3) of the Tax Laws Amendment (Implementation of the Common Reporting Standard) Act 2015 operated too narrowly. The CRS specifies that a financial institution does not have to report an account (and therefore provide a statement to the Commissioner about that account) until it has identified the account as being a 'Reportable Account'. Therefore, a financial institution could, for example, conduct the necessary due diligence to identify Lower Value Accounts in the first half of 2019 and because the account would not be identified as a Reportable Account in 2017, it would not be subject to subitem 15(3). Instead it would be subject to the subsection 396-105(6) in Schedule 1 to the TAA and the financial institution would not need to report that account until 31 July 2020 (the first 31 July after it has been identified as a Reportable Account).

8.15 This Schedule amends subitem 15(3) of the Tax Laws Amendment (Implementation of the Common Reporting Standard) Act 2015 so that a Lower Value Account maintained by an Australian financial institution in the 2018 calendar year will be treated as being a Reportable Account, regardless of when the financial institution identifies it as a 'Reportable Account'. This ensures that Australian financial institutions must provide statements about such accounts to the Commissioner by 31 July 2019 (that is, the statement is due on the first 31 July after the end of 2018 in accordance with the standard rule provided by subsection 396-105(6) in Schedule 1 to the TAA). This ensures that subitem 15(3) of the Tax Laws Amendment (Implementation of the Common Reporting Standard) Act 2015 applies in accordance with the announced policy intent. [Schedule 8, item 2, subitem 15(3) of the Tax Laws Amendment (Implementation of the Common Reporting Standard) Act 2016]

8.16 These amendments commence on 1 January 2018 to ensure that accounts maintained in the 2018 calendar year must be reported by 31 July 2019. Although, this change retrospectively corrects technical issues with subitem 15(3), it is not expected to have a negative impact on Australian financial institutions or other individuals as the amendments ensure that subitem 15(3) operates in line with its announced intent. That is, the due date for reporting is the same date that is already generally understood by Australian financial institutions and for which they are taking action to meet.

8.17 These amendments do not change the operation of current subitem 15(3) for the 2017 calendar year. That is, a financial institution that has conducted due diligence in 2017 to identify an account as a Reportable Account that is a Lower Value Account must provide a statement relating to the account by 31 July 2019.

Part 3-Road user charge

Consequential amendments as a result of the Fuel Tax Regulation 2016

8.18 This Schedule makes consequential amendments to the Fuel Tax Act 2006. This was a result of amendments made by the Fuel Tax Regulation 2016 which omitted regulation 43-10 of the Fuel Tax Regulations 2006 (former regulations). Regulation 43-10 of the former regulations allowed the Road User Charge (RUC), which is expressed in cents for each litre of fuel, to be converted to a rate in cents for each kilogram of fuel. This conversion allowed the RUC to be applied to fuels sold in kilograms such as liquefied natural gas (LNG) and compressed natural gas (CNG) powered heavy vehicles on-road.

8.19 The amendments streamline the process of applying the RUC to fuels sold in kilograms and provide ongoing structural flexibility for the Transport Minister to determine rates for the RUC in litres, kilograms and other units of measurement of fuel. For example, taxpayers that purchase fuels sold in kilograms (such as LNG or CNG) would apply the RUC expressed in cents per kilogram of fuel directly rather than undertake a conversion process. [Schedule 8, items 3 and 4, subsections 43-10(7), (8) and (11A) of the Fuel Tax Act 2006]

8.20 The amendments also ensure that the Transport Minister cannot make more than one determination in respect of a class of taxable fuel (such as litres, kilograms etc.) in a financial year if the effect of the determination would be to increase the RUC for that class more than once in a financial year. [Schedule 8, item 5, subsection 43-10(12) of the Fuel Tax Act 2006]

8.21 The amendments also apply the converted RUC rates (cents for each kilogram of fuel) to their respective periods for previously issued RUC determinations, which were expressed in cents for each litre of fuel. Further, the amendments ensure that the Fuel Tax (Road User Charge) Determination 2017 continues in force as if it were a determination made under the amendments. These amendments do not impact taxpayers as they apply the same rates that have been previously applied in past years and over the same periods they applied to. [Schedule 8, items 6 and 7]

8.22 Further, the amendments ensure that the converted cents for each kilogram of fuel RUC rate pursuant to the Fuel Tax (Road User Charge) Determination 2017 remains in effect until it is revoked by a new RUC determination (for taxable fuels for which duty is payable at a rate per kilogram) made by the Transport Minister. [Schedule 8, item 7]

Part 4-Seasonal Workers Program

Consequential amendments as a result of the Migration Amendment (Temporary Activity Visas) Regulation 2016

8.23 This Schedule makes consequential amendments to the ITAA 1997 and Schedule 1 to the TAA as a result of amendments made by the Migration Amendment (Temporary Activity Visas) Regulation 2016, which changed the classification of the Seasonal Labour Mobility Program visa from the 'Special Program Visa (subclass 416)' to the 'Temporary Work (International Relations) Visa (subclass 403)'. The consequential amendments are required to ensure that the withholding tax provisions operate in relation to the new visa subclass in the same way that the provisions operate in relation to holders of the Special Program Visa (subclass 416).

8.24 The amendments ensure that an employer must withhold an amount from salary, wages, commission, bonuses or allowances it pays to certain employees that hold the Temporary Work (International Relations) Visa (subclass 403) at the rate provided by the Taxation Administration Regulations 2017. [Schedule 8, item 9, subparagraph 12-319A(b)(ii) in Schedule 1 to the TAA]

8.25 The amendments also ensure that certain employees that hold the Temporary Work (International Relations) Visa (subclass 403) are liable to pay income tax at the special rate that applies under the Seasonal Labour Mobility Program withholding tax (as provided by the Income Tax (Seasonal Labour Mobility Program Withholding Tax) Act 2012). [Schedule 8, item 8, subparagraph 840-905(b)(ii) of the ITAA 1997]

8.26 The amendments apply to income derived and salary, wages, commission, bonuses and allowances paid on or after 19 November 2016 and ensure that the law is consistent with the practice generally adopted by employers prior to and on and after 19 November 2016 of withholding at a rate of 15 per cent. This aligns with the date the change to the visa classification was made by the Migration Amendment (Temporary Activity Visas) Regulation 2016. Whilst the amendments are retrospective, they are wholly beneficial to employees that hold such visas and their employers. This is because the amendments ensure employees that held the new visa classification had access to a final flat tax rate of 15 per cent on their earnings. Without the amendment, higher marginal tax rates would apply, and employers would be required to have withheld at the higher rate. Any employers that have withheld at the higher rate prior to the amendments are not subject to penalties under the tax law, and the employees are entitled to refunds of those amounts. [Schedule 8, item 10]

8.27 This Schedule also makes amendments to ensure that despite these amendments, the withholding tax provisions continue to operate in relation to holders of the Special Program Visa (subclass 416). [Schedule 8, item 11]

Part 5-Offshore information notices

Rewriting the offshore information notice rules in Schedule 1 to the TAA

8.28 Part 5 of Schedule 8 to this Bill rewrites provisions regarding offshore information notices from the ITAA 1936 into Schedule 1 to the TAA.

8.29 The rewritten provisions make changes to conform to the legislative approach used in Schedule 1 to the TAA, to simplify how the law is expressed, and to remove any ambiguity about the operation of the law.

8.30 The rewritten provisions also contain newly written guide material and the provision is restructured so as to simplify the language and expression of the provision.

8.31 In general, the legal effect of the provisions is not intended to change as a result of the rewrite. However, several changes have been made to extend the operation of the offshore information notice regime to all taxes administered by the Commissioner, and to simplify the operation of the provision. The effect of these changes is detailed below.

Application to all tax-related liabilities

8.32 Currently, the offshore information notice regime for income tax is contained in the ITAA 1936, and this provision is applied to PRRT and the Register of Foreign Ownership of Agricultural Land through the Petroleum Resource Rent Tax Assessment Act 1987 and the Register of Foreign Ownership of Water or Agricultural Land Act 2015, respectively. Schedule 8 to this Bill extends the offshore information notice regime to all taxes administered by the Commissioner. [Schedule 8, items 12, 14, 15 and 19, section 264A of the ITAA 1936; section 108A of the Petroleum Resource Rent Tax Assessment Act 1987; section 33 of the Register of Foreign Ownership of Water or Agricultural Land Act 2015; and Subdivision 353-B in Schedule 1 to the TAA]

8.33 Offshore information notices are considered to be effective in improving the Commissioner's ability to administer Australia's income tax and PRRT regimes in relation to overseas taxpayers. Extending this regime to all taxes will allow the Commissioner to better administer other taxes that are increasingly being applied to a greater number of foreign taxpayers as a result of recent policy decisions, including the application of GST to digital products from overseas.

8.34 This change continues the ongoing simplification work of successive governments to standardise the administrative provisions applying to taxes the Commissioner administers.

8.35 The Commissioner's decision to issue an offshore information notice remains subject to judicial review under the Administrative Decisions (Judicial Review) Act 1977.

Evidentiary consequences of non-compliance

8.36 Schedule 8 to this Bill amends the law so that a refusal or failure to provide information or documents as requested in an offshore information notice has the effect that the information or documents requested are inadmissible in proceedings under Part IVC of the TAA disputing any assessment for a tax-related liability. [Schedule 8, item 19, section 353-30 in Schedule 1 to the TAA]

8.37 This is an extension to the evidentiary consequences of failing or refusing to comply with an offshore information notice, which, under the current law, limit inadmissibility to proceedings disputing the assessment or assessments in relation to which the information or documents were requested.

8.38 This change follows and complements the extension of the offshore notice regime to all taxes administered by the Commissioner, and encourages the timely provision of all information and documents needed by the Commissioner to obtain a full and correct understanding of the transactions under examination and to arrive at an accurate assessment or assessments for each tax for which the taxpayer maybe liable.

The Commissioner issues an offshore information notice to Skalex Pty Ltd. The notice contains six requests for information or documents relating to income tax. Skalex Pty Ltd complies with five of the requests, but refuses to provide documents under the last request.

No proceedings relating to assessments of income tax for Skalex Pty Ltd eventuate. However, the Commissioner separately brings proceedings against Skalex Pty Ltd to determine its GST liability.

The information and documents covered by the request with which Skalex Pty Ltd refused to comply is inadmissible in these proceedings to challenge assessments for a GST liability, even though the request was made in the context of income tax.

8.39 Consistent with the existing law, no information or documents may be admitted when they are covered by an offshore information notice that has not been fully complied with. This limitation recognises that allowing evidence to be admitted from partial compliance with an offshore information notice will not create the necessary incentives required to encourage full and complete disclosure to the Commissioner. Allowing evidence from partial compliance to be automatically admissible will merely encourage taxpayers to only provide information and evidence that supports their position and to continue to withhold from the Commissioner all other information.

Commissioner's considerations when determining consent to evidence

8.40 If a taxpayer refuses or fails to comply with a request set out in an offshore information notice, the information or documents covered by that request are not admissible in proceedings disputing the taxpayer's assessment for a tax-related liability.

8.41 However, the Commissioner may consent to the taxpayer admitting the information or documents into evidence in such proceedings.

8.42 Schedule 8 to this Bill will require the Commissioner, when exercising this power, to consider whether the absence of the information or documents would have the effect that the remaining information or documents relevant to the proceeding are, or are likely to be, misleading. [Schedule 8, item 19, subsection 353-30(2) in Schedule 1 to the TAA]

8.43 Under the current law, the Commissioner is instead required to have regard to whether the absence of the information or documents would have the effect that the remaining information or documents relevant to that issue are, or are likely to be, misleading.

8.44 This change allows the Commissioner to consider the absence of the relevant information or documents in the context of the whole of the proceedings rather than on an issue by issue basis. This is a broader and simpler consideration which removes the need for complex rules setting out different outcomes based upon the number of issues in relation to which the information or documents are relevant.

Following on from Example 1.1, the Commissioner must consider whether to consent to the admission into evidence of the information and documents covered by the request with which Skalex Pty Ltd refused to comply.

In deciding whether to consent, the Commissioner must consider whether the absence of the information or documents would have the effect that the remaining information or documents that are relevant to the proceedings are, or are likely to be, misleading.

Consequential amendments

8.45 A number of consequential amendments are made to reflect the movement of the provisions from the ITAA 1936 to Schedule 1 to the TAA.

8.46 Definitions of offshore information and offshore document are inserted into the ITAA 1997. [Schedule 8, item 13, subsection 995-1(1) of the ITAA 1997]

8.47 The definition of statements made to a taxation officer in the TAA has been updated to reflect the movement of the offshore information notice provisions into Schedule 1. [Schedule 8, items 16 and 17, subsection 8J(2) of the TAA]

8.48 Guide material has been inserted at the beginning of Division 353 in line with drafting practice throughout the TAA. [Schedule 8, item 18, Division 353 in Schedule 1 to the TAA]

Finding tables

8.49 This Chapter includes finding tables to assist in identifying which provision in this Schedule corresponds to a provision in the old law that has been rewritten, and vice versa.

8.50 References to old law in the finding tables are to these provisions in the ITAA 1936.

8.51 References to the new law are to provisions in the TAA, unless otherwise indicated. Also, in the finding tables:

Finding table 1 - old law to new law

Finding table 2 - new law to old law

Part 6-Various amendments

Correcting misplaced comma in note in A New Tax System (Goods and Services Tax) Act 1999

8.52 This Schedule corrects a typographical error involving the misplacement of a comma in a note at the end of the definition of taxable supply in the A New Tax System (Goods and Services Tax) Act 1999. [Schedule 8, item 20, note to the definition of 'taxable supply' in section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999]

Consequential amendments relating to the Public Governance and Resources Legislation Amendment Act (No. 1) 2017

8.53 This Schedule repeals section 44AAJ of the Competition and Consumer Act 2010 to align the reporting requirements of the Australian Energy Regulator and the Australian Competition and Consumer Commission, which produce a combined Annual Report. The amendment removes the requirement for the Australian Energy Regulator to produce its own report in addition to the combined report, which already meets the standard legislative requirements set out in the Public Governance, Performance and Accountability Act 2013. [Schedule 8, item 21, section 44AAJ of the Competition and Consumer Act 2010]

8.54 The repeal applies in relation to reporting periods that commence on or after 1 July 2018. [Schedule 8, item 22]

Removing inoperative provisions in the ITAA 1936 and associated consequential amendments

8.55 Sections 163A and 163B of the ITAA 1936 are inoperative, applying to the 2001 and prior income years. This Schedule repeals these provisions and makes associated consequential amendments. [Schedule 8, items 23, 32, 34, 49, 50, 57 to 60, 64, 65 and 67, paragraph (b) of the definition of 'income tax' in subsection 3(1) of the Crimes (Taxation Offences) Act 1980, subparagraphs 254(2)(a)(i) and 255(4)(a)(i) and sections 163A, 163AA, 163B and 254 of the ITAA 1936, items 9 and 10 in the table in subsection 8AAB(4) of the TAA, item 50 in the table in subsection 250-10(1) and items 1, 3 and 5 in the table in 340-10(2) in Schedule 1 to the TAA and subparagraphs 8A(1)(a)(va), 8A(1)(a)(vb) and 12A(1)(a)(i) of the Taxation (Interest on Overpayments and Early Payments) Act 1983]

Updating the taxation law to reflect updates in State and Territory legislation

8.56 Part XIC of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) enables the States and Territories to devolve their administration and payment of fringe benefits tax to the departmental level in a similar way to the arrangements that apply for the Commonwealth.

8.57 The States and Territory departmental bodies that are eligible for nomination for these purposes are listed in section 135T of the FBTAA. As each State and Territory has its own legislative definitions of bodies that are the equivalent of Commonwealth departments, subsection 135T(1) of the FBTAA defines an 'eligible State or Territory body' by reference to the relevant State or Territory legislation.

8.58 This Schedule updates section 135T of the FBTAA to reflect changes to the legislation in various States and Territories. [Schedule 8, item 24, subsection 135T(1) of the FBTAA]

8.59 This update applies from the first 1 April that occurs on or after this Bill commences to coincide with the start of years of tax for fringe benefits tax purposes. [Schedule 8, item 25]

Correcting reference to 'fuel tax credit' in the Fuel Tax Act 2006

8.60 Subsection 43-5(1) of the Fuel Tax Act 2006 incorrectly refers to a 'tax fuel credit'. This Schedule corrects the reference to 'fuel tax credit'. [Schedule 8, item 26, subsection 43-5(1) of Fuel Tax Act 2006]

Spelling error in subsection 26BC(9D) of the ITAA 1936

8.61 Currently, subsection 26BC(9D) of the ITAA 1936 refers to 'the applicaton of Parts 3-1...'. This Schedule corrects the spelling error. [Schedule 8, item 27, subsection 26BC(9D) of ITAA 1936]

Spelling error in section 121EJ of the ITAA 1936

8.62 Currently, section 121EJ of the ITAA 1936 refers to 'OB activites'. This Schedule corrects the spelling error. [Schedule 8, item 28, section 121EJ of ITAA 1936]

Amendments ensuring consistent treatment between deferred annuities

8.63 The definition of 'ineligible annuity' in subsection 159GP(1) of the ITAA 1936 provides a carve-out from the definition of qualifying security. This carve-out currently refers to 'an annuity issued by a life assurance company to or for the benefit of a natural person (other than in the capacity of the trustee of a trust estate)'. The carve-out applies to a deferred annuity purchased directly by an individual from a life company, but not to an annuity purchased by a superannuation fund to underwrite the liabilities it has in respect of its members.

8.64 As a result, annuities that are issued by life companies to complying superannuation funds to meet their liabilities to provide deferred superannuation income streams may be subject to double taxation during the accumulation (pre-retirement) phase. This double taxation arises from annuities of this kind falling within the definition of qualifying security, meaning that they are taxed at both the life company level under Division 320 of the ITAA 1997 and at the superannuation fund level under the accruals taxation rules in Division 230.

8.65 This Schedule amends the definition of 'ineligible annuity' in subsection 159GP(1) to include annuities that are issued by a life assurance company to a complying superannuation fund for the sole purpose of the fund meeting its liabilities to provide a deferred superannuation income stream to one or more of its members. [Schedule 8, item 30, paragraph 159GP(1)(b) of the ITAA 1936]

8.66 To be covered by the definition of ineligible annuity, the value of the annuity must be the same or substantially the same as the value of the deferred superannuation income stream (or streams) to its members. The terms on which the annuity is payable must also be the same or substantially the same as the terms on which the deferred superannuation income stream (or streams) are payable. [Schedule 8, item 30, subparagraphs 159GP(1)(b)(ii) and (iii) of the ITAA 1936].

8.67 The requirement about benefits being 'substantially the same' ensures that the benefits payable under the annuity are materially the same as the underlying benefits that are paid to the fund's members, while allowing for differences that arise from the annuity not being directly issued to the member. These differences include things like slight differences in timing for the payment of benefits or in payment amounts because of fees and costs.

8.68 The Schedule also makes equivalent amendments in respect of annuities issued to retirement savings account (RSA) providers that are held by a provider for the purposes of meeting its liabilities to provide a deferred income stream to one or more of its holders. [Schedule 8, item 30, paragraph 159GP(1)(c) of the ITAA 1936]

8.69 These changes prevent double taxation from arising in respect of annuities that are issued to superannuation funds and RSA providers and ensure consistent treatment with deferred annuities that are purchased directly from life companies by individuals.

8.70 To facilitate these changes, the amendments insert the definition of 'deferred superannuation income stream' into the section 159GP. This definition refers directly to the definition in the ITAA 1997. [Schedule 8, item 29, subsection 159GP(1) of the ITAA 1936]

8.71 The changes apply from 1 July 2017, being the time from which the rules about deferred income streams also began to apply. Although the changes are retrospective in nature, they are wholly beneficial to taxpayers as they ensure that they are not subject to unintended double taxation. [Schedule 8, item 31]

Duplication of words 'agreement' and 'choice' in the ITAA 1936

8.72 Currently, subparagraph 177C(2)(a)(i) of the ITAA 1936 refers to 'the making of an agreement, choice, declaration, agreement, election, selection or choice, the giving of a notice or the exercise of an option'.

8.73 This Schedule removes the erroneous duplication of the words 'agreement' and 'choice'. [Schedule 8, item 33, subparagraph 177C(2)(a)(i) of the ITAA 1936]

Name changes for deductible gift recipients

8.74 This Schedule updates the specific listing of three deductible gift recipients that have changed their legal names.

8.75 The amendments apply retrospectively. This ensures that all gifts collected by the entities after they changed names are lawful and tax deductibility for donations are preserved.

8.76 Given that the entities have not changed their activities or objects, the ATO has been administering the law by allowing deductions made on or after the names changed to the renamed entities. Therefore, retrospective application of the changes is beneficial to taxpayers and ensures actions taken are valid and supported by the law.

Royal Society for the Prevention of Cruelty to Animals Tasmania

8.77 The Royal Society for the Prevention of Cruelty to Animals Tasmania Limited changed its name to 'Royal Society for the Prevention of Cruelty to Animals Tasmania', effective from 11 April 2016.

8.78 This Schedule updates the listing of this entity, effective for gifts or contributions made on or after 11 April 2016. [Schedule 8, items 35 and 36, item 4.2.11 in the table in subsection 30-45(2) of the ITAA 1997]

The East African Fund Limited

8.79 The East African Fund changed its name to 'The East African Fund Limited', effective from 17 July 2017.

8.80 This Schedule updates the listing of this entity, effective for gifts or contributions made on or after 17 July 2017. [Schedule 8, items 37 and 38, item 9.2.15 in the table in subsection 30-80(2) of the ITAA 1997]

The Prince's Trust Australia Limited

8.81 The Prince's Charities Australia Limited changed its name to 'The Prince's Trust Australia Limited', effective from 17 January 2013.

8.82 This Schedule updates the listing of this entity, effective for gifts or contributions made on or after 17 January 2013. [Schedule 8, items 39 and 40, item 13.2.20 in the table in section 30-105 of the ITAA 1997]

Consequential amendments

8.83 The index in Division 30 has been updated to reflect the amended listings for 'The Prince's Trust Australia Limited' and 'The East African Fund Limited'. [Schedule 8, items 41and 42, items 45B and 89A in the table in section 30-315 of the ITAA 1997]

8.84 The index does not require consequential amendment for the name change for the Royal Society for the Prevention of Cruelty to Animals Tasmania because the current entry in the index refers to 'Royal Societies for the Prevention of Cruelty to Animals', which is broad enough to cover the changes.

Reversionary transition to retirement income streams

8.85 A transition to retirement income stream is one type of superannuation income stream that can be paid to an individual who has reached preservation age but has not yet retired. Other examples of such income streams are non-commutable allocated annuities and non-commutable allocated pensions and transition to retirement pensions (for simplicity, these income streams are referred to collectively in this Chapter as 'TRISs'). After a TRIS commences, it retains its character as a TRIS even after the recipient satisfies a general condition of release.

8.86 When the beneficiary of a TRIS satisfies certain conditions of release (such as retirement), the TRIS converts to being in the 'retirement phase'. As with other superannuation income streams, income from the assets that support a TRIS that is in the retirement phase is generally exempt from income tax. After a TRIS commences, it retains its character as a TRIS even after the recipient satisfies a general condition of release.

8.87 Under the current law, if the recipient of a reversionary TRIS dies, the TRIS can only revert to a dependent beneficiary if the beneficiary satisfies one of the relevant conditions of release. This outcome arises because of the interaction between the specific 'retirement phase' definition that applies to TRISs and the requirement in regulation 6.21 of the SIS Regs that death benefits can only be paid through a superannuation income stream that is in the retirement phase.

8.88 This Schedule modifies the rules that determine when a TRIS is in the retirement phase. The changes ensure that reversionary TRISs can always be paid to a reversionary beneficiary, irrespective of whether they have satisfied a condition of release.

8.89 The amendments achieve this by excluding reversionary beneficiaries from the requirement that, to be in the retirement phase, a TRIS must be paid to a beneficiary who has satisfied a condition of release. [Schedule 8, item 43, paragraph 307-80(3)(aa) of the ITAA 1997]

8.90 This means that TRISs that are paid to a reversionary beneficiary are subject to the general retirement phase definition in subsection 307-80(1) (which simply requires that a superannuation benefit is paid).

8.91 The change will allow a reversionary TRIS to be paid to a dependant beneficiary rather than having to be commuted and a new income stream started from the deceased member's underlying superannuation interests. This approach is consistent with the treatment of other superannuation income streams, which do not require the reversionary beneficiary to satisfy a condition of release.

8.92 A reversionary beneficiary is a beneficiary who receives a benefit from a superannuation income stream that continues to be paid after the death of the primary beneficiary (that is, the income stream does not cease on death). The term 'reversionary beneficiary' takes on its ordinary meaning, consistent with the approach in other provisions (such as the transfer balance cap 'credit' rules in item 1 in the table to subsection 294-25(1)).

8.93 Although not covered explicitly by the amendments, a reversionary TRIS can only be paid to a reversionary beneficiary who is also a dependant beneficiary of the deceased. This additional requirement arises because of the compulsory cashing rules in regulation 6.21 of the SIS Regs, which, as noted above, restricts the payment of a deceased member's superannuation interests through a pension or an annuity to dependant beneficiaries.

8.94 The amendments apply to the part of the retirement phase definition that relates to TRISs. To ensure that the change has effect from the same time that the 'retirement phase' definition first applied, the amendments apply in the same way as any other provision that refers to the retirement phase definition. [Schedule 8, item 44]

8.95 The retirement phase definition was introduced as part of the superannuation reform package enacted in 2016 and was used in respect of several measures that applied from different times. Applying the changes in the above way ensures that the amended definition takes effect from the first time that it applied in relation to each of those measures. This approach is necessary given the way the original application rule for the definition was constructed (see item 11 in Schedule 9 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016).

8.96 In practice, the amendment largely applies from 1 July 2017, being the time from which most of the measures that first began using the retirement phase definition applied.

8.97 Applying the amendments in this way will result in the changes having a retrospective application. However, this retrospective application is appropriate because it is wholly beneficial to superannuation providers and reversionary beneficiaries, who will have a greater range of options in dealing with the superannuation interests of deceased members. The changes ensure that any payments of TRISs to reversionary beneficiaries that have occurred since 1 July 2017 do not result in a contravention of the requirement in regulation 6.21 of the SIS Regs (that only superannuation income streams that are in the retirement phase can be paid to dependent beneficiaries).

Incorrect section reference in note to subsection 311-55 of the ITAA 1997

8.98 Currently, the note to subsection 311-55 of the ITAA 1997 refers erroneously to 'Section 320'. This Schedule corrects the typographical error, so that the note refers to 'Section 320-200'. [Schedule 8, item 45, note to subsection 311-55(1) of the ITAA 1997]

Inserting definition of 'Arts Minister' in the ITAA 1997

8.99 Currently, the ITAA 1997 does not define 'Arts Minister'. However, the term 'Arts Minister' is used extensively in the ITAA 1997, notably in Divisions 30 and 376. This Schedule defines 'Arts Minister' as the Minister administering the National Gallery Act 1975'. [Schedule 8, item 46, subsection 995-1(1) of the ITAA 1997]

Removing inoperative provisions in the Income Tax (Transitional Provisions) Act 1997

8.100 This Schedule repeals transitional provisions relating to the refunding of tax offsets that applies only to the 2012-13 income year. These provisions are inoperative. [Schedule 8, item 47, Division 67 of the Income Tax (Transitional Provisions) Act 1997]

Ensuring defined terms in the TAA are identified in line with applicable drafting conventions

8.101 Currently, various defined terms in the TAA are incorrectly identified with an asterisk. This Schedule ensures those defined terms are identified in line with applicable drafting conventions for the TAA (outside of Schedule 1 to that Act). [Schedule 8, items 48 and 52 to 55, paragraph 3B(1AA)(d), definitions of 'adjusted rest cost base asset setting amount', 'original reset cost base asset setting amount', 'tax on capital gain' in subsection 8W(1C) and subsection 8W(4) in the TAA]

Removing note in TAA containing a redundant reference

8.102 This Schedule repeals the note to subsection 8AAZLGA(3) of the TAA, which contains a reference to 'Part 2A of the regulations'. The Taxation Administration Regulations 2017 (which were remade on 1 October 2017) no longer contain a Part 2A. [Schedule 8, item 51, note to subsection 8AAZLGA(3) in the TAA]

Incorrect definition of the Australian Securities and Investments Commission

8.103 Tax and Superannuation Laws Amendment (2015 Measures No. 5) Act 2015 contained amendments to define the Australian Securities and Investments Commission as ASIC and standardise that definition throughout Schedule 1 to the TAA. This included amendments to subsection 355-65(4) in Schedule 1 to the TAA, which concerns the disclosure of protected information to ASIC. These amendments commenced on Royal Assent (that is, 30 November 2015) (refer item 5 of commencement table).

8.104 The Foreign Acquisitions and Takeovers Legislation Amendment Act 2015 also contained amendments to subsection 355-65(4) in Schedule 1 to the TAA, which changed the scope of protected information the ATO is allowed to provide to ASIC. These amendments inadvertently changed '*ASIC' back to "the Australian Securities and Investments Commission". These amendments commenced on 1 December 2015 (refer item 4 of commencement table).

8.105 This Schedule changes the reference from 'the Australian Securities and Investments Commission' to '*ASIC' in subsection 355-65(4) in Schedule 1 to the TAA to ensure the standard definition applies across the taxation law. [Schedule 8, item 61, item 1 in the table in subsection 355-65(4) in Schedule 1 to the TAA]

8.106 This Schedule also changes the reference from 'the Australian Securities and Investments Commission' to 'ASIC' in the example in paragraph 18-135(3)(b) in Schedule 1 to the TAA. [Schedule 8, item 56, example in paragraph 18-135(3)(b) in Schedule 1 to the TAA]

Ensuring exemption from third party reporting regime is available in accordance with the policy intent

8.107 The Tax and Superannuation Laws Amendment (2015 Measures No. 5) Act 2015 amended Schedule 1 to the TAA to create Subdivision 396-B. Subdivision 396-B contains a regime requiring a range of third parties (those listed in section 396-55, table column 1) to report to the ATO on certain transactions (those listed in table column 2). Section 396-65 exempts entities listed at table items 5 to 8 of section 396-55 from the general reporting requirement. The exemption applies where a party to the transaction is not an individual, and is a wholesale client (as defined in section 761G of the Corporations Act 2001).

8.108 When applied to table item 8, the exemption is intended to apply where the beneficiary is a non-individual, wholesale client. However, currently the exemption may have been interpreted to apply where the trustee is a non-individual, wholesale client, irrespective of whether the beneficiary meets these criteria, because the trustee is the legal 'party to the transaction'.

8.109 This Schedule amends section 396-65 so that information about a transaction described in item 8 is exempted to the extent that the information relates to a beneficiary entity described in paragraph (b) of column 2 of table item 8, that is not an individual and that is being provided a financial product, or a financial service, under the transaction as a wholesale client. [Schedule 8, item 62, section 396-65 in Schedule 1 to the TAA]

8.110 The amendment applies in relation to transactions entered into on or after 1 July 2017. This aligns with the commencement of the reporting obligation for table item 8 in section 396-55. Although, this change retrospectively clarifies the intended operation of the exemption from reporting, it does not have a negative impact on reporting entities or other individuals as the ATO has administered this exemption on the basis that it was operating as intended. [Schedule 8, item 63]

Consequential amendments to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 (No 101 of 2006)

8.111 The Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 repealed subparagraph 12A(1)(a)(iii) of the Taxation (Interest on Overpayments and Early Payments) Act 1983.

8.112 This Schedules removes the references to the terms 'credit', 'crediting' and 'credited' in various provisions of the Taxation (Interest on Overpayments and Early Payments) Act 1983, as these terms only had relevance to the repealed subparagraph 12A(1)(a)(iii) of the Taxation (Interest on Overpayments and Early Payments) Act 1983. [Schedule 8, items 66, 68 to 70, Part IIIA Heading, subsection 12A(1) and section 12B of the Taxation (Interest on Overpayments and Early Payments) Act 1983]

Part 7-Transitional arrangements relating to the disclosure of information

Transitional arrangements relating to the Australian Financial Complaints Authority

8.113 The Treasury Laws Amendment (Putting Consumers First - Establishment of the Australian Financial Complaints Authority) Act 2018 amends the Corporations Act 2001 to establish a new external dispute resolution framework for the financial system to ensure that consumers have easy access to a single external dispute resolution scheme, known as AFCA, to resolve disputes about products and services provided by financial firms. Once fully operational, the AFCA scheme will replace the Superannuation Complaints Tribunal and the existing external dispute resolution schemes approved by the Australian Securities and Investments Commission. To ensure a smooth transition to the new external dispute resolution framework, there will be a transitional period where AFCA and the Superannuation Complaints Tribunal are both operating.

8.114 The Superannuation Complaints Tribunal is subject to strict secrecy rules that make it difficult for it to share information about complaints made to the Superannuation Complaints Tribunal with AFCA to facilitate a coordinated approach to handling complaints particularly during the transition period.

8.115 These amendments allow Superannuation Complaints Tribunal members or staff of the Australian Securities and Investments Commission who are made available to the Superannuation Complaints Tribunal to disclose information acquired in connection with a complaint made to the Superannuation Complaints Tribunal to the operator of AFCA to assist AFCA to perform its functions or exercise its powers. [Schedule 8, items 71 to 74, subsections 63(2), (2B), (3B) and (5) of the Superannuation (Resolution of Complaints) Act 1993]

8.116 For example, this will allow AFCA to:

•

work out whether a complaint has already been received and resolved by the Superannuation Complaints Tribunal, and therefore should not be re-considered by AFCA;

•

obtain information about similar ongoing complaints before the Superannuation Complaints Tribunal that are lodged with AFCA (whether by the same complainant, or by a different party in the case of death benefit complaints) to determine which body should resolve the complaint that has been lodged with both;

•

obtain operational resources and processes of the Superannuation Complaints Tribunal acquired in connection with a complaint made to the Superannuation Complaints Tribunal to assist with the establishment of AFCA.

8.117 The amendments apply in relation to disclosures of information made on and after the day after this Bill receives the Royal Assent (whether the information was acquired before, on or after that day). [Schedule 8, item 75]