House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer, Minister for Housing and Minister for Homelessness, Social and Community Housing, the Hon Michael Sukkar MP)

General outline and financial impact

Schedules 1 to 5 - Corporate Collective Investment Vehicles

Outline

Schedules 1 to 5 to the Bill establish the regulatory and tax frameworks CCIVs.

Schedules 1 to 4 to the Bill amend corporate and financial services law to establish a CCIV as a new type of a company limited by shares that is used for funds management. A CCIV is an umbrella vehicle that is comprised of one or more sub-funds and is operated by its single corporate director.

Schedule 5 to the Bill amends the taxation law to specify the tax treatment for the CCIV. The amendments give effect to the core CCIV tax framework to ensure that the CCIV is taxed on a flow-through basis, with the objective that the general tax treatment of CCIVs and their members align with the existing tax treatment of AMITs (and their members).

Date of effect

Schedules 1, 2, 3 and 5 to the Bill will commence on 1 July 2022.

Schedule 4 to the Bill commences on 1 July 2022 only if the Corporations Amendment (Meetings and Documents) Act 2021 has commenced prior to that date, otherwise it will not commence.

Proposal announced

The intention to create a CCIV regime was first announced in the 2016-17 Budget as part of the Ten Year Enterprise Tax Plan.

In May 2021 the Government announced the project would apply with a start date of 1 July 2022. Schedules 1 to 5 to the Bill fully implement the measure included in the 2021-22 Budget.

Financial impact

This measure is estimated to result in an unquantifiable impact on receipts over the forward estimates period.

Regulation impact statement

The measures detailed in Schedules 1 to 5 to the Bill are estimated to result in a total average annual regulatory cost of $1.2 million.

The Regulation Impact Statement covering the amendments in Schedules 1 to 5 to the Bill has been included in Attachment 1.

Human rights implications

Schedules 1 to 4 to the Bill engage, or may engage, human rights. See Statement of Compatibility with Human Rights - Chapter 19.

Schedule 5 to the Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 19.

Compliance cost impact

Compliance costs will be low to medium and be similar to current investment entities in the market.

Schedule 6 - Extension of temporary loss carry back

Outline

Schedule 6 to the Bill amends the income tax law to extend the loss carry back rules by 12 months, allowing eligible corporate tax entities to claim a loss carry back tax offset in the 2022-23 income year.

Date of effect

The measure in Schedule 6 to the Bill will apply to assessments made in the 2020-21 income year, in the 2021-22 income year and in the 2022-23 income year.

Proposal announced

Schedule 6 to the Bill fully implements the measure Temporary loss carry back extension from the 2021-22 Budget.

Financial impact

All figures in this table represent amounts in $[m].

This measure is estimated to have the following receipts impact over the forward estimates period.

Human rights implications

Schedule 6 to the Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 19.

Compliance cost impact

Low.

Schedule 7 - Deductible gift recipients

Outline

Schedule 7 to the Bill amends the ITAA 1997 to:

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specifically list the Greek Orthodox Community of New South Wales Ltd, Australian Associated Press Ltd, Virtual War Memorial Limited and SU Australia Ministries Limited as deductible gift recipients;

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extend the deductible gift recipient specific listings of Cambridge Australia Scholarships Limited and Foundation 1901 Limited; and

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remove the deductible gift recipient specific listing of the East African Fund Limited (with the fund remaining endorsed as a deductible gift recipient under another category).

Date of effect

The amendments apply to gifts made on or after 1 July 2019 to the Greek Orthodox Community of New South Wales Ltd.

The amendments apply to gifts made on or after 1 July 2021 and before 1 July 2026 to Australian Associated Press Ltd and Virtual War Memorial Limited.

The amendments apply to gifts made on or after 1 July 2021 and before 1 July 2023 to SU Australia Ministries Limited.

The amendments extend the period of the listing of Cambridge Australia Scholarships Limited so that it applies to gifts made on or after 1 July 2021 and before 1 July 2026.

The amendments extend the period of the listing of Foundation 1901 Limited so that it applies to gifts made on or after 1 September 2021 and before 1 September 2026.

The amendments to remove the deductible gift recipient listing of the East African Fund Limited take effect on the first day of the quarter following Royal Assent.

Proposal announced

Schedule 7 to the Bill fully implements the measure Philanthropy - updates to the list of specifically listed deductible gift recipients from the 2021-22 Budget; and partially implements the measure Philanthropy - updates to the list of specifically listed deductible gift recipients from the 2019-20 Mid Year Economic and Fiscal Outlook.

Financial impact

The specific listing of the Greek Orthodox Community of New South Wales Ltd was part of the 2019-20 Mid-Year Economic and Fiscal Outlook measure Philanthropy - updates to the list of specifically listed deductible gift recipients. The measure was estimated to have a total cost to revenue of $0.7 million from 2018-19 to 2022-23.

Specifically listing SU Australia Ministries Limited, Australian Associated Press Ltd, Virtual War Memorial Limited, and extending the specific listings of Cambridge Australia Scholarships Limited and Foundation 1901 Limited, and removing the specific listing of the East African Fund Limited were part of the 2021-22 Budget measure Philanthropy - updates to the list of specifically listed deductible gift recipients. The measure was estimated to decrease receipts by $7.5 million from 2020-21 to 2024-25.

Human rights implications

Schedule 7 to the Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 19.

Compliance cost impact

Not applicable.

Schedule 8 - Minor and technical amendments Spring 2021

Outline

Schedule 8 to the Bill makes a number of miscellaneous and technical amendments to various laws in the Treasury portfolio. The amendments are part of the Government's ongoing commitment to the care and maintenance of Treasury portfolio legislation.

The amendments make minor and technical changes to correct typographical and numbering errors, repeal inoperative provisions, remove administrative inefficiencies, address unintended outcomes, and ensure that the law gives effect to the original policy intent.

Date of effect

Part 1 of Schedule 8 commences the day after the Bill receives the Royal Assent.

Part 2 of Schedule 8 commences on the first day of the next quarter after the Bill receives the Royal Assent.

Part 3 of Schedule 8 commences immediately after the commencement of Part 2 of Schedule 2 to the National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Act 2021 being 1 July 2022.

Part 4 of Schedule 8 commences immediately after the commencement of item 143 of Schedule 4 to the Treasury Laws Amendment (2020 Measures No. 6) Act 2020.

Proposal announced

This measure was announced on 24 September 2021.

Financial impact

These amendments in Schedule 8 to the Bill are estimated to have a small but unquantifiable impact on receipts over the forward estimates period.

Human rights implications

Schedule 8 to the Bill does not raise any human rights implications. See Statement of Compatibility with Human Rights - Chapter 19.

Compliance cost impact

The amendments in Schedule 8 to the Bill are unlikely to have more than a minor impact on compliance costs.

Schedule 9 - Retirement income covenant

Outline

Schedule 9 to the Bill amends the SIS Act to insert a new covenant that requires trustees of RSEs to develop a retirement income strategy for beneficiaries who are retired or are approaching retirement.

Date of effect

The amendments in Schedule 9 to the Bill introducing a retirement income covenant commence on the day after Royal Assent. This commencement allows trustees to take steps to gather information to formulate their retirement income strategy that will be publicly available from 1 July 2022. Trustees will not be required to give effect to all components of their strategy by 1 July 2022 as implementation of the strategy will be an ongoing process.

Proposal announced

Schedule 9 to the Bill partially implements the measure More Choices for a Longer Life - comprehensive income products in retirement from the 2018-19 Budget.

Financial impact

Schedule 9 to the Bill was estimated to have a nil impact on receipts over the forward estimates at the time of the 2020-21 Budget.

Human rights implications

Schedule 9 to the Bill engages human rights but does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 19.

Compliance cost impact

The amendments in Schedule 9 to the Bill have an estimated average annual regulatory cost of $20.2 million.

Summary of regulation impact statement

Regulation impact on business

Impact

The amendments have an estimated average annual regulatory cost of $20.2 million.

Main points

The retirement income covenant will require trustees of RSEs to formulate, review regularly and give effect to a retirement income strategy for the retired members of their fund, and the members of their fund approaching retirement.

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The strategy is a governance document developed by the trustees that identifies and recognises the broad retirement income needs of the members of the fund; and presents a plan to build the RSE's capacity and capability to service those needs.

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Administratively this would require trustees to analyse information related to their membership, formulate and develop a retirement income strategy, review and give effect to the strategy. This includes publishing a summary of the strategy on the website of the RSE.

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It is anticipated that a requirement to develop a retirement income strategy would result in many trustees evaluating the products and assistance they offer to their members and investigating whether their product offerings can be improved to better meet the needs of their members.

Schedule 10 - Employee share schemes: Removing cessation of employment as a taxing point

Outline

Schedule 10 to the Bill amends the ITAA 1997 to remove cessation of employment as a taxing point for ESS interests which are subject to deferred taxation.

Date of effect

This measure will apply to ESS interests for which the ESS deferred taxing point occurs on or after the beginning of the financial year starting after Royal Assent, or if this Bill receives Royal Assent on 1 July-to ESS interests for which the ESS deferred taxing point occurs on or after that 1 July.

Proposal announced

Schedule 10 to the Bill partially implements the measure Employee Share Schemes - removing cessation of employment as a taxing point and reducing red tape from the 2021-22 Budget.

Financial impact

The measure is estimated to have the following impact on the underlying cash balance over the forward estimates period ($m):

Human rights implications

Schedule 10 to the Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 19.

Compliance cost impact

Low.