Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 4 - Commonwealth Places (Consequential Amendments) Bill 1998
Overview
4.1 The Commonwealth Places (Consequential Amendments) Bill 1998 sets out consequential amendments to the Income Tax Assessment Act 1936 (ITAA 1936), the Income Tax Assessment Act 1997 (ITAA 1997) and the Commonwealth Places (Application of Laws) Act 1970 (CPAL) as a result of the proposed Commonwealth places windfall tax.
Summary of the provisions
4.2 The purpose of the Commonwealth Places (Consequential Amendments) Bill 1998 is to make amendments to the Income Tax Assessment Acts as a result of the windfall tax. The Bill also makes amendments to the CPAL.
4.3 The proposed amendments will apply from the date of Royal Assent of the Bill [clause 2] . The amendments to the ITAA 1936 are to apply to the 1996-97 year of income. The amendments to the ITAA 1997 are to apply for the 1997-98 year of income and all subsequent years. It is necessary to amend both Income Tax Assessment Acts because the ITAA 1997 only applies to the 1997-98 and subsequent years. The ITAA 1936 needs to be amended to cover amounts which may arise for a late balancing company whose balancing date for the 1996-97 year is on or after 6 October 1997 [clause 4] .
Explanation of the provisions
4.4 The Bill, when enacted, will be called the Commonwealth Places (Consequential Amendments) Act 1998 [clause 1] .
4.5 The Act is to commence on the day it receives the Royal Assent [clause 2] .
4.6 Schedule 1 of the Bill sets out the amendments to the CPAL and the two Income Tax Assessment Acts [clause 3] . The references in this explanatory memorandum to particular items are references to items in that Schedule.
Amendments to Commonwealth Places (Application of Laws) Act 1970
4.7 Subsection 4(1) of the CPAL states that:
"The provisions of the laws of a State as in force at a time (whether before or after the commencement of this Act) apply, or shall be deemed to have applied, in accordance with their tenor, at that time in and in relation to each place in that State that is or was a Commonwealth place at that time."
4.8 Item 1 inserts new subsection 4(1A) which provides that subsection 4(1) does not apply to the extent that the provisions of the laws of a State have effect as laws of the Commonwealth, under the Commonwealth Places (Mirror Taxes) Act 1998 (Mirror Taxes Act). This amendment ensures that any provisions of State taxing laws, as defined for the purposes of the Mirror Taxes Act, which may have applied as Commonwealth laws by virtue of the CPAL will now apply as State taxing laws only by virtue of the Mirror Taxes Act.
Amendments to the Income Tax Assessment Act 1936
4.9 Section 23 of the ITAA 1936 sets out amounts which are exempt from income tax. Section 23 is to be amended to exempt taxable amounts, within the meaning of the Commonwealth Places Windfall Tax (Collection) Act 1998 , which are derived by the taxpayer. If a taxpayer is subject to windfall tax on a refund of State taxes, the refund will be exempt from tax to the extent to which the refund is subject to windfall tax [item 2 - new paragraph 23(kg)] .
4.10 Section 51 of the ITAA 1936 allows a deduction for losses or outgoings incurred in deriving assessable income or in carrying on a business for the purposes of gaining or producing assessable income. The section also sets out specific amounts which are not allowable as a deduction. The section is to be amended to deny a deduction for payments of windfall tax imposed under the Commonwealth Places Windfall Tax (Imposition) Act 1998 [item 3 - new subsection 51(11)] .
Amendments to the Income Tax Assessment Act 1997
4.11 Section 11-10 lists the classes of income which are exempt, no matter who derives the income. Taxable amounts subject to the Commonwealth places windfall tax are to be added to the list [item 4] . These amounts will be specifically exempt from income tax. This means that if a taxpayer is subject to windfall tax on a refund of one of the four State taxes, the refund will be exempt from tax to the extent to which the refund is subject to windfall tax [item 7 - new section 51-49] .
4.12 Section 12-5 of the ITAA 1997 lists the provisions in the ITAA 1997 which contain rules about specific types of deduction. Commonwealth places windfall tax will be added to the list [item 5] . The ITAA 1997 is to be amended to deny a deduction for payments of windfall tax imposed under the Commonwealth Places Windfall Tax (Imposition) Act 1998 [item 6 - new section 26-17] .