• Legal database
Legal database
Senate

Tax Law Improvement Bill (No. 1) 1998

Tax Law Improvement Act (No. 1) 1998

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

CHANGE OF TITLE - TAX LAW IMPROVEMENT BILL (No. 1) 1998 - SENATE - Explanatory Memorandum.

The Tax Law Improvement Bill (No. 2) 1997 has been retitled the Tax Law Improvement Bill (No. 1) 1998. All references in this explanatory memorandum that refer to Tax Law Improvement Bill (No. 2) 1997 should now read Tax Law Improvement Bill (No. 1) 1998.
THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE OF REPRESENTATIVES TO THE BILL AS INTRODUCED

Chapter 2.26 - Indexation

Overview

This segment covers the rules for indexing amounts for inflation contained in Subdivision 960-M.

Part A summarises these rules.

Part B explains the changes to the 1936 Act.

Part C explains the transitional arrangements. Part D explains amendments that need to be made to the 1997 Act and the 1936 Act as a consequence of the rewriting of the 1936 Act.

A. Summary of the new law

Subdivision 960-M: Indexation

What the Subdivision does

There are some provisions in the taxation law that require amounts to be indexed. Subdivision 960-M explains how to do the indexation calculations.

B. Discussion of changes

Subdivision 960-M Indexation

This Subdivision contains the indexation rules.

Section 960-270 Indexing amounts

Change

Make it clear that cost base amounts are not required to be reduced in periods of deflation.

Explanation

Some of the indexation requirements in the 1936 Act could be read as involving downward adjustments in periods of deflation. This was not intended and the rewrite makes this specific.

C. Amendment of the Income Tax (Transitional Provisions) Act 1997

Part 1 of Schedule 9 amends the Income Tax (Transitional Provisions) Act 1997. It inserts a provision needed for the transition from the 1936 Act to the rewritten law relating to indexation. [Schedule 9, item 1]

Section 42-70 (Adjustment: acquiring a car at a discount) is inserted in that Transitional Act to ensure that the adjustment provision has effect if the car was first used in a year to which the corresponding 1936 Act provision applied.

D. Consequential amendments

Part 2 of Schedule 9 amends the 1997 Act to update references to the rewritten indexation provisions and related concepts.

Part 3 of Schedule 9 amends the 1936 Act to give effect to a Government decision to amend the law so that the indexation factor used to calculate the car depreciation limit cannot be negative. This change was announced by the Treasurer in Press Release No. 71 on 27June 1997. It ensures that taxpayers are not disadvantaged by a decline over time in the index number for the motor vehicle purchase sub-group of the Consumer Price Index.

The consequential changes are summarised in following table:

Section Changes
1997 Act
Note to subsection 28-45(2) Replaces section reference. [Schedule 9, item 2]
Paragraph 42-70(1)(c) Omits obsolete references. [Schedule 9, item 3]
Section 42-80 Inserts additional provisions. [Schedule 9, item 4]
Subdivision 42-K Repeals redundant Subdivision. [Schedule 9, item 5]
car depreciation limit -subsection 995-1(1) Replaces section reference. [Schedule 9, item 6]
1936 Act
Subsection 57AF(5) Inserts a limitation on the motor vehicle depreciation limit indexation factor for the 1997-98 income year. The limitation is incorporated in the rewritten indexation provisions which will apply from the 1998-99 income year. [Schedule9,item7]


View full documentView full documentBack to top