Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Pay as you go (PAYG) withholding
Amends the TAA 1953, ITAA 6 and other Acts to supplement the rules establishing a PAYG withholding system that were contained in the PAYG Bill.
The amendments clarify the scope of the new labour hire withholding arrangements. They also include the rules for PAYG withholding about:
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- how much to withhold;
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- voluntary declarations of TFNs by those receiving payments;
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- registration;
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- notifying the Commissioner when a declaration stating a TFN is not given; and
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- annual reporting to the Commissioner.
The amendments also include a number of consequential and minor technical amendments relating to PAYG withholding.
Date of effect: The amendments will generally apply from 1 July 2000.
Proposal announced: The PAYG withholding measures were announced in ANTS. There was no separate announcement for these supplementary rules.
Financial impact: The financial impact of the new PAYG withholding system was outlined in the Explanatory Memorandum to the PAYG Bill.
Compliance cost impact: The compliance cost impact of the new PAYG system was outlined in the Regulation Impact Statement to the PAYG Bill.
Collection and recovery rules
Amends the TAA 1953, ITAA 6 and other Acts to introduce standardised rules which will enable the Commissioner to collect and recover tax-related liabilities which:
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- arise under the various taxation laws for which the Commissioner has general administration; and
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- remain unpaid after they become due and payable.
The amendments also include a number of consequential amendments to enable a smooth transition from the different rules which exist throughout the different taxation laws to the standardised rules.
Date of effect: The amendments will generally apply from 1 July 2000.
Proposal announced: The new rules are part of the Government's broad commitment announced in ANTS to look at ways of streamlining administrative processes.
Financial impact: The standardised recovery rules are expected to result in a small but unquantifiable revenue gain.
Compliance cost impact: The compliance cost impact of the new recovery rules is outlined in a separate Regulation Impact Statement covering the measures in this Bill.
Binding oral advice on income tax matters
Amends the TAA 1953 to introduce the new oral rulings regime. The introduction of the new regime will provide that an individual can apply to the Commissioner for an oral ruling about a range of matters under an income tax law where they meet the requirements of having simple tax affairs and a simple inquiry.
Amendments to the ITAA 6 will provide that, where a taxpayer applies for, and is given, an oral ruling and the income tax law applies in a different way which is less favourable to the taxpayer than is the oral ruling, the Commissioner will be bound by the oral ruling. An oral ruling will not be binding on the taxpayer.
Date of effect: The oral rulings regime will apply from 1 July 2000 with effect for the 2000-2001 income year and later income years.
Proposal announced: This measure was announced in ANTS.
Financial impact: The measure will not have a significant impact on the revenue.
Compliance cost impact: Taxpayers who have simple tax affairs will have reduced compliance costs.
Summary of Regulation Impact Statement
A Regulation Impact Statement is not required as the measure does not apply to taxpayers who are in business.
Payment, ABN and identification verification system
Amends the TAA 1953 to introduce a reporting, verification and identification system to improve compliance with taxation laws.
The amendments will require additional reporting verification and identification checks in relation to high risk compliance transactions.
Date of effect: The new system will operate from 1 July 2000 and will be able to apply to certain payments specified in regulations.
Proposal announced: The transaction reporting aspect of the new system was announced in ANTS. There was no separate announcement for the verification and identification aspects of the system.
Financial impact: The financial impact of the new system is difficult to quantify but its introduction is expected to result in a gain to the revenue.
Compliance cost impact: The compliance cost impact of the new system is outlined in a separate Regulation Impact Statement covering the measures in this Bill.
Shorter period of review
This Bill amends the ITAA 6 and the TAA 1953 to provide for a shorter period of review for taxpayers with simple tax affairs.
This Bill also makes consequential changes to reduce from 4 to 2 years the period within which these taxpayers are generally able to lodge objections to their assessments or private binding rulings or to request amendments to their assessments or to seek private binding rulings.
Date of effect: The amendments will apply from the 2000-2001 income year and later years.
Proposal announced: This proposal was announced on 13 August 1998 in the Government's ANTS tax reform package.
Financial impact: The measure will not have a significant impact on the revenue.
Compliance cost impact: Taxpayers who have simple tax affairs will have reduced compliance costs because they can keep records for a reduced period.
Summary of Regulation Impact Statement
The Office of Regulation Review has advised that a Regulation Impact Statement is not required.
Endorsement of deductible gift recipients and tax exempt charities
Schedule 7 requires any entity seeking deductible gift recipient status (other than those entities specifically listed by name in the ITAA 1997 or the ITAR 1997 as eligible to receive deductible gifts) to obtain an ABN and be endorsed by the Commissioner as a deductible gift recipient. The endorsed entity will be registered in the ABR as a deductible gift recipient.
Schedule 8 requires any charity seeking to claim income tax exemption to obtain an ABN and be endorsed by the Commissioner as income tax exempt.
Date of effect: Gift recipients and charities will need to be endorsed by 1 July 2000.
Proposal announced: Announced by the Government in ANTS.
Financial impact: The effect of registration of charities on the revenue cannot be separated from that of the GST and other tax reform measures. However, revenue benefits are anticipated with improved integrity of the taxation system with respect to these tax concessions.
Compliance cost impact: The number of tax exempt charities is not known. The number of deductible gift recipients presently recorded by the Commissioner is approximately 30,000. It is expected that there will be in excess of 200,000 endorsement applications.
Deductible gift recipients and tax exempt charities will incur a small, but unquantifiable, cost in applying for endorsement from the Commissioner as part of obtaining their ABN (this mainly involves completing a form with information that should be readily available). Any costs are expected to be offset by reductions in the costs associated with dealing with government and business resulting from obtaining an ABN.
Once charities have registered, the benefit will be ongoing. As ABN holders, charities will be identified by one number for all government purposes and this will allow them to more easily comply with regulatory requirements and receive government assistance and advice. Gift providers will be able to check the ABR to ensure the deductible gift status of the recipient.
The cost to the Government of implementing this measure is expected to be small since there is only a small increase in complexity for this type of ABN registration. The compliance assurance activity is also similar.
The estimated administrative costs are for:
1999-2000 financial year - $2.4 million
2000-2001 financial year - $2.3 million
2001-2002 financial year - $2.3 million.
Summary of Regulation Impact Statement
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- Deductible gift recipients that are not specifically listed by name in the ITAA 1997 or the ITAR 1997 will have to seek an ABN and be endorsed by the Commissioner in order to retain their deductible gift recipient status.
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- Those charities that are not registered by 1 July 2000 will not be eligible to receive deductible gifts or income tax exemption.
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- Specifically listed (by name in the ITAA 1997 or ITAR 1997) deductible gift recipients are exempt from the requirement to seek an ABN and be endorsed for deductible gift recipient status. However, they may apply for an ABN for other purposes, including if they require income tax exempt status.
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- This Bill will authorise the AB Registrar to collect relevant information and to indicate on the ABR those ABN holders that have been endorsed by the Commissioner as entitled to receive deductible gifts.
To ensure the integrity of the taxation system in respect of deductible gift recipients and income tax exempt charities.
Administration of BAS obligations
Amends the TAA 1953 and other Acts to further enhance the administration of the aligned business tax obligations of one return and one payment outlined in ANTS. The measures covered by the amendments will:
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- require an entity to notify all BAS obligations for a period in the same manner;
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- require an entity that either exceeds the GST electronic lodgment threshold or is a large withholder under the PAYG withholding system to pay all tax debts electronically;
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- enable an entity to be entitled to interest where a refund of an RBA surplus or voluntary payment is not made within 14 days; and
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- remove the GST and WET refund rules to the extent that they are covered by the new generic refund rules in the TAA 1953.
Date of effect: The amendments will generally apply from 1 July 2000.
Proposal announced: These measures have not been separately announced but are part of the Government's broad commitment to streamline the administrative processes for business tax obligations.
Financial impact: There is expected to be a small but unquantifiable cost to the revenue from the delayed refund interest provisions. The other measures are not expected to affect the revenue.
Compliance cost impact: The compliance cost impact of the BAS administration measures is outlined in the Regulation Impact Statement of this Bill.
Pay as you go (PAYG) instalments
The amendments contained in Schedules 10 and 16 comprise the second instalment of the proposed pay as you go income tax instalments (PAYG instalments) system. The first instalment is contained in the PAYG Bill.
The amendments in Schedule 10 consist of:
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- new provisions which deal with the way in which quarterly instalment payers who choose to calculate their instalments using GDP-adjusted notional tax may vary the amount of their instalments; and
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- make consequential amendments arising from the insertion of those new provisions.
The amendments in Schedule 16 are consequential upon the introduction of the PAYG instalments system.
Date of effect: The amendments in both Schedule 10 and 16 will apply to the 2000-2001 and later income years. This is the same date of effect proposed for the provisions contained in the PAYG Bill.
Proposal announced: The PAYG instalments system was announced in ANTS.
Financial impact: The financial impact of the new PAYG system was outlined in the Explanatory Memorandum to the PAYG Bill.
Compliance cost impact: The compliance cost impact of the new PAYG system was outlined in the Regulation Impact Statement to the PAYG Bill.
Provisional tax - technical correction
The amendment will make a technical correction to the provisional tax provisions of the ITAA 6. The correction will ensure that the savings rebate, which was abolished with effect from (and including) the 1999-2000 income year, is not taken into account in the calculation of provisional tax for that income year.
Date of effect: The amendment will apply to provisional tax payable for the 1999-2000 income year.
Proposal announced: Not previously announced.
Financial impact: Nil.
Compliance cost impact: Nil.
The Office of Regulation Review has confirmed that a Regulation Impact Statement is not required.