Senate

Revised Explanatory Memorandum

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

General outline and financial impact

PAYG instalments and trusts

This Bill amends proposed Parts 2-1, 2-5 and 2-10 of Schedule 1 to the TAA 1953 to:

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state what is instalment income for certain entities;

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provide that a trustee will pay PAYG instalments in relation to the trustees tax liability in respect of:

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a beneficiary; and/or

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income to which no beneficiary is entitled;

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provide a way to calculate instalment rates for a trustee where the trustee is liable to pay tax in respect of different beneficiaries or in respect of income to which no beneficiary is entitled;

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provide a special rule for working out the adjusted taxable income of a life insurance entity or a registered organisation;

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clarify the transitional deferral of company instalments where an amended assessment issues;

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provide for collection of SFSS and ABSTUDY debts through the PAYG system; and

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make consequential and technical amendments.

Date of effect : The amendments discussed in this chapter will commence immediately after the commencement of section 1 of the Tax Administration Bill. The amendments to the PAYG instalments regime will have effect for the 2000-2001, and later, income years. The amendments to the PAYG withholding regime will have effect from 1 July 2000. The amendments to the SSA 1991 will commence immediately after item 6 of Schedule 2 of the Youth Allowance Consolidation Bill 1999.

Proposal announced : The PAYG instalments regime was announced in ANTS.

Financial impact : The financial impact of the new PAYG system was outlined in the Explanatory Memorandum to the PAYG Bill.

The financial impact of the measure to enable the collection of SFSS and ABSTUDY debts through the PAYG system is set out in the following table:

Compliance cost impact : The compliance cost impact of the new PAYG system was outlined in the Regulation impact statement to the PAYG Bill.

Summary of Regulation impact statement

A Regulation impact statement is not required for this measure.

Fringe benefits tax instalments

Schedule 2 to this Bill amends the FBTAA 1986 to:

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enable an employer to claim a credit for excess FBT instalments where the employers notional tax amount is reduced during the FBT year; and

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use an amount of tax that was assessed for the most recent earlier year of tax as the notional tax amount in the calculation of an instalment of tax.

Date of effect : The amendment to the credit measure will apply for the year of tax commencing 1 April 2000 and later years of tax. The amendment to the notional tax measure will apply for the year of tax commencing on 1 April 2001 and later years of tax.

Proposal announced : These measures were announced in ANTS.

Financial impact : Nil.

Compliance cost impact : Negligible.

Summary of Regulation impact statement

Regulation impact on business

Impact : Low.

Main points :

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Only quarterly FBT payers will be affected by this measure; that is, approximately 46,000 FBT payers.

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Employers making an estimate of tax will be able to claim a credit for earlier FBT instalments in the quarter that the credit arises. This credit will be available for offset against other business tax liabilities or for refund where there are excess credits.

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The revenue impact is expected to be nil as instalment credits will be either claimed or offset in the same year as if the credit had been refunded on assessment.

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Compliance costs will be insignificant because the affected payers will be completing a BAS for other business tax obligations.

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Employers estimating their FBT liability for a year of tax may receive a cash flow benefit as they will be able to claim a credit for an instalment in the quarter that it arises rather than on assessment.

Policy objective : The policy objective of this measure is to complete the alignment of FBT instalments with PAYG. Where an estimate of tax has been made, an employer will be able to claim a credit for earlier FBT instalments at the time that the credit arises. The credit may be used to offset other taxation liabilities and excess credits will be refunded.

Consequential amendments relating to collection and recovery rules

Schedule 3 to this Bill amends the ITAA 1936 and other Acts to complete the transition from the existing recovery provisions in the taxation laws to the standardised collection and recovery rules of Part 4-15 in Schedule 1 to the TAA 1953.

Date of effect : The amendments will generally apply from 1 July 2000.

Proposal announced : The amendments support the standardised collection and recovery rules which are part of the Governments broad commitment, announced in ANTS, to streamline administrative processes.

Financial impact : Nil.

Compliance cost impact : The compliance cost of the standardised collection and recovery rules was outlined in the Regulation Impact Statement to the Tax Administration Bill.

Summary of Regulation impact statement

A Regulation impact statement is not required for this measure.

PAYG withholding technical and consequential amendments

Schedule 4 to this Bill will make a small number of technical amendments to the provisions introducing the PAYG withholding arrangements to clarify how those arrangements are intended to operate.

It will also further limit the No ABN withholding arrangements to payments for supplies all or a part of which are made on or after 1July2000.

In addition, it will make consequential amendments to sections 202DH, 202DI and 202DJ of the ITAA 1936 to reflect the new PAYG withholding legislation.

Date of effect : The amendments will apply from 1 July 2000.

Proposal announced : Not announced.

Financial impact : Nil.

Compliance cost impact : Negligible.

Summary of Regulation impact statement

A Regulation impact statement is not required for this measure.

Amendments to the oral rulings for individuals regime

Amendments contained in Schedule 4 amend proposed Division 360 of Schedule 1 to the TAA 1953 which provides for binding oral advice to be given on income tax matters. The amendments are minor and:

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take account of amendments made to the ITAA 1936 and the ITAA 1997 by the ANTS (Family Assistance) (Consequential and Related Measures) Act (No. 1) 1999 and the ANTS (Family Assistance) (Consequential and Related Measures) Act (No. 2) 1999 ; and

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ensure that an oral ruling can only be made by a person who is authorised to perform a function, or exercise a power, of the Commissioner under proposed Division 360. The authorised person must perform the function, or exercise the power, at places approved by the Commissioner.

Date of effect : The amendments will apply from 1 July 2000 with effect for the 2000-2001 year of income and later years of income.

Proposal announced : Not previously announced.

Financial impact : Nil.

Compliance cost impact : Nil.

Summary of Regulation impact statement

A Regulation impact statement is not required for this measure.