Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Portfolio transfers
Amendments 2 and 3 amend the GST Act to ensure that the correct GST result is achieved where an insurer has transferred its insurance portfolio to another insurer. The amendments ensure that the insurance provisions within the GST Act apply as if the transferee insurer were the insurer in relation to the insurance policy. In particular, the amendments ensure that, regardless of which insurer issued the policy:
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- decreasing adjustments may be available to an insurer that is settling a claim under an insurance policy that was a taxable policy; and
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- an insurer is not entitled to input tax credits on acquisitions made by the insurer to provide in settlement of a claim under a GST-free insurance policy.
Date of effect: The amendments to the GST Act apply, and are taken to have applied to GST returns and net amounts for tax periods starting, or that started, on or after 1 January 2001.
Proposal announced: Not previously announced.
Financial impact: Nil impact on forward estimates.
Compliance cost impact: Nil.
Personal services income
The amendments to Part 2-42 of the ITAA 1997, the ITAA 1936 and the TAA 1953 will clarify particular aspects of how the personal services income provisions operate. The most important amendment will ensure that a taxpayer satisfies the results test for conducting a personal services business if the conditions are satisfied for 75% of their personal services income for the income year.
Date of effect: Amendments 8 and 19 apply to the 2002-2003 income year and later income years. Amendments 11 to 17 apply on and after the day on which the Act receives Royal Assent. The other amendments can only benefit taxpayers, and apply to the 2000-2001 income year and later income years.
Proposal announced: Not previously announced.
Financial impact: Amendments 4 to 7, which clarify the operation of the results test for conducting a personal services business, will result in a cost to revenue of $1 million per year. The other amendments will have no impact on revenue.
Compliance cost impact: Nil.