House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, Hon J. B. Hockey MP)

General outline

The following abbreviations and acronyms are used throughout this explanatory memorandum.

General outline and financial impact

Repeal of the Tax Bonus for Working Australians

This Bill repeals the Tax Bonus for Working Australians Act (No. 2) 2009 (Tax Bonus Act) to ensure that the Commissioner of Taxation does not make any further tax bonus payments. This Bill also makes some consequential amendments to the taxation laws as a result of the repeal of the Tax Bonus Act.

Date of effect : The repeal takes affect from the day after Royal Assent.

Proposal announced : The measure has not been previously announced.

Financial impact : This measure is expected to save $0.25 million on an underlying cash balance basis over the forward estimates. The full impact is expected to occur in 2014-15.

Human rights implications : This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.22 to 1.25.

Compliance cost impact : Nil.

Chapter 1 - Repeal of the Tax Bonus for Working Australians

Outline of chapter

1.1 This Bill repeals the Tax Bonus for Working Australians Act (No. 2) 2009 (Tax Bonus Act) to ensure that the Commissioner of Taxation (Commissioner) does not make any further tax bonus payments. This Bill also makes some consequential amendments to taxation laws as a result of the repeal of the Tax Bonus Act.

Context of amendments

1.2 Tax bonuses were paid to Australian residents who paid tax in the 2007-08 income year and met certain income tests. The payments were designed to provide stimulus to the Australian economy at the height of the Global Financial Crisis. Most payments were made in 2009, but a small number of payments continue to be made through either late banking of cheques (stale cheques that are reissued by the Australian Taxation Office (ATO)) or the issue of an amended assessment for the 2007-08 income year where the taxpayer has an outstanding entitlement to the tax bonus. The ATO has ceased issuing cheques in most circumstances except where requested by the taxpayer.

1.3 Given that stimulus to the economy is no longer required, the Government considers that further payments are not warranted, and represent an opportunity to remove government waste. To ensure that further tax bonus payments cannot be made by the ATO, the Government will repeal the Tax Bonus Act.

Summary of new law

1.4 This Bill repeals the Tax Bonus Act to ensure that the Commissioner does not make any further tax bonus payments.

1.5 However, the Commissioner will retain the power to undertake compliance action with respect to past claims and, where necessary, undertake recovery action in respect of overpayments.

1.6 This Bill also amends the Taxation Administration Act 1953 (TAA 1953), the Income Tax Assessment Act 1997, the Social Security Act 1991 and the Veterans' Entitlements Act 1986 to remove cross references to the Tax Bonus Act.

Comparison of key features of new law and current law

Detailed explanation of new law

1.7 This Bill repeals the Tax Bonus for Working Australians Act (No. 2) 2009 (Tax Bonus Act). [Schedule 1, item 1]

1.8 The Acts Interpretation Act 1901 provides a standard set of protections that apply in relation to any repeal by Parliament of a law. The protections ensure that the repeal does not, amongst other things, affect any right, privilege, obligation or liability acquired, accrued or incurred under the Act prior to the repeal. The effect of the protections means that a simple repeal of the Tax Bonus for Working Australians Act (No. 2) 2009 would not remove the Commissioner's ongoing obligation to honour unpaid tax bonuses, either by reissuing cheques, or by making new payments in relation amended assessments for the 2007-08 income year.

1.9 Despite the protections contained in subsection 7(2) of the Acts Interpretation Act 1901, the Commissioner must not pay a tax bonus on or after the date the Tax Bonus Act is repealed. [Schedule 1, item 9]

1.10 The Commissioner 'must not pay' means that the Commissioner must not reissue a new cheque to a tax bonus recipient, make further electronic payments of the tax bonus or use a tax bonus entitlement to offset other liabilities the taxpayer may owe to the Commissioner (either within or without a running balance account).

1.11 Taxpayers may still deposit valid tax bonus cheques (that are not stale) where the cheque was issued by the Commissioner before Royal Assent of the Bill.

1.12 Despite the repeal of the Tax Bonus Act, the Commissioner will retain the power to undertake compliance action with respect to past payments of the tax bonus, and where necessary, undertake recovery action in respect of overpayments. [Schedule 1, item 10]

Consequential amendments

Amendments occurring on Royal Assent

1.13 The Bill amends the TAA 1953 to remove cross references to the Tax Bonus Act contained in the running balance account rules and generic collection and recovery rules. [Schedule 1, items 2 to 4, table item 49 in subsection 8AAB(4), definition of ' credit' in section 8AAZA, and subsection 250-10(2) in Schedule 1 to the TAA 1953]

1.14 However, as discussed in paragraph 1.10, the Commissioner will retain the power to undertake compliance action with respect to past payments of the tax bonus, and where necessary, undertake recovery action in respect of overpayments. Therefore, despite the removal of the cross references to the Tax Bonus Act from the TAA 1953, the Commissioner will retain the power to use the generic collection and recovery rules to recover overpayments of the tax bonus and to add any overpayments to a running balance account of a taxpayer. [Schedule 1, item 10]

Amendment occurring on 1 July 2016

1.15 The Bill also amends the Income Tax Assessment Act 1997 to:

•

remove an income tax exemption in respect of payments of the tax bonus; and

•

remove from the checklist of tax exemptions, the tax exemption for payments of the tax bonus.

[Schedule 1, items 5 and 6, sections 11-55 and 59-45 of the Income Tax Assessment Act 1997]

1.16 The amendments to Income Tax Assessment Act 1997 are delayed until 1 July 2016 to accommodate late payments of the tax bonus that have been received in the 2013-14 income year, and may be received in the 2014-15 income year due to the late cashing of valid cheques. As payments of the tax bonus have been made during the 2013-14 income year, and the shorter individual taxpayer's period of review for assessments for the 2013-14 income year (the year in which a tax bonus has been received and may otherwise be assessable income) will not end until 2016, it was appropriate to delay the commencement of repeal until 1 July 2016. Further, some issued cheques may still remain valid for up to 15 months before becoming stale. During this time, a tax bonus recipient may still deposit the cheque and the provisions to be repealed will need to remain operative to maintain the tax treatment of the tax bonus payment.

1.17 The Bill amends the Social Security Act 1991 and the Veterans' Entitlements Act 1986, to remove references to the Tax Bonus Act. The references to the Tax Bonus Act in the Social Security Act 1991 and the Veterans' Entitlements Act 1986 ensured the tax bonus was not taken into account when applying income tests contained within those respective Acts. [Schedule 1, items 7 and 8, paragraphs 8(8)(yaa) of the Social Security Act 1991 and 5H(8)(zzaaa) of the Veterans' Entitlements Act 1986]

1.18 For reasons similar to those set out in paragraph 1.16, the amendments to the Social Security Act 1991 and the Veterans' Entitlements Act 1986 do not commence until 1 July 2016.

Application and transitional provisions

1.19 The repeal of the Tax Bonus Act commences on the day after Royal Assent.

1.20 However, the Commissioner will retain the power to undertake compliance action with respect to past payments of the tax bonus, and where necessary, undertake recovery action in respect of overpayments. [Schedule 1, item 10]

1.21 The application dates of the consequential amendments are discussed at paragraphs 1.13 to 1.18.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Tax Bonus for Working Australian Repeal Bill 2013

1.22 This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

1.23 This Bill repeals the Tax Bonus for Working Australians Act (No. 2) 2009 (Tax Bonus Act) to ensure that the Commissioner of Taxation does not make any further tax bonus payments. This Bill also makes some consequential amendments to taxation laws as a result of the repeal of the Tax Bonus Act.

Human rights implications

1.24 This Bill does not engage any of the applicable rights or freedoms.

Conclusion

1.25 This Bill is compatible with human rights as it does not raise any human rights issues.

Treasurer, the Hon J B Hockey MP

Index

Schedule 1: Tax Bonus for Working Australians