Supplementary Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello MP)General outline and financial impact
Amendments 1 to 4 to Schedule 2 - CGT roll-over for superannuation entities that merge under new superannuation safety arrangements
Amendments 1 to 4 amend Schedule 2 to provide an automatic capital gains tax (CGT) roll-over for registrable superannuation entities that merge under new superannuation safety arrangements for registrable superannuation entities whose trustees did not seek a licence required by the Superannuation Industry (Supervision) Act 1993 but during the transitional period merged with other registrable superannuation entities whose trustees intended to be licensed by the end of the transitional period.
The amendments ensure that the CGT roll-over applies when assets are transferred to one or more registrable superannuation entities whose trustees are not licensed at the time of the transfer but where it is reasonable to assume that they will be licensed by 1 July 2006.
The amendments also ensure that, if the trustees of the registrable superannuation entities are not licensed by 1 July 2006, the roll-over is treated as if it had never happened.
Date of effect: These amendments apply to CGT events that happen to CGT assets from 1 July 2004 to 30 June 2006 (inclusive).
Proposal announced: These amendments have not previously been announced.
Financial impact: Nil.
Compliance cost impact: These amendments will not add additional compliance costs.
Amendments 5 to 32 to Schedule 6 - goods and services tax and real property
Amendments 5 to 32 amend Schedule 6 to make two key changes to the proposed goods and services tax (GST) real property amendments. They change the requirement to obtain written agreement for the use of the margin scheme, so that it applies only to supplies made under contractual arrangements entered into after the date of Royal Assent. The amendments also remove the proposed new rules for calculating the margin for the supply of real property that was initially acquired as a GST-free going concern or GST-free farm land.
Further, the amendments make minor changes to address mainly technical issues, including to the grouping, joint venture and deceased estate provisions to ensure the amendments cause no unintended consequences.
Date of effect: These amendments apply from Royal Assent.
Proposal announced: These amendments were announced in the Minister for Revenue and Assistant Treasurer's Press Release No. 052 of 7 June 2005.
Financial impact: The GST revenue impacts of all the GST property amendments in Schedule 6 are expected to result in an unquantifiable revenue gain to GST revenue. These amendments are expected to reduce this GST revenue gain.
Compliance cost impact: These amendments are not expected to impact significantly on compliance costs.
Chapter 1 - Amendments 1 to 4 to Schedule 2 - CGT roll-over for superannuation entities that merge under new superannuation safety arrangements
Explanation of amendments 1 to 4
1.1 Amendments 1 to 3 amend Schedule 2 to ensure that a CGT roll-over for superannuation entities that merge under new superannuation safety arrangements is provided for the transfer of assets to one or more registrable superannuation entities whose trustees are not licensed at the time of the transfer but where it is reasonable to assume that they will be licensed by 1 July 2006.
1.2 Amendment 4 provides that if the trustees of the registrable superannuation entities do not acquire the required licence by 1 July 2006 the roll-over will be treated as if it had never happened.
Chapter 2 - Amendments 5 to 32 to Schedule 6 - goods and services tax and real property
Explanation of amendments 5 to 32
2.1 Amendments 5 to 32 amend Schedule 6 to make two key changes to the proposed goods and services tax (GST) real property amendments, namely in relation to the requirement to obtain written agreement for the use of the margin scheme and the proposed rules for calculating the margin for the supply of real property that was initially acquired as a GST-free going concern or GST-free farm land. Further, the amendments make minor changes to address mainly technical issues to ensure the amendments cause no unintended consequences.
2.2 The amendments change the requirement to obtain written agreement for the use of the margin scheme. Proposed subsection 75-5(1A) now applies only to supplies made under contracts entered into, and supplies made pursuant to rights and options granted, after the date of Royal Assent. Consequently, the proposed amendment will no longer affect arrangements entered into prior to Royal Assent. [Amendment 32]
2.3 The amendments remove the proposed rules for calculating the margin with reference to a 1 July 2000 valuation for the supply of real property that was initially acquired as, or part of, a GST-free going concern or GST-free farm land (proposed subsections 75-11(5) and (6)). [Amendment 26]
2.4 The amendments ensure that the measure aimed at preventing entities manipulating the goods and services tax (GST) joint ventures provisions (with the margin scheme and the new residential premises provisions) does not have an unintended wider impact, such as on the mining and energy sectors. To achieve this, the proposed subsection 51-30(2A) is being replaced by an amendment to proposed subsection 40-75(2A) and new subsections 75-11(2A) and (2B). [Amendments 5, 6, 11, 12, 17, 19 and 24]
2.5 The amendments change the proposed subsections 75-11(3) and (4) regarding calculating the margin for the supply of real property acquired from a deceased estate. The beneficiary will now have the option of using the consideration paid by the deceased rather than obtaining a valuation. The amendments also provide a meaning for 'inherit' to ensure property acquired from a deceased estate includes situations where the property is transferred by way of court order or deed of arrangement. [Amendments 8, 18, 20 to 23, 25 and 29]
2.6 The amendments correct the proposed paragraph 75-11(1)(b) so it does not prevent the group using the price paid (or the value of the interest if an associate) by the member of the group that acquired the interest before joining the group. [Amendments 14 to 16]
2.7 The amendments clarify the operation of the new rules (proposed subsection 75-5(3)) concerning eligibility to use the margin scheme including when the property is inherited, or acquired by a group, prior to the new legislation taking effect. [Amendments 9, 10, 13 and 28]
2.8 The amendments make a decision by the Commissioner of Taxation (Commissioner) - to extend the time to obtain written agreement for use of the margin scheme (proposed subsection 75-5(1A)) - a reviewable decision under section 62 of the Taxation Administration Act 1953. [Amendment 7]
2.9 The amendments clarify that 'associates' in the proposed subsection 75-11(7) cover the associate rules for GST branches, non-profit sub-entities or government entities as in Subdivision 72-D. [Amendment 27]
2.10 The amendments make a change to the definition of 'margin scheme' in section 195-1 to refer to new subsection 75-5(1). [Amendment 30]
Application and transitional provisions
2.11 There are no changes to the date of application of Schedule 6. However, amendment 32 effectively changes the start date for the requirement for written agreement.
Consequential amendments
2.12 Amendment 31 makes a consequential change to subsection 62(2) of the Taxation Administration Act 1953 to account for amendment 7 that makes a decision by the Commissioner - to extend the time to obtain written agreement for use of the margin scheme - a reviewable decision.