House of Representatives

Explanatory Memorandum

RELEASED BY AUTHORITY OF THE TREASURER, THE HON. P.J. KEATING, M.P. CANBERRA, 19 FEBRUARY 1990

GENERAL OUTLINE

The Bill will amend the Income Tax Assessment Act 1936 -

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to authorise the making of regulations -

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to increase and target more effectively the rebate of tax (the pensioner rebate) allowable to recipients of social security pensions, benefits and allowances (other than unemployment, sickness or special benefits) or service pensions (proposal announced in the April 1989 Economic Statement); and

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to increase where necessary and to target more effectively on the basis of age levels the rebate of tax (the beneficiary rebate) allowable to recipients of social security unemployment, sickness or special benefits, the Job Search Allowance, the Formal Training Allowance or allowances payable under certain Commonwealth education schemes (proposal announced in the Budget on 15 August 1989);

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to make the following changes to the Medicare levy provisions (proposal announced in the Budget on 15 August 1989) -

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to exempt from Medicare levy a person otherwise personally exempt, but presently required to pay one-half of the levy because he or she has a dependant, where either -

(a)

the dependant is liable to pay the levy; or

(b)

the person has a spouse who is liable to pay the levy and the spouse contributes to the maintenance of the dependant; and

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to allow a married (or defacto) couple who are both otherwise personally exempt from Medicare levy, but are presently required to pay one-half of the levy because they have a dependant, to agree as to which of them is to be exempt from paying Medicare levy;

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to allow losses, including film losses and foreign source losses, incurred by a taxpayer during the 1989-90 and subsequent years of income to be tax deductible over an unrestricted period. At present these losses are allowable deductions for seven years only (proposal announced in the Budget on 15 August 1989);

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to provide that certain eligible capital expenditures incurred by a taxpayer on or after 16 August 1989, engaged in quarrying operations is deductible on a similar basis as for taxpayers engaged in mining operations, except that the statutory maximum write off period is to be 20 years and capital expenditure on housing and welfare facilities is to be excluded from deductibility (proposal announced in the Budget on 15 August 1989);

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to provide income tax exemption for not-for-profit bodies established for -

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the promotion or encouragement of any game or sport; or

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community service purposes (proposals announced in the Budget on 15 August 1989);

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to repeal the exemption from income tax of the Australian Wool Testing Authority Ltd for income derived on or after 1 July 1990 (proposal announced in the Budget on 15 August 1989);

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to provide for companies to incur franking debits when distributions are made under dividend streaming arrangements after 30 June 1990 (proposal announced in the Budget on 15 August 1989) being in respect of -

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an unfranked or partly franked dividend paid in substitution for a franked dividend;

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tax-exempt bonus shares issued in substitution for a franked dividend;

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a dividend paid by another company in substitution for a franked dividend; and

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unfranked dividends paid by another company where franked dividends are paid in substitution for the unfranked dividends;

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to ensure that eligible securities lending arrangements will be treated as though lenders had not sold and repurchased securities, with the treatment of borrowers also being adjusted (proposal announced in the Budget on 15 August 1989);

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to enable profits from the disposal of contaminated live stock to be brought to account over five years or applied to reduce deductions for the cost of replacement stock (proposal announced on 1 September 1989);

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to remove a requirement under the film industry tax concession that certain funds be deposited in a film account in the Australian Film Industry Trust Fund;

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to make minor amendments to the tax file number provisions;

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to allow income tax deductions for gifts to -

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the Borneo Memorials Trust Fund (proposal announced on 5 December 1989);

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the Guadalcanal and Solomon Islands War Memorial Foundation (proposal announced on 5 December 1989);

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Australian Vietnam Forces Welcome Home '87 Pty Limited, where the gift is for the purpose of the Australian Vietnam Forces National Memorial project (proposal announced on 5 December 1989); and

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the Life Education Centre or a company that conducts life education programs under the auspices of the Life Education Centre (proposal announced on 6 December 1989).

The Bill will amend the Debits Tax Administration Act 1982 to exempt from debits tax amounts deducted under the tax file number arrangements where interest is paid or credited to an account in respect of which a file number has not been quoted.

The Bill will also amend the Sales Tax (Exemptions and Classifications) Act 1935 to exempt from sales tax imported uncut precious and semi-precious gemstones and imported coins that are legal tender in a country other than Australia (proposal announced on 18 October 1989).