House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer the Hon John Dawkins, M.P.)

General Outline and Financial Impact

Amendment of the Fringe Benefits Assessment Act 1986

Employees employed in foreign locations

Amends section 58L of the Fringe Benefits Tax Assessment Act 1986 ('the FBTAA') to overcome administrative difficulties arising out of the present requirement of that section that names of certain foreign localities must be prescribed by regulation.

The effect of the amendment will be to generally exempt from fringe benefits tax a travel benefit provided by an employer in respect of any employee working outside of Australia to enable the employee to obtain suitable medical treatment.

Date of effect: Royal Assent.

Proposal announced: Not previously announced.

Financial Impact: Negligible.

Car parking benefits

Amends the definitions "all-day parking" and "commercial parking station" in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 ('the FBTAA') so that night rates charged by commercial parking station operators and fees charged at kerbside parking meters cannot be used to value car parking benefits provided by an employer to an employee.

Date of effect: 1 April 1994.

Proposal announced: Assistant Treasurer's Press Release of 28 October 1993.

Financial Impact: The amendments will prevent an unintended loss to revenue. For the 1993-94 year of income it is not possible to quantify the effect on revenue resulting from these amendments.

Non-government schools

Amends section 65J of the Fringe Benefits Tax Assessment Act 1986 ('the FBTAA) so that certain non-government schools which have been established under Commonwealth, a State or Territory legislation will qualify as rebatable employers for the purposes of that section.

Date of effect: 1 April 1994

Proposal announced: Not previously announced.

Financial Impact: Negligible

Amendment of the Income Tax Assessment Act 1936

Tax-exempt infrastructure borrowings

Will allow tax-exempt infrastructure borrowings to be spent on:

a)

the construction of infrastructure facilities on land leased from the Crown under a commercial lease.

b)

paying interest that accrues and falls due on direct infrastructure borrowings while the facility is being constructed.

Date of effect:

a)

The amendments that are in relation to the construction of facilities on Crown land held on a commercial lease will apply to borrowings made after 23 June 1993.

b)

The amendments in relation to interest on direct infrastructure borrowings that falls due while the facility is being constructed will apply to borrowings made after 17 August 1993.

Proposal announced:

a)

Treasurer's Press Release of 23 June 1993

b)

1993-94 Budget, 17 August 1993

Financial Impact:

a)

Nil

b)

The cost to the revenue will be:

1993-94	1994-95	1995-96	1996-97
$3m	$10m	$30m	$30m

Pensions and annuity rebates

Amends the Income Tax Assessment Act 1936 to extend the rebate that applies to superannuation pensions and roll-over annuities paid from a taxed source to:

•

superannuation pensions and roll-over annuities purchased by rolling over an eligible termination payment (ETP) representing the commutation of a deferred annuity; and

•

superannuation pensions and roll-over annuities purchased by rolling over an ETP representing the commutation of a pension from an untaxed superannuation fund.

Date of effect: 1 July 1988.

Proposal announced: The Treasurer's Press Release No 84 of 23 July 1993.

Financial impact: Insignificant.

Leases of luxury cars

Increases the income returned under the "finance method" by lessors of luxury cars to take account of the depreciation limit on such cars. This will ensure that the depreciation limit is not avoided by lessors using the "finance method" to return income.

Date of effect: To apply from 8 July 1993 to leases existing at that date and leases entered into on or after that date.

Proposal announced: Treasurer's Press Release No. 78 of 8 July 1993.

Financial impact: The annual revenue at risk is $60m.

Exemptions for pensions and allowances

Extends the income tax treatment of bereavement payments to:

•

bereavement lump sum payments in relation to the Carer Pension in particular circumstances; and

•

bereavement payments to recipients of Job Search Allowance, Newstart Allowance, Sickness Allowance and Special Benefit.

Provides for income tax treatment of:

•

the Mature Age Allowance similar to that provided for the Age Pension; and

•

the Mature Age Partner Allowance similar to that provided for the Wife Pension.

Date of effect:

Bereavement payments: 1 July 1993

Mature Age Allowance and Mature Age Partners Allowance: 20 March 1994.

Proposal announced:

Bereavement payments: 1993-94 Budget, 17 August 1993.

Mature Age Allowance and Mature Age Partner Allowance: Not previously announced.

Financial Impact:

The nature of the bereavement payment measures is such that it is not possible to make a reliable estimate of the cost to revenue.

The revenue cost of the Mature Age Allowance and the Mature Age Partner Allowance (apart from the associated bereavement payments) is estimated to be $5million in each income year 1994-95, 1995-96 and 1996-97.

Payment of instalments by companies and certain trustees

Includes in the new company tax instalment arrangements rules for grouping instalment taxpayers for the purposes of those arrangements.

The Bill will also make an amendment to the penalty provision of the new company tax instalment arrangements and some other minor technical amendments.

Date of effect: 1995-96 year of income for grouping amendments

1994-95 year of income for other amendments

Proposal announced: The Prime Minister's 'Investing in the Nation' statement of 9 February, 1993.

Financial Impact: The amendments will not result in any change to the original estimates provided when the new company tax instalment arrangements were introduced.

Penalties for over-franking dividends

Amends the penalty for deliberate overfranking of dividends to ensure its intended operation in cases where franking deficit tax is offset by an initial payment of company tax.

Date of effect: For calculations of franking additional tax payable in respect of dividends deliberately overfranked that have been paid after [date of introduction] , the date of introduction of this Bill.

Proposal announced: Not previously announced.

Financial Impact: Insignificant.

Heritage conservation rebate

Provides for a rebate of twenty cents in the dollar for approved expenditure on conservation work on buildings listed in Commonwealth, State or Territory heritage registers.

Date of effect: Royal Assent

Proposal announced: 1993-94 Budget, 17 August 1993

Financial impact: The cost to the revenue will be:

Savings banks

Removes the exemption from income tax and withholding tax for certain savings banks.

Date of effect:

For income tax, from the 1994-95 year of income.

For withholding tax, from 1 July 1994.

Proposal announced: 1993-94 Budget, 17 August 1993.

Financial impact: These amendments are not expected to have any revenue impact.

Exclusion of low income rebate from provisional tax arrangements

Amends the provisional tax provisions to exclude entitlement to the low income rebate from provisional tax calculations, leaving the rebate to be provided on assessment.

Date of effect: The calculation of provisional tax (including instalments) payable for the 1994-95 and later years of income; and variations to provisional tax for the 1993-94 and later income years (for variation requests received on or after introduction of the Bill).

Proposal announced: 1993-94 Budget, 17 August 1993.

Financial impact: This measure will maintain the original revenue costs for the rebate and avoid a one-off cost increase in the order of $110 million, to the estimated cost of $530 million, for 1994-95.

Amendment of the Superannuation Guarantee (Administration) Act 1992

Superannuation Guarantee amendments

Amends the Superannuation Guarantee (Administration) Act 1992 to:

•

make it clear that certain statutory authorities whose enabling legislation otherwise exempts them from Commonwealth taxation will be liable for the Superannuation Guarantee charge

•

exclude lump sum payments for accrued annual leave, accrued long service leave and accrued sick leave on termination of employment from the definition of ordinary time earnings

•

allow the Fund Benchmark Salary Rate contained in an industrial agreement between an employer in the maritime industry and the Maritime Union of Australia to be an acceptable notional earnings base*

•

remove any doubt that payments made to contractors wholly or principally for their labour are salary or wages*

•

allow an employer, in order to satisfy the employer's Superannuation Guarantee responsibility, to make payments directly to a deceased employee's legal personal representative where the employee dies before the employer makes contributions to a superannuation fund on behalf of the employee*

•

defer the requirement that employers meet their Superannuation Guarantee obligations on a quarterly basis until the 1994-95 financial year

•

ensure that the notional earnings base and ordinary time earnings of an employee whose status changes part way through a contribution period are calculated by reference to payments for that part of the period for which Superannuation Guarantee contributions have to be made*

•

clarify the circumstances in which a notional earnings base specified in an industrial award can be used for Superannuation Guarantee purposes and allow for flat dollar contributions for part-time employees to be referenced to the appropriate proportion of the notional earnings base rather than to the full notional earnings base

•

make the definition of permanent incapacity or invalidity in the Superannuation Guarantee (Administration) Act consistent with the definition of permanent incapacity or invalidity in other taxation and occupational superannuation legislation.

Date of effect: The amendments marked with an asterisk (*) will apply from 1 July 1992. The remaining amendments will apply from 1 July 1993.

Proposal announced: The Treasurer's Statement on National Savings and Superannuation of 17 August 1993 and the Treasurer's Press Release No 91 of 3 August 1993. The proposal relating to the maritime industry industrial agreement has not been previously announced.

Financial impact: Nil.