House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer the Hon P. J. Keating M.P.)

GENERAL OUTLINE

Taxation Laws Amendment Bill (No. 4) 1985

This Bill will amend -

the Income Tax Assessment Act 1936

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to deny income tax deductions for entertainment expenses incurred after 19 September 1985 (September 1985 Tax Reform announcement);

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to introduce rules to require, with effect from 1 July 1985, substantiation of employment-related expenses and car and travel expense claims (September 1985 Tax Reform announcement);

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to deny deductions for the travel costs of a spouse who accompanies an employee or self-employed person on a business trip (September 1985 Tax Reform announcement);

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as an alternative to substantiating claims in full, to introduce arbitrary deduction rules for car expenses(September 1985 Tax Reform announcement);

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to extend the company tax system to public unit trusts which carry on a trade or business, but not to public unit trusts whose business consists of investing in real estate for rental purposes or in equities or securities; the changes to apply to income of the 1985-86 and subsequent income years for such trusts established after 19 September 1985, and of the 1988-89 and subsequent income years for trusts created on or before that date (September 1985 Tax Reform announcement);

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to provide that capital expenditure by primary producers incurred after 19 September 1985 on water conservation or conveyance of a kind presently qualifying for immediate income tax deduction be deductible in equal instalments over 5 years (September 1985 Tax Reform announcement);

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to continue the immediate deductibility of capital expenditure on soil conservation and extend it to expenditure in respect of land degradation generally;

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to counter arrangements designed to exploit the concessional income tax treatment of lump sum superannuation payments and other retirement or employment termination payments by the commutation of immediate annuities purchased wholly or partly with moneys other than moneys paid on retirement or termination of employment (proposal announced on 22 August 1985);

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to extend the income tax rebate available in respect of taxable amounts received under life assurance policies to similar amounts paid under policies issued by certain State government insurance offices, and to correct a technical deficiency in the rebate provisions (proposal announced on 9 October 1985);

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to revise references to, and make other changes consequential upon the repeal of, certain Repatriation statutes as part of an exercise to rationalise and simplify the Repatriation legislation;

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to ensure that the carer's pension, introduced from 1 November 1985, payable to a person who provides constant care and attention to a severely handicapped pensioner spouse or close relative, and the corresponding carer's service pension, are taxed on a similar basis to the former spouse carer's pension (1985-86 Budget announcement); and

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to incorporate technical changes consequential on amendments of the Social Security Act 1947.

This Bill will also amend -

the Income Tax (Individuals) Act 1985 -

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to exclude from the scope of the Act the trustee of a public trading trust to whom company tax arrangements are to apply;

the Income Tax (International Agreements) Act 1953 -

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to deny to a public trading trust proposed to be taxed as a company credit for foreign tax paid on dividends in respect of which a rebate is to be allowed; and

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to ensure that reduced rates of withholding tax applicable to dividends paid by a company to a resident of an agreement country also apply to distributions made by a public trading trust to such a resident; and

the Income Tax (Rates) Act 1982 -

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to exclude from the scope of the Act the trustee of a public trading trust, who is to be subject to company tax arrangements.

Income Tax (Companies, Corporate Unit Trusts and Superannuation Funds) Amendment Bill 1985

This Bill will amend the Income Tax (Companies, Corporate Unit Trusts and Superannuation Funds) Act 1985 to formally declare and impose the rate of tax payable by trustees of public trading trusts within the meaning of the proposed Division 6C of Part III of the Income Tax Assessment Act 1936.