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. 2) 1987

This Bill will amend -

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the Income Tax Assessment Act 1936 -

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to modify the rules that require substantiation of car expenses by log book records and documentary evidence (proposal announced on 29 October 1986);

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to abolish, subject to transitional provisions, the undistributed profits tax payable under Division 7 by private companies in respect of the year of income commencing on 1 July 1986 and subsequent years of income (proposal announced on 10 December 1986);

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to apply the intercorporate dividend rebate under section 46 on a gross, rather than net basis in respect of the year of income commencing on 1 July 1987 and subsequent years of income (proposal announced on 10 December 1986);

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to remove the exemption from tax under subsection 44(2) for certain bonus shares issued after 30 June 1987 (proposal announced on 10 December 1986);

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to extend the operation of the imputation measures contained in new Part IIIAA to corporate unit trusts and public trading trusts which are treated as companies under Divisions 6B and 6C, respectively, of Part III of the Act (proposal announced on 10 December 1986);

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to ensure that franked dividends received by a company that is -

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exempt from income tax in respect of those dividends;

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a life assurance company for the purposes of Division 8 of Part III of the Act, being dividends attributable to assets that are included in the insurance funds of the company; or

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a registered organisation for the purposes of Division 8A of the Act,

do not give rise to franking credits under the new Part IIIAA (part of anti-avoidance arrangements foreshadowed on 10 December 1986);

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to enable franking rebate entitlements to be taken into account in the calculation of provisional tax payable by individual shareholders (consequence of the introduction of the imputation system);

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to overcome a perceived deficiency in the provisions of the income tax law that authorise special concessions for investments in the production of Australian films;

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to enable the Commissioner of Taxation and authorised officers to exercise, for the purposes of the pay-as-you-earn provisions of the income tax law, information-gathering powers of a kind available for more general purposes of the law;

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the Bank Account Debits Tax Administration Act 1982 -

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to subject to tax debits made to payment order accounts kept with non-bank financial institutions (proposal announced on 28 November 1986);

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to generally extend the present exemption of debits made to inter-bank accounts to inter-financial institution accounts;

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to ensure that debits made to bank accounts in respect of "third party cheques" are liable to tax;

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to counter possible avoidance of tax by the aggregation of amounts debited to accounts;

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to give legislative support to the administrative practice of applying the specified rates of tax to the Australian currency equivalent of debits expressed in foreign currency; and

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to change its short title to the Debits Tax Administration Act 1982;

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a number of other Commonwealth Acts as a consequence of the amendments of the bank account debits tax law;

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the Australian Capital Territory Taxation (Administration) Act 1969 and the Australian Capital Territory Tax (Insurance Business) Act 1969 to exempt from ACT tax premiums in respect of international trade insurance (proposal announced on 24 December 1986);

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the Pay-roll Tax (Territories) Assessment Act 1971 to provide an exemption from ACT pay-roll tax in respect of wages paid or payable to first year apprentices and to trainees employed under the Australian Traineeship System; and

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the Taxation Administration Act 1953 to streamline the processes for approval of acting arrangements in respect of the statutory offices of Commissioner of Taxation and Second Commissioners of Taxation.

The Bill will also amend various taxation laws to require persons to provide reasonable assistance to ensure the effective exercise of the existing right of access by the Commissioner of Taxation and authorised officers to buildings, documents, etc.

Further, the Bill will amend the Australian Capital Territory stamp duty and tax (including pay-roll tax) laws to facilitate the transfer of responsibility for administration of those laws from the Commissioner of Taxation to the proposed statutory office of the Commissioner for Australian Capital Territory Revenue Collections (proposal announced on 4 May 1987).

BANK ACCOUNT DEBITS TAX AMENDMENT BILL 1987

This Bill will -

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abolish the higher rates of the bank account debits tax applicable in the Australian Capital Territory (1986-87 Budget announcement); and

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insert anti-avoidance provisions necessary as a consequence of the imposition of tax on debits to payment order accounts kept with non-bank financial institutions, as proposed by the accompanying Taxation Laws Amendment Bill (No. 2) 1987.