Senate

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

General outline and financial impact

CDEP Scheme Participant Supplement

Schedule 1 to this Bill amends the Income Tax Assessment Act 1936 ,the Taxation Administration Act 1953 and the Income Tax Rates Act 1986 to provide for the same income tax treatment of the CDEP Scheme Participant Supplement as the equivalent payment made to Newstart and Youth Allowance recipients involved in labour market programs. Recipients of the CDEP Scheme Participant Supplement will be eligible for a beneficiary rebate in respect of that payment. The payment will also be subject to the pay as you earn and pay as you go withholding systems.

Date of effect: The amendments will apply to payments made on or after 11 November 1999 and to assessments for the 1999-2000 year of income and all later years of income.

Proposal announced: The introduction of the CDEP Scheme Participant Supplement was announced in the 1998-1999 budget.

Financial impact: The amendments will have an insignificant revenue impact.

Compliance cost impact: Compliance costs will be minimal.

Exempting value received from GST Direct Assistance Certificates

Schedule 2 to this Bill amends the Income Tax Assessment Act 1997 to ensure that GST direct assistance certificates are exempt from income tax that may arise from the receipt or redemption of the certificates.

Date of effect: The amendments apply to the 1999-2000 and 2000-2001 income years.

Proposal announced: This measure has not been previously announced.

Financial impact: The measure is expected to cost the revenue $70 million over the 1999-2000 and 2000-2001 income years.

Compliance cost impact: Nil.

Medicare levy surcharge

Schedule 3 to this Bill amends the Medicare Levy Act 1986 and A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 to ensure that an appropriate level of private patient hospital cover is held to avoid the imposition of the Medicare levy surcharge. These amendments will ensure that high income earners cannot avoid paying the Medicare levy surcharge by purchasing a low cost hospital product.

Date of effect: 1 July 2000.

Proposal announced: 24 May 2000.

Financial impact: Negligible.

Compliance cost impact: Minimal.

Summary of regulation impact statement

Regulation impact on business

Impact: Low.

Main points:

•

Health funds will face information dissemination costs to existing and new members.

•

Those funds that have in the past attracted new high income earners to high front-end deductible hospital insurance policies, will, in the future, be less able to do so.