House of Representatives
Tax Laws Amendment (2008 Measures No. 6) Bill 2008
Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon Wayne Swan MP)Chapter 4 Minor amendments
Outline of chapter
4.1 Schedule 4 to this Bill makes various minor amendments to the taxation laws.
Context of amendments
4.2 Taxation legislation is complex and wide-ranging. Therefore, errors can occur. Even minor errors can detract from the readability of the taxation laws and can confuse or mislead readers, so the errors need correcting.
4.3 The minor amendments are part of the Government's commitment to the care and maintenance of the taxation laws.
Summary of new law
4.4 These amendments deal with issues such as:
- •
- incorrect terminology;
- •
- grammatical or punctuation errors;
- •
- missing asterisks from defined terms;
- •
- inoperative material;
- •
- ambiguities in the law; and
- •
- realign policy with the original policy intent.
4.5 More significant amendments include:
- •
- extending capital allowance roll-over relief for depreciating assets to the case where a fixed trust is converted to a company (see items 16 to 18);
- •
- allowing funds that can make payments to dependents of deceased estates to still be approved worker entitlement funds and so retain the fringe benefits tax exemption for payments to them (see item 5); and
- •
- giving trustees and beneficiaries of employee share trusts a choice to backdate recently inserted capital gains tax (CGT) provisions that prevent taxing both trustees and beneficiaries when the employee becomes absolutely entitled to shares held in the trust after exercising rights under an employee share scheme (see item 51).
4.6 These amendments apply from the date of Royal Assent unless otherwise stated.
Detailed explanation of new law
Table 4.1 : Amendments to the Goods and Services Tax Act 1999
| Provision being amended | What the amendment does |
| 195-1 ('hospital treatment') | Replaces a reference to a definition that has been repealed with the definition that replaced it.
'Hospital treatment' is a goods and services tax (GST) free health service. The current definition of 'hospital treatment' has the meaning given by subsection 67(4) of the National Health Act 1953 . That provision was repealed on the enactment of the Private Health Insurance Act 2007 . As a result, hospital treatment is defined by reference to a repealed provision. The amendment instead refers to the definition of 'hospital treatment' in the Private Health Insurance Act 2007 which achieves the same effect. [ Schedule 4, item 1, section 195-1 ] |
Table 4.2: Amendments to the Fringe Benefits Tax Assessment Act 1986
| Provision being amended | What the amendment does |
| 5C(3) and (4) | Amends the fringe benefits tax (FBT) calculation of an employer's aggregate fringe benefits amount to restore the pre-GST concessional treatment of remote area property benefits. [
Schedule 4, items 2 and 3, subsections 5C(3) and (4
)]
These amendments also clarify how remote area housing fringe benefits are allocated between Type 1 and Type 2 aggregate fringe benefits amounts, according to whether the amortised fringe benefit to which it relates is a GST-creditable benefit. The calculation of an employer's aggregate fringe benefits amount was amended in 2000 to take the effect of GST into account. However, the amendments inadvertently did not replicate the previous FBT discount for remote area housing, nor the spreading of certain remote area property benefits over an amortisation period. The amendments, which favour taxpayers, apply from the FBT year commencing 1 April 2000 (when the original GST amendments began). [ Schedule 4, item 4 ] |
| 58PB(4)(c)(i) | Allows approved worker entitlement funds to make payments to the dependants of deceased workers. [
Schedule 4, item 5, subparagraph 58PB(4
)(
c
)(
i
)]
Sections 58PA and 58PB provide an exemption from FBT for certain payments to approved worker entitlement funds. A fund can only be an approved worker entitlement fund if it is limited to making payments to the employees for whom contributions were received. This amendment provides that, upon the death of an employee, the fund is able to make payments to the employee's dependants or the trustee of the employee's deceased estate, without losing its status as an approved worker entitlement fund. This is consistent with the outcome where a worker with unused leave entitlements dies and amounts in respect of those entitlements are paid to the dependants directly by an employer rather than by a worker's entitlement fund. |
Table 4.3: Amendments to the Income Tax Assessment Act 1936
| Provision being amended | What the amendment does |
| 23AB(5)(a) | Updates a reference to the now repealed ' Commonwealth Employees' Rehabilitation and Compensation Act 1988' . The Act was retitled to the ' Safety, Rehabilitation and Compensation Act 1988' in 1992 and 1993. [ Schedule 4, item 6, paragraph 23AB(5 )( a )] |
| Provision being amended | What the amendment does |
| 23AG(1) | Corrects a grammatical error by replacing the word 'is' with the word 'are'. [ Schedule 4, item 7, subsection 23AG(1 )] |
| 73A(6) (definition of 'Research Secretary') | Changes a reference to '
Education Research Act 1970'
to '
Australian Research Council Act 2001'
. This restores the capacity of the Secretary to the Department of Innovation to declare an institution an approved research institute.
The Education Research Act 1970 was repealed on 3 July 2008 by the Statute Law Revision Act 2008 . [ Schedule 4, item 8, subsection 73A(6 ) ( definition of ' Research Secretary' )] |
| 82KZMGA(1) | Removes a discrepancy in the law that may inhibit the trading of pre-2 October 2001 interests in forestry managed investment schemes. This amendment reflects the original policy intent of the Tax Laws Amendment (2007 Measures No. 3) Act 2007 . [ Schedule 4, item 9, subsection 82KZMGA(1 )] |
| 102T(27) ('unit trust distribution') | Replaces a mistaken reference to 'subsection 102M(1)' (which does not exist) with the correct reference 'section 102M'. [ Schedule 4, item 10, subsection 102T(27 ) ( unit trust distribution )] |
Table 4.4: Amendments to the Income Tax Assessment Act 1997
| Provision being amended | What the amendment does |
| 20-55(1) (item 1 in the table)
20-55(1) (item 6 in the table) 25-5(8) 36-17(5) (example) 43-50(1) and (2) 43-210 (step 6) 43-215 (step 4) 240-55 (heading) 290-90(2) (note 2) |
Replaces references to 'allowable deduction' with 'deduction', which is the term used in the Income Tax Assessment Act 1997 (ITAA 1997). There is no change in outcomes. [ Schedule 4, items 11, 12, 13, 15, 21, 22, 23, 27, 28, subsections 20-55(1 ) ( item 1 in the table ), 20-55(1 ) ( item 6 in the table ), 25-5(8 ), 36-17(5 ) ( example ), 43-50(1) and (2) and 290-90(2 ) ( note 2 ), sections 43-210 (step 6 ), 43-215 (step 4) and 240-55 (heading )] |
| 25-7(b) and (c) | Repeals a paragraph that only relates to the 2001-02 income year and is therefore inoperative. [ Schedule 4, item 14, paragraph 25-7(b )] |
| Provision being amended | What the amendment does |
| 26-50(3)(b)(iv)
30-15(2) (column headed 'How much you can deduct') 51-50(2)(b)(i) 52-70(b) 52-105(3)(b) 149-15(1)(b) 152-40(1A)(a) 215-10(1)(b)(ii) 215-10(1)(b) 215-10(1)(c) 215-10(2)(a)(ii) 295-485(1)(a) 320-107(1)(a) |
Corrects asterisking of defined terms. In the ITAA 1997, the protocol is to mark defined terms with an asterisk but to do so only for the first occurrence of the term in each subsection. [ Schedule 4, item 52, subparagraphs 26-50(3 )( b )( iv ), 215-10(1 )( b )( ii) and 215-10(2 )( a )( ii ), paragraphs 52-105(3 )( b ), 149-15(1 )( b ), 152-40(1A )( a ), 215-10(1 )( b ), 215-10(1 )( c ), 295-485(1 )( a ), 320-107(1 )( a) and subsections 30-15(2) and 52-70(b )] |
| 40-340(1) | Extends capital allowance roll-over relief to the same situations that Subdivision 124-N covers for CGT provisions. Because the situations are the same in both cases, the reasons for providing roll-over relief for CGT make it appropriate to also provide it for capital allowances. [
Schedule 4, items 16 and 18, subsections 40-340(1) and (2
)]
Generally roll-over relief is a deferral of tax where there is no underlying change in ownership of an asset (eg, where an asset is transferred from a company to a trust owned by the same person). The law provides situations where roll-over relief is available in CGT situations, and capital allowance situations. Usually these situations are aligned. The CGT rules in Subdivision 124-N provide roll-over relief where a unit trust transfers its assets to a company and the unit holders are provided with shares in the company. This amendment extends roll-over relief to capital allowances in the same case. The amendment applies to balancing adjustment events in the 2008-09 income year and later years. This ensures there is a uniform treatment across the income year. [ Schedule 4, item 17 ] |
| 40-340(5) | Replaces references to 'person' with 'you', the direct form of address generally used in the ITAA 1997. [ Schedule 4, items 19 and 20, subsection 40-340(5 )] |
| Provision being amended | What the amendment does |
| 116-30(2B) | Amends subsection 116-30(2B) to ensure that it applies as intended.
Subsection 116-30(2B) ensures that the CGT market value substitution rule in subsection 116-30(2) does not apply when CGT event C2 (about the cancellation, surrender and similar endings of an intangible CGT asset) happens to interests in certain widely held companies and trusts. Subsection 116-30(2B) was intended to apply only in those cases where the capital proceeds differ from the market value of the asset (ie, in paragraph 116-30(2)(b) cases). However, subsection 116-30(2B) at present also inappropriately extends to cases where some or all of the capital proceeds cannot be valued (ie, paragraph 116-30(2)(a) cases). The amendment ensures that the market value substitution rule can still apply in 116-30(2)(a) cases. [ Schedule 4, item 24, subsection 116-30(2B )] This amendment (which favours taxpayers) applies to CGT events happening after the start of the 2006-07 income year so that it is consistent with the original application of subsection 116-30(2B). [ Schedule 4, item 25 ] |
| 122-50(1) example | Amends an example so that it correctly reflects the law.
The example was correct when it was first introduced, but the need to amend it was overlooked when amendments were made to the operative provision in 2001. [ Schedule 4, item 26, subsection 122-50(1) example ] |
| 707-310 | Changes references to 'income' to the less ambiguous equivalent 'ordinary or statutory income'. [ Schedule 4, items 29 to 31, section 707-310 ] |
| 711-30(3) | Replaces an unnecessary internal tag 'the receivable' with 'the asset' to remove unnecessary verbiage in the law.
[ Schedule 4, items 32 to 35, subsection 711-30(3 )] |
Table 4.5: Amendments to the Income Tax Rates Act 1986
| Provision being amended | What the amendment does |
| 23(2)(c) | Updates references to provisions that were renumbered in 2007. [
Schedule 4, item 35, paragraph 23(2
)(
c
)]
The amendment applies to assessments for the 2007-08 and later income years (when the error first applied) to avoid any confusion in the law. [ Schedule 4, item 36 ] |
Table 4.6: Amendments to the Taxation Administration Act 1953
| Provision being amended | What the amendment does |
| 16-5 in Schedule 1, note 2 | The note refers to a number of sections and then refers to the time required by 'that section'. An amendment made by the Tax Laws Amendment (Election Commitments No. 1) Act 2008 inserted 'or subsection 12-390(4)', in the note. Consequently, the use of 'that section' no longer covers all the provisions mentioned. The amendment corrects that by replacing 'that section' with 'that provision'. [ Schedule 4, item 37, section 16-5 in Schedule 1 ] |
| 20-35(2)(b) in Schedule 1 | The paragraph refers to a number of sections and then refers to the receipt mentioned in 'that section'. A consequential amendment made by the
Tax Laws Amendment (Election Commitments No. 1) Act 2008
inserted 'or subsection 12-390(4),' in the paragraph. Consequently, the use of 'that section' no longer covers all the provisions mentioned. The amendment corrects that by replacing 'that section' with 'that provision'. [
Schedule 4, item 38, paragraph 20-35(2
)(
b) in Schedule 1
]
The application applies to income years starting on or after 1 July 2008 to avoid confusion. [ Schedule 4, item 39 ] |
| 45-10 in Schedule 1 (note 1)
45-10 in Schedule 1 (note 2) 45-450 in Schedule 1 |
Updates cross-references that were missed when section 9-1 of the ITAA 1997 was re-ordered in 2007. [
Schedule 4, items 40 to 43, section 45-450 in Schedule 1
]
The amendments are backdated to assessment for the 2007-2008 and later income years (when the references were missed) to avoid confusion in the law. [ Schedule 4, item 44 ] |
Table 4.7: Amendments to the Taxation (Interest on Overpayments and Early Payments) Act 1983
| Provision being amended | What the amendment does |
| 3(1) | Restores the provision that allows interest to be paid to taxpayers when they have overpaid certain amounts. [
Schedule 4, item 45, subsection 3(1
)]
Paragraph (a) of the definition of 'income tax crediting amount' in section 3 was repealed as a consequential amendment to the introduction of the new foreign tax offset provisions (item 213 of Schedule 1 to the Tax Laws Amendment (2007 Measures No. 4) Act 2007 ). Part of that paragraph allowed interest to be paid to taxpayers when a credit entitlement arose that was not related to foreign tax credits. The amendment restores that part of the repealed paragraph. It applies from the time that the repeal of the old paragraph applied (ie, accounting periods starting on or after 1 July 2008). [ Schedule 4, item 46 ] |
| 10(1)(a)
10(1) 9(2) and (3) |
Repeals an inoperative provision and makes consequential amendments to references. [
Schedule 4, items 47 to 49, paragraph 10(a
),
subsections 9(2) and (3) and 10(1
)]
The subparagraph deals with the calculation of interest payable to a person for a period that commenced in the mid-eighties. A savings provision ensures that, in the unlikely event a taxpayer is still owed interest from that period, the operation of the subparagraph is preserved. [ Schedule 4, item 50 ] |
Table 4.8: Amendments to the Tax Laws Amendment (Budget Measures) Act 2008
| Provision being amended | What the amendment does |
| Item 14 of Schedule 1 | Provides taxpayers with a choice to amend their assessments for the 1998-99 to 2007-08 income years.
Subsection 130-90(3) of the ITAA 1997 was amended in 2008 to prevent taxing both a trustee and a beneficiary of an employee share trust when the employee becomes absolutely entitled to shares held in the trust after exercising rights under an employee share scheme. That amendment applied to CGT events happening after 7.30 pm on 13 May 2008 (the time of announcement of the amendment). The application date was based on the understanding that taxpayers were not using these arrangements because of the potential double taxation that may apply. This understanding has proved to be incorrect. A number of public company schemes involving employee share trusts have been used since 1998 (when section 130-90 was introduced into the ITAA 1997). The current amendment provides taxpayers with the choice to apply for retrospective amendment of their assessments back to 1998-99. [ Schedule 4, item 51, item 14 of Schedule 1 ] This allows taxpayers to use the amendment in those cases where they would otherwise suffer double taxation, but still allows taxpayers to avoid any disadvantage retrospective application that the original amendment might impose. In other words, it ensures that the backdating is only to the benefit of taxpayers. Standard amendment periods (typically, two or four years depending on the taxpayer's circumstances) still apply. |
Table 4.9: Amendments to the Pay-roll Tax Act 1941
| Provision being amended | What the amendment does |
| All provisions | Repeals an inoperative Act.
The Pay-roll Tax Assessment Act 1941 was repealed in 2006 by the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 but repealing the inoperative imposition Act was overlooked. [ Schedule 4, item 53, Pay-roll Tax Act 1941 ] Commonwealth payroll tax ceased to apply to wages paid after 1 September 1971, which is the date the Commonwealth transferred responsibility for payroll tax to the States. |
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