House of Representatives

Explanatory Memorandum

Circulated By the Authority of the Treasurer, the Hon Wayne Swan MP

General outline and financial impact

GST and representatives of incapacitated entities

Schedule 1 to this Bill amends the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to ensure that a representative of an incapacitated entity is responsible for the goods and services tax (GST) consequences that arise during its appointment. This is the stated policy intention of the current law however, a recent Federal Court decision held that the current law does not achieve this intention. The proposed amendments will restore the policy intention of the GST Act relating to the GST consequences for a representative of an incapacitated entity.

The proposed amendments will also ensure that the GST consequences that arise from an action performed by the representative are the same as those that would have arisen had the action been performed by the incapacitated entity.

Date of effect: The main operative provisions will take effect from 1 July 2000, the introduction date of the GST. The consequential amendment to the Fuel Tax Act 2006 will take effect from 1 July 2006 which is the commencement date for that Act. The remaining consequential and minor amendments will commence from the date of Royal Assent.

Proposal announced: This measure was announced in the then Assistant Treasurer and Minister for Competition Policy and Consumer Affairs' Media Release No. 005 of 6 February 2009.

Financial impact: This measure has the following revenue implications:

The proposed amendments will have an insignificant impact on revenue as they will give effect to the stated policy intention as at the commencement of the GST law on 1 July 2000. The proposed amendments are also generally consistent with the way the law has been administered by the Commissioner of Taxation.

Compliance cost impact: Low.

Pay as you go instalments and taxation of financial arrangements interactions

Schedule 2 to this Bill amends the pay as you go instalment provisions to address a number of issues arising out of amendments to the Taxation Administration Act 1953 contained in the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 (TOFA Act).

Date of effect: The amendments generally apply to entities with effect from their first applicable income year (within the meaning of item 102 of Schedule 1 to the TOFA Act) and later income years.

Proposal announced: These amendments were announced in the Assistant Treasurer's Media Release No. 043 of 4 September 2009.

Financial impact: This measure will have an unquantifiable gain to revenue over the forward estimates. This gain represents a timing impact only, with no net increase in tax receipts.

Compliance cost impact: Compliance costs are expected to be low.

Outer regional and remote payment made under the Helping Children with Autism package

Schedule 3 to this Bill amends the Income Tax Assessment Act 1997 to ensure that the outer regional and remote payment made under the Helping Children with Autism package is not subject to income tax.

Date of effect: This measure applies retrospectively to amounts received in the 2008-09 income year and later income years and does not adversely affect taxpayers.

Proposal announced: This measure has not previously been announced. The outer regional and remote payment was announced via a joint press release from the Minister for Families, Housing, Community Services and Indigenous Affairs, the Minister for Health and Ageing, the Acting Minister for Education and the Parliamentary Secretary for Disabilities and Children's Services on 25 June 2008.

Financial impact: Nil. There is no impact on the forward estimates, as no related revenue was recorded in the Portfolio Additional Estimates Statements 2007-08 where the Helping Children with Autism package was announced by the Department of Families, Housing, Community Services and Indigenous Affairs.

Compliance cost impact: Low.

Continence Aids Payment Scheme

Schedule 4 to this Bill amends the Income Tax Assessment Act 1997 to ensure that payments made under the Continence Aids Payment Scheme are not subject to income tax.

Date of effect: This measure applies to amounts received in the 2009-10 income year and later income years.

Proposal announced: The income tax exemption for this payment has not previously been announced. However, the Continence Aids Payment Scheme was announced as part of the 2009-10 Budget.

Financial impact: Nil. As clients do not pay any income tax on the value of benefits received under the current subsidised products scheme and will not pay any income tax on receiving the replacement income tax exempt cash payments, there is no impact on the forward estimates.

Compliance cost impact: Low.

Interest withholding tax - extension of eligibility for exemption to Commonwealth issued debt

Schedule 5 to this Bill amends section 128F of the Income Tax Assessment Act 1936 to extend eligibility for exemption from interest withholding tax to debt issued in Australia by the Commonwealth or Commonwealth authorities.

Date of effect: This amendment applies to interest paid on or after the commencement date. The commencement date is the day after Royal Assent.

Proposal announced: This measure was announced in the Treasurer's Media Release No. 092 of 21 August 2009.

Financial impact: This measure has the following revenue implications:

Compliance cost impact: Nil.

2009 Victorian Bushfire Appeal Trust Account

Schedule 6 to this Bill provides the Victorian Bushfire Appeal Fund Independent Advisory Panel (the Panel) with greater scope to support communities and individuals affected by the 2009 Victorian bushfires.

The Panel oversees the expenditure of funds from the 2009 Victorian Bushfire Appeal Trust Account (the Appeal Fund). The amendments permit funds in the Appeal Fund to be used for a broader range of purposes than the law considers charitable, without jeopardising the charitable status of the Australian Red Cross Society (the Red Cross), which is the charity that collected the donations.

The charitable status of the Red Cross will be protected so long as the funds are used for the purposes specified in these amendments (the allowable purposes).

The purposes for which the funds may be expended are extended by this Bill but are contained to provide assurance to the donors that their charitable donations will be used appropriately.

Date of effect: This measure applies to payments made by the Red Cross to the Appeal Fund after 28 January 2009 and before 6 February 2014.

Proposal announced: This measure was announced in the Assistant Treasurer and the Parliamentary Secretary for Victorian Bushfire Reconstruction's Joint Press Release No. 031 of 17 August 2009.

Financial impact: Nil.

Compliance cost impact: Low.