House of Representatives

Explanatory Memorandum

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

Chapter 5 - Income tax exemption: Global Carbon Capture and Storage Institute Limited

Outline of chapter

5.1 Schedule 5 to this Bill amends the Income Tax Assessment Act 1997 ( ITAA 1997) to make the Global Carbon Capture and Storage Institute Limited (the Institute) income tax exempt for a four-year period.

Context of amendments

5.2 The Institute was formally launched by the Prime Minister on 16 April 2009, and was established as a not-for-profit company limited by guarantee on 12 June 2009.

5.3 The central objective of the Institute is to accelerate the commercial deployment of carbon capture and storage projects to contribute to reducing carbon dioxide emissions.

5.4 The Institute does not meet the general requirements for income tax exempt entities set out in the tax law.

5.5 The information and expertise developed by the Institute is to be disseminated broadly and globally to the benefit of both the Australian and global carbon capture and storage communities.

Summary of new law

5.6 The Institute will be made exempt from income tax over the period 1 July 2009 to 30 June 2013.

Detailed explanation of new law

5.7 Section 50-5 of the ITAA 1997 contains a table of entities (relating to charity, education, science and religion) for which all of their ordinary and statutory income is exempt from income tax. The Institute will be added to the table, making the Institute exempt from income tax . [Schedule 5, item 1, item 1.8 in the table in section 50-5 of the ITAA 1997]

5.8 Section 11-5 of the ITAA 1997 lists entities that are exempt from income tax. This list will be amended to include the Institute . [Schedule 5, item 8, section 11-5 of the ITAA 1997]

Application and transitional provisions

5.9 The exemption applies to amounts included in assessable income on or after 1 July 2009, and before 1 July 2013 . [Schedule 5, item 1, item 1.8 in the table in section 50-5 of the ITAA 1997]

5.10 These amendments will be repealed on 1 January 2018, by which time they will have become inoperative . [Schedule 5, items 10 and 11]

Consequential amendments

5.11 The definitions of 'eligible policy', 'exempt entity', 'exempt life assurance fund', and 'trustee' in section 102M of the Income Tax Assessment Act 1936 ( ITAA 1936) will be repealed and replaced with provisions that preserve the effect of the current law, but are clearer and more consistent with tax law drafting principles . [Schedule 5, items 2 to 6]

5.12 References in the ITAA 1997 will be updated to reflect these amendments . [Schedule 5, item 9, paragraph 295-173(b) of the ITAA 1997]

5.13 These consequential amendments are desirable because the current definition of 'exempt entity' in section 102M of the ITAA 1936 is inconsistent with the definition in the Dictionary to the ITAA 1936.

5.14 Further, the words in a heading in section 11-5 of the ITAA 1997 will be reordered, to be consistent with the ordering of the same words in section 50-5 of the ITAA 1997 . [Schedule 5, item 7]

5.15 The consequential amendments do not involve any substantive changes to the law.