House of Representatives

Explanatory Memorandum

(Circulated by authority of the Acting Minister for Revenue and Financial Services, Senator the Hon Mathias Cormann)

General outline and financial impact

Wine equalisation tax producer rebate

Schedule 1 to this Bill amends the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) to improve the integrity of the wine equalisation tax (WET) producer rebate.

The amendments make integrity changes to the WET producer rebate, quoting and WET credit rules, reduce the WET rebate cap from $500,000 to $350,000, tighten the associated producers rule and repeal the earlier producer rebate rule.

Date of effect: The new WET eligibility criteria generally apply to wine for which the wine-making process commenced on or after 1 January 2018 and to most other wine from 1 July 2018.

The reduction of the WET rebate cap to $350,000 applies to dealings in wine made on or after 1 July 2018.

The amendments to the associated producers rule apply to dealings in wine from the day that Schedule 1 to the Bill commences.

Proposal announced: This measure was announced by the Treasurer in the 2016-17 Budget. The changes to the producer rebate were announced by the Minister for Revenue and Financial Services on 2 December 2016.

Financial impact: This measure is estimated to result in a gain to revenue of $300 million over the forward estimates period comprising:

- Nil

Human rights implications: This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - paragraphs 1.80 to 1.84.

Compliance cost impact: There is expected to be a small compliance cost impact from the measures as affected businesses and their advisers become familiar with the changes to the law.

Summary of regulation impact statement

Regulation impact on business

Impact: This measure has a compliance cost impact of $0.3 million. A regulatory offset has not been identified. However, Treasury is seeking to pursue net reductions in compliance costs and will work with affected stakeholders and across Government to identify regulatory burden reductions where appropriate. The Regulation Impact Statement is in Chapter 3.

Main points:

•

The WET producer rebate has distorted production in the wine industry, contributing to the increased supply of wine and wine grapes and preventing necessary adjustments that would improve the long term strength of the industry.

•

Reform of the WET producer rebate would better target the rebate and improve its integrity. It would also ensure consistency with the original policy intent of benefitting small wine producers who are making a genuine investment in the wine industry, many of whom are in rural and regional Australia. Small wine makers are an important source of economic activity and employment in their regions. The WET producer rebate assists small wine makers and delivers benefits to their communities.

•

The WET producer rebate, if left in its current form, will continue to encourage businesses to restructure to maximise rebate claims and encourage excess production of wine and wine grapes, exacerbating challenging market conditions.

Income tax relief for transfers within a fund to a MySuper product

Schedule 2 to the Bill amends the Income Tax Assessment Act 1997 (ITAA1997) to provide asset roll-over relief for mandatory transfers within a superannuation fund in the transition to a MySuper product.

Date of effect: The amendments apply to transfers within a superannuation fund to a MySuper product made between 29 June 2015 and 1 July 2017.

Proposal announced: The amendments were announced by the then Assistant Treasurer on 29 June 2015.

Financial impact: The amendments will have an unquantifiable financial impact.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 2, paragraphs 2.51 to 2.54.

Compliance cost impact: Nil.