House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer, the Hon Stuart Robert MP)

General outline and financial impact

Income tax exemption for flood assistance support

Schedule 1 to the Bill amends the ITAA 1997 to make grants non-assessable non-exempt income if they:

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are Category C or D measure disaster recovery grants paid to small businesses, primary producers or non-profit organisations; and

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relate to flooding that commenced in Australia in the period between 25 January 2019 and 28 February 2019 (inclusive).

As a result, Category C and D measure grants to small businesses, primary producers and non-profit organisations affected by floods in North Queensland in late January 2019 and that continued into February 2019 are non-assessable non-exempt income.

Schedule 1 to the Bill also amends the ITAA 1997 to make grants to primary producers non-assessable non-exempt income if the grants are for repairing or replacing farm infrastructure, restocking or replanting, and they are provided for the purposes of an agreement between the Commonwealth and a State or Territory to assist primary producers affected by the flooding.

As a result, such grants to primary producers in North Queensland affected by floods in late January 2019 that continued into February 2019 are non-assessable non-exempt income.

Date of effect: The amendments apply to the 2018-19 income year and later income years for qualifying grants.

Proposal announced: This Schedule implements the measure 'North Queensland Flood Recovery Package - tax treatment of qualifying grants' from the 2019-20 Budget.

Financial impact: As at the 2019-20 Budget, the measure is estimated to have no revenue impact over the forward estimates period.

Human rights implications: This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 4, paragraphs 4.1 to 4.7.

Compliance cost impact: Nil.

Income tax exemption for storm assistance payments

Schedule 2 to the Bill amends the ITAA 1997 to exempt from income tax certain payments to primary producers that relate to storm damage sustained on or around 25 October 2018.

Payments may be made by the Foundation for Rural and Regional Renewal under grants totalling $1 million from the Commonwealth to support primary producers in the Fassifern Valley, Queensland, affected by the storm.

Date of effect: The amendments apply to the 2018-19 income year and later income years.

Proposal announced: This Schedule implements the measure 'Queensland storms - tax treatment of payments to primary producers' from the 2019-20 Budget.

Financial impact: As at the 2019-20 Budget, the measure is estimated to have no revenue impact over the forward estimates period.

Human rights implications: This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 4, paragraphs 4.8 to 4.12.

Compliance cost impact: Nil.

Loan scheme for eligible primary producers affected by floods in Northern Queensland

Schedule 3 to the Bill implements a loan scheme to provide urgent assistance for eligible primary producers affected by floods in Northern Queensland.

Date of effect: Schedule 3 to the Bill commences the day after the bill receives the Royal Assent.

Proposal announced: The loan scheme was announced by the Prime Minister on 1 March 2019.

Financial impact: The Commonwealth will make available up to a total of $1.75 billion in loans to participating ADIs. The estimated impact on the underlying cash balance between 2019-20 and 2022-23 is $0.7 million.

Human rights implications: This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 4, paragraphs 4.13 to 4.16.

Compliance cost impact: Minor.