senate

Explanatory Memorandum

(Circulated by the authority of the Treasurerthe Hon John Dawkins, M.P.)This Memorandum takes account of amendments made by the House of Representatives to the Bill as introduced.

Chapter 6 PROVISIONAL TAX UPLIFT FACTOR

Overview

6.1 This Chapter explains provisions in the Bill which propose to amend the definition of provisional tax uplift factor in the Act so that the factor is:

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reduced from 10% to 8% for the 1993-94 year of income [Clause 31] ; and

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restored to 10% for later income years.

Summary of amendments

6.2 Purpose of amendment: To amend the Act so that the provisional tax uplift factor is 8% for the 1993-94 year of income and 10% for later income years.

6.3 Date of Effect : The amendment will apply in relation to the calculation of provisional tax (including instalments) payable for the 1993-94 year of income and for all later years of income [ Clause 33 ] .

Background to the legislation

6.4 Provisional income for a year of income is obtained by uplifting the preceding year's taxable income by the provisional tax uplift factor. Provisional tax is then obtained by applying the tax rates and medicare levy to the provisional income and allowing for rebate and credit entitlements which are expected to be claimed or allowed in the provisional year of income [section 221YCAA].

6.5 The "provisional tax uplift factor" reflects the effects of inflation and other relevant factors in ascertaining provisional income. The uplift factor for the calculation of 1993-94 provisional income is 10% [subsection 221YA(1)].

6.6 In Press Release 67 of 1993, the Treasurer announced that the uplift factor of 8% used to calculate 1992-93 provisional income would be retained for the purpose of calculating 1993-94 provisional tax.

Explanation of the amendments

6.7 The Bill proposes to amend subsection 221YA(1) to ensure that a provisional tax uplift factor of 8% will be used in ascertaining provisional tax payable (including instalments) for the 1993-94 year of income and, until the Parliament otherwise provides, 10% for later years of income [Clauses 32 and 33] .