House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurerthe Hon John Dawkins, M.P.)

GENERAL OUTLINE AND FINANCIAL IMPACT

The Taxation (Deficit Reduction) Bill (No. 2) 1993 will amend various Acts (unless otherwise indicated all amendments refer to the Income Tax Assessment Act 1936) by making the following changes:

Fringe Benefits Tax

Rates of tax

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Amends the Fringe Benefits Tax Act 1986 to increase the rate of fringe benefits tax from 48.25% to 48.4%.

Date of effect: 1 April 1994

Proposal announced: 1993-94 Budget, 17 August 1993

Financial Gain: 93-94 94-95 95-96 96-97

Taxation of Friendly Societies and Other Registered Organisations

Income Tax Rates Act 1986

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The rate of tax paid by friendly societies and other registered organisations on their life insurance and other similarly taxed business is to be brought into line, on an incremental basis, with the rate of tax applicable to the same business undertaken by life companies.

Date of effect:

increase to 33% for the 1994-95 income year;

increase to 36% for the 1995-96 income year;

increase to 39% from the 1996-97 income years and subsequent years.

Proposal announced: Budget 1993-94, 17 August 1993

Financial Gain:

Income Tax Assessment Act 1936

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Allows deductions to friendly societies and other registered organisations for expenses they incur in gaining the investment component of life insurance premiums.

Date of effect: 1 July 1994.

Proposal announced: Budget 1993-94, 17 August 1993

Financial Cost:

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Increases the rebate currently applying to assessable bonuses on life policies issued by friendly societies to reflect the change in tax rates paid by friendly societies.

Date of effect: The rebate is to be increased to 33% from 1 July 1995, to 36% from 1 July 1996, and to 39% from 1 July 1997.

Proposal announced: Budget 1993-94, 17 August 1993

Financial Cost: