Senate

Explanatory Memorandum

(Circulated by the authority of the Treasurer the Hon Ralph Willis, M.P.)

CHAPTER 7 - REPEALED PROVISIONS - SHORT_TERM ASSET SALES AND HOME LOAN INTEREST REBATE

Overview

7.1 This Bill will repeal section 26AAA and subdivision 17AA of Part III of the Income Tax Assessment Act 1936 (the Act).

Summary of the amendments

Purpose of the amendments

7.2 This Bill will:

•

repeal section 26AAA of the Act which taxed gains made from the sale of assets, where the sale occurred within twelve months of the purchase of the asset. Section 26AAA is now redundant;

•

repeal subdivision 17AA of Part III of the Act which provided a rebate of tax for home loan interest paid between the period 1July 1982 and 30 June 1990.

Date of effect

7.3 The amendments will apply from the day the Bill receives Royal Assent.

Background to the legislation

Short-term asset sales

7.4 Section 26AAA was introduced in 1973 to tax gains made from the sale of assets, where the purchase and sale of an asset occurred within twelve months.

7.5 When the capital gains and losses provisions were introduced in 1985, section 26AAA was retained as a transitional measure and overrode the capital gains and losses provisions for short-term asset sales.

7.6 Following an announcement in the May 1988 Economic Statement, the operation of section 26AAA was terminated in respect of sales of assets made after 25 May 1988.

Home loan interest rebate

7.7 Subdivision 17AA of Part III of the Act (sections 159ZA to 159ZQ) contains two different rebate schemes which provided a rebate of tax for home loan interest payments. Both of the schemes have ceased to have any application.

7.8 The first scheme applied to interest paid between 1 July 1982 and 30 June 1983.

7.9 The second scheme applied to interest paid during the first five years of home occupation, but ceased to apply to interest paid after 30June 1990.

Explanation of the amendments

7.10 Subdivision 17AA has been inoperative for over three years. Section 26AAA has been inoperative for over six years. Their repeal will remove 21 sections and 30 pages from the Act. [Clauses 69 and 78]

7.11 The Bill will contain a small 'saving' provision to ensure that the repealed sections will still be available for application in any assessments or amended assessments made in relation to the relevant income periods. [Clauses 76 and 81]

7.12 The Bill also makes consequential amendments to other provisions of the Act by omitting references to section 26AAA and references to subdivision AA of Division 17 of Part III.

7.13 Section 26 AAA contained definitions which were used in other provisions of the Act. The Bill includes some provisions that restate those definitions in the relevant provisions of the Act without changing the meaning of the definitions or the effect of the relevant provisions.