Senate

Replacement Explanatory Memorandum

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

General Outline and Financial Impact

The Taxation Laws Amendment Bill (No. 4) 1992 will amend the income tax law by making the following changes:

Disability Support Pension, Special Needs Support Pension, Bereavement Payments and Textile, Clothing and Footwear Special Allowance

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Restore a provision of the Principal Act whereby disability support pensions and special needs disability support pensions will be taxable where the recipient is of pension age.

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Amend the exempt bereavement payments calculators in sections 24ABZB and 24ACX of the Principal Act to restore a provision whereby the proportion of bereavement payments which is exempt is calculated in relation to social security and service pensions.

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Amend the Principal Act to extent eligibility for a rebate of income tax to recipients of Textile, Clothing and Footwear Special Allowance.

Proposed announced: Not previously announced.

Financial impact: Insignificant.

Offshore Banking - Income Tax Concessions

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Provide concessional income tax treatment at a tax rate of 10% on profits from offshore banking activities carried on in Australia.

Proposed announced: One Nation Statement of 26 February 1992. However, the scope of the tax concessions is wider than that announced in the Statement.

Financial impact: The direct cost to revenue of the measures is likely to be around $30 million in a full financial year from 1993-94.

It is possible, however, that additional revenue from business which is not presently conducted in Australia will offset this cost to some extent.

Capital Gains Tax Amendments

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Clarify the operation of subsections 160M(6) and 160M(7) to provide that, where a person creates an incorporeal asset (such as rights under an agreement) for another person, any consideration (less incidental costs) received by the person creating the asset will be a capital gain.

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Clarify the situations in which subsections 160M(6) and 160M(7) apply to non-residents.

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Provide that subsection 160M(7) does not apply between 20 September 1985 and 22 May 1986 (inclusive) where the asset referred to in subsection 160M(7) is owned by a person other than the taxpayer.

Proposal announced: Not previously announced

Financial impact: These amendments are not expected to have any significant impact on revenue.

Penalties for Late Payment of Tax and Related Penalties

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This Bill will reduce late payment penalty and related penalties from 20% per annum to 16% per annum to reflect lower market interest rates. The lower rate is to be effective from 1 October 1992.

Proposal announced: Treasurer's Press Release of 26 May 1992

Financial impact: It is estimated that the cost to revenue of the reduction in the rate of penalty for late payment of tax and related penalties from 20% to 16% per annum is $16 million in 1992-93 and $25 million in each subsequent year.