Senate

Supplementary Explanatory Memorandum and Correction to the Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

General outline and financial impact

Amendments to the New Business Tax System (Debt and Equity) Bill 2001

The amendments to the New Business Tax System (Debt and Equity) Bill 2001 will ensure the debt/equity measures operate as intended. There are a number of amendments as a result of the consideration of submissions received after the bill was introduced into the Parliament on 28 June 2001. Other amendments are of a technical and clarifying nature.

Date of effect: 1 July 2001 for amendments to the New Business Tax System (Debt and Equity) Bill 2001. However, for interests issued before 1 July 2001 the existing legislation will apply until 1 July 2004 unless the issuer of such interests makes an election that the rules contained in the New Business Tax System (Debt and Equity) Bill 2001 apply from 1 July 2001. Under a further transitional rule, the amendments will not apply until 1 January 2003 for certain at call loans.

Proposal announced: Not previously announced.

Financial impact: The financial impact of these changes will be a cost to the revenue of $3 million per year for the 2003 to 2005 taxation years. This impact is due to the change in the treatment of co-operative capital units.

Compliance cost impact: The amendments will involve no additional compliance costs. Changes to the transitional rules will reduce the compliance costs of issuers of interests issued before 1 July 2001. The amendments will also reduce the compliance costs of the parties to at call loans that are not affected by the amendments until 1 January 2003.