House of Representatives

Supplementary Explanatory Memorandum

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

General outline and financial impact

Amendments 1 to 4 to Schedule 2 - CGT roll-over for superannuation entities that merge under new superannuation safety arrangements

Amendments 1 to 4 amend Schedule 2 to provide an automatic capital gains tax (CGT) roll-over for registrable superannuation entities that merge under new superannuation safety arrangements for registrable superannuation entities whose trustees did not seek a licence required by the Superannuation Industry (Supervision) Act 1993 but during the transitional period merged with other registrable superannuation entities whose trustees intended to be licensed by the end of the transitional period.

The amendments ensure that the CGT roll-over applies when assets are transferred to one or more registrable superannuation entities whose trustees are not licensed at the time of the transfer but where it is reasonable to assume that they will be licensed by 1 July 2006.

The amendments also ensure that, if the trustees of the registrable superannuation entities are not licensed by 1 July 2006, the roll-over is treated as if it had never happened.

Date of effect: These amendments apply to CGT events that happen to CGT assets from 1 July 2004 to 30 June 2006 (inclusive).

Proposal announced: These amendments have not previously been announced.

Financial impact: Nil.

Compliance cost impact: These amendments will not add additional compliance costs.

Amendments 5 to 32 to Schedule 6 - goods and services tax and real property

Amendments 5 to 32 amend Schedule 6 to make two key changes to the proposed goods and services tax (GST) real property amendments. They change the requirement to obtain written agreement for the use of the margin scheme, so that it applies only to supplies made under contractual arrangements entered into after the date of Royal Assent. The amendments also remove the proposed new rules for calculating the margin for the supply of real property that was initially acquired as a GST-free going concern or GST-free farm land.

Further, the amendments make minor changes to address mainly technical issues, including to the grouping, joint venture and deceased estate provisions to ensure the amendments cause no unintended consequences.

Date of effect: These amendments apply from Royal Assent.

Proposal announced: These amendments were announced in the Minister for Revenue and Assistant Treasurer's Press Release No. 052 of 7 June 2005.

Financial impact: The GST revenue impacts of all the GST property amendments in Schedule 6 are expected to result in an unquantifiable revenue gain to GST revenue. These amendments are expected to reduce this GST revenue gain.

Compliance cost impact: These amendments are not expected to impact significantly on compliance costs.