Senate

Supplementary Explanatory Memorandum

(Circulated by authority of the Treasurer,the Hon Ralph Willis, MP)

General outline and financial impact

Employee share schemes

Amends the employee share scheme (ESS) provisions set out in Schedule 2 to:

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exclude shares or rights acquired at market value from the new ESS measures. The tax treatment of these shares and rights will remain unchanged.

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exclude benefits that consist of money or other property given to a trust to obtain shares on behalf of employees from the definition of 'fringe benefit' in the Fringe Benefits Tax Assessment Act 1986 to avoid double taxation of such benefits.

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give taxpayers the option of electing that the new measures, which will generally take effect on 28 March 1995, will apply to shares, or rights to acquire shares, acquired since the original ESS changes were first proposed on 10 May 1994.

Date of effect: 6 pm in the ACT (and the equivalent time elsewhere) on 28 March 1995.

Financial impact: The nature of the amendments is such that a reliable estimate cannot be made.

Compliance cost impact:

Refunds of TFN amounts

Amends in two respects the provisions of the Bill concerning the refund of TFN amounts deducted in error by investment bodies. The first amendment changes the commencement date of the refund provisions from 1 July 1995 to the date of Royal Assent to the Bill. The second amendment introduces new provisions which will limit the liability of investment bodies to provide refunds for TFN amounts deducted in error prior to the date of Royal Assent. It will maintain the rights of investors in these cases, with existing rights to receive a direct refund now to be exercised by investors against the Commissioner of Taxation rather than against investment bodies as is currently the case.

Date of effect: Royal Assent.

Financial impact: None.

Compliance cost: There are no compliance cost implications associated with the first amendment to change the commencement date. The second amendment to limit the liability of investment bodies to provide refunds for deductions made before Royal Assent will have the effect of reducing compliance costs for investment bodies.

Superannuation and determination of life expectation factor

Ensures that the amendment proposed in Item 31 of Schedule 3 applies to an annuity where the beginning of the period to which the first payment of the annuity relates is on or after 1 April 1995

Date of effect

Amendment announced Not previously announced

Financial impact: Insignificant.

Late lodgment penalty

The amendments will delay the commencement of the proposed late lodgment penalties so that they will apply to income tax returns for the 1995-96 year and later years of income.

The amendments will also enable individual taxpayers to claim a tax deduction for payments of the interest penalty.

Date of effect: The date of Royal Assent.

Proposal announced: Not previously announced.

Financial impact: It is not possible to make a reliable estimate of the revenue impact caused by delaying the introduction of the proposed late lodgment penalty amendments. However, the cost to the revenue would be minimal. The tax deductibility of interest will cause an unquantifiable but small reduction in revenue collections.

Compliance cost impact: There are no compliance costs for taxpayers from these proposals.