Senate

Supplementary Explanatory Memorandum

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

General outline and financial impact

Amends Taxation Laws Amendment Bill (No. 2) 1999 (this Bill) by making a number of changes to the franking credit trading measures set out in Schedules 4 and 7 to this Bill. The amendments to the related payments rule set out in Schedule 4 will:

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exclude related payments under contracts for the sale of Share Price Index futures from the related payments rule until 2 July 1998; and

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make a correction to the rules for determining a taxpayers position in relation to shares.

Also, distributions in respect of interests in trusts and partnerships acquired before 2 July 1998 will be excluded from the operation of the changes to section 45Z of the Income Tax Assessment Act 1936 (ITAA 1936).

Date of effect: The correction to the rules for determining a taxpayers position in relation to shares for the related payments rule will take effect from the day this Bill receives Royal Assent. The other changes will apply from the commencement of the relevant measures.

Proposal announced: These changes have not been previously announced. The measures were first announced in the 1997-98 Budget.

Financial impact: The correction to the rules for determining a taxpayers position in relation to shares for the related payments rule is expected to have no revenue impact. The other two changes will result in a loss to revenue that cannot be quantified but is not expected to be significant.

Compliance cost impact: These changes will have a negligible impact on compliance costs.

Summary of Regulation Impact Statement

The Office of Regulation Review has advised that no changes are required to the Regulation Impact Statement for these measures contained in the Explanatory Memorandum to Taxation Laws Amendment Bill (No. 2) 1999.