Second Reading
Senator CROWLEY (South Australia--Minister for Family Services) (5.15 p.m.)--I table a revised explanatory memorandum relating to the Taxation Laws Amendment (FBT Cost of Compliance) Bill 1995 and move:That these bills be now read a second time.
I seek leave to have the second reading speeches incorporated in Hansard
Leave granted.
The speeches read as follows--
Taxation Laws Amendment (FBT Cost of Compliance) Bill 1995
The Taxation Laws Amendment (FBT Cost of Compliance) Bill 1995 will amend the fringe benefits tax and income tax laws to give effect to the Government's fringe benefits tax cost of compliance statement of 24 February 1995. It will also make changes to the fringe benefits tax substantiation rules which were announced on 29 March 1995.
In line with this Government's desire to minimise taxpayers' costs in complying with the tax laws, the amendments in this bill will substantially reduce compliance costs for employers liable to fringe benefits tax. In addition, a number of benefits provided by employers will no longer be subject to fringe benefits tax.
Most of the measures in this bill will apply from 1 April 1995, the start of the current fringe benefits tax year. However, measures dealing with living away from home allowances will take effect from 1 July 1995.
The bill will exempt from fringe benefits tax a range of benefits that are primarily used for business purposes. These benefits include employment related protective clothing, briefcases, calculators and electronic diaries, tools of trade, employment related software and portable computers.
Mobile and car phones will also be exempt where their use is primarily for employment purposes.
In recognition of the safety and health issues involved, taxis provided by employers to employees for travel to and from home between the hours of 8pm and 6am will be exempt, as will taxi travel for sick employees to home or to another place of care.
The exemption of taxi travel is estimated to cost $45 million in 1995-96 and $30 million in each later year. The other exemptions have a small but unquantifiable cost to the revenue.
The bill will also reduce the number of declarations required by the fringe benefits tax law. Where a series of identical benefits is provided, an employee declaration is generally required each time a benefit is provided so that the private portion of the benefit can be determined. This requirement for multiple declarations will be replaced by a single employee declaration which can be used for up to five years.
Further, a single employer declaration will also be available in certain situations. This declaration can also be used for up to five years.
The bill will reduce the compliance costs associated with the calculation of FBT on meal entertainment by providing two further options for determining the value of a benefit.
The simplest of these methods is to accept that 50 per cent of expenditure on meal entertainment in a year is subject to fringe benefits tax, with the balance being non-deductible to the employer. This method will also be available for use with the lease or hire costs of corporate boxes and other entertainment facilities.
The other method requires the employee to keep a twelve week register. This register is then applied over the whole year to determine the amount of meal entertainment which is subject to fringe benefits tax and the amount which is deductible for income tax purposes. The register will remain effective for up to five years.
Amendments in the bill will also reduce the compliance costs associated with the taxation of car parking benefits.
First, fringe benefits tax will no longer apply to car parking on employers' premises unless there is a commercial car parking station within a one kilometre radius that charges more than $5 a day at the beginning of the fringe benefits tax year. This wila ensure that fringe benefits tax will only apply to car parking in areas where such benefits have significant values, such as in CBD areas.
Secondly, employers will be able to adopt a simplified method of valuing car parking benefits. This new method will enable an employer to determine the value of a benefit by reference to the average of the lowest commercial car park fees at the start and end of the FBT year.
Also, a further two optional methods for calculating the total taxable value of car parking fringe benefits will be available. One of these methods uses a statutory formula and the other allows an employer to keep a twelve week record of car park usage.
Comparable changes will be made to the income tax law relating to the deductibility of car parking expenditure incurred by self- employed taxpayers.
These amendments are estimated to cost $76 million in 1995-96 and $62 million in each later year.
The Government will also take the opportunity in this bill to make a technical correction to ensure that, as originally intended, car parking benefits provided by Commonwealth, State or Territory government educational institutions will be exempt from fringe benefits tax. This amendment, which will have no effect on revenue, will be retrospective to 1 April 1993.
Living-away-from-home allowances
The bill will also modify the fringe benefits tax treatment of living-away-from-home allowance benefits and other food and accommodation benefits provided to employees who are required to live away from their usual place of residence. These modifications will provide a greater degree of certainty in determining whether the benefits will be subject to concessional treatment.
These benefits will be subject to concessional treatment for up to four years for benefits provided to expatriates working in Australia or for benefits provided to Australian residents working overseas, for up to two years for employees working in remote areas (unlimited time for employees working on a `fly-in fly-ou'f basis) and for up to one year for benefits provided for all other employees.
The date of effect of these measures has been moved to 1 July 1995.
The bill will also amend the fringe benefits tax substantiation provisions to make them generally consistent with the revised income tax substantiation rules, including reducing the period for which records are required to be retained from seven to five years.
In order to maintain the revenue neutrality of this package of compliance cost reduction measures, the bill will increase the statutory fractions used in the statutory formula for car benefits by approximately 10 per cent. Even with these increases in the statutory fractions, the statutory formula will remain significantly concessional under a wide range of circumstances.
This amendment is estimated to raise $121 million in 1995-96 and $91 million in each later year.
Rebate for medical research bodies
The bill will also extend the rebate of fringe benefits tax presently allowed to certain non-profit, non-government bodies to certain medical research bodies which, while established under a Commonwealth, State or Territory law, are not conducted by or on behalf of a government.
The amendment will be effective from 1 April 1994.
Full details of the amendments in the bill are contained in the Explanatory Memorandum circulated to honourable senators.
I also foreshadow that the Government will be moving some minor amendments to the bill in the Senate. Copies of those amendments and a Supplementary explanatory memorandum will be circulated to senators.
I commend the bill to the Senate.
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