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2022-2023
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TREASURY LAWS AMENDMENT (2023 MEASURES NO. 2) BILL 2023
EXPLANATORY MEMORANDUM
(Circulated by authority of the Assistant Treasurer and Minister for Financial Services,
the Hon Stephen Jones MP)
Table of Contents
Glossary................................................................................................. iii
General outline and financial impact ...................................................... 1
Medicare levy and Medicare levy surcharge income
thresholds .................................................................... 7
Maintaining the Commonwealth Bank superannuation
fund guarantee .......................................................... 13
Tax accounting for primary producer registered
emissions units .......................................................... 17
Cash flow relief for small and medium businesses .... 27
Enhancements to the Home Guarantee Scheme ...... 31
Statement of Compatibility with Human Rights .......... 35
Glossary
This Explanatory Memorandum uses the following abbreviations and acronyms.
Abbreviation Definition
Bill Treasury Laws Amendment (2023
Measures No. 2) Bill 2023
CBA Super fund Commonwealth Bank Group Super fund
Commissioner Commissioner of Taxation
Commonwealth Bank Commonwealth Bank of Australia
Commonwealth Banks Act Commonwealth Banks Act 1959
CPI Consumer price index
GDP Gross domestic product
GST Goods and services tax
Investment Mandate National Housing Finance and
Investment Corporation Investment
Mandate Direction 2018
ITAA 1997 Income Tax Assessment Act 1997
NHFIC National Housing Finance and
Investment Corporation (to be renamed
by the Treasury Laws Amendment
(Housing Measures No. 1) Bill 2023 as
Housing Australia)
NHFIC Act National Housing Finance and
Investment Corporation Act 2018 (to be
renamed by the Treasury Laws
Amendment (Housing Measures No. 1)
Bill 2023 as the Housing Australia Act
2018)
PAYG Pay as you go
Glossary
Abbreviation Definition
SAPTO Seniors and pensioners tax offset
TAA 1953 Taxation Administration Act 1953
Threshold amount Medicare levy and Medicare levy
surcharge low-income threshold amount
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
General outline and financial impact
Schedule 1 - Medicare levy and Medicare levy
surcharge income thresholds
Outline
Schedule 1 to the Bill amends the Medicare Levy Act 1986 and the A New Tax System
(Medicare Levy Surcharge -- Fringe Benefits) Act 1999 to increase:
• the Medicare levy low-income thresholds for individuals and families
(along with the dependent child/student component of the family
threshold) in line with movements in the CPI;
• the Medicare levy low-income thresholds for individuals and families
eligible for SAPTO (along with the dependent child/student
component of the family threshold), in line with movements in the
CPI; and
• the Medicare levy surcharge low-income threshold in line with
movements in the CPI.
Date of effect
This measure applies to the 2022-23 income year and later income years.
Proposal announced
Schedule 1 to the Bill implements the Personal Income tax - increasing the Medicare
levy low-income thresholds measure from the 2023-24 Budget.
Financial impact
This measure is estimated to decrease receipts by $460 million over the forward
estimates period ($m):
2022-23 2023-24 2024-25 2025-26 2026-27
- -100.0 -140.0 -120.0 -100.0
- nil
1
General outline and financial impact
Human rights implications
Schedule 1 to the Bill does not raise any human rights issues. See Statement of
Compatibility with Human Rights -- Chapter 6.
Compliance cost impact
Nil.
Schedule 2 - Maintaining the Commonwealth
Bank superannuation fund guarantee
Outline
As part of the privatisation of the Commonwealth Bank, the Commonwealth
Government provided a guarantee to ensure that pre-privatisation members of the CBA
Super fund would not risk losing their superannuation following privatisation.
Schedule 2 to the Bill ensures that those members will continue to have the assurance
of the existing Commonwealth guarantee if the CBA Super fund is merged with
another superannuation fund.
Date of effect
Schedule 2 to the Bill will commence on the day after the Bill receives Royal Assent.
Financial impact
Nil.
Human rights implications
Schedule 2 to the Bill does not raise any human rights issues. See Statement of
Compatibility with Human Rights -- Chapter 6.
Compliance cost impact
Nil.
2
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
Schedule 3 - Tax accounting for primary
producer registered emissions units
Outline
Schedule 3 to the Bill amends the ITAA 1997 to allow eligible primary producers to
treat certain carbon abatement income as primary production income for the purposes
of the Farm Management Deposit Scheme and accessing income tax averaging
arrangements for primary producers.
Date of effect
Schedule 3 to the Bill commences on the first 1 January, 1 April, 1 July or 1 October to
occur after the date the Bill receives Royal Assent.
Proposal announced
Schedule 3 to the Bill partially implements the Primary Producers - increasing
concessional tax treatment for carbon abatement measure from the 2022-23 March
Budget. The biodiversity stewardship income aspect of the announced measure has
been deferred to 1 July 2024.
Financial impact
Schedule 3 to the Bill was estimated to reduce receipts by $100 million at the time of
the 2022-23 March Budget, comprising ($m):
2022-23 2023-24 2024-25 2025-26
- -30.0 -30.0 -40.0
- nil
Human rights implications
Schedule 3 to the Bill is compatible with human rights. See Statement of Compatibility
with Human Rights -- Chapter 6.
Compliance cost impact
It is expected that there will be no more than a minor compliance cost for eligible
primary producers as the measure largely operates within the existing tax framework,
and there will be no new or additional processes or reporting requirements. Accounting
professionals and tax advisers will need to understand the new changes and update
their guidance accordingly.
3
General outline and financial impact
Schedule 4 - Cash flow relief for small and
medium businesses
Outline
Schedule 4 to the Bill amends the TAA 1953 to reduce the GDP adjustment factor for
the 2023-24 income year to 6 per cent. The GDP adjustment factor is applied by the
Commissioner to work out the amount of PAYG and GST instalments payable by a
taxpayer in certain circumstances.
Date of effect
This measure will apply for the purposes of working out the amount of PAYG and
GST instalments for instalment quarters for the 2023-24 income year.
Proposal announced
Schedule 4 to the Bill implements the Small Business Support - Helping small business
manage their tax instalments and improving cashflow measure from the 2023-24
Budget.
Financial impact
Schedule 4 to the Bill is estimated to have the following impact on the underlying cash
balance over the forward estimates period ($m):
2022-23 2023-24 2024-25 2025-26 2026-27
- -1,600 1,600 - -
- nil
Human rights implications
Schedule 4 to the Bill does not raise any human rights issues. See Statement of
Compatibility with Human Rights -- Chapter 6.
Compliance cost impact
Nil.
4
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
Schedule 5 - Enhancements to the Home
Guarantee Scheme
Outline
Schedule 5 to the Bill amends the NHFIC Act to expand the objects of that Act,
providing for the NHFIC to improve housing outcomes for Australians by assisting
earlier access to the housing market for eligible individuals who have not held an
ownership interest in real property in Australia in the preceding 10 years, as well as
single legal guardians of children. The amendments to the objects of the NHFIC Act
enable the Minister to issue directions to the NHFIC concerning eligibility for the
Home Guarantees through the Investment Mandate.
Date of effect
Schedule 5 to the Bill commences from 1 July 2023 or the day after Royal Assent,
whichever occurs later. Subject to timing of passage of the Bill, this will allow
guarantees to be issued under the expanded group of home buyers as soon as possible
from 1 July 2023.
Proposal announced
Schedule 5 to the Bill partially implements the Increasing the Supply of Social and
Affordable Housing and Making it Easier to Buy a Home measure in the 2023-24
Budget.
Financial impact
Nil.
Human rights implications
Schedule 5 to the Bill positively engages human rights. See Statement of Compatibility
with Human Rights -- Chapter 6.
Compliance cost impact
Nil.
5
Medicare levy and Medicare
levy surcharge income thresholds
Table of Contents:
Outline of chapter .................................................................................. 7
Context of amendments ......................................................................... 8
Medicare levy low-income thresholds.............................................. 8
Medicare levy surcharge low-income threshold .............................. 8
Comparison of key features of new law and current law ........................ 8
Detailed explanation of new law ............................................................ 9
Medicare levy low-income thresholds.............................................. 9
Phase-in limits ............................................................................... 10
Medicare levy surcharge low-income threshold ............................ 11
Commencement, application, and transitional provisions .................... 12
Outline of chapter
1.1 Schedule 1 to the Bill amends the Medicare Levy Act 1986 and the A New Tax
System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 to increase:
• the Medicare levy low-income thresholds for individuals and families
(along with the dependent child/student component of the family
threshold) in line with movements in the CPI;
• the Medicare levy low-income thresholds for individuals and families
eligible for SAPTO (along with the dependent child/student
component of the family threshold), in line with movements in the
CPI; and
• the Medicare levy surcharge low-income threshold in line with
movements in the CPI.
7
Medicare levy and Medicare levy surcharge income thresholds
Context of amendments
Medicare levy low-income thresholds
1.2 The Medicare Levy Act 1986 provides that no Medicare levy is payable by
low-income individuals and families where their taxable income or combined
family taxable income does not exceed the stated threshold amounts.
1.3 The Medicare levy phases in at a rate of 10 cents in the dollar where the
taxable income or combined family taxable income does not exceed the stated
threshold amounts.
Medicare levy surcharge low-income threshold
1.4 A Medicare levy surcharge of between one and one and a half per cent applies
on taxable income in certain cases where taxpayers do not have appropriate
private patient hospital cover (sections 8B and 8G of the Medicare Levy Act
1986). The Medicare levy surcharge also applies to reportable fringe benefits
in certain cases where taxpayers do not have appropriate private hospital cover
(sections 12 to 16 of the A New Tax System (Medicare Levy Surcharge --
Fringe Benefits) Act 1999).
1.5 A family member who otherwise would be liable for the Medicare levy
surcharge is not required to pay the surcharge where the total of that person's
income for Medicare levy surcharge purposes does not exceed the individual
low-income threshold amount. Unlike the Medicare levy, there is no phase-in
of the Medicare levy surcharge above the threshold amount.
Comparison of key features of new law and
current law
Table 1.1 Comparison of new law and current law
New law Current law
Medicare levy low-income thresholds
The individual income threshold for the The individual income threshold for the
2022-23 income year is $24,276. 2021-22 income year is $23,365.
The family income threshold for the The family income threshold for the 2021-22
2022-23 income year is $40,939. income year is $39,402.
8
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
New law Current law
The income threshold for individual The income threshold for individual
taxpayers eligible for the SAPTO for the taxpayers eligible for the SAPTO for the
2022-23 income year is $38,365. 2021-22 income year is $36,925.
The income threshold for families eligible The income threshold for families eligible for
for the SAPTO for the 2022-23 income year the SAPTO for the 2021-22 income year is
is $53,406. $51,401.
The child-student component of the income The child-student component of the income
threshold for families (whether eligible for threshold for families (whether eligible for
SAPTO or not) for the 2022-23 income year SAPTO or not) for the 2021-22 income year
is $3,760. is $3,619.
Phase-in limit
The individual phase-in limit for the The individual phase-in limit for the 2021-22
2022-23 income year is $30,345. income year is $29,206.
The phase-in limit for individual taxpayers The phase-in limit for individual taxpayers
eligible for the SAPTO for the 2022-23 eligible for the SAPTO for the 2021-22
income year is $47,956. income year is $46,156.
The phase-in limit for families for the The phase-in limit for families for the 2021-
2022-23 income year is $51,173. 22 income year is $49,252.
The phase-in limit for families eligible for The phase-in limit for families eligible for
the SAPTO for the 2022-23 income year is the SAPTO for the 2021-22 income year is
$66,757. $64,251.
The child-student component of the phase- The child-student component of the phase-in
in limit for families (whether eligible for limit for families (whether eligible for
SAPTO or not) for the 2022-23 income year SAPTO or not) for the 2021-22 income year
is $4,700. is $4,523.
Detailed explanation of new law
Medicare levy low-income thresholds
1.6 Schedule 1 to the Bill increases the low-income threshold for individuals and
families (including the dependent child-student component of the family
threshold) in line with annual movements in the CPI.
1.7 Section 7 of the Medicare Levy Act 1986 states that no levy is payable where a
taxpayer has a taxable income at or below the applicable threshold amount as
specified in subsection 3(1) of the Medicare Levy Act 1986.
1.8 The individual threshold amount (specified in paragraph (c) of the definition of
the 'threshold amount' in subsection 3(1) of the Medicare Levy Act 1986)
increases from $23,365, to $24,276.
9
Medicare levy and Medicare levy surcharge income thresholds
[Schedule 1, item 5, paragraph (c) of the definition of 'threshold amount' in
subsection 3(1) of the Medicare Levy Act 1986]
1.9 The level of the 'family income threshold' referred to in subsections 8(5), 8(6)
and 8(7) of the Medicare Levy Act 1986 increases from $39,402 to $40,939.
For each dependent child or student, the family income threshold increases by
a further $3,760, instead of the previous amount of $3,619.
[Schedule 1, items 6, 7 and 8, the definition of 'family income threshold' in
subsection 8(5), and subsections 8(6) and (7) of the Medicare Levy Act 1986]
1.10 Schedule 1 to the Bill also increases the threshold amount for individual
taxpayers eligible for the SAPTO for the 2022-23 income year.
1.11 The threshold amount for individual taxpayers eligible for the SAPTO
(specified in paragraph (a) of the definition of the 'threshold amount' in
subsection 3(1) of the Medicare Levy Act 1986) increases from $36,925 to
$38,365.
[Schedule 1, item 4, paragraph (a) of the definition of 'threshold amount' in
subsection 3(1) of the Medicare Levy Act 1986]
1.12 The threshold amount for families eligible for SAPTO increases from $51,401
to $53,406. For each dependent child or student, the income threshold
increases by a further $3,760, instead of the previous figure of $3,619.
[Schedule 1, item 9, subsection 8(7) of the Medicare Levy Act 1986]
Phase-in limits
1.13 Section 7 of the Medicare Levy Act 1986 also provides that the Medicare levy
applies at a reduced rate to taxpayers with taxable incomes above the threshold
amount but not more than the 'phase-in limit' specified in subsection 3(1). The
rate of Medicare levy payable in these circumstances is limited to 10 per cent
of the excess over the threshold amount that is relevant to the particular person.
1.14 The phase-in limit for individuals (specified in paragraph (c) of the definition
of 'phase-in limit' in subsection 3(1) of the Medicare Levy Act 1986) increases
from $29,206 to $30,345.
[Schedule 1, item 3, paragraph (c) of the definition of 'phase-in limit' in
subsection 3(1) of the Medicare Levy Act 1986]
1.15 The phase-in limit for individual taxpayers eligible for SAPTO (specified in
paragraph (a) of the definition of 'phase-in limit' in subsection 3(1) of the
Medicare Levy Act 1986) increases from $46,156 to $47,956.
[Schedule 1, item 2, paragraph (a) of the definition of 'phase-in limit' in
subsection 3(1) of the Medicare Levy Act 1986]
1.16 There is no phase-in limit for families in the Medicare Levy Act 1986, as the
limit changes with the number of dependants. Instead, subsection 8(2) of the
Medicare Levy Act 1986 contains a formula that limits the levy payable by
10
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
persons with families to 10 per cent of the amount of family income that
exceeds their family income threshold.
1.17 The increased threshold amounts and phase-in ranges for the 2022-23 income
year are as shown in Table 1.2.
Table 1.2 2022-23 Medicare levy low-income thresholds amounts and
phasing-in ranges
Category of No levy payable in Reduced levy in Ordinary rate of levy
taxpayer 2022-23 if taxable 2022-23 (if taxable payable in 2022-23
income or family income or family where taxable
income does not income is within income or family
exceed (figure for range (inclusive) income is equal to or
2021-22) exceeds (figure for
2021-22)
Individual $24,276 ($23,365) $24,277-$30,345 $30,346 ($29,207)
taxpayer
Individual $38,365 ($36,925) $38,366-$47,956 $47,957 ($46,157)
taxpayers
eligible for the
SAPTO
Families $53,406 ($51,401) $53,407-$66,757 $66,758 ($64,252)
eligible for the
SAPTO
Families with (family income) (family income) (family income)
the following
number of
children and/or
students
0 $40,939 ($39,402) $40,940-$51,173 $51,174 ($49,253)
1 $44,699 ($43,021) $44,700-$55,873 $55,874 ($53,776)
2 $48,459 ($46,640) $48,460-$60,573 $60,574 ($58,299)
3 $52,219 ($50,259) $52,220-$65,273 $65,274 ($62,822)
4 $55,979 ($53,878) $55,980-$69,973 $69,974 ($67,345)
5 $59,739 ($57,497) $59,740-$74,673 $74,674 ($71,868)
Medicare levy surcharge low-income threshold
1.18 References to the individual low-income threshold amount of $23,365 in the
Medicare levy surcharge provisions (in sections 8D and 8G of the Medicare
Levy Act 1986) in respect of the Medicare levy surcharge payable on taxable
income for a person who is married (or both married and a beneficiary of a
trust) are also increased to $24,276.
11
Medicare levy and Medicare levy surcharge income thresholds
[Schedule 1, items 10 to 13, paragraphs 8D(3)(c) and 8G(2)(c) and
subparagraphs 8D(4)(a)(ii) and 8G(3)(a)(ii) of the Medicare Levy Act 1986]
1.19 References to the individual low-income threshold amount of $23,365 in the
Medicare levy surcharge provisions (in sections 15 and 16 of the A New Tax
System (Medicare Levy Surcharge -- Fringe Benefits) Act 1999) in respect of
the Medicare levy surcharge on reportable fringe benefits are also increased to
$24,276.
[Schedule 1, item 1, paragraphs 15(1)(c) and 16(2)(c) of the A New Tax
System (Medicare Levy Surcharge -- Fringe Benefits) Act 1999]
Commencement, application, and transitional
provisions
1.20 Schedule 1 to the Bill commences on the day after it receives Royal Assent.
1.21 The amendments apply retrospectively from the start of the 2022-23 income
year. However, they are beneficial to all affected taxpayers as they
retrospectively reduce or remove liability for Medicare levy and the Medicare
levy surcharge that would otherwise apply to affected taxpayers.
1.22 Schedule 1 to the Bill applies to assessments for the 2022-23 income year and
later income years.
[Schedule 1, item 14]
12
Maintaining the
Commonwealth Bank superannuation
fund guarantee
Table of Contents:
Outline of chapter ................................................................................ 13
Context of amendments ....................................................................... 13
Comparison of key features of new law and current law ...................... 14
Detailed explanation of new law .......................................................... 14
Commencement, application, and transitional provisions .................... 16
Outline of chapter
2.1 As part of the privatisation of the Commonwealth Bank, the Commonwealth
Government provided a guarantee to ensure that pre-privatisation members of
the CBA Super fund would not risk losing their superannuation following
privatisation. Schedule 2 to the Bill ensures that those members will continue
to have the assurance of the existing Commonwealth guarantee if the CBA
Super fund is merged with another superannuation fund.
Context of amendments
2.2 Generally, a superannuation fund cannot transfer members' benefits to another
fund without the members' consent. However, superannuation funds are
permitted to transfer members to another superannuation fund (without
members' consent), as long as members will receive equivalent benefits from
the new fund following the transfer. This process is known as a 'successor fund
transfer', and the fund receiving the members is the 'successor fund'.
2.3 This legislative framework ensures members will be no worse off if they are
transferred to another superannuation fund (without their consent). Indeed,
members of smaller funds may benefit from a transfer to a larger and better
performing super fund.
13
Maintaining the Commonwealth Bank superannuation fund guarantee
2.4 Members who joined the CBA Super fund prior to privatisation of the
Commonwealth Bank have their contributions to, and payments from, that fund
guaranteed by the Commonwealth. This guarantee only applies to that fund (in
existence at the time of privatisation). This means the Commonwealth
guarantee ceases to apply if a pre-privatisation member of the CBA Super fund
chooses to leave that fund.
2.5 This also means the Commonwealth guarantee ceases to apply if the
CBA Super fund merges with another superannuation fund. As the
Commonwealth guarantee could be considered a member benefit, this could be
an impediment to the Trustee of the CBA Super fund transferring member
members to another fund in accordance with the successor fund rules in the
event of a merger between the CBA Super fund and another superannuation
fund.
Comparison of key features of new law and
current law
Table 2.1 Comparison of new law and current law
New law Current law
The Commonwealth guarantees payments The Commonwealth guarantees payments to
to and from the CBA Super fund or a and from the CBA Super fund, by the trustee
successor fund, by the trustee of that fund of that fund or by the Commonwealth Bank,
or by the Commonwealth Bank, in respect in respect of a pre-privatisation member of
of a pre-privatisation member of that fund. that fund.
Detailed explanation of new law
2.6 Subsection 117(3) of the Commonwealth Banks Act provides the legislative
basis for the existing Commonwealth government guarantee. The guarantee
only applies to persons who were members, retired members or beneficiaries of
the CBA Super fund prior to privatisation of the Commonwealth Bank -
collectively referred to as pre-privatisation members of the CBA Super fund.
The guarantee also only applies to amounts:
• payable to or from the CBA Super fund; and
• paid by the trustee of the CBA Super fund, or by the Commonwealth
Bank.
2.7 Schedule 2 to the Bill inserts a new provision which ensures that the existing
Commonwealth guarantee continues to apply to these pre-privatisation
14
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
members of the CBA Super fund following a successor fund transfer. That is,
the amended Commonwealth guarantee only applies to a person who:
• prior to a successor fund transfer--was a pre-privatisation member of
the CBA Super fund; and
• following a successor fund transfer--continues to hold an interest in
the successor fund.
[Schedule 2, item 1, subsection 117(3A) of Commonwealth Banks
Act]
2.8 Consistent with the parameters of the existing Commonwealth guarantee, in
the event of a successor fund transfer, the amended guarantee would only
apply to amounts:
• payable to or from the successor fund; and
• paid by the trustee of the successor fund, or by Commonwealth Bank.
[Schedule 2, item 1, subsection 117(3A) of Commonwealth Banks
Act]
2.9 The amended Commonwealth guarantee would apply if the CBA Super fund
merges with another regulated superannuation fund via a successor fund
transfer, within the legislative frameworks of the ITAA 1997 and the
Superannuation Industry (Supervision) Act 1993. A regulated superannuation
fund has the same meaning as in the Superannuation Industry (Supervision)
Act 1993.
[Schedule 2, items 1 and 2, subsections 117(3A) and (4) of Commonwealth
Banks Act]
2.10 These amendments ensure that, for pre-privatisation members, the
Commonwealth guarantee would continue to apply to the successor fund in the
same way that it currently applies to the CBA Super fund. On that basis, there
would be no change in rights between the CBA Super fund and the successor
fund in regard to the guarantee. For avoidance of doubt these amendments also
specify that it is not necessary to take the Commonwealth guarantee into
consideration when determining whether those members will receive
equivalent rights from the new fund following a successor fund transfer.
[Schedule 2, item 1, subsection 117(3B) of Commonwealth Banks Act]
2.11 Any member of a superannuation fund may choose to switch to another fund.
Members of the CBA Super fund have those same rights. The Commonwealth
guarantee no longer applies if a pre-privatisation member of the CBA Super
fund chooses to leave that fund, or if they choose to leave the successor fund
following a successor fund transfer.
15
Maintaining the Commonwealth Bank superannuation fund guarantee
Commencement, application, and transitional
provisions
2.12 The amendments commence on the day after Royal Assent.
16
Tax accounting for primary
producer registered emissions units
Table of Contents:
Outline of chapter ................................................................................ 17
Context of amendments ....................................................................... 17
Comparison of key features of new law and current law ...................... 19
Detailed explanation of new law .......................................................... 20
Eligibility for concessional tax treatment........................................ 20
Arrangements with carbon service providers ................................ 21
Exclusions ..................................................................................... 22
Calculating the taxable primary production income ....................... 22
Consequential amendments ................................................................ 24
Commencement, application, and transitional provisions .................... 24
Outline of chapter
3.1 Schedule 3 to the Bill amends the ITAA 1997 to allow eligible primary
producers to treat certain carbon abatement income as primary production
income for the purposes of the Farm Management Deposit Scheme and
accessing income tax averaging arrangements for primary producers.
3.2 All legislative references in this chapter are to the ITAA 1997 unless otherwise
stated.
Context of amendments
3.3 Australian carbon credit units are issued by the Clean Energy Regulator for
carbon abatement activities undertaken as part of the Australian Government's
Emissions Reduction Fund.
17
Tax accounting for primary producer registered emissions units
3.4 Currently, primary producers who sell Australian carbon credit units cannot
treat the income as primary production income and therefore do not
automatically qualify for concessional tax treatment under the Farm
Management Deposit Scheme or income tax averaging for such income.
3.5 The Farm Management Deposit Scheme allows eligible primary producers to
make deposits under the scheme to reduce their taxable income in years of
good cash flow and to draw down on that income by making withdrawals in
years when they need the income. Similarly, income tax averaging allows
primary producers to even out their income tax liability from year to year by
reducing the effect that fluctuations in their taxable income have on the
marginal rates of tax that apply to them from year to year.
3.6 Holders of Australian carbon credit units are also currently taxed based on
changes in the value of their Australian carbon credit units each income year,
which can result in tax liabilities arising prior to sale.
3.7 The Government is taking practical steps to move towards net zero emissions
and protect the environment by encouraging primary producers to undertake
additional carbon abatement activities. In particular, the Government is
providing concessional tax treatment for the net proceeds of sale of Australian
carbon credit units and income derived from farm abatement activities with
carbon service providers supporting such units.
3.8 Eligible primary producers will be able to treat the net proceeds from the sale
of Australian carbon credit units they first held on or after 1 July 2022 as
primary production income for the purposes of the Farm Management Deposit
Scheme and accessing income tax averaging arrangements, provided they are
individuals who meet the specified criteria. Specifically, under the new
amendments, income derived indirectly from a trust to an eligible primary
producer will be considered net income and income received directly as an
individual will be considered gross income.
3.9 The taxing point for Australian carbon credit units held by eligible primary
producers will also be changed to the point of sale. Similarly, income derived
from farm abatement activities with carbon service providers supporting such
units first held on or after 1 July 2022 will be treated as primary production
income for the purposes of the Farm Management Deposit Scheme and
accessing income tax averaging arrangements.
3.10 This new tax incentive will encourage primary producers to diversify their
income by generating and selling Australian carbon credit units and supporting
the creation of such units, as it helps to balance out other fluctuations in
income derived from farming.
3.11 Deferring the taxation point until the point of sale for eligible individual
primary producers also benefits the cash flow position of primary producers,
encouraging more primary producers to increase their carbon abatement
activities.
18
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
3.12 Targeted support to primary producers will further incentivise more carbon
abatement projects in the agricultural sector and drive investment in regional
communities, while helping Australia achieve its commitment to net zero
emissions by 2050.
Comparison of key features of new law and
current law
Table 3.1 Comparison of new law and current law
New law Current law
Proceeds from selling Australian carbon Proceeds from selling Australian carbon
credit units and income derived from farm credit units and income derived from farm
abatement activities supporting such units, abatement activities with carbon service
are treated as primary production income providers supporting such units are treated as
for primary producers' eligibility for non-primary production income and,
concessional tax treatment under the Farm accordingly, are ineligible for concessional
Management Deposit Scheme and tax tax treatment under the Farm Management
averaging. Concessional treatment does not Deposit Scheme and tax averaging.
apply to companies and trusts.
Holders of primary producer registered Holders of Australian carbon credit units are
emissions units (that is, Australian carbon taxed based on changes in the value of their
credit units held by eligible primary Australian carbon credit units each year.
producers) are not taxed based on changes
in the value of their Australian carbon
credit units each year.
Instead, eligible primary producers holding
primary producer registered emissions units
are taxed based on the net proceeds (or net
income derived from farm abatement
activities supporting such units) in the year
they are sold.
Subdivision 420-D is still applicable to
trusts. Individual beneficiaries will be taxed
on the changes of the value of the
Australian carbon credit units which are
held by the trust.
19
Tax accounting for primary producer registered emissions units
Detailed explanation of new law
Eligibility for concessional tax treatment
3.13 Concessional tax treatment under the Farm Management Deposit Scheme and
income tax averaging is available for the net proceeds from the sale of an
Australian carbon credit unit or net income derived from another entity that
holds such a unit when the following conditions are met:
• the Australian carbon credit unit is first held on or after 1 July 2022;
• the unit is issued under the Carbon Credits (Carbon Farming
Initiative) Act 2011 in relation to an 'eligible offsets project' (within
the meaning of subsection 27(2) of the Carbon Credits (Carbon
Farming Initiative) Act 2011 which provides that an offsets project will
be considered an eligible offsets project if the Minister declares it to
be), or the unit is transferred by a carbon service provider that held a
unit issued under the Carbon Credits (Carbon Farming Initiative) Act
2011 in relation to an eligible offsets project;
• at all times while the eligible offsets project is carried on, a primary
production business is also carried on in the same area as the offsets
project or in an area connected to an area in which the offsets project is
carried on; and
• the primary production business mentioned above is carried on by an
individual (but not an individual in their capacity as a trustee of a trust)
or a trust (which the individual is a beneficiary of) or a partnership
(which the individual is a partner in). An individual's eligibility could
be met under one or more of the above criteria depending on their
circumstances (that is, they may meet the conditions of an individual, a
beneficiary of a trust, a partner in a partnership or a combination at
different times).
[Schedule 3, item 3, section 420-13 and note 3 to section 420-13]
3.14 An Australian carbon credit unit that meets the above conditions deeming
eligibility for concessional tax treatment is known as a primary producer
registered emissions unit.
[Schedule 3, item 7, subsection 995-1(1)]
3.15 'Hold' has the same meaning as in section 5 of the Carbon Credits (Carbon
Farming Initiative) Act 2011. An Australian carbon credit unit is held by a
person if the person is the registered holder of the unit.
3.16 Existing Subdivision 420-D that sets out the tax treatment for registered
emissions units is intended to continue to apply unaffected if the above
conditions are not met, such as for pre-1 July 2022 units or where the primary
20
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
production activity is not carried on as required.
[Schedule 3, item 4, section 420-62]
3.17 The cost of an Australian carbon credit unit issued under the Carbon Credits
(Carbon Farming Initiative) Act 2011 as set out in section 420-60 of
Subdivision 420-D is not affected by these amendments - that is, the cost of an
Australian carbon credit unit, whether or not it is a primary producer
registered emissions unit, will be its market value immediately after the holder
began to hold the unit.
[Schedule 3, item 4, section 420-62]
Arrangements with carbon service providers
3.18 An entity that carries on the business of providing services wholly or mainly
relating to offsets projects, is known as a carbon service provider.
3.19 Such services include those involving the entity carrying out such projects as
the project proponent (within the meaning of section 5 of the Carbon Credits
(Carbon Farming Initiative) Act 2011 which provides that the project
proponent means the person who is responsible for carrying out the project and
has the legal right to carry out the project).
[Schedule 3, item 7, subsection 995-1(1)]
3.20 An eligible primary producer may enter an arrangement with a carbon service
provider to undertake carbon abatement activities, which results in the carbon
service provider being issued Australian carbon credit units. The proceeds that
the primary producer receives from the carbon service provider as part of this
arrangement, whether it be a regular payment or proceeds from the sale of the
Australian carbon credit units, are considered assessable primary production
income. Furthermore, if the carbon service provider provides the primary
producer with Australian carbon credit units directly as part of their
commercial agreement, these Australian carbon credit units (and proceeds from
the sale of these Australian carbon credit units) are also considered assessable
primary production income.
[Schedule 3 item 2, paragraph 392-80(2)(e)]
3.21 The net proceeds from the sale of units that accrue to the primary producer and
net income derived from farm abatement activities supporting such units are
eligible for concessional tax treatment (when the above conditions are met).
3.22 However, where the arrangement between the eligible primary producer and
carbon service provider takes a form of a rental or lease arrangement, then any
income or Australian carbon credit units derived from this arrangement are
excluded from the concessional tax treatment. This ensures that the
concessional tax treatment is only provided to eligible primary producers
conducting carbon abatement activities on their land, rather than leasing their
land to a third party that undertakes the carbon abatement activity. This is
consistent with the treatment that applies generally under the tax law that
21
Tax accounting for primary producer registered emissions units
income from leasing of farmland is property income rather than primary
production income.
[Schedule 3, item 2, subparagraphs 392-80(2)(e)(iii) and 392-80(3)(d)(iii)]
Exclusions
3.23 Concessional tax treatment is only intended to apply to units issued under the
Carbon Credits (Carbon Farming Initiative) Act 2011 in relation to an 'eligible
offsets project'. Concessional tax treatment will not apply to subsequent
holdings of units - if a primary producer disposes of a unit, and that unit is
later acquired by a new holder or reacquired by the same primary producer,
concessional tax treatment is not available for that unit.
[Schedule 3, item 3, notes 1 and 2 to section 420-13]
3.24 Incorporated farms are excluded, which essentially maintains the current
arrangements in relation to eligibility for the Farm Management Deposit
Scheme - that is, companies are not eligible for a Farm Management Deposit.
The tax treatment set out in existing subdivision 420-D is intended to continue
to apply for units held by companies and trusts. When Australian carbon credit
units are held by trusts and not disposed of, the beneficiaries will be subject to
the existing treatment under Division 420-D in which the Australian carbon
credit units will be taxed based on the increase or decrease in the value of the
Australian carbon credit units. The derived income from the trusts by
beneficiaries in this circumstance will not be considered primary production
income.
Calculating the taxable primary production income
3.25 Existing Divisions 392 and 393 set out the rules for the Farm Management
Deposit Scheme and tax averaging. These Divisions apply in relation to the net
proceeds from the sale of units that meet the eligibility conditions and the net
income derived from farm abatement activities supporting such units.
[Schedule 3, items 5 and 6, subsections 420-65(7) and 420-70(3)]
3.26 Whether the primary producer would have the benefit of income tax averaging
or the Farm Management Deposit Scheme will depend on the application of
those schemes for the particular income year in which the sale of Australian
carbon credit units occurs or net income is derived from farm abatement
activities supporting such units.
3.27 Taxable primary production income is taken into account to work out the
averaging adjustment for the purposes of averaging of a primary producer's tax
liability. It is also used to determine entitlement to the Farm Management
Deposit Scheme.
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Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
3.28 Taxable primary production income is worked out using assessable primary
production income and primary production deductions.
3.29 For the income year that the sale of a unit occurs, the following can be
included in the primary producer's assessable primary production income:
• any amount included in assessable income for that year because the
primary producer ceases to hold the unit;
• if the primary producer is a beneficiary of a trust that is carrying on a
primary production business - any amount included in basic assessable
income for that year to the extent that that amount is the primary
producer's share of the trust's net income that is attributable to, or
resulted from, an amount included in the assessable income of the trust
because the trust ceases to hold the unit;
• if the primary producer is a partner in a partnership that is carrying on
a primary production business - any amount included in basic
assessable income for that year to the extent that that amount is the
primary producer's share of the partnership's net income that is
attributable to, or resulted from, an amount included in the assessable
income of the partnership because one of the partners ceases to hold
the unit; and
• if the primary producer is under an arrangement with a carbon service
provider - any amount included in basic assessable income for that
year that was derived from, or resulted from, the arrangement to the
extent that the arrangement relates to the carbon service provider
starting to hold, holding or ceasing to hold the unit.
3.30 The above applies to any unit that meets the eligibility conditions or would
meet the eligibility conditions had the primary producer started to hold, held
and ceased to hold the unit instead of the trust, holding partner or provider. For
example, if the primary producer is a beneficiary of a trust that is carrying on a
primary production business - the primary producer will put themselves in the
place of the trust and see if the unit would thus satisfy the eligibility conditions
to be a primary producer registered emissions unit.
[Schedule 3, item 2, subsection 392-80(2)]
3.31 For the income year that the sale of a unit occurs, the following can be
included in the primary producer's primary production deductions:
• so much of any deductible amounts for that year in relation to
expenditure the primary producer incurs in starting to hold, holding or
ceasing to hold the unit; and
• if the primary producer is under an arrangement with a carbon service
provider - so much of any deductible amounts for that year in relation
to expenditure the primary producer incurs under the arrangement to
the extent that the arrangement relates to the carbon service provider
starting to hold, holding or ceasing to hold the unit.
23
Tax accounting for primary producer registered emissions units
3.32 The above applies to any unit that meets the eligibility conditions or would
meet the eligibility conditions had the primary producer started to hold, held
and ceased to hold the unit instead of the provider. For example, if the primary
producer is under an arrangement with a carbon service provider - the primary
producer will put themselves in the place of the provider and see if the unit
would thus satisfy the eligibility conditions to be a primary producer registered
emissions unit.
[Schedule 3, item 2, subsection 392-80(3)]
3.33 A note has been included to clarify that primary producers can deduct
expenditure incurred in preparing or lodging an application for a 'certificate of
entitlement' (within the meaning of section 15 of the Carbon Credits (Carbon
Farming Initiative) Act 2011) or an 'offsets report' (within the meaning of
section 76 of the Carbon Credits (Carbon Farming Initiative) Act 2011).
[Schedule 3, item 2, note 1 to subsection 392-80(3)]
3.34 A further note has been included to clarify that expenditure incurred in ceasing
to hold a unit is currently a deduction under existing section 420-42.
[Schedule 3, item 2, note 2 to subsection 392-80(3)]
3.35 Primary producers and other businesses continue to be entitled to deduct
amounts under existing Division 8. For example, businesses can deduct
expenditure incurred in establishing a carbon farming project (that is, cost of
trees (deducted over a number of income years) and water and fertiliser in
establishing and maintaining a tree planting project for carbon sequestration).
In addition, other related activities which may be undertaken to derive
Australian carbon credit units can be deducted under specific provisions such
as Division 40-J which provides for deductions for carbon sink forests.
Consequential amendments
3.36 Schedule 3 to the Bill also amends the meaning of the expression basic
assessable income to correct some technical and typographical errors.
[Schedule 3, item 1, subsection 392-45(2)]
Commencement, application, and transitional
provisions
3.37 The amendments commence on the first 1 January, 1 April, 1 July or 1 October
to occur after the date the Bill receives Royal Assent.
3.38 The amendments apply to assessments for the income year that includes 1 July
2022 and later income years Accordingly, the amendments in Schedule 3 to the
24
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
Bill have retrospective application.
[Schedule 3, item 8]
3.39 The amendments apply retrospectively to ensure that primary producers
qualify for the concessional tax treatment as announced in the March 2022-23
Budget - that is, if Australian carbon credit units are first held on or after
1 July 2022, concession tax treatment may apply to the units provided they
meet the eligibility conditions. The changes provide an overall benefit to
persons affected by these amendments because they allow concessional income
tax treatment by enabling the smoothing out of income and tax liabilities over
income years.
25
Cash flow relief for small
and medium businesses
Table of Contents:
Outline of chapter ................................................................................ 27
Context of amendments ....................................................................... 27
Comparison of key features of new law and current law ...................... 28
Detailed explanation of new law .......................................................... 29
Commencement, application, and transitional provisions .................... 29
Outline of chapter
4.1 Schedule 4 to the Bill amends the TAA 1953 to reduce the GDP adjustment
factor for the 2023-24 income year to 6 per cent. The GDP adjustment factor is
applied by the Commissioner to work out the amount of PAYG and GST
instalments payable by a taxpayer in certain circumstances.
Context of amendments
4.2 Most small businesses and some individuals are required to pay instalments
toward their expected annual income tax under the PAYG instalment system.
The difference between instalment payments and the taxpayer's final tax
liability is reconciled in a wash-up payment or refund at the time an income tax
assessment is made (generally at the end of the income year).
4.3 Small and medium business entities that are liable to pay GST may also elect
to pay by instalments. The amount of the GST instalments payable by a
business entity is worked out by the Commissioner taking into account the
GDP adjustment factor.
4.4 There are a number of methods to determine tax instalments based on previous
tax outcomes. These include:
• the Instalment Rate method - under this method the amount of the
instalment is worked out based on income as a proxy for profit within
instalment periods; and
27
Cash flow relief for small and medium businesses
• the Quarterly Instalment Amount method - under this method the
amount of the instalment is worked out based on previous tax
outcomes that are uplifted based on the nominal increase in GDP over
the previous two calendar years.
4.5 Taxpayers can vary their instalments if they consider their income is expected
to be lower or higher than the amount determined by the Commissioner.
4.6 The Commissioner has advised that without this amendment, the GDP
adjustment factor that will apply to work out instalments for the 2023-24
income year under the Quarterly Instalment Amount method will be 12 per
cent.
4.7 The GDP adjustment factor can be unrepresentative of expected profit growth
in income years where economic and business conditions change quickly and
the expected income of taxpayers changes accordingly. This can cause
taxpayers to be required to pay instalments that are too high compared with
their actual income, with the overpaid tax being credited to them after the end
of the income year when their final tax liability is assessed.
4.8 The current 2023-24 GDP adjustment factor of 12 per cent is high compared to
previous years. This significant increase can be attributed to higher commodity
prices (especially within the mining sector), inflation, and GDP growth.
Therefore, having regard to these economic and business conditions, the GDP
adjustment factor that applies to work out the amount of instalments payable is
reduced to 6 per cent for the 2023-24 income year.
Comparison of key features of new law and
current law
Table 4.1 Comparison of new law and current law
New law Current law
The GDP adjustment factor used by the The GDP adjustment factor used by the
Commissioner to work out PAYG Commissioner to work out PAYG
instalments under the Quarterly Instalment instalments under the Quarterly Instalment
Amount method for the 2023-24 income Amount method for the 2023-24 income
year will be 6 per cent. year will be 12 per cent.
The Commissioner will apply the GDP The Commissioner will apply the GDP
adjustment factor to work out the amount adjustment factor to work out the amount of
of GST instalments payable by business GST instalments payable by business entities
entities in the 2023-24 income year. in the 2023-24 income year.
28
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
Detailed explanation of new law
4.9 Schedule 4 to the Bill amends section 45-405 in Schedule 1 to the TAA 1953
to reduce the GDP adjustment factor for the 2023-24 income year to 6 per cent.
4.10 Taxpayers who make PAYG and GST instalments on the basis of the Quarterly
Instalment Amount method are required to pay a percentage of their GDP
adjusted notional tax each quarter as worked out under either section 45-400 or
section 45-402 in Schedule 1 to the TAA 1953.
4.11 GDP adjusted notional tax is calculated by the Commissioner under section 45-
405 in Schedule 1 to the TAA 1953. Broadly, a taxpayer's GDP adjusted
notional tax is calculated by increasing the taxpayer's adjusted taxable income
from their recent income tax return by the GDP adjustment factor to give the
adjusted taxable income for the purposes of calculating their notional tax for
the current income year.
4.12 The GDP adjustment factor is generally calculated using the formula in
subsection 45-405(3) in Schedule 1 to the TAA 1953. However, for the 2023-
24 income year, the GDP adjustment factor is set at 6 per cent.
[Schedule 4, item 1, subsection 45-405(10) in Schedule 1 of the TAA 1953]
4.13 The Commissioner will apply the reduced GDP adjustment factor to work out
the amount of GST instalments payable by eligible taxpayers in the 2023-24
income year.
4.14 Taxpayers may still vary their quarterly instalments if they consider their
income is expected to be lower or higher than the amount determined by the
Commissioner using the 6 per cent GDP adjustment factor.
4.15 The reduction of the GDP adjustment factor does not alter the relevant
taxpayer's overall tax liability. Instead, the reduction minimises adverse
impacts on cashflow for the 2023-24 income year as instalments fall due.
Commencement, application, and transitional
provisions
4.16 The amendments commence on the day after Royal Assent of the Bill.
4.17 These amendments will apply for the purposes of working out the amount of
PAYG and GST instalments for instalments quarters of the 2023-24 income
year.
[Schedule 4, item 2]
4.18 This will ensure that the measure will apply for the purposes of working out
the amount of a taxpayer's instalments in relation to the 2023-24 income year
(including the PAYG instalments payable by a taxpayer that has a substituted
29
Cash flow relief for small and medium businesses
accounting period). For relevant taxpayers with substituted accounting periods
that are early balancers for the 2023-24 income year, the reduction of the GDP
adjustment factor to 6 per cent does not cause a disadvantage as there is a
reduction in the applicable instalments.
4.19 To avoid inoperative provisions remaining in the tax laws, the provisions that
give effect to this measure will be automatically repealed on 1 July 2028.
[Schedule 4, item 1]
30
Enhancements to the Home
Guarantee Scheme
Table of Contents:
Outline of chapter ................................................................................ 31
Context of amendments ....................................................................... 31
Summary of new law............................................................................ 32
Detailed explanation of new law .......................................................... 32
Enhancement of the Home Guarantee Schemes .......................... 32
Enhancement of the Family Home Guarantee .............................. 33
The Investment Mandate............................................................... 33
Commencement, application, and transitional provisions .................... 34
Outline of chapter
5.1 Schedule 5 to the Bill amends the NHFIC Act to expand the objects of the Act,
providing for the NHFIC to improve housing outcomes for Australians by
assisting earlier access to the housing market for eligible individuals who have
not held an ownership interest in real property in Australia in the preceding 10
years, as well as single legal guardians of children. The amendments to the
objects of the NHFIC Act enable the Minister to issue directions to the NHFIC
concerning eligibility for the Home Guarantees through the Investment
Mandate.
Context of amendments
5.2 The NHFIC Act establishes the NHFIC and its functions. Directions to the
NHFIC regarding the performance of its functions are given by the Minister in
the Investment Mandate.
5.3 In giving a direction through the Investment Mandate, the Minister must have
regard to the object of the NHFIC Act in section 3 of that Act and any other
matters the Minister considers relevant. Further, the Minister must not give a
31
Enhancements to the Home Guarantee Scheme
direction that is inconsistent with the NHFIC Act, including the object of the
Act (see paragraph 14(b) of the NHFIC Act).
5.4 One of the NHFIC's functions is to issue guarantees to improve housing
outcomes. Directions regarding this function are set out in Part 5A of the
Investment Mandate. The guarantees which the amendments apply to include
the First Home Guarantee, the Regional First Home Buyer Guarantee and the
Family Home Guarantee.
5.5 The Government intends to allow the NHFIC to provide guarantees to support:
• eligible individuals who may not be first home buyers, but who have
not held an ownership interest in real property in Australia in the
preceding 10 years; and
• legal guardians of children where the legal guardian is single.
5.6 This recognises the importance of housing in providing a foundation for social,
economic and emotional wellbeing.
Summary of new law
5.7 Schedule 5 to the Bill expands the objects of the NHFIC Act to make clear the
Minister's power to issue a direction to the NHFIC includes the power to issue
directions regarding assisting earlier access, or re-entry, to the housing market
by eligible individuals who have not held an ownership interest in real property
in Australia in the preceding 10 years. It also provides for the expansion of the
Family Home Guarantee to include single legal guardians of children.
Detailed explanation of new law
Enhancement of the Home Guarantee Schemes
5.8 Schedule 5 to the Bill expands the objects of the NHFIC Act to improve
housing outcomes for Australians by assisting earlier access to the housing
market for individuals who have not held an ownership interest in real property
in Australia in the preceding 10 years.
[Schedule 5, item 1, paragraph 3(g) of the NHFIC Act]
5.9 The purpose of adding this new object to the NHFIC Act is to enable the
Minister to issue a direction to the NHFIC for guarantees to be issued to
eligible individuals who have not held an ownership interest in real property in
Australia in the preceding 10 years, regardless of whether they are first home
buyers or previous property owners.
32
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
5.10 This would include where two individuals seek to purchase a home together, so
that one individual could be a first home buyer whilst the other would qualify
if they have not held an ownership interest in a real property in Australia in the
past 10 years, or both previously held an ownership interest in real properties
in Australia jointly or separately more than 10 years ago.
5.11 The changes recognise the importance of housing in providing a foundation for
social, economic and emotional wellbeing, and expands current support
beyond first home buyers. Through the addition of the new object, the
Government is providing a pathway to allow eligible individuals to return to
home ownership. This may include individuals who despite previously owning
a property, may have been forced to sell and found it difficult to return to the
housing market while paying rent. Accordingly, the amendments allow them to
build or purchase a home sooner, subject to their ability to service a loan.
Enhancement of the Family Home Guarantee
5.12 The intention of the Family Home Guarantee is to provide assistance in
entering the housing market to single individuals with dependants. Schedule 5
to the Bill amends the existing NHFIC Act to extend support to single
individuals who are legal guardians of children, regardless of whether the
individuals are parents.
[Schedule 5, item 1, paragraph 3(f) of the NHFIC Act]
5.13 The clarification provided by this amendment ensures that all single
individuals with dependants, including single legal guardians of children, are
able to access support from the NHFIC in entering the housing market. The
amendment recognises that opportunities to realise homeownership should be
broadened beyond single parents to those who are not natural or adoptive
parents of a child.
The Investment Mandate
5.14 The Investment Mandate will be amended to allow some non-first home buyers
to access the First Home Guarantee and Regional First Home Buyer Guarantee
Schemes. This will apply where they have not held a freehold interest in real
property in Australia, a lease of land in Australia (including a renewal or
extension of such a lease) or, a company title interest in land in Australia, in
each case, in the last 10 years.
5.15 The Investment Mandate will also be amended to allow single legal guardians
of children to access the Family Home Guarantee on the same terms that single
parents with dependants are able to currently.
5.16 The deposit requirements, caps on taxable income of individuals and the
property price caps under the Home Guarantee Schemes will remain
unchanged.
33
Enhancements to the Home Guarantee Scheme
5.17 It is appropriate for the details of the guarantees to be included in the
Investment Mandate to ensure the scheme promotes consistency with the
existing legislative framework already approved by the Parliament and in place
under the NHFIC Act. Including the guarantee in the Investment Mandate also
allows refinements to be made to reflect new information and changes in
market conditions.
5.18 In accordance with item 2 of the table in section 9 of the Legislation
(Exemptions and Other Matters) Regulation 2015, the Investment Mandate is
not disallowable as it is a direction by a Minister to a person or body. It is
appropriate that the Investment Mandate is not disallowable as it is a
ministerial direction, and therefore executive control is intended.
Commencement, application, and transitional
provisions
5.19 Schedule 5 to the Bill commences on the later of 1 July 2023 and the day after
Royal Assent.
[Clause 2]
5.20 The commencement provision ensures that, subject to changes to the
Investment Mandate, the NHFIC is able to start to issue guarantees under the
relevant Home Guarantee Schemes on 1 July 2023. However, if Royal Assent
has not occurred by 30 June 2023, guarantees under the Home Guarantee
Schemes can be issued from the later date of commencement of Schedule 5 to
the Bill.
5.21 Schedule 5 to the Bill amends the NHFIC Act. However, the Treasury Laws
Amendment (Housing Measures No. 1) Bill 2023 contains provisions to rename
the NHFIC Act as the Housing Australia Act 2018. If, the NHFIC Act is
renamed to the Housing Australia Act 2018 prior to the commencement of
these amendments, then references to the NHFIC Act are instead treated as
references to the Housing Australia Act 2018. This is in accordance with
section 10 of the Acts Interpretation Act 1901.
34
Statement of Compatibility
with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
Table of Contents:
Schedule 1 - Medicare levy and Medicare levy surcharge income
thresholds ............................................................................................ 36
Overview ....................................................................................... 36
Human rights implications ............................................................. 36
Conclusion .................................................................................... 36
Schedule 2 - Maintaining the Commonwealth Bank superannuation fund
guarantee............................................................................................. 37
Overview ....................................................................................... 37
Human rights implications ............................................................. 37
Conclusion .................................................................................... 37
Schedule 3 - Tax accounting for primary producer registered emissions
units ..................................................................................................... 37
Overview ....................................................................................... 37
Human rights implications ............................................................. 38
Conclusion .................................................................................... 38
Schedule 4 - Cash flow relief for small and medium businesses ......... 39
Overview ....................................................................................... 39
Human rights implications ............................................................. 39
Conclusion .................................................................................... 39
Schedule 5 - Enhancements to the Home Guarantee Scheme ........... 39
Overview ....................................................................................... 39
35
Statement of Compatibility with Human Rights
Human rights implications ............................................................. 40
Conclusion .................................................................................... 40
Schedule 1 - Medicare levy and Medicare levy
surcharge income thresholds
Overview
6.1 Schedule 1 to the Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011.
6.2 Schedule 1 to the Bill amends the Medicare Levy Act 1986 and the A New Tax
System (Medicare Levy Surcharge--Fringe Benefits) Act 1999 to:
• increase the Medicare levy low-income thresholds for individuals and
families (along with the dependent child-student component of the
family threshold) in line with movements in the CPI;
• increase the Medicare levy low-income thresholds for individuals and
families eligible for the SAPTO (along with the dependent child-
student component of the family threshold), in line with movements in
the CPI; and
• increase the Medicare levy surcharge low-income threshold in line the
movements in the CPI.
6.3 This will ensure that low-income individuals, families, seniors and pensioners
who were exempt from the Medicare levy in the 2021-22 income year continue
to be exempt in the 2022-23 income year if their income has increased in line
with, or less than, movements in the CPI.
Human rights implications
6.4 Schedule 1 to the Bill does not engage any of the applicable rights or freedoms.
Conclusion
6.5 Schedule 1 to the Bill is compatible with human rights as it does not raise any
human rights issues.
36
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
Schedule 2 - Maintaining the Commonwealth
Bank superannuation fund guarantee
Overview
6.6 Schedule 2 to the Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011.
6.7 As part of the privatisation of the Commonwealth Bank, the Commonwealth
Government provided a guarantee to ensure that pre-privatisation members of
the CBA Super fund would not risk losing their superannuation following
privatisation. Schedule 2 to the Bill ensures that those members will continue
to have the assurance of the existing Commonwealth guarantee if the CBA
Super fund is merged with another superannuation fund.
Human rights implications
6.8 Schedule 2 to the Bill does not engage any of the applicable rights or freedoms.
Conclusion
6.9 Schedule 2 to the Bill is compatible with human rights as it does not raise any
human rights issues.
Schedule 3 - Tax accounting for primary
producer registered emissions units
Overview
6.10 Schedule 3 to the Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011.
6.11 Schedule 3 to the Bill amends the ITAA 1997 to allow primary producers to
treat certain carbon abatement income as primary production income for the
purposes of the Farm Management Deposit Scheme and accessing income tax
averaging arrangements for primary producers.
37
Statement of Compatibility with Human Rights
Human rights implications
6.12 Schedule 3 to the Bill promotes the right to an adequate standard of living,
including food, water and housing under Article 11 of the International
Covenant on Economic, Social and Cultural Rights.
6.13 The right to an adequate standard of living provides that Australia must take
appropriate steps towards the realisation of this right in its jurisdiction, and that
the relevant standard must be continuously improving.
6.14 Schedule 3 to the Bill improves the standard of living in Australia by providing
concessional tax treatment for the net proceeds of sale of Australian carbon
credit units and income derived from farm abatement activities supporting such
units. Each Australian carbon credit unit represents one tonne of carbon
dioxide equivalent greenhouse gas emissions stored or avoided. This targeted
support to primary producers will assist in enhancing the welfare of
Australians, by further incentivising more carbon abatement projects in the
agricultural sector while helping Australia achieve its commitment to net zero
emissions by 2050.
6.15 Schedule 3 to the Bill promotes the right to health under Article 12 of the
International Covenant on Economic, Social and Cultural Rights.
6.16 The right to health recognises the right of everyone to the enjoyment of the
highest attainable standard of physical and mental health. The Committee has
stated that the right to health embraces a wide range of socio-economic factors
that promote conditions in which people can lead a health life, and extends to
the underlying determinants of health, including a healthy environment.
6.17 Schedule 3 to the Bill would work to protect the environment by encouraging
primary producers to undertake additional carbon abatement activities. As
discussed above, Australian carbon credit units are created from eligible
carbon abatement activities for each tonne of carbon dioxide equivalent
greenhouse gas emissions stored or avoided. Encouragement of primary
producers to support the creation of such units aims to reduce carbon emissions
in Australia.
Conclusion
6.18 Schedule 3 to the Bill is compatible with human rights as it promotes the right
to an adequate standard of living and the right to health.
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Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
Schedule 4 - Cash flow relief for small and
medium businesses
Overview
6.19 Schedule 4 to the Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011.
6.20 Schedule 4 to the Bill amends the TAA 1953 to reduce the GDP adjustment
factor for the 2023-24 income year to 6 per cent. The GDP adjustment factor is
applied by the Commissioner to work out the amount of PAYG and GST
instalments payable by a taxpayer in certain circumstances.
Human rights implications
6.21 Schedule 4 to the Bill does not engage any of the applicable rights or freedoms.
Conclusion
6.22 Schedule 4 to the Bill is compatible with human rights as it does not raise any
human rights issues.
Schedule 5 - Enhancements to the Home
Guarantee Scheme
Overview
6.23 Schedule 5 to the Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011.
6.24 Schedule 5 to the Bill amends the NHFIC Act to expand the objects of the Act
to improve housing outcomes for Australians by assisting earlier access to the
housing market by eligible individuals who have not held an ownership interest
in real property in Australia in the preceding 10 years, as well as single legal
guardians of children. The amendments to the objects will enable the Minister
to issue directions to the National Housing Finance and Investment
Corporation through the Investment Mandate.
39
Statement of Compatibility with Human Rights
Human rights implications
6.25 Schedule 5 to the Bill engages the right to an adequate standard of living,
including food, water and housing under Article 11 of the International
Covenant on Economic, Social and Cultural Rights.
6.26 The right to an adequate standard of living provides that Australia must take
appropriate steps towards the realisation of this right in its jurisdiction, and that
the relevant standard must be continuously improving.
6.27 Schedule 5 to the Bill improves the standard of living in Australia by
promoting home ownership and housing affordability in Australia.
Conclusion
6.28 Schedule 5 to the Bill is compatible with human rights as it positively engages
the right to an adequate standard of living.
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