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1998-1999-2000
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
TAXATION LAWS AMENDMENT BILL (No. 8) 2000
SUPPLEMENTARY EXPLANATORY MEMORANDUM
Amendments and requests for amendments to be
moved on
behalf of the Government
(Circulated by authority of the
Treasurer, the Hon Peter
Costello, MP)
ISBN: 0642 464189
General outline and financial impact
The amendments and requests for amendments to the Bill will:
• provide that the surrender to a government of a short-term lease of land is GST-free where the surrender of the short-term lease is made in return for freehold title or a long-term lease of the land;
• clarify that all entities (including income tax exempt entities) are only able to claim input tax credits to the extent that an acquisition, in relation to the provision of a fringe benefit, is deductible under income tax law;
• ensure that the amendments relating to the application of a running balance account surplus, credit or payment to a tax debt will apply from 1 July 2000;
• ensure that the increasing adjustment for insurers in relation to the excess paid to them in certain circumstances, can be calculated on a reasonable basis that will closely approximate the calculation provided in the Bill as originally presented to the Parliament; and
• provide that if an insurer has an increasing adjustment on an excess it will have a decreasing adjustment if it refunds the excess.
Date of effect: Various.
Proposal announced: Not announced.
Financial impact: Nil.
Compliance cost impact: The first, fourth and fifth amendments will result in a reduction in compliance costs.
1. A government may supply unimproved land to a developer by way of short-term lease, subject to conditions which, if satisfied, will lead to the granting of freehold title or long-term lease to the developer.
2. The Bill contains provisions (new section 38-450) which will allow the initial supply by a government of a short-term conditional lease over unimproved Crown land to be GST-free. The Bill also contains provisions (new subsection 38-445(1A)) which will allow the ultimate supply by the government of the long-term lease or freehold title in the land to also be GST-free.
3. There are situations where the short-term conditional leases are surrendered to the government by the developer prior to the lease expiry. In return, the developer receives the freehold title or a long-term lease in the land. This request for an amendment provides that the supply of the surrender of the short-term lease by the developer is also GST-free. New subsection 38-450(2) will allow the surrender of the short-term lease over land to be GST-free where:
• the original short-term lease was GST-free; and
• in return for the surrender of the short-term lease the government makes a supply of freehold title or long-term lease in the land.
4. Amendment 1 applies from 1 July 2000.
5. An acquisition or importation of meal entertainment and entertainment facilities will only be creditable to the extent that it is deductible under sections 51AEA to 51AEC of the Income Tax Assessment Act 1936 [Schedule 3, item 9, subsection 69-5(3A)]. Subsection 69-5(3A) ensures that an entity can only claim input tax credits for acquisitions and importations to the same extent that these expenses are deductible under income tax law.
6. Amendment 2 amends Schedule 3 to the Bill to clarify that subsection 69-5(3A) applies to all entities. The amendment will make it clear that all entities (including income tax exempt entities) are only able to claim input tax credits to the extent that an acquisition in relation to the provision of a fringe benefit is of a kind that is deductible under income tax law. [Amendment 2]
7. Amendment 2 applies to net amounts for tax periods starting from 1 November 2000 for entities with monthly tax periods and 1 January 2000 for entities with quarterly tax periods.
8. This amendment is the application provision for item 4 in Schedule 5. This item introduces subsection 8AAZL(3) to give the Commissioner of Taxation (Commissioner) the discretion to refund an RBA surplus, credit or payment rather than apply it against a tax debt where:
• the debt, other than a business activity statement amount, is due but not yet payable;
• the taxpayer has complied with an arrangement to pay the debt by instalments; or
• the Commissioner has agreed to defer recovery of the debt.
9. Amendment 3 will allow subsection 8AAZL(3) to operate retrospectively. Any RBA surplus, credit or payment that arose, or arises on or after 1 July 2000 will not be required to be applied against these tax debts. Instead, the Commissioner will have the discretion to decide whether to refund the amount rather than apply it to the tax debt.
10. Amendment 3 applies from the date of Royal Assent.
11. The Bill as originally presented to Parliament provided for an increasing adjustment for insurers in relation to excesses in certain circumstances. In determining the amount of the increasing adjustment there was an apportionment calculation in the method statement in proposed section 78-18. Further consultation with the insurance industry has shown that this calculation would have been difficult to implement.
12. The proposed amendment to the calculation will allow for the excess to be apportioned on a reasonable basis that closely reflects the result that would have been achieved if the method statement in the Bill was used. [Amendment 4]
13. Further consultation with the insurance industry has also shown that there are circumstances in which an excess that has been paid to an insurer will be refunded by the insurer to the insured. If the insurer has had an increasing adjustment on the excess and it is so refunded, the insurer should have a decreasing adjustment to refund it the amount of the increasing adjustment. Amendment 5 achieves this by providing that the decreasing adjustment mechanism in Division 19 will apply.
14. Amendments 4 and 5 are taken to have applied in relation to net amounts for tax periods starting on or after 17 August 2000. Amendment 6 includes new item 25A, included in the Bill by Amendment 5, in the application provision for the insurance amendments in the Bill.