TAX LAWS AMENDMENT (2009 MEASURES NO. 1) BILL 2009 Explanatory Memorandum
TAX LAWS AMENDMENT (2009 MEASURES NO. 1) BILL 2009
2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Tax laws amendment (2009 measures no. 1) bill 2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 PAYG instalment reduction for small businesses 7
Chapter 2 Temporary residents' superannuation and unclaimed money
15
Chapter 3 Key concepts 41
Chapter 4 Amendment of payment summary provisions 55
Chapter 5 Amendment of income tests 61
Chapter 6 Regulation impact statement 77
Chapter 7 Exclusion of certain employer superannuation contributions
from test for exceptional circumstances relief payment 93
Chapter 8 Dependency tax offsets 99
Index 107
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|ANTS (MLS) Act 1999 |A New Tax System (Medicare |
| |Levy Surcharge - Fringe |
| |Benefits) Act 1999 |
|ATO |Australian Taxation Office |
|Co-contribution Act |Superannuation (Government |
| |Co-contribution for Low |
| |Income Earners) Act 2003 |
|Commissioner |Commissioner of Taxation |
|DASP Act |Superannuation (Departing |
| |Australia Superannuation |
| |Payments Tax) Act 2007 |
|EC |exceptional circumstances |
|HELP debt |Higher Education Loan Program|
| |debt |
|HESA 2003 |Higher Education Support Act |
| |2003 |
|ITAA 1936 |Income Tax Assessment Act |
| |1936 |
|ITAA 1997 |Income Tax Assessment Act |
| |1997 |
|MLA 1986 |Medicare Levy Act 1986 |
|MLS lump sum |Medicare levy surcharge lump |
| |sum |
|PAYG |pay as you go |
|RESC |reportable employer |
| |superannuation contributions |
|SATO |senior Australians tax offset|
|SGAA 1992 |Superannuation Guarantee |
| |(Administration) Act 1992 |
|SS Act 1991 |Social Security Act 1991 |
|SSAA 1995 |Small Superannuation Accounts|
| |Act 1995 |
|S(UMLM) Act |Superannuation (Unclaimed |
| |Money and Lost Members) Act |
| |1999 |
|TAA 1953 |Taxation Administration Act |
| |1953 |
|Temporary Residents |Temporary Residents' |
|Act |Superannuation Legislation |
| |Amendment Act 2008 |
|TFN |tax file number |
General outline and financial impact
PAYG instalment reduction for small businesses
Schedule 1 to this Bill amends section 45-400 of Schedule 1 to the
Taxation Administration Act 1953 (which provides how the
Commissioner of Taxation works out the amount of the pay as you go
(PAYG) instalments on the basis of GDP-adjusted notional tax for
quarterly payers paying four instalments annually) to provide for:
. a 20 per cent reduction of the amount of the PAYG
instalment worked out under the section for the quarter
that includes 31 December 2008 for certain small business
taxpayers; and
. a regulation-making power to allow the amount of the PAYG
instalment worked out under the section to be reduced in
the future in circumstances specified by regulations.
Date of effect: This measure applies in relation to instalment
quarters in the 2007-08 income year and later income years.
Proposal announced: This measure was announced in the Treasurer's
Media Release No. 140 of 12 December 2008 and the Prime Minister's
Media Release '$4.7 Billion Nation Building Package' of
12 December 2008.
Financial impact: This measure will have these revenue
implications:
|2007-08 |2008-09 |2009-10 |2010-11 |2011-12 |
|Nil |-$440m |$395m |$45m |Nil |
Compliance cost impact: Low. This measure will not require
increased compliance activity on behalf of small business
taxpayers. There is no ongoing compliance cost impact and a
minimal transitional impact.
Temporary residents' superannuation and unclaimed money
Schedule 2 to this Bill amends various Acts as a result of the
payment of temporary residents' unclaimed superannuation to the
Australian Government and to improve the administration of the
broader unclaimed money regime.
The temporary residents' superannuation amendments affect
legislation governing small superannuation accounts, superannuation
guarantee, the Government superannuation co-contribution and
administrative arrangements within the unclaimed money regime.
The changes to the broader unclaimed money regime are intended to
make the existing provisions in the Superannuation (Unclaimed Money
and Lost Members) Act 1999 (S(UMLM) Act) more compatible with the
new temporary residents' superannuation provisions which have been
inserted into the S(UMLM) Act.
Date of effect: These amendments commence on the day after Royal
Assent subject to the application, transitional and savings
provisions outlined in Part 3 of Schedule 2.
Proposal announced: These amendments have not previously been
announced.
Financial impact: Unquantifiable, but expected to have a minor or
negligible net financial impact (revenue and outlays).
Compliance cost impact: Low.
Reforms to income tests
Schedule 3 to this Bill amends relevant legislation to give effect
to measures, announced in the 2008-09 Budget, to amend income tests
across the tax and transfer systems. These measures will enhance
fairness in the application of income tests and better ensure that
government assistance is targeted to those most in need.
Overview of arrangements
Chapter 3 outlines the key concepts and definitions that will be
added to income for means-tested government assistance programs as
a result of the 2008-09 Budget measures. These concepts are
certain 'salary sacrificed' contributions to superannuation, to be
known as 'reportable superannuation contributions', and an
individual's 'total net investment loss'.
There is also a definition of 'reportable employer superannuation
contributions' (RESC) that is to be inserted in Schedule 1 to the
Taxation Administration Act 1953 (TAA 1953). RESC are employer
contributions that fall within the definition of 'reportable
superannuation contributions'.
Further, Chapter 3 inserts a new definition of 'adjusted fringe
benefits total' into the Income Tax Assessment Act 1936 (ITAA
1936). The chapter also consolidates the components of income to
be assessed for particular tax offsets and the Medicare levy
surcharge into two new definitions in section 995-1 of the Income
Tax Assessment Act 1997. These definitions are 'rebate income' and
'income for surcharge purposes' respectively.
Chapter 4 outlines the amendments to payment summary provisions in
Schedule 1 to the TAA 1953 to require reporting of RESC on payment
summaries and in the annual withholding report for the Commissioner
of Taxation (Commissioner).
Chapter 5 outlines the amendments to specific income definitions
across tax and transfer legislation for relevant affected programs
to include the new components of income as relevant. These
components are 'reportable superannuation contributions', RESC, an
individual's 'total net investment loss', and an individual's
'adjusted fringe benefits total' in respect of particular tax
offsets.
Chapter 6 is the regulation impact statement prepared in respect of
the proposal to include particular 'salary sacrificed'
contributions to superannuation in income tests.
Chapter 7 outlines amendments to the Farm Household Support Act
1992 to exclude from income, certain superannuation contributions
that would have become income for the purposes of the exceptional
circumstances relief payment as a result of reforms announced in
the 2008-09 Budget.
Chapter 8 outlines amendments to the dependency tax offset
provisions in the ITAA 1936 to align the income definitions used
for the purposes of those offsets with the 'adjusted taxable
income' definition in the A New Tax System (Family Assistance) Act
1999. As part of these reforms, this chapter repeals the 'separate
net income' definition.
Date of effect: These amendments commence the day after Royal
Assent and apply in relation to income years starting on or after 1
July 2009.
Proposal announced: The amendments in this Schedule give effect to
measures announced on 13 May 2008 as part of the 2008-09 Budget.
Financial impact: These amendments have a fiscal cost of
$545.2 million over the forward estimates (including administration
costs) as follows:
|2007-08 |2008-09 |2009-10 |2010-11 |2011-12 |
|Nil |-$15.1m |$164.0m |$192.5m |$203.8m |
Compliance cost impact: There are likely to be medium
implementation costs for employers as a result of the amendments to
payment summary requirements and a medium increase in ongoing
compliance costs. However, the design of the initiative as
reflected in the law sought to minimise compliance costs for
employers.
Summary of regulation impact statement
Regulation impact on business - inclusion of reportable superannuation
contributions in income
Impact: The amendments to include 'reportable superannuation
contributions' in income tests will affect employers,
intermediaries, welfare recipients, tax practitioners and the
Australian Government.
Main points
. The amendments will require entities to report any RESC on
individual annual and part-year payment summaries from
1 July 2009, as well as the annual withholding report for
the Commissioner.
. Intermediaries, such as payroll providers and software
developers, will need to update software packages and
payroll systems to allow for the reporting of RESC.
. The amendments will affect individuals' eligibility for
relevant means-tested government assistance programs.
Individuals will also be required to declare any
'reportable superannuation contributions' as income when
applying for government assistance.
Chapter 1
PAYG instalment reduction for small businesses
Outline of chapter
1. Schedule 1 to this Bill amends section 45-400 of Schedule 1 to the
Taxation Administration Act 1953 (TAA 1953) (which provides how the
Commissioner of Taxation (Commissioner) works out the amount of the
pay as you go (PAYG) quarterly instalments on the basis of GDP-
adjusted notional tax) to provide for:
. a 20 per cent reduction of the amount of the PAYG
instalment worked out under the section for the quarter
that includes 31 December 2008 for certain small business
taxpayers; and
. a regulation-making power to allow the amount of the PAYG
instalment worked out under the section to be reduced in
the future in circumstances specified by regulations.
Context of amendments
2. Under the PAYG instalments system, taxpayers earning business or
investment income pay instalments during the year towards their
final tax liability for that income year. Taxpayers may pay their
PAYG instalments on the basis of GDP-adjusted notional tax (GDP-
adjustment method) or on the basis of instalment income.
3. The GDP-adjustment method is available to the classes of taxpayers
listed in section 45-130 of Schedule 1 to the TAA 1953. These
taxpayers are individuals, multi-rate trustees and full self-
assessment taxpayers with $2 million or less of instalment income
for the previous income year or more than $2 million of instalment
income for the previous income year and are eligible to pay an
annual PAYG instalment but have chosen not to. For the 2009-10
income year or later income years, 'small business entities' (as
defined by section 328-110 of the Income Tax Assessment Act 1997
(ITAA 1997)) will be automatically eligible to use the GDP-adjusted
method.
4. Taxpayers who pay PAYG instalments on the basis of the GDP-adjusted
method are generally quarterly payers who pay four instalments
annually. However, section 45-134 of Schedule 1 to the TAA 1953
allows primary production businesses and special professionals to
pay two instalments a year under the GDP-adjustment method.
5. Under the GDP-adjustment method, the Commissioner works out the
amount of the instalments taxpayers pay in accordance with
Subdivision 45-L of Schedule 1 to the TAA 1953.
6. The amount of the instalments payable depends on the taxpayer's GDP-
adjusted notional tax which is worked out under section 45-405 of
Schedule 1 to the TAA 1953. Broadly, the GDP-adjusted notional tax
is worked out by 'uplifting' the taxpayer's income in the previous
year by that year's rate of nominal GDP growth (the GDP uplift
factor).
7. The GDP uplift 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 PAYG
instalments that are too high compared with their actual income,
with the overpaid tax being refunded to them at the conclusion of
the income year when their final tax liability is assessed. For
example, for the 2008-09 income year, due to the global financial
crisis, the profit growth for small businesses as forecasted in the
Mid-year Economic and Fiscal Outlook 2008-09 is significantly lower
than the GDP uplift factor of 8 per cent.
8. While taxpayers may vary their instalment amounts calculated and
notified by the Commissioner themselves, many are reluctant to do
so, as underpayments can trigger the general interest charge. As
such, it is desirable to build more flexibility in the law to allow
the instalment amounts calculated on the basis of GDP-adjusted
notional tax to be reduced to more accurately reflect changing
economic circumstances.
Summary of new law
9. The PAYG instalment amount for the quarter that includes
31 December 2008 for certain small business taxpayers who are
quarterly payers paying four instalments annually on the basis of
the GDP-adjustment method as worked out under section 45-400 of
Schedule 1 to the TAA 1953 will be reduced by 20 per cent. This
reduction will not affect the instalment amounts as worked out
under the section for the following quarters in the same income
year.
10. In addition, the PAYG instalment amounts as worked out under
section 45-400 of Schedule 1 to the TAA 1953 may be reduced in the
future in certain circumstances as prescribed by regulations. Any
prescribed reduction will not affect the instalment amounts as
worked out under the section for the quarters following the
prescribed quarter(s) in the same income year.
Comparison of key features of new law and current law
|New law |Current law |
|The PAYG instalment |No equivalent. |
|amount for the quarter | |
|that includes | |
|31 December 2008 as | |
|worked out under | |
|section 45-400 of | |
|Schedule 1 to the | |
|TAA 1953 (for quarterly | |
|payers who pay four | |
|instalments annually on | |
|the basis of GDP-adjusted| |
|notional tax) is reduced | |
|by 20 per cent for | |
|certain small business | |
|taxpayers. | |
|The PAYG instalment |No equivalent. |
|amount as worked out | |
|under section 45-400 of | |
|Schedule 1 to the TAA | |
|1953 (for quarterly | |
|payers who pay four | |
|instalments annually on | |
|the basis of GDP-adjusted| |
|notional tax) may be | |
|reduced in certain | |
|circumstances as | |
|prescribed by | |
|regulations. | |
Detailed explanation of new law
Amount of instalments reduced as specified by regulation
11. The amendments insert a regulation-making power to allow for PAYG
instalment amounts for quarterly payers who pay four instalments
annually on the basis of GDP-adjusted notional tax to be reduced in
certain specified circumstances to more accurately reflect
prevailing economic conditions and actual income of certain
taxpayers for a particular income year. Section 18 of the TAA 1953
provides that the Governor-General may make regulations prescribing
matters required or permitted by the Act to be prescribed, or
necessary or convenient to be prescribed for carrying out or giving
effect to the TAA 1953 .
[Schedule 1, item 3, subsection 45-400(3) of Schedule 1 to the
TAA 1953]
12. The PAYG instalment amounts payable under the GDP-adjustment method
for quarterly payers who pay four instalments annually are worked
out in accordance with the table in subsection 45-400(2) of
Schedule 1 to the TAA 1953.
13. The regulations may specify the instalment quarter(s) to which a
reduction applies or the taxpayers eligible for the reduction.
[Schedule 1, item 3, subsection 45-400(4) of Schedule 1 to the TAA
1953]
14. A prescribed reduction of the instalment amount for a quarter in an
income year will not affect the working out of instalment amounts
for the later quarters of that income year. The amounts worked out
for quarters following the prescribed quarter will be determined as
if no reduction had occurred. [Schedule 1, item 3, subsection 45-
400(5) of Schedule 1 to the TAA 1953]
15. An instalment amount for a quarter in an income year as worked out
in accordance with the table in subsection 45-400(2) of Schedule 1
to the TAA 1953 is a set percentage of a taxpayer's GDP-adjusted
notional tax reduced by the instalment amounts for the earlier
quarters in that income year. As such, the reduction of one
quarter's amount would ordinarily be clawed back in the next
quarter's instalment amount, effectively reversing the cash flow
benefit of reducing one quarter's PAYG instalment amount. By
ignoring the reduction for the quarters following the quarter(s) to
which the reduction applies, the amount reduced is not clawed back
through the subsequent quarter's instalment amount.
December 2008 quarter PAYG instalment reduction
16. The quarterly PAYG instalment amount for the quarter that includes
31 December 2008 for certain small business taxpayers who are
quarterly payers paying four instalments annually on the basis of
GDP-adjusted notional tax will be reduced by 20 per cent.
[Schedule 1, item 3, subsection 45-400(6) of Schedule 1 to the TAA
1953]
17. The 20 per cent reduction for the quarter that includes
31 December 2008 broadly represents the annual reduction in
instalments necessary to reflect the expected slowing in small
business profit growth for the 2008-09 income year in a single
quarterly instalment.
18. Small business taxpayers who will be eligible for the reduction are
small business entities (see below), a partner of a partnership
that is a small business entity, or a beneficiary of a trust that
is a small business entity, for either the 2007-08 or 2008-09
income years. [Schedule 1, item 3, paragraphs 45-400(6)(a) to (c)
of Schedule 1 to the TAA 1953]
1.
Alice is a partner of a partnership that is a small business
entity for the 2007-08 income year. Alice is required to
pay quarterly PAYG instalments on investment and business
income she derives (including her share of the partnership
income) on the basis of GDP-adjusted notional tax.
While Alice is not a small business entity herself she is
eligible to receive the 20 per cent reduction to her
quarterly PAYG instalment amount for the December 2008
quarter as she is a partner of a partnership that is a small
business entity. The 20 per cent reduction applies to all
the income accounted for in working out Alice's GDP-adjusted
notional tax which includes both her income from the
partnership and business and investment income from other
sources.
19. 'Small business entity' is defined in section 328-110 of the
ITAA 1997. Broadly, an entity is a small business entity for an
income year if they are carrying on a business for the income year
and their aggregated turnover is less than $2 million for the
previous income year or is likely to be less than $2 million for
the current income year (calculated on the first day of the current
income year for the entity).
1.
In the 2007-08 income year, James carried on an IT
consultancy business. His aggregated turnover for that
income year was $1.9 million.
For the 2008-09 income year, James is a small business
entity because his aggregated turnover for 2007-08 was less
than $2 million. This is irrespective of his likely or
actual turnover in the 2008-09 income year.
20. Small business taxpayers who are quarterly payers who pay two
instalments annually are not eligible for the reduction. Under
section 45-134 of Schedule 1 to the TAA 1953, primary production
businesses and certain professionals, such as professional sports
persons, may pay two instalments annually under the GDP-adjusted
method. The amount of instalment for quarterly payers who pay two
instalments annually is worked out under section 45-402 of Schedule
1 to TAA 1953. These taxpayers are required to pay their two
instalments at the third and fourth quarters in an income year, as
such, the period between the time that they are required to pay
instalments and the time they are required to pay their final
annual income tax liability is shorter than a taxpayer who pays
four quarterly instalments throughout the income year.
Accordingly, applying the PAYG instalment reduction will not
provide much cash flow relief for these taxpayers as the timing
difference between the payment of their instalments and receiving a
possible refund on their final annual income tax liability is
small.
1.
Michael is a primary producer and pays two instalments
annually on the basis of GDP-adjusted notional tax. Michael
is not eligible for the 20 per cent reduction applicable to
the PAYG instalment for the instalment quarter including
31 December 2008.
21. Similarly, small business entities who have voluntarily varied
their PAYG instalment amount for the instalment quarter that
includes 31 December 2008 to better reflect their individual
circumstances under section 45-112 of Schedule 1 to the TAA 1953
are not eligible for the 20 per cent reduction. The 20 per cent
reduction is intended as an alternative to voluntary variation
where taxpayers are uncertain about varying their PAYG instalment.
22. Depending on a taxpayer's accounting period, the instalment quarter
that includes 31 December 2008 may be an entity's first, second,
third or fourth instalment quarter. The meaning of instalment
quarter is provided in section 45-60 of TAA 1953.
1.
Constantine Cleaning Services Pty Ltd, with the
Commissioner's permission, adopts a substituted accounting
period and is a quarterly payer who pays four instalments
annually on the basis of GDP-adjusted notional tax.
Constantine Cleaning Services Pty Ltd is an 'early balancer'
and its 2008-09 income year covers the period from
1 May 2008 to 30 April 2009.
As a company with an aggregated turnover of less than $2
million in the 2007-08 income year, Constantine Cleaning
Services Pty Ltd is eligible for the 20 per cent PAYG
instalment reduction. The quarter including
31 December 2008 will be the third quarter for Constantine
Cleaning Services Pty Ltd. The 20 per cent reduction will
apply to Constantine Cleaning Services Pty Ltd's third
quarter PAYG instalment.
23. The reduction for the quarter that includes 31 December 2008 will
not affect the instalment amounts worked out under section 45-400
of Schedule 1 to the TAA 1953 for the later quarters in the same
income year. The amounts worked out for quarters following the
quarter that includes 31 December 2008 will be worked out as if no
reduction had occurred. [Schedule 1, item 3, subsection 45-400(7)
of Schedule 1 to the TAA 1953]
24. Ignoring the 20 per cent reduction for the quarter that includes
31 December 2008 will make sure the reduction is not clawed back
through the subsequent instalment amounts in the same income year.
25. In order to avoid inoperative provisions in the tax laws, the
provisions that give effect to the reduction for the quarter that
includes the 31 December 2008 will be automatically repealed on
1 July 2013. [Schedule 1, item 4.
26. Given the insertion of new provisions in section 45-400 of Schedule
1 to the TAA 1953, two headings will be inserted in the section to
make clearer the matters that are dealt with by each of the
subsections. [Schedule 1, items 1 and 2]
Application provisions
27. The amendments in Part 1 of this Schedule commence on the day the
Bill receives Royal Assent and apply in relation to instalment
quarters in the 2007-08 income year and later income years. The
application to instalment quarters in the 2007-08 income year is
required in order to account for small business taxpayers who
adopted a substituted accounting period with a late December
balancing date in lieu of 30 June 2008 (late December balancers).
The quarter that includes 31 December 2008 for late December
balancers will be the fourth quarter of the 2007-08 income year for
these taxpayers. [Schedule 1, item 5]
Chapter 2
Temporary residents' superannuation and unclaimed money
Outline of chapter
28. Schedule 2 to this Bill amends various Acts as a result of the
payment of temporary residents' unclaimed superannuation to the
Australian Government. Schedule 2 also amends the Superannuation
(Unclaimed Money and Lost Members) Act 1999 (S(UMLM) Act) to
facilitate the administration of the broader unclaimed money
regime. All references are to the S(UMLM) Act unless otherwise
stated.
Context of amendments
29. The Temporary Residents' Superannuation Legislation Amendment Act
2008 (Temporary Residents Act) amended the S(UMLM) Act and other
Acts to provide that the superannuation money of a former temporary
resident is included in unclaimed superannuation and is payable to
the Commissioner of Taxation (Commissioner).
30. Changes to the broader unclaimed money regime make the existing
provisions in the S(UMLM) Act more compatible with the new
temporary residents' unclaimed superannuation provisions which have
been inserted into that Act. The amendments also improve the
general administration of the unclaimed money regime.
31. Additional consequential amendments are required to other Acts as a
result of the temporary residents' unclaimed superannuation regime.
Summary of new law
32. The temporary residents' superannuation amendments include changes
to legislation governing:
. small superannuation account payments;
. superannuation guarantee shortfall components;
. Government superannuation co-contribution payments; and
. financial transaction reporting.
33. The changes to the broader unclaimed money regime include:
. allowing the Commissioner to set the due dates for
statements and payments by legislative instrument;
. payments of unclaimed superannuation by the Commissioner;
. making the penalties and general interest charge operate
for unclaimed money consistent with broader taxation
administration;
. clarifying the law in relation to the taxation components
of unclaimed money payments made by the Commissioner;
. other administrative issues, such as refunds and returns
and recovery of overpayments; and
. other minor refinements and improvements to the operation
of the existing law.
Comparison of key features of new law and current law
|New law |Current law |
|Superannuation providers |Superannuation providers |
|will work out their |work out if they have |
|unclaimed money on |unclaimed money on the |
|specified unclaimed money|last day of the |
|days as determined by the|half-years that end on 31|
|Commissioner by |December and 30 June each|
|legislative instrument. |year. |
|Statements of unclaimed |Statements of unclaimed |
|money are due to be given|money are due to be given|
|to the Commissioner by |to the Commissioner |
|the scheduled statement |before 1 May and |
|day (as determined by the|1 November respectively. |
|Commissioner by | |
|legislative instrument) | |
|that relates to the | |
|unclaimed money day. | |
|Payment of unclaimed |Payment of unclaimed |
|money to the Commissioner|money to the Commissioner|
|is due and payable by the|is due and payable when a|
|scheduled statement day |statement of unclaimed |
|(as determined by the |money is given to the |
|Commissioner by |Commissioner. |
|legislative instrument) | |
|that relates to the | |
|unclaimed money day. | |
|State and territory |State and territory |
|providers that do not |providers can comply with|
|comply with state and |state and territory |
|territory arrangements |arrangements that mirror |
|that mirror the existing |the existing unclaimed |
|unclaimed money regime |money regime rather than |
|will have to comply with |sending statements and |
|the new arrangements with|payments to the |
|the Commissioner. |Commissioner. |
|Nil reporting will apply |Unless unclaimed money |
|to all superannuation |exists the superannuation|
|providers (except |provider does not have to|
|regulated superannuation |provide a statement to |
|funds with fewer than |the Commissioner. |
|five members and state | |
|and territory providers, | |
|unless the state or | |
|territory provider is | |
|making payments to the | |
|Commonwealth unclaimed | |
|money regime). | |
|A superannuation provider|A superannuation provider|
|will be required to |is not compelled to |
|correct an error or |correct an error or |
|omission in a statement |omission in a statement |
|of unclaimed money given |of unclaimed money given |
|to the Commissioner. |to the Commissioner. |
|Broader taxation |General interest charge |
|administration will apply|cannot be applied to late|
|to all unclaimed money |payments of unclaimed |
|payments to the |money to the |
|Commissioner in relation |Commissioner. |
|to general interest | |
|charge and administrative| |
|penalties. | |
|During the life of a |During the life of a |
|person, the Commissioner |person, the Commissioner |
|must pay unclaimed money |must pay unclaimed money |
|to a person, or a fund |to a person if unclaimed |
|for the person if the |money has been paid to |
|Commissioner is satisfied|the Commissioner and the |
|that a superannuation |Commissioner is satisfied|
|provider paid unclaimed |that if the unclaimed |
|money to the Commissioner|money law had not been |
|in respect of that |enacted the |
|person. |superannuation provider |
| |would have paid the |
| |unclaimed money to the |
| |person. |
|After the death of a |After the death of a |
|person, if the |person, the Commissioner |
|Commissioner is satisfied|must pay unclaimed money |
|that the superannuation |to a person if unclaimed |
|provider, had it not paid|money has been paid to |
|the amount to the |the Commissioner and the |
|Commissioner as unclaimed|Commissioner is satisfied|
|money, would have been |that if the unclaimed |
|required to pay a death |money law had not been |
|benefit amount or amounts|enacted the |
|to one or more death |superannuation provider |
|beneficiaries as a result|would have paid the |
|of the person's death, |unclaimed money to the |
|then the Commissioner |person. |
|must pay the amount to | |
|that beneficiary or | |
|beneficiaries (or to the | |
|person's legal personal | |
|representative if the | |
|Commissioner is not | |
|satisfied). | |
|The unclaimed money |The unclaimed money |
|register will also |register includes details|
|include details of |of unclaimed money. |
|temporary residents' | |
|unclaimed superannuation | |
|and related information. | |
|The Commissioner will |Depending on the |
|treat a superannuation |circumstances of the |
|guarantee shortfall for a|person, the Commissioner |
|former temporary resident|deals with superannuation|
|as if it had been paid to|guarantee shortfall by |
|the Commissioner as |paying it to a fund for |
|temporary resident |the person, to the |
|unclaimed superannuation |person, or to the |
|by a superannuation plan.|person's legal personal |
| |representative. |
|A person who holds a |A person who holds an |
|temporary visa at any |eligible temporary |
|time during the income |resident visa at any time|
|year, and who is not a |during the income year |
|prescribed visa holder or|will not be eligible for |
|a New Zealand citizen at |a Government |
|all times whilst holding |superannuation |
|that temporary visa, will|co-contribution in that |
|not be eligible for a |year. |
|Government superannuation| |
|co-contribution in that | |
|year. | |
Detailed explanation of new law
Unclaimed money
34. The simplified outline of the S(UMLM) Act is being amended to
reflect the amendments being made to that Act by this Schedule.
[Schedule 2, items 1 to 5, section 7]
35. A definition of 'former temporary resident' is being inserted into
the S(UMLM) Act to simplify various provisions in that Act and as a
reference for use of this term in another Act. The meaning is
effectively the same as that outlined in paragraphs 20C(1)(b) to
(d) of that Act (which are to be repealed). [Schedule 2, items 6,
28 and 29, sections 8 and 20AA and paragraphs 20C(1)(b) to (d)]
36. Part 3 of the S(UMLM) Act will now also be separated into
Divisions, with Division 1 commencing at section 11. [Schedule 2,
item 9]
37. A minor technical correction is being made so that references in
the S(UMLM) Act correctly refer to a superannuation provider for a
fund rather than a superannuation provider in relation to a fund.
[Schedule 2, item 10, subsection 13(1)]
Dates for statements and payments of unclaimed money
38. Currently Part 3 of the S(UMLM) Act requires a superannuation
provider to give a statement and pay unclaimed money in relation to
that statement to the Commissioner in relation to the unclaimed
money as at the end of each half-year. A half-year ends on 30 June
or 31 December. Statements in relation to those half-years are due
before 1 November and 1 May respectively. Payments are due and
payable when the statement of unclaimed money is given to the
Commissioner.
39. The definition of 'scheduled statement day' inserted into the
S(UMLM) Act by the Temporary Residents Act is being replaced by a
new definition so that the term also has the meaning given by
section 15A of the S(UMLM) Act in relation to a statement required
by Part 3 of that Act. This will help to achieve consistency in
the reporting requirements of Part 3 and Part 3A of that Act.
[Schedule 2, item 7, section 8]
40. A definition of 'unclaimed money day' is being inserted into the
S(UMLM) Act and will have the meaning given by section 15A.
[Schedule 2, item 8, section 8]
41. For the purposes of Part 3 of the S(UMLM) Act, the Commissioner
will be able to specify unclaimed money days by legislative
instrument. The Commissioner will also be able to specify the
scheduled statement day that relates to the unclaimed money day by
legislative instrument. [Schedule 2, item 11, section 15A]
42. The new regime being implemented by this Schedule as it applies to
statements and payments of unclaimed money by superannuation
providers to the Commissioner under Part 3 of the S(UMLM) Act, will
not apply to half-years that end on 30 June 2009 or earlier half-
years. [Schedule 2, subitem 67(2)]
43. An unclaimed money day specified by the Commissioner under
paragraph 15A(a) of the S(UMLM) Act will have to be a day that
occurs on or after 1 July 2009. [Schedule 2, subitem 67(1)]
44. Despite the amendments to sections 16, 17 and 18 of the S(UMLM) Act
being made by this Bill, those sections, as in force just before
the commencement of this Schedule, continue to apply in relation to
half-years ending before 1 July 2009. [Schedule 2, subitem 67(2)]
Statement of unclaimed money
45. For the purposes of Part 3 of the S(UMLM) Act a superannuation
provider will now be required by section 16 to give to the
Commissioner, by the end of the scheduled statement day that
relates to an unclaimed money day, a statement in relation to all
unclaimed money as at the end of the unclaimed money day.
[Schedule 2, item 12, subsections 16(1) and (3)]
46. A superannuation provider includes the trustee of a regulated
superannuation fund or an approved deposit fund and a retirement
savings account provider. However this requirement under section
16 of the S(UMLM) Act does not apply to a superannuation provider
who is the trustee of a state or territory public sector
superannuation scheme as defined in subsection 18(7) of the S(UMLM)
Act and who gives a statement and makes a payment to a state or
territory authority as provided for in section 18 of that Act.
47. The Commissioner may, under the Taxation Administration Act 1953
(TAA 1953), defer the time for the superannuation provider to give
the statement of unclaimed money to the Commissioner. If the
information is not given when it must be given the TAA 1953
provides for offences and administrative penalties.
48. The requirement by a superannuation provider to give a statement
under section 16 of the S(UMLM) Act does not apply to a regulated
superannuation fund with fewer than five members if there is no
unclaimed money at the end of the unclaimed money day in that fund.
That is, self-managed superannuation funds and small Australian
Prudential Regulation Authority regulated superannuation funds will
only be required to give to the Commissioner such a statement if
they have unclaimed money at the end of an unclaimed money day.
[Schedule 2, item 12, subsections 16(1) and (2A)]
49. Where a statement is required by subsection 16(1) of the S(UMLM)
Act and there is no unclaimed money for any member (or holder in
the case of a retirement savings account provider) at the end of
the unclaimed money day the statement must say so. [Schedule 2,
item 12, subsection 16(1A)]
50. Currently, a superannuation provider that holds no unclaimed money
for a person in a reporting period is not required to give to the
Commissioner a statement under section 16 of the S(UMLM) Act. This
new reporting requirement will give the Commissioner greater
certainty about whether a superannuation provider is fulfilling its
reporting obligations and allow more effective enforcement of
reporting obligations.
51. A statement under subsection 16(1) of the S(UMLM) Act will be
required to be given in a form approved by the Commissioner. The
statement may also cover matters of unclaimed money administration
in connection with Part 3 of the S(UMLM) Act, the Superannuation
(Departing Australia Superannuation Payments Tax) Act 2007
(DASP Act), as well as (in so far as they relate to either the
DASP Act or Part 3 of the S(UMLM) Act), Part 3AA of the S(UMLM)
Act, (dealing with the unclaimed superannuation money of former
temporary residents), the Income Tax Assessment Act 1997 (ITAA
1997), and Chapters 2 and 4 in Schedule 1 to the TAA 1953. The
approved form may also require the statement to include certain tax
file numbers (TFNs) under subsection 25(1) of the S(UMLM) Act.
[Schedule 2, item 12, subsection 16(1)]
52. Such reporting may include information that allows the Commissioner
to apply the correct taxation treatment to a payment of unclaimed
money made in respect of a person under section 17 of the S(UMLM)
Act.
53. If the statement required to be given by superannuation providers
under subsection 16(1) of the S(UMLM) Act includes false or
misleading statements the TAA 1953 provides for offences and
administrative penalties. The amendments in this Bill will make
the penalties for unclaimed superannuation money consistent with
broader taxation administration.
54. The statement of unclaimed money required to be given by a
superannuation provider under subsection 16(1) of the S(UMLM) Act
to the Commissioner will (similar to the existing requirement)
include information about each payment made to an entitled person
between the end of the unclaimed money day and the day on which the
superannuation provider gives the statement to the Commissioner.
[Schedule 2, item 12, subsection 16(2)]
55. The statement of unclaimed money must also now include information
about amounts that were unclaimed money at the end of the unclaimed
money day, but which ceased to be unclaimed money between the end
of that day and the day on which the superannuation provider gives
the statement to the Commissioner (other than in situations where
the provider made a payment to the Commissioner under subsection
17(1) of the S(UMLM) Act). [Schedule 2, item 12, paragraph
16(2)(b)]
1.
On 31 December 2009 Lidia's superannuation provider
considered that the amount payable to Lidia was unclaimed
money as it satisfied all the conditions of subsection 12(1)
of the S(UMLM) Act. The amount was due and payable before 1
May 2010. However on 31 March 2010 Lidia made a
contribution to her account, resulting in the criterion of
paragraph 12(1)(c) no longer being satisfied.
Although the amount payable to Lidia was no longer unclaimed
money, Lidia's superannuation provider is still required to
include in the statement of unclaimed money information in
relation to the amount.
56. As a result of the amendments made by this Schedule, some minor
technical corrections are made to subsection 16(7) and associated
note of the S(UMLM) Act which were inserted by the Temporary
Residents Act. [Schedule 2, items 13 and 14, subsection 16(7)]
Errors or omissions
57. There is currently no obligation for superannuation providers to
correct errors in, or omissions from, the information reported to
the Commissioner in an unclaimed money statement (eg, unlike the
case with member contributions statements provided under section
390 of the TAA 1953).
58. Where a superannuation provider is required to give the
Commissioner a statement under section 16 of the S(UMLM) Act and
the provider becomes aware of a material error in, or omission
from, that statement, the provider must now give the Commissioner
the corrected or omitted information in the approved form no later
than 30 days after becoming aware of the error or omission.
[Schedule 2, item 15, section 16A]
59. These provisions will provide greater certainty to the Commissioner
that superannuation providers have correctly fulfilled their
reporting obligations under the S(UMLM) Act.
60. The obligations on superannuation providers under section 16A of
the S(UMLM) Act will not apply in relation to statements given to
the Commissioner under section 16 of that Act, as were in force
just before the commencement of this Schedule. [Schedule 2, item
68]
61. A superannuation provider's obligations to correct an error or
omission remain even if the Commissioner becomes aware of the error
or omission, including where the Commissioner takes action as a
result of such a discovery (eg, by refunding under section 18A of
the S(UMLM) Act an overpayment made by a superannuation provider).
62. The Commissioner may, under section 388-55 in Schedule 1 to the TAA
1953, defer the time for the superannuation provider to give the
information. If the information is not given when it must be
given, the TAA 1953 provides for offences and administrative
penalties. The amendments in this Bill make penalties operate for
unclaimed superannuation money consistent with broader taxation
administration.
Payment of unclaimed money to the Commissioner
63. For the purposes of Part 3 of the S(UMLM) Act a superannuation
provider must under subsection 17(1) of that Act pay to the
Commissioner the amount worked out under subsection 17(1A) of that
Act in relation to each unclaimed money day. The amount that the
provider must pay the Commissioner is due and payable at the end of
the scheduled statement day for the unclaimed money day. However
the requirements of subsection 17(1) of the S(UMLM) Act do not
apply to a superannuation provider who is a trustee of a state or
territory public sector superannuation scheme as defined in
subsection 18(7) of that Act and who gives a statement and makes a
payment to a state or territory authority as provided for in
section 18 of that Act. Section 18A of the S(UMLM) Act also allows
the Commissioner to refund an overpayment by the provider that
occurs when making such a payment. [Schedule 2, items 16 and 20,
subsections 17(1) and 18(2)]
64. The Commissioner may, under section 255-10 in Schedule 1 to the TAA
1953, defer the time at which the amount is due and payable by the
superannuation provider. The amount the provider must pay is a tax-
related liability for the purposes of the TAA 1953 and as such a
general interest charge and administrative penalties are connected
with such liabilities. The amendments in this Bill make penalties
operate for unclaimed money consistent with broader taxation
administration.
65. The amount due and payable under subsection 17(1) of the S(UMLM)
Act will now be worked out using the formula in subsection 17(1A)
of that Act. The formula starts with all unclaimed money as at the
end of the unclaimed money day. The formula then subtracts 'former
unclaimed money' from the amount due and payable. Former unclaimed
money arises from either one of two events that occur between the
end of the unclaimed money day and the day on which the
superannuation provider gives the statement of unclaimed money to
the Commissioner under subsection 16(1). The first of those events
is a payment or payments by the superannuation provider to a person
who is entitled to the money. The second of those events is
unclaimed money that ceases to be unclaimed money (other than
because of a payment made by the superannuation provider under
subsection 17(1) of the S(UMLM) Act). [Schedule 2, item 16,
subsection 17(1A)]
1.
Continuing from Example 1.1, Lidia's superannuation provider
is not required to pay an amount to the Commissioner under
subsection 17(1) of the S(UMLM) Act on 1 May 2010 in
relation to Lidia, as the unclaimed money in question ceased
to be unclaimed money between the end of the unclaimed money
day and the day on which the superannuation provider gives
the statement of unclaimed money to the Commissioner.
66. Subsection 17(1) of the S(UMLM) Act will not require the
superannuation provider to pay the Commissioner an amount of
unclaimed money that satisfied the conditions outlined in
subsection 12(1) of the S(UMLM) Act if the amount relates to a
person for whom the Commissioner has given a notice to the provider
under section 20C of that Act. This is because such money is
payable to the Commissioner under section 20F of the S(UMLM) Act.
[Schedule 2, item 16, subsection 17(1B)]
1.
Nadia was a former temporary resident who last left
Australia in 2003. On 31 December 2009 Nadia's
superannuation provider considered that the amount payable
to Nadia was unclaimed money as it satisfied all the
conditions of subsection 12(1) of the S(UMLM) Act. The
amount was due and payable on 1 May 2010 under subsection
17(1) of that Act. However on 1 February 2010 the
Commissioner gave a notice (former temporary resident
notice) to Nadia's superannuation provider under section 20C
of the S(UMLM) Act. As a result Nadia's superannuation
provider was required to pay an amount to the Commissioner
in accordance with section 20F of that Act and no longer
required to pay the amount under subsection 17(1) of that
Act.
State and territory providers
67. At present if the unclaimed money legislation of a state or
territory satisfies the requirements of subsections 18(4) and (5)
of the S(UMLM) Act the trustee of a state or territory public
sector superannuation scheme can report and pay unclaimed money to
the relevant state or territory authority rather than provide a
statement to, and pay unclaimed money to, the Commissioner. That
is, if such a provider complies with the relevant laws in its
jurisdiction, it does not have to comply with subsection 16(1) or
17(1) of the S(UMLM) Act.
68. In the future a trustee of a state or territory public sector
superannuation scheme can continue to report and pay unclaimed
money to the relevant state or territory authority in accordance
with the existing requirements. It will not be necessary for such
a trustee to comply with the new arrangements as provided for by
this Schedule in relation to statements and payments to the
Commissioner, and the periods that apply to those statements and
payments (sections 16 and 17 of the S(UMLM) Act), if the unclaimed
money legislation of a state or territory satisfies the
requirements of subsections 18(4) and (5) of the S(UMLM) Act as in
force just before the commencement of this Schedule and certain
conditions are met. [Schedule 2, items 21 and 22, subsections
18(4) and (5)]
69. The first condition is that a trustee of a state or territory
public sector superannuation scheme gives the relevant state or
territory authority a statement that satisfies the requirements of
subsection 18(4) of the S(UMLM) Act in relation to the first half-
year that ends on or after the unclaimed money day (to be specified
by legislative instrument). The second condition is that such a
trustee pays the amount worked out under item 3 of subsection 18(4)
of that Act to the relevant state or territory authority.
[Schedule 2, items 20 and 21, subsections 18(2) and (4)]
70. If a trustee of a state or territory public sector scheme fails to
comply with the requirements under section 18 of the S(UMLM) Act
with the relevant state or territory authority, the trustee will
then have to comply with the new arrangements as provided for by
this Schedule in relation to all unclaimed money days for which
both a statement was not given and a payment was not made to the
state or territory authority.
Payment of unclaimed money from the Commissioner
71. A reference to a payment made under subsection 17(1) or 17(2) of
the S(UMLM) Act includes a payment made under that respective
subsection as in force before the commencement of this Schedule.
[Schedule 2, item 69]
72. The Commissioner will have to pay unclaimed money in respect of a
person if a superannuation provider paid unclaimed money to the
Commissioner under subsection 17(1) of the S(UMLM) Act in respect
of that person and the Commissioner is satisfied that an amount can
be paid in respect of that person under subsection 17(2) of that
Act. The Commissioner may either be satisfied on receipt of an
application in the approved form or by the Commissioner's own
initiative. [Schedule 2, item 16, subsection 17(1C)]
73. Money for payments under subsection 17(2) of the S(UMLM) Act is
appropriated by section 16 of the TAA 1953. There is no need for
the former appropriation provision in the S(UMLM) Act. [Schedule
2, item 18]
74. If, during the life of a person, the Commissioner can pay unclaimed
money in respect of a person because the conditions in subsection
17(1C) of the S(UMLM) Act are satisfied, then the Commissioner must
pay the amount to the person unless the person directs the
Commissioner to pay the amount to a fund that is a complying
superannuation plan. In the case of payments to a fund, the
Commissioner can only pay to a single fund. [Schedule 2, item 16,
paragraphs 17(2)(a) and (d)]
75. If, after the death of the person, the Commissioner can pay
unclaimed money in respect of a person because the conditions in
subsection 17(1C) of the S(UMLM) Act are satisfied and the
Commissioner is satisfied that the superannuation provider, had it
not paid the amount to the Commissioner as unclaimed money, would
have been required to pay a death benefit amount or amounts to one
or more death beneficiaries as a result of the person's death then
the Commissioner must pay the amount to that beneficiary or
beneficiaries. If the Commissioner cannot be so satisfied, then
the Commissioner must pay the amount to the person's legal personal
representative. [Schedule 2, item 16, paragraphs 17(2)(b) and (c)
and subsection 17(2AA)]
1.
Andrew provided a binding death nomination to his
superannuation provider nominating his wife Thea as a death
beneficiary. Unclaimed money in respect of Andrew was paid
to the Commissioner by the superannuation provider under
subsection 17(1) of the S(UMLM) Act. After Andrew died Thea
contacted the Australian Taxation Office to inquire about
lost or unclaimed superannuation held for her deceased
husband either in a fund or by the Commissioner. The
Commissioner was able to be satisfied through documents
provided by Thea that Andrew's superannuation provider would
have been required to pay Thea a death benefit had it not
paid an amount in respect of Andrew to the Commissioner as
unclaimed money. As the relevant conditions of paragraph
17(2)(b) of the S(UMLM) Act apply, the Commissioner must
make a payment to Thea in accordance with subsection 17(2AA)
of that Act.
76. A formula is applied to death beneficiary payment cases covered by
paragraph 17(2)(b) of the S(UMLM) Act. If there is only one death
beneficiary the whole of the unclaimed money is payable to that
beneficiary. However where there is more than one death
beneficiary the formula acts as a proportioning rule to determine
how much of the amount that the Commissioner has available to pay,
is payable to each death beneficiary. [Schedule 2, item 16,
subsection 17(2AA)]
77. As a result of the amendment made by this Schedule, some minor
technical corrections are made to subsection 17(2A) of the S(UMLM)
Act. Subsection 17(2A) was inserted by the Temporary Residents
Act. [Schedule 2, item 17, subsection 17(2A)]
78. The S(UMLM) Act will now provide that a superannuation provider is
liable to pay a general interest charge on an amount of unclaimed
money that is due and payable under subsection 17(1) of that Act
that remains unpaid after it is due and payable. These amendments
will make the operation of unclaimed money consistent with broader
taxation administration. [Schedule 2, item 19, subsection 17A(1)]
79. The S(UMLM) Act will now provide that an offence is committed if a
person by their conduct breaches a requirement under subsection
17(1) of that Act. These amendments make the former penalty
provision in subsection 17(6) of that Act no longer necessary and
so subsection 17(6) is repealed. [Schedule 2, items 18 and 19 and
subsection 17A(2)]
80. Whilst a reference to a payment made under subsection 17(1) of the
S(UMLM) Act includes a payment made before the commencement of this
Schedule, section 17A as inserted by this Schedule does not apply
to such a payment. [Schedule 2, item 69]
81. There is a lower likelihood that an amount will be required to be
withheld by the Commissioner under Division 12 in Schedule 1 to the
TAA 1953 from a payment made under subsection 17(2) of the
S(UMLM) Act (eg, for an excess untaxed roll-over amount) than from
a payment made under section 20H (ie, for withholding that applies
to departing Australia superannuation payments). However, where
tax is withheld from a payment under subsection 17(2) of the
S(UMLM) Act, such an amount is still taken to have been paid by the
Commissioner despite the fact that provisions that are similar to
subsections 20H(5) and (6) of the S(UMLM) Act have not been
inserted into section 17 by this Bill.
Refunds, overpayments and returns
82. The S(UMLM) Act will now provide for a refund of an overpayment
made to the Commissioner by a superannuation provider under Part 3
in a similar manner as provided by section 20K for an overpayment
made to the Commissioner by a superannuation provider under Part 3A
(ie, payment of unclaimed superannuation of former temporary
residents). As a result, subsection 17(3) of the S(UMLM) Act is
also repealed. [Schedule 2, items 18 and 23, subsection 18A(1)]
83. Similar to the conditions in section 20K of the S(UMLM) Act, where
an amount is to be refunded by the Commissioner under section 18A,
the Commissioner must pay the relevant amount to the superannuation
provider which made the underlying overpayment (or, if that
superannuation provider no longer exists, to the provider of a
successor fund). [Schedule 2, item 23, subsection 18A(2)]
84. Money for payments under subsection 18A(2) of the S(UMLM) Act is
appropriated by section 16 of the TAA 1953.
85. Whilst a reference to a payment made under subsection 17(1) of the
S(UMLM) Act includes a payment made before the commencement of this
Schedule, section 18A as inserted by this Schedule does not apply
to such a payment. [Schedule 2, item 69]
86. The S(UMLM) Act will now allow the Commissioner to recover an
overpayment that results from a payment made, or purportedly made,
under Part 3 in respect of a person in a similar manner as provided
for by section 20L for an overpayment made under Part 3A (ie,
payment of unclaimed money of former temporary residents).
[Schedule 2, item 23, section 18B]
87. Before recovering an overpayment the Commissioner must give the
debtor a written notice about the proposed recovery and specify the
amount to be recovered. Prescribing the details to be covered by
the written notice gives the Commissioner flexibility to alter the
notice to allow for changing circumstances. [Schedule 2, item 23,
paragraph 18B(4)(a)]
88. The notice in section 18B of the S(UMLM) Act is not a 'legislative
instrument' within the definition in section 5 of the Legislative
Instruments Act 2003 because it does not have a legislative
character which determines or alters the content of the law; it is
merely declaratory of the law and causes the law to be applied.
[Schedule 2, item 23, subsection 18B(8)]
89. Whilst a reference to a payment made under subsection 17(2) of the
S(UMLM) Act includes a payment made before the commencement of this
Schedule, section 18B as inserted by this Schedule does not apply
to such a payment. [Schedule 2, item 69]
90. The S(UMLM) Act will now provide that if a superannuation provider
cannot credit a payment made by the Commissioner under subsection
17(2) within a certain period to an account for the benefit of the
person, then the superannuation provider must return the payment to
the Commissioner [Schedule 2, item 23, section 18C]. This is
similar to section 20M of the S(UMLM) Act in relation to payments
made by the Commissioner under Part 3A (ie, payment of unclaimed
money of former temporary residents).
91. Whilst a reference to a payment made under subsection 17(2) of the
S(UMLM) Act includes a payment made before the commencement of this
Schedule, section 18C as inserted by this Schedule does not apply
to such a payment. [Schedule 2, item 69]
92. The amount the provider must pay is a tax-related liability for the
purposes of the TAA 1953 and the Commissioner can deal with the
amount in a way that is consistent with broader taxation
administration, including deferring the time that the amount is due
and payable and applying a general interest charge and
administrative penalties in connection with such liabilities.
Administrative matters
Unclaimed and lost member registers
93. A new Part is inserted in the S(UMLM) Act by this Schedule in
relation to the register of unclaimed money. [Schedule 2, item 23,
Part 3AA]
94. The register of unclaimed money will now also contain particulars
of amounts paid to the Commissioner under section 20F of the
S(UMLM) Act. That is, particulars of unclaimed superannuation of
former temporary residents. [Schedule 2, item 26, paragraphs
19(1)(c) and (d)]
95. Other minor technical amendments are made to the existing
provisions of the S(UMLM) Act. [Schedule 2, items 24 and 25,
paragraphs 19(1)(a) and (b)]
96. Currently, a superannuation provider who fails to lodge a lost
member statement with the Commissioner in accordance with
Regulations 5 and 6 of the Superannuation (Unclaimed and Lost
Members) Regulations 1999, is guilty of an offence under
subsection 23(5) of the S(UMLM) Act. However, there are existing
offence and administrative penalties under the TAA 1953 for failing
to lodge an approved form on time (ie, sections 8C and 8E and
Division 286 in Schedule 1). The duplicate offence in the S(UMLM)
Act is removed by this Schedule. The TAA 1953 also provides for
offences if the statement includes false or misleading statements.
[Schedule 2, items 33 to 35, subsections 23(1) and (5)]
Information, access and records
97. Subsection 25(1) of the S(UMLM) Act currently only allows a
statement provided under section 16 to the Commissioner to include
the TFN of the fund and the relevant member. This Schedule amends
subsection 25(1) to also allow the TFN of the superannuation
provider for the fund to be provided to the Commissioner.
[Schedule 2, item 36, subsection 25(1)]
98. Subsection 26(2) of the S(UMLM) Act currently provides that the
trustee of a regulated exempt public sector superannuation scheme
may (in certain circumstances) give a state or territory authority
the TFNs of the scheme and the scheme's members in the approved
form (ie, as per section 388-50 in Schedule 1 to the TAA 1953).
This Schedule will now allow the form to be a form approved by a
state or territory authority rather than an approved form under the
TAA 1953. [Schedule 2, item 37, subsection 26(2)]
99. Section 32 of the S(UMLM) Act allows the Commissioner to disclose
protected information for the purposes of, or in the performance of
duties under, that Act. Section 37 is not relevant and is
repealed. [Schedule 2, items 38 and 39]
100. Notes are inserted in provisions that apply penalties on a person
who prevents access to the Commissioner under section 288-35 in
Schedule 1 to the TAA 1953, and, on a person who fails to keep and
retain proper records under section 288-25 of Schedule 1 and
sections 8L, 8M, 8Q, 8R, 8T and 8V of the TAA 1953. [Schedule 2,
items 40 and 41, subsections 46(4) and 48(5)]
Taxation administration
101. The TAA 1953 is amended so that a superannuation provider is liable
to pay a general interest charge on an amount of unclaimed money
that is due and payable under subsections 17(1) and 18C(2) of the
S(UMLM) Act and remains unpaid after it is due and payable. This
amendment will make the operation of unclaimed money consistent
with broader taxation administration. [Schedule 2, item 64,
subsection 8AAB(5) of the TAA 1953]
102. The TAA 1953 is amended so that withholding tax can be worked out
under the regulations for excess untaxed roll-over amounts. This
amendment will make the operation of unclaimed money consistent
with broader taxation administration. [Schedule 2, item 65,
subsection 15-10(2) in Schedule 1 to the TAA 1953]
103. The TAA 1953 is amended so that an amount that a superannuation
provider must pay under section 17 or 18C of the S(UMLM) Act is a
tax-related liability for the purposes of administrative penalties
and offences that need to be connected with such liabilities. The
amendments in this Bill will make the operation of the penalties
and offences for unclaimed money consistent with broader taxation
administration. [Schedule 2, item 66, subsection 250-10(2) in
Schedule 1 of the TAA 1953]
Temporary residents' superannuation consequential amendments
Former temporary resident definition
104. A new definition of 'former temporary resident' is inserted by this
Schedule into the S(UMLM) Act. This definition will be used in
other provisions in that Act and in the Superannuation Guarantee
(Administration) Act 1992 (SGAA 1992).
105. A 'former temporary resident' is a person in relation to whom the
Commissioner would give a superannuation provider a notice under
section 20C of the S(UMLM) Act if the Commissioner was also
satisfied that the person has a superannuation interest in the
fund. The simplified outline is also amended. [Schedule 2, items
27 to 29, sections 20A and 20AA and paragraphs 20C(1)(b) to (d)]
106. The regulations may prescribe a visa for the purposes of
subparagraph 20AA(1)(a)(i) of the definition. Prescribing
exclusions to the definition of a former temporary resident allows
flexibility, for example, to respond to changing circumstances (ie,
if a new temporary visa class is created) and to cater
appropriately for any specific visa classes. [Schedule 2, items 28
and 70, subsection 20AA(2)]
107. The notice in section 20C of the S(UMLM) Act is not a 'legislative
instrument' within the definition of section 5 of the
Legislative Instruments Act 2003 because it does not have a
legislative character which determines or alters the content of the
law; it is merely declaratory of the law and causes the law to be
applied.
108. Minor technical amendments are made to the existing provisions of
the S(UMLM) Act. [Schedule 2, items 30 to 32, paragraphs 20L(1)(a)
and (b) and subparagraph 20E(1)(b)(iii)]
Small superannuation amounts
109. The amendments will provide that where an individual satisfies the
Commissioner that they are not a permanent resident or Australian
citizen or New Zealand citizen and that they held a temporary visa
that has ceased to be in effect and have left Australia, the
individual may apply, under the Small Superannuation Accounts Act
1995 (SSAA 1995), for a payment from the Superannuation Holding
Account Special Account. [Schedule 2, items 53 to 57, sections 4,
14, 62 and 67A of the SSAA 1995]
110. It was necessary to update the SSAA 1995 in this way as a result of
the payment of temporary residents' unclaimed superannuation to the
Australian Government. This condition is also consistent with the
condition which applies to an individual applying for a departing
Australia superannuation payment from a superannuation provider.
Superannuation guarantee shortfall amounts
111. If an employee was a former temporary resident and the Commissioner
has received a superannuation guarantee shortfall component in
respect of that person the Commissioner will no longer pay the
amount to a superannuation provider of the person or to the person
or to the person's legal personal representative, but rather will
now treat the amount as if it had been received from a
superannuation provider under section 20F of the S(UMLM) Act.
[Schedule 2, items 60 to 63, sections 65, 65AA, 65A, 66 and 67 of
the SGAA 1992]
112. It was necessary to update the SGAA 1992 in this way as a result of
the payment of temporary residents' unclaimed superannuation to the
Australian Government. This will prevent unnecessary transfers of
amounts by the Commissioner to superannuation providers where the
amount will most likely have to be paid back to the Commissioner
under section 20F of the S(UMLM) Act.
Government superannuation co-contribution payments
113. Currently a Government superannuation co-contribution is not
payable to a person who holds at any time during an income year an
eligible temporary resident visa. The definition of 'eligible
temporary resident visa' is being replaced as a result of the
payment of temporary residents' unclaimed superannuation to the
Australian Government. As a result amendments are necessary to the
Superannuation (Government Co-contribution for Low Income Earners)
Act 2003 (Co-contribution Act).
114. A person will no longer be eligible for a Government superannuation
co-contribution under the Co-contribution Act if they hold a
temporary visa (under the Migration Act 1958) at any time during
the income year unless at all times when they hold such a visa they
are either a New Zealand citizen or the holder of a visa prescribed
for the purposes of subsection 20AA(2) of the S(UMLM) Act.
[Schedule 2, items 58 and 59, sections 6 and 56 of the Co-
contribution Act]
115. The amendments to section 6 of the Co-contribution Act made by this
Schedule only apply in relation to the 2009-10 and later income
years. [Schedule 2, item 71]
Financial transaction reports
116. Under the Financial Transaction Reports Act 1988 if a cash dealer
does not have certain information about an account, the account is
blocked and withdrawals from such an account can give rise to an
offence under that Act. However, this does not apply to certain
withdrawals made in accordance with the S(UMLM) Act. This Bill
replaces references to sections 17 and 18 of the S(UMLM) Act as a
result of the payment of temporary residents' unclaimed
superannuation to the Australian Government. [Schedule 2, item 42,
paragraph 18(4B)(ca) of the Financial Transaction Reports Act 1988]
Income tax amendments
117. Schedule 2 amends the ITAA 1997 to address previous inefficiencies
in the taxation treatment of payments of unclaimed money made by
the Commissioner.
118. A lack of certainty previously existed as to whether a payment made
by the Commissioner under subsection 17(2) of the S(UMLM) Act was
an 'unclaimed money payment' and a 'superannuation benefit' as
described in subsection 307-5(1) of the ITAA 1997. Previous
wording of subsection 307-5(1) could be interpreted as only
referring to payments made under subsection 17(1) of the S(UMLM)
Act from a superannuation provider to the Commissioner. In order
to remove any doubt in this regard, the reference in subsection 307-
5(1) of the ITAA 1997 to section 17 of the S(UMLM) Act has been
removed and replaced with a reference to subsection 17(1) or 17(2)
of that Act. [Schedule 2, items 46 and 47, subsection 307-5(1) of
the ITAA 1997]
Components of unclaimed money payments made by the Commissioner
119. Section 307-120 of the ITAA 1997 provides that section 307-142 of
the ITAA 1997 calculates the tax free and taxable components of a
payment made by the Commissioner under section 20H of the S(UMLM)
Act. Section 307-120 of the ITAA 1997 is now amended to advise
that section 307-142 of the ITAA 1997 also deals with payments made
by the Commissioner under subsection 17(2) of the S(UMLM) Act.
[Schedule 2, item 48, paragraph 307-120(2)(e) of the ITAA 1997]
120. Section 307-142 of the ITAA 1997 is amended to accommodate payments
by the Commissioner under subsection 17(2) of the S(UMLM) Act, and
to better address those payments made to the Commissioner under
subsection 17(1) of the S(UMLM) Act before 1 July 2007 (when most
superannuation payments were dealt with under the Income Tax
Assessment Act 1936 (ITAA 1936)).
121. The amount of the tax free component of a superannuation benefit
paid by the Commissioner under subsection 17(2) or section 20H of
the S(UMLM) Act is calculated by determining:
. the amount (the 'unclaimed amount') or amounts to which
the superannuation benefit being paid by the Commissioner
is attributable;
. an amount (the 'claimed equivalent') which represents an
amount notionally paid to the person, based on an
assumption that the unclaimed amount (or amounts) was (or
were) paid to the person instead of being paid to the
Commissioner; and
. the tax free component of that claimed equivalent.
122. The tax free component of the superannuation benefit paid under
either subsection 17(2) or section 20H of the S(UMLM) Act is equal
to the tax free component of the claimed equivalent. [Schedule 2,
item 49, subsection 307-142(2) of the ITAA 1997]
123. The determination of the claimed equivalent and tax free components
are dependant upon whether the underlying payment was made by the
superannuation provider to the Commissioner under subsection 17(1)
or subsection 20F(1) of the S(UMLM) Act, and if made under
subsection 17(1), when that payment was made. [Schedule 2, item
49, column 1 in the table in subsection 307-142(3) of the ITAA
1997]
124. Where the Commissioner pays a superannuation benefit which is
attributable to an unclaimed amount paid on or after 1 July 2007 by
a superannuation provider to the Commissioner under subsection
17(1) of the S(UMLM) Act, the tax free component of that
superannuation benefit is equal to the tax free component of the
claimed equivalent. [Schedule 2, item 49, item 1 in the table in
subsection 307-142(3) of the ITAA 1997]
1.
On 6 August 2007, Jenny's superannuation provider paid
$5,000 to the Commissioner under subsection 17(1) of the
S(UMLM) Act in respect of Jenny. Had the payment been made
as a superannuation benefit to Jenny instead, it would have
comprised a tax free component of $1,500 and an element
taxed in the fund of the taxable component of $3,500. If
the Commissioner were to make a payment under subsection
17(2) (or section 20H if applicable) which was attributable
to the $5,000 amount, the tax free component of the payment
would be $1,500, being equal to the tax free component of
the claimed equivalent.
125. Where the Commissioner pays a superannuation benefit which is
attributable to an unclaimed amount paid before 1 July 2007 by a
superannuation provider to the Commissioner under subsection 17(1)
of the S(UMLM) Act, the tax free component of that superannuation
benefit is equal to the total of the components, as referred to in
subsection 307-225(2) of the ITAA 1997, that form part (or all) of
the claimed equivalent. [Schedule 2, item 49, item 2 in the table
in subsection 307-142(3) of the ITAA 1997]
1.
On 15 June 2007, Daniel's superannuation provider paid
$10,000 to the Commissioner under subsection 17(1) of the
S(UMLM) Act in respect of Daniel. Had the payment been made
as an eligible termination payment to Daniel instead, it
would have comprised undeducted contributions of $1,000, a
pre-July 1983 component of $2,000 and a post-June 1983
component (taxed element) of $7,000. The tax free component
of this claimed equivalent is $3,000, being the total of the
components referred to in subsection 307-225(2) of the
ITAA 1997. If the Commissioner were to make a payment under
subsection 17(2) (or section 20H if applicable) which was
attributable to that $10,000 amount, the tax free amount of
the payment would be $3,000, being equal to the tax free
component of the claimed equivalent.
126. Where the Commissioner pays a superannuation benefit which is
attributable to an unclaimed amount paid by a superannuation
provider to the Commissioner under subsection 20F(1) of the S(UMLM)
Act (other than an amount referred to in section 65AA of the SGAA
1992), the tax free component of that superannuation benefit is
equal to the tax free component of the claimed equivalent.
[Schedule 2, item 49, item 3 in the table in subsection 307-142(3)
of the ITAA 1997]
127. The amount referred to in section 65AA of the SGAA 1992, which
represents a shortfall component received by the Commissioner in
relation to a former temporary resident, is excluded from the above
calculation as the shortfall component should not contain a tax
free component. The taxation treatment of shortfall components
which relate to former temporary residents is discussed further in
paragraph 2.108 of this chapter.
128. The taxable component of the superannuation benefit paid by the
Commissioner under either subsection 17(2) or section 20H of the
S(UMLM) Act is so much (if any) of the superannuation benefit that
is not a tax free component. This includes, but is not limited to,
a payment attributable to a shortfall component relating to a
former temporary resident (as discussed above), as well as interest
paid by the Commissioner under subsection 20H(2A) of the S(UMLM)
Act. [Schedule 2, item 49, subsection 307-142(4)]
Elements of the taxable component of unclaimed money payments made
by the Commissioner
129. The amount of the element taxed in the fund of the taxable
component of a superannuation benefit paid by the Commissioner
under subsection 17(2) or section 20H of the S(UMLM) Act is
calculated by determining:
. the amount (the 'unclaimed amount') or amounts to which
the taxable component of the superannuation benefit being
paid by the Commissioner is attributable;
. an amount (the 'claimed equivalent') which represents the
taxable component of an amount notionally paid to the
person, based on an assumption that the unclaimed amount
(or amounts) was (or were) paid to the person instead of
being paid to the Commissioner; and
. the element taxed in the fund of the taxable component of
the claimed equivalent.
130. The element taxed in the fund of the taxable component of the
superannuation benefit paid under either subsection 17(2) or
section 20H of the S(UMLM) Act is equal to the element taxed in the
fund of the taxable component of the claimed equivalent. [Schedule
2, item 51, subsection 307-300(2) of the ITAA 1997]
131. Similar to calculating the tax free component of the superannuation
benefit, the determination of the element taxed in the fund of the
taxable component is dependant upon whether the underlying payment
was made by the superannuation provider to the Commissioner under
subsection 17(1) or section 20F(1) of the S(UMLM) Act, and if made
under subsection 17(1), when that payment was made. [Schedule 2,
item 51, column 1 in the table in subsection 307-300(3) of the ITAA
1997]
132. Where the Commissioner pays a superannuation benefit which is
attributable to an unclaimed amount paid on or after 1 July 2007 by
a superannuation provider to the Commissioner under subsection
17(1) of the S(UMLM) Act, the element taxed in the fund of the
taxable component of that superannuation benefit is equal to the
amount of the element taxed in the fund of the taxable component of
the claimed equivalent. [Schedule 2, item 51, item 1 in the table
in subsection 307-300(3) of the ITAA 1997]
1.
Using the facts from Example 2.5, if the Commissioner were
to make a payment under subsection 17(2) (or section 20H if
applicable) which was attributable to the amount in
question, the element taxed in the fund of the taxable
component of the superannuation benefit would be $3,500,
being equal to the element taxed in the fund of the taxable
component of the claimed equivalent.
133. Where the Commissioner pays a superannuation benefit which is
attributable to an unclaimed amount paid before 1 July 2007 by a
superannuation provider to the Commissioner under subsection 17(1)
of the S(UMLM) Act, the element taxed in the fund of the taxable
component of that superannuation benefit is equal to the taxed
element of the post-June 1983 component of the eligible termination
payment (within the meaning of subsection 27A(1) of the ITAA 1936
as in force just before 1 July 2007) that forms part or all of the
claimed equivalent. [Schedule 2, item 51, item 2 in the table in
subsection 307-300(3) of the ITAA 1997]
1.
Using the facts from Example 2.6, if the Commissioner were
to make a payment under subsection 17(2) (or section 20H if
applicable) which was attributable to the amount in
question, the element taxed in the fund of the taxable
component of the superannuation benefit would be $7,000,
being the taxed element of the 'post-June 1983 component' of
the eligible termination payment and therefore also being
the element taxed in the fund of the taxable component of
the claimed equivalent.
134. Where the Commissioner pays a superannuation benefit which is
attributable to an unclaimed amount paid by a superannuation
provider to the Commissioner under subsection 20F(1) of the S(UMLM)
Act (other than an amount referred to in section 65AA of the SGAA
1992), the element taxed in the fund of the taxable component of
that superannuation benefit is equal to the amount of the element
taxed in the fund of the taxable component of the claimed
equivalent. [Schedule 2, item 51, item 3 in the table in
subsection 307-300(3) of the ITAA 1997]
135. Continuing on from the discussion in paragraph 2.100 of this
chapter, the amount which represents a shortfall component received
by the Commissioner in relation to a former temporary resident is
excluded from the above calculation as that shortfall component
should not contain an element taxed in the fund of a taxable
component. The amount of the superannuation benefit paid by the
Commissioner which is attributable to a shortfall amount referred
to in section 65AA of the SGAA 1992 should be comprised of an
element untaxed in the fund of a taxable component. This reflects
its nature as not having been subject to taxation, having never
been included in the assessable income of a superannuation
provider.
136. The element untaxed in the fund of a taxable component of the
superannuation benefit paid by the Commissioner under either
subsection 17(2) or section 20H of the S(UMLM) Act is so much (if
any) of the taxable component that is not the element taxed in the
fund. This includes, but is not limited to, a payment attributable
to a shortfall component relating to a former temporary resident
(as discussed above), as well as interest paid by the Commissioner
under subsection 20H(2A) of the S(UMLM) Act (which reflects the
nature of interest as having never been taxed). [Schedule 2, item
51, subsection 307-300(4)]
137. Subdivision 301-C of the ITAA 1997 deals with the taxation of
elements untaxed in the fund of taxable components of
superannuation benefits, but only in relation to superannuation
benefits paid by superannuation plans. Amendments will be made to
Subdivision 301-C of the ITAA 1997 to treat a superannuation lump
sum paid by the Commissioner under either subsection 17(2) or
section 20H of the S(UMLM) Act as if it were paid from a
superannuation plan, thereby ensuring the correct taxation
treatment of such payments. [Schedule 2, item 43, section 301-125
of the ITAA 1997]
Untaxed plan cap amount
138. An amendment is made to section 306-15 of the ITAA 1997 to clarify
that an untaxed plan cap amount as referred to in that section
relates to the superannuation plan making the payment, rather than
to the superannuation plan receiving the roll-over amount.
[Schedule 2, item 44, paragraph 306-15(1)(d) of the ITAA 1997]
139. A note is also added to section 306-15 of the ITAA 1997, advising
that an untaxed plan cap amount in relation to an unclaimed money
payment made by the Commissioner is calculated under subsection 307-
350(2B) of the ITAA 1997. [Schedule 2, item 45, subsection 306-
15(1) of the ITAA 1997]
140. Section 307-350 of the ITAA 1997 is amended to ensure that a person
only has one untaxed plan cap amount in relation to amounts paid
from the Commissioner under the S(UMLM) Act, regardless of whether
more than one amount was received by the Commissioner from
superannuation providers in relation to the person. [Schedule 2,
item 52, subsection 307-350(2B) of the ITAA 1997]
141. Currently under section 307-350 of the ITAA 1997 the 'untaxed plan
cap amount' is adjusted to take into account any superannuation
member benefit that is received from a superannuation plan which
includes an element untaxed in the fund. However, because an
unclaimed money payment from the Commissioner in respect of a
person under the S(UMLM) Act is not from a superannuation plan, the
untaxed plan cap amount for the person has not been subject to
variation by payments made by the Commissioner. The amendments in
this Bill correct that situation and treat an unclaimed money
payment from the Commissioner as if it were a payment from a
superannuation plan for the purposes of excess untaxed roll-over
taxation. [Schedule 2, item 52, subsection 307-350(2B) of the ITAA
1997]
Disability superannuation benefits
142. These provisions also clarify that section 307-145 of the
ITAA 1997, relating to disability superannuation benefits, does not
apply to an unclaimed money payment. [Schedule 2, item 50,
subsection 307-145(1) of the ITAA 1997]
Application and transitional provisions
143. Despite the amendments to sections 16, 17 and 18 of the S(UMLM) Act
being made by this Schedule those sections, as in force just before
the commencement of this Schedule, continue to apply in relation to
half-years ending before 1 July 2009. In addition, an unclaimed
money day specified by the Commissioner under paragraph 15A(a) of
the S(UMLM) Act will have to be a day that occurs on or after 1
July 2009. [Schedule 2, item 67]
144. The obligations on superannuation providers under section 16A of
the S(UMLM) Act being made by this Schedule will not apply in
relation to statements given to the Commissioner under section 16
of the S(UMLM) Act as in force just before the commencement of this
Schedule. [Schedule 2, item 68]
145. Whilst a reference to a payment made under subsection 17(1) or
17(2) of the S(UMLM) Act includes a payment made before the
commencement of this Schedule, sections 17A, 18A, 18B and 18C as
inserted by this Schedule do not apply to such payments. [Schedule
2, item 69]
146. Savings provisions have been inserted to ensure that where
regulations have been made for the purposes of subparagraph
20C(1)(b)(i) and paragraph 20L(4)(a) of the S(UMLM) Act before the
commencement of this Schedule, that they have effect as if they had
been made for the purposes of subsection 20AA(2) and paragraph
18B(4)(a) of the S(UMLM) Act respectively. These regulations deal
with prescribed visa class exemptions from the definition of a
'former temporary resident' and written notices from the
Commissioner to debtors respectively. [Schedule 2, item 70]
147. The amendments to the Co-contribution Act made by this Schedule
only apply in relation to the 2009-10 and later income years.
[Schedule 2, item 71]
Chapter 3
Key concepts
Outline of chapter
148. Part 1 of Schedule 3 to this Bill amends the Income Tax Assessment
Act 1936 (ITAA 1936), Income Tax Assessment Act 1997 (ITAA 1997)
and Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)
to provide the key concepts and definitions that will apply as part
of three means testing reforms announced in the 2008-09 Budget.
149. In particular, this Part defines:
. 'adjusted fringe benefits';
. 'reportable superannuation contributions';
. 'reportable employer superannuation contributions' (RESC);
and
. 'total net investment loss', which draws on a new
definition of 'financial investment' to be inserted in the
ITAA 1997.
150. There are also definitions of 'rebate income' and 'income for
surcharge purposes' which consolidate the components of income to
be assessed in determining an individual's eligibility for
particular offsets, and obligations to pay the Medicare levy
surcharge.
Context of amendments
151. The 2008-09 Budget announced three measures to expand income
definitions used for means-tested tax and transfer system programs.
These measures enhance the fairness and integrity of the tax and
transfer systems by removing inconsistencies in the treatment of
non-wage remuneration and ensure better account is taken of certain
losses.
152. One measure, Means testing of government support - expanded
definitions of income to include certain 'salary sacrificed'
contributions to superannuation will mean that particular 'salary
sacrificed' superannuation contributions are assessed as income.
As a result, those individuals that reduce their assessable income
by electing to have salary contributed to superannuation will be
treated on an equivalent basis to those who cannot access salary
sacrifice.
153. Another measure, Means testing of government support - expanded
definitions of income to include net losses from investments' ,
expands relevant income definitions to include net losses from
'financial investments', and net losses from rental property where
appropriate.
154. Net rental property losses are currently added to income for a
number of transfer programs including Family Tax Benefit, Child
Care Benefit, and child support. This measure extends the
government assistance programs that income test net rental property
losses and also adds net financial investment losses to income for
those programs where such losses are not included.
155. As a result, this measure ensures better account is taken of losses
and removes inconsistencies in their treatment for income test
purposes.
156. The third means testing reform announced in the 2008-09 Budget,
Means testing of government support - expanded definitions of
income to include reportable fringe benefits was to extend income
definitions for particular tax offsets to include reportable fringe
benefits. However, on 19 June 2008, as part of a decision to retain
the inclusion of adjusted fringe benefits in the income test for
family assistance programs, the Government announced that the
Budget measure would be varied so that adjusted fringe benefits
were added to income.
157. Adjusted fringe benefits are the 'grossed-down' amount of
reportable fringe benefits paid to an employee. Under current
arrangements, reportable fringe benefit amounts are 'grossed-down'
by multiplying the reportable fringe benefits amount by 53.5 per
cent.
158. Most transfer programs that assess fringe benefits as income assess
the adjusted value of fringe benefits. However, tax programs that
currently assess fringe benefits rely on the reportable fringe
benefits amount. This is the 'grossed-up' amount of fringe
benefits which is designed to capture what an individual would have
been required to pay before tax to acquire the benefit. The effect
of the 'adjustment' process means the 'cash value' of the fringe
benefit is assessed as income.
159. The 2008-09 Budget means test reforms extend to most Australian
Government tax and transfer programs that are income tested. Among
the programs to be affected are those that currently assess taxable
income only and programs that use adjusted taxable income.
160. Under the current law, the definition of income used to assess an
individual's liability to pay the Medicare levy surcharge is
derived from three pieces of legislation: the Medicare Levy Act
1986 (MLA 1986); the A New Tax System (Medicare levy surcharge -
Fringe Benefits) Act 1999 (ANTS (MLS) Act 1999); and Part VIIB of
the ITAA 1936.
161. This is because the MLA 1986 applies the Medicare levy surcharge
against an individual's taxable income (as modified by the MLA
1986) and the ANTS (MLS) Act 1999 applies the Medicare levy
surcharge against an individual's reportable fringe benefits total
for the year (where applicable).
162. The ANTS (MLS) Act 1999 replicates the income test that is used in
the MLA 1986 to determine an individual's Medicare levy surcharge
liability. This adds to legislative size and complexity.
Summary of new law
163. Part 1 of Schedule 3 inserts a number of new definitions into the
ITAA 1997 and the TAA 1953. For example, a new definition of
'reportable superannuation contributions' is inserted into the ITAA
1997 which captures the particular 'salary sacrificed'
superannuation contributions to be added to income as a result of
means testing reforms announced in the 2008-09 Budget.
164. A component of 'reportable superannuation contributions' is
employer contributions to superannuation that the employee has
influenced to be made in such a way that their assessable income is
reduced. These contributions, to be known as 'reportable employer
superannuation contributions', are to be defined in Schedule 1 of
the TAA 1953.
165. The amendments also insert a new definition of an individual's
'total net investment loss' into the ITAA 1997. This definition
captures net losses from 'financial investments', and net rental
property losses. The amendments insert a new definition of
'financial investment' into the ITAA 1997 for the purposes of this
definition.
166. A taxpayer's 'adjusted fringe benefits total', which are to be
assessed as income for particular tax offsets as a result of the
reforms, are to be defined in the ITAA 1936.
167. Also, the amendments insert two new definitions of 'rebate income'
and 'income for Medicare levy surcharge purposes' into the
ITAA 1936 and the ITAA 1997 for legislative simplicity in response
to the income test reforms announced in the 2008-09 Budget.
168. These definitions will be used to determine eligibility for
particular means-tested tax offsets and obligations to pay the
Medicare levy surcharge.
Detailed explanation of new law
Key concepts and definitions
Adjusted fringe benefits total
169. Part 1 of Schedule 3 amends the ITAA 1936 to insert a definition of
'adjusted fringe benefits total' into subsection 6(1), which is the
definitions section of the ITAA 1936. [Schedule 3, Part 1, item 1]
170. The amendments also repeal the current definition of 'reportable
fringe benefits total' from subsection 6(1) of the ITAA 1936 and
insert a definition that cross-references the Fringe Benefits
Assessment Act 1986.
171. The new 'adjusted fringe benefits total' definition is consistent
with the definition of that concept in other legislation such as
clause 4 of Schedule 3 to the A New Tax System (Family Assistance)
Act 1999 and subpoint 1067G-F11(2) of the Social Security Act 1991
(SS Act 1991). The effect of the definition, having regard to the
current rate of fringe benefits tax, is that an individual's
'adjusted fringe benefits total' will be their reportable fringe
benefits for the income year multiplied by 53.5 per cent.
172. An individual's 'adjusted fringe benefits total' will be assessed
in determining eligibility for the senior Australians tax offset
and the pensioner tax offset as a consequence of the income
definition for these programs being amended to 'rebate income'
(explored below).
173. The beneficiary, and beneficiary's spouse's adjusted fringe
benefits total (where appropriate), will also become relevant in
determining a trustee's eligibility for the offset in section
160AAAB of the ITAA 1936.
Rebate income
174. Part 1 of Schedule 3 to this Bill also inserts a definition of
'rebate income' into the ITAA 1936. [Schedule 3, Part 1, item 2]
175. This 'rebate income' definition will be applied in determining an
individual's eligibility for the senior Australians tax offset, the
pensioner tax offset and a trustee's eligibility for an offset
under section 160AAAB of the ITAA 1936. 'Rebate income' is
inserted to consolidate the components of income that are to be
assessed for these offsets.
176. This is because, as a result of the 2008-09 Budget reforms, the
income tests for these offsets will expand to assess an
individual's (and their spouse's where appropriate): taxable
income; 'adjusted fringe benefits total'; 'total net investment
loss'; and 'reportable superannuation contributions' for the year
of income. Including a new definition of 'rebate income' that
incorporates these income components reduces the need for
unnecessary amendments.
177. The label 'rebate income' is used, even though the benefits to
which it applies are more commonly known as 'offsets', because the
ITAA 1936 refers to the benefits as 'rebates' so the references to
'rebate income' was preferred for consistency.
Income for Medicare levy surcharge purposes
178. The amendments also amend the ITAA 1997 to insert a new definition
of 'income for surcharge purposes'. This definition will be used
to determine an individual's liability to pay the Medicare levy
surcharge. [Schedule 3, Part 1, item 7]
179. The new definition consolidates the current components of income
assessed in determining an individual's Medicare levy surcharge
liability and the new components which are to be assessed as a
result of the Budget measures, so that there is less complexity in
the law and reduced duplication.
Reportable superannuation contributions
180. Another definition to be inserted by Part 1 of Schedule 3 is
'reportable superannuation contributions'. This is the definition
for the certain 'salary sacrificed' superannuation contributions
that were announced as being for inclusion in income tests in the
2008-09 Budget.
181. 'Reportable superannuation contributions' will be added to income
for a range of programs across the tax and transfer systems.
'Reportable superannuation contributions' include the total of an
individual's deductions under Subdivision 290-C of the ITAA 1997
and an individual's 'reportable employer superannuation
contributions'.
182. The total personal contributions that are to be assessed are all
contributions that are, or will be, deductible under Subdivision
290-C of the ITAA 1997. Under income test arrangements for income
support payments paid under the SS Act 1991, these contributions
are currently assessed as income.
Reportable employer superannuation contributions
183. A definition of RESC is inserted in Schedule 1 of the TAA 1953.
The location for this provision is in the payment summary
provisions which are relevant for RESC as, from 1 July 2009,
employers will be required to report RESC on annual and part-year
payment summaries. [Schedule 3, Part 1, item 11]
184. RESC are also defined in section 995-1 of the ITAA 1997 and
subsection 6(1) of the ITAA 1936, which are the definitions
sections for those Acts. The definition in section 995-1 of the
ITAA 1997 cross-references the RESC definition in Schedule 1 of the
TAA 1953. [Schedule 3, Part 1, items 4 and 8]
185. RESC are contributions to a superannuation fund or retirement
savings account, made on behalf of an individual during an income
year, by their employer or an associate of their employer.
'Employer' is defined in new subsection 16-182(3) of Schedule 1 to
the TAA 1953 to have the expanded meaning of that term in section
12 of the Superannuation Guarantee (Administration) Act 1992.
Associate of the employer
186. 'Associate' is defined in section 318 of the ITAA 1936. In respect
of an employer company, the definition would include the trustee of
any trust of which the employer was a beneficiary, or of which
their 'associate' were a beneficiary, and a subsidiary of the
employer company.
187. One of the tests for whether contributions being made by a second
entity, on behalf of an individual employed by the first entity,
are RESC will be whether the first entity sufficiently influenced,
or was sufficiently influenced by, the second entity (whether
individually or in concert with another entity).
188. An entity is sufficiently influenced by a second entity, or other
entities, if the entity is accustomed, under an obligation (whether
formal or informal) or might reasonably be expected to act in
accordance with directions, instructions or wishes of the second
entity or other entities.
189. Relevant considerations in determining whether an entity is
sufficiently influenced by a second entity will be the history of
relations between the entities, including evidence of non-arms'
length dealings.
190. Evidence that the directors or senior personnel of the different
entities are the same, or associates, for the purposes of
subsection 318(1) of the ITAA 1936 will be strong evidence that two
entities are associates. It is also relevant if the directors of a
second entity are former directors of the first entity.
Capacity to influence - size of the amount
191. The fact superannuation contributions have been made on behalf of
an individual does not mean they are RESC. Only those
contributions made on behalf of an individual in circumstances
where the individual had some capacity, or might reasonably be
expected to have some capacity, to influence the size of the
contribution or the way in which the contribution was made are
RESC.
192. There are two amounts of superannuation contribution made on behalf
of an individual that may be RESC. The first is any amount made
where the individual has, or has had, or might reasonably be
expected to have or have had, capacity to influence the size of the
amount. The other example of RESC is any amount that an individual
has, or has had, or might reasonably be expected to have or have
had made in such a way so that his or her assessable income is
reduced.
193. A key example of the first category of RESC are amounts that an
individual has elected to have contributed to superannuation as
part of a 'salary sacrifice arrangement'. These are arrangements
between an employer and their employee to have prescribed amounts,
or a prescribed percentage, of their salary contributed to
superannuation.
194. In these circumstances, the amount of contribution in excess of the
amount required to be made under superannuation guarantee law would
be RESC.
1.
Lisa is an employee of FJH Pty Ltd (FJH). FJH contributes
9 per cent of Lisa's total remuneration (including her
reportable fringe benefits total) to superannuation under an
industrial agreement that was negotiated between FJH and the
union representative. Lisa was not involved in these
negotiations and had no involvement in the preparation of
the agreement, aside from voting on it. As such, Lisa would
have no capacity to influence this amount of contribution.
However, under the agreement, employees may elect to have an
amount of salary paid to superannuation. This is in
addition to the 9 per cent contribution required under the
agreement. During the year, Lisa approached FJH to have
$5,000 contributed to her superannuation fund as part of an
effective 'salary sacrifice' agreement. This $5,000
contribution is RESC.
195. A further example where RESC would exist is where contributions
above the amount required under superannuation guarantee law are
made pursuant to the terms of a common law employment contract or
as a result of some agreement between an employee and their
employer for increased superannuation contributions to be made on
behalf of an employee as part of a remuneration package.
1.
Wei is an employee of TKU Pty Ltd (TKU). During
negotiations of Wei's common law employment contract, TKU
offered Wei increased contributions to superannuation as
part of a range of employment-related benefits. These
contributions, which equate to $10,000 of Wei's total
remuneration, were provided as part of a remuneration
package that Wei was allowed to consider and discuss with
TKU. TKU made it clear to Wei that he could negotiate the
contents of the additional incentives and that other
benefits may be provided. These dealings are evidence to
suggest Wei might reasonably have been expected to have had
capacity to influence the amount of contributions being made
on his behalf. The $10,000 contribution is in addition to
contributions being made by TKU under superannuation
guarantee law. TKU would be expected to record the $10,000
superannuation contribution as RESC.
196. Importantly, the definition of RESC does not capture that part of a
contribution made by an employer that meets the employer's
requirements under federal, state or territory legislation. That
is, an amount of contributions equating to what an employer would
have been required to make on behalf of an employee under the
Superannuation Guarantee (Administration) Act 1992 would never be
RESC.
197. This is because, to the extent an employer contribution meets the
employer's requirements under law, or some other obligation, the
employee cannot have, have had, or reasonably be expected to have
or have had, capacity to influence the size of the contribution.
1.
Owen is an employee of KZP Pty Ltd (KZP). KZP pays 9 per
cent of Owen's ordinary time earnings to superannuation in
accordance with the Superannuation Guarantee
(Administration) Act 1992. This amount is the minimum
amount required to be contributed by KZP on Owen's behalf so
Owen would not have, and could not reasonably be expected to
have, capacity to influence this amount. Because Owen has
not influenced further superannuation contributions to be
made on his behalf by KZP or influenced any contributions to
be made in such a way that his assessable income is reduced,
Owen has no RESC for the income year.
198. It is not necessary for contributions to be compelled by law for
them to fall outside the definition of RESC. To the extent that an
employer makes contributions above those mandated by law for
administrative or other considerations, over which the employee has
no, and could not reasonably be expected to have, capacity to
influence, then those contributions will not be RESC.
1.
Aparna is an employee of GKU Pty Ltd (GKU). Aparna's
ordinary time earnings are $100,000 but Aparna has earned
$1,000 in overtime during the income year. GKU's payroll
system calculates superannuation contributions on Aparna's
total income of $101,000. However, GKU is only compelled,
under superannuation guarantee law, to make superannuation
contributions on $100,000. GKU's payroll system does not
allow for superannuation contributions to be made on an
employee's ordinary time earnings alone. Because Aparna has
not influenced further contributions to be made on her
behalf or influenced contributions to be made in such a way
that her assessable income is reduced, Aparna has no RESC
for the income year.
199. There is also the circumstance where an employer makes
superannuation contributions on behalf of an employee under the
terms of an industrial agreement. Provided this agreement has been
made at arms' length with the employee and that employee has no
capacity to influence, and could not reasonably be expected to have
capacity to influence, the terms of the agreement, then the amount
would not be RESC. This includes if an employer is paying more
than the amount required under the agreement for administrative
reasons and the employee could not reasonably be expected to have
capacity to influence the amount of contributions being made on
their behalf.
1.
Costa is an employee of PQZ Pty Ltd (PQZ). Costa's
employment conditions are governed by an industrial
agreement that was negotiated between Costa's employer and
the union representative. Costa was not involved in the
negotiations and had no involvement in the preparation of
the agreement, aside from voting on it. The terms of the
agreement require PQZ to contribute 15 per cent of Costa's
ordinary time earnings to superannuation. However, PQZ's
payroll system pays 15 per cent of Costa's total
remuneration (including overtime). PQZ's payroll system
does not allow for superannuation contributions to be made
on an employee's ordinary time earnings alone. Because
Costa has not influenced further contributions to be made on
his behalf or influenced contributions to be made in such a
way that his assessable income is reduced, Costa has no RESC
for the income year.
200. However, for a contribution to be excluded from the RESC definition
when made pursuant to the terms of an industrial agreement, it must
be demonstrated that the employee had no capacity to influence the
terms of the agreement and could not reasonably be expected to have
capacity to influence those terms.
201. If an employee is related to their employer in the sense that they
are an associate of the employer for the purposes of section 318 of
the ITAA 1936, or an 'attributable stakeholder' of their employer
company or trust for the purposes of the SS Act 1991, then there is
a rebuttable presumption that the employee had capacity to
influence the amount of contributions being made on their behalf to
the extent that those contributions exceed the amount is required
by law.
202. In these circumstances, the burden of proving that an employee had
no capacity to influence falls on the employer. Relevant
considerations in demonstrating whether an employee had capacity to
influence will be the relationship of the employee to their
employer, the involvement of the employee in the negotiations
concerning the terms of any industrial agreement governing the
employee's work conditions, and the size of the amount contributed
on the employee's behalf relative to what amount would be required
by superannuation guarantee law.
1.
Tula is an employee of MGK Pty Ltd (MGK). Tula's employment
conditions are governed by an industrial agreement that was
negotiated between Tula and the other employees of MGK
(Tula's husband, Tony and their adult children, Michael and
Rena). There was no external involvement in the
negotiations of the agreement and it was not made at arms'
length. The agreement requires MGK to contribute an amount
equating to 15 per cent of employee total remuneration
(including overtime) to superannuation. In Tula's case, her
total remuneration is $66,000 per year but ordinary time
earnings is only $60,000 per year. Tula's annual
contribution from MGK is $5,940. However, under
superannuation guarantee law, MGK is only compelled to pay
$5,400 on behalf of Tula, being 9 per cent multiplied by
$60,000. Because the contributions made on behalf of Tula
and her fellow employees are required under the terms of an
agreement that was not negotiated at arms' length, and which
Tula had capacity to influence, then MGK must report the
difference between the amount compelled by law and the
amount paid under the industrial agreement as RESC. That
amount is the difference between $5,940 and $5,400 (being
$540).
203. However, an employer must only report an amount contributed in
excess of that required by law as RESC to the extent that the
employee had capacity to influence that amount. That is, if an
employee would not have capacity to influence an amount above that
compelled by law because it is the minimum amount that may be
contributed under the employer's payroll system, and the employee
does not have, has not had, and could not reasonably be regarded as
having capacity to influence that minimum amount, then the employer
must only report the contribution to the extent that the employee
had capacity to influence its size or the way the contribution was
made.
Capacity to influence - form of contribution
204. The other category of contributions that fall within the RESC
definition are contributions that an individual has or has had, or
might reasonably be expected to have or have had, capacity to
influence to be made in such a way that the individual's assessable
income is reduced.
205. For some funds, particularly defined benefit funds, members are
required to make contributions from their assessable income (known
as 'member contributions'). These contributions are typically a
certain percentage although members may elect the relevant
percentage of contribution they would like to make.
206. New subsection 16-182(2) of Schedule 1 to the TAA 1953 provides
that all contributions made from an individual's assessable income
for the income year are excluded from the RESC definition. As a
result, notwithstanding that they may have capacity to influence
the amount of contributions being made, employees that vary their
member contribution rate will not have any increased superannuation
contribution assessed as income.
207. However, if an employee has capacity to 'salary sacrifice' a member
contribution under the rules of a defined benefit scheme then the
amount of any contribution they have influenced to be paid, or
might reasonably be expected to have influenced to be paid, in such
a way that their assessable income is reduced, will be RESC.
1.
Rhonda's employer makes superannuation contributions on
Rhonda's behalf to a defined benefit fund. The employer
contributions are applied to a pool to fund the liability of
the entire fund. In addition, the rules of the fund require
Rhonda to make a member contribution equal to 7 per cent of
ordinary time earnings. Ordinarily, this member
contribution would be made from Rhonda's assessable income.
However, the rules of the defined benefit fund were recently
amended so that individuals may elect to contribute their
member contribution from pre-tax salary or wages. Rhonda
exercises this option and the 'grossed-up' amount of her
member contribution is deducted from her pre-tax salary or
wages so that Rhonda makes the same net contribution to her
employer's defined benefit fund as she would have made if
the member contribution were made from assessable income.
The total 'grossed-up' amount of the contribution is RESC
because it represents the amount that Rhonda has elected to
have made from pre-tax salary with the effect that her
assessable income is reduced.
Financial investment
208. Part 1 of Schedule 3 inserts a new definition of 'financial
investment' into section 995-1 of the ITAA 1997. This definition
will be relevant for the purposes of the 'total net investment
loss' definition.
[Schedule 3, Part 1, item 6]
209. The new 'financial investment' definition includes shares in a
company (whether those shares are in an Australian company or
foreign company), and interests in a managed investment scheme for
the purposes of the Corporations Act 2001. This means that the
requirement for the managed investment scheme to have more than 20
members, which is an element of the 'managed investment scheme'
definition in the ITAA 1997, does not apply.
210. Paragraph (e) of the 'financial investment' definition also
captures investments of a 'like nature' to shares and managed
investment schemes. Relevant considerations in determining whether
an investment is of a 'like' nature to the other investments are
whether the investment is traded in a manner similar to the other
investments and the similarities between the type of investors in
that investment, and other investments in the 'financial
investment' definition.
211. Given the relevance of the 'financial investment' definition to the
concept of an individual's 'total net investment loss', it will
also be relevant if the particular investment involved is the
subject of an investment loan arrangement. It is intended that the
'financial investment' definition capture as many investments
subject to investment loan, or margin loan arrangements as is
appropriate.
Total net investment loss
212. Part 1 of Schedule 3 also inserts a definition of 'total net
investment loss' into the ITAA 1997, which is referenced in a new
definition of the concept in the ITAA 1936. [Schedule 3, Part 1,
items 5 and 10]
213. The 'total net investment loss' definition rationalises the various
definitions of net rental property loss that are currently in
applicable legislation and recognises them in one definition. This
ensures the definition of net rental property losses added to
income for means-tested assistance programs is consistent across
tax and transfer legislation.
214. The definition also captures net losses from 'financial investment'
with a definition of 'financial investment' to be inserted in
section 995-1 of the ITAA 1997.
215. An individual will have a 'total net investment loss' where their
deductions for the relevant income year from financial investments
and rental property exceed the individual's gross income from those
activities for the year. Deductions in respect of a financial
investment may be claimed for expenses such as the costs of
borrowing to invest in the financial investment or management fees
charged on the investment.
Application and transitional provisions
216. These amendments will commence the day after Royal Assent.
217. The amendments apply in relation to income years starting on or
after 1 July 2009.
Chapter 4
Amendment of payment summary provisions
Outline of chapter
218. Part 2 of Schedule 3 to this Bill amends Schedule 1 to the Taxation
Administration Act 1953 (TAA 1953) to provide the mechanism for
reporting of 'reportable employer superannuation contributions'
(RESC).
219. This chapter details how 'payers', for the purposes of the payment
summary provisions in the TAA 1953, will be required to include
RESC amounts in annual withholding reports and in annual and part-
year payment summaries.
Context of amendments
220. Schedule 1 to the TAA 1953 contains the pay as you go (PAYG)
withholding arrangements that require 'payers' to withhold amounts
from 'withholding payments' made to recipients to assist the
recipient meet their ultimate income tax liability. Withheld
amounts must be paid to the Commissioner of Taxation
(Commissioner).
221. 'Withholding payment' is defined in section 995-1 of the Income Tax
Assessment Act 1997 and includes payments identified in Divisions
12, 13 and 14 of Schedule 1 to the TAA 1953. Examples are payments
for work and services; superannuation payments; benefit and
compensation payments; non-cash benefits (other than fringe
benefits); and particular alienated personal services payments.
222. Payers that withhold amounts from particular 'withholding payments'
must provide a payment summary to the recipient within 14 days
after the end of the financial year. A payment summary must also
be provided if the recipient has a reportable fringe benefits
amount in respect of his or her 'employment' (as defined in the
Fringe Benefits Tax Assessment Act 1986) by the payer.
223. The payment summary must be in the 'approved form' and must satisfy
other content requirements in section 16-170 of Schedule 1 to the
TAA 1953. In particular, it must include total amounts withheld
and the total income to which the withheld amounts relate. Where
applicable, the payment summary must also specify the reportable
fringe benefit amount it covers and the income year to which the
amount relates.
224. Schedule 1 to the TAA 1953 provides for part-year payment
summaries, which must be given to a recipient (on request) where
the recipient made their request more than 21 days before the end
of the financial year. Part-year payment summaries must generally
be provided to the recipient 14 days after the payer receives the
request unless the recipient has a reportable fringe benefits
amount in respect of their employment with the payer for the income
year.
225. The penalty for failing to meet the requirements in Schedule 1 to
the TAA 1953 in respect of an annual or part-year payment summary
is 20 penalty units and the offence is an offence of strict
liability. Having regard to the circumstances of a particular
case, the Commissioner may exempt an entity from the need to
provide a payment summary or specified requirements of the payment
summary provisions under section 16-180 of Schedule 1 to the
TAA 1953.
226. For example, on 16 May 2008, the Australian Taxation Office (ATO)
issued a legislative instrument (ID: 2008/MEI001) pursuant to
subsection 16-180(1). The instrument exempts payers from the
requirement to provide recipients with a copy of the payment
summary under sections 16-155, 16-160 and 16-167 of Schedule 1 to
the TAA 1953.
227. Schedule 1 to the TAA 1953 also provides for an annual withholding
report that must be prepared by payers. If an entity has withheld
amounts in an income year, or a person has a reportable fringe
benefits amount at the end of the year in respect of their
employment with the entity, the entity must give a report to the
Commissioner under subsection 16-153(2) of Schedule 1 to the
TAA 1953. This report must meet content requirements and must be
provided no later than 14 August after the end of the financial
year.
228. For some withholding payments, prescribed in subsection 16-153(1)
of Schedule 1 to the TAA 1953, the annual report may be provided
after 14 August but no later than 31 October after the financial
year in which the withholding payment was made.
Summary of new law
229. Part 2 of Schedule 3 amends Schedule 1 to the TAA 1953 to require
payers to disclose RESC made on behalf of an employee during a
financial year, or part of a financial year, on part-year payment
summaries and the annual payment summary provided to that employee
for the financial year.
230. Part 2 of Schedule 3 also amends Schedule 1 to the TAA 1953 to
require payers to provide an annual withholding report to the
Commissioner where they have made RESC during the financial year.
Payers will need to provide this annual withholding report to the
Commissioner, no later than 14 August after the end of the
financial year in which the RESC were made.
Comparison of key features of new law and current law
|New law |Current law |
|Payers must disclose RESC|Payers do not disclose |
|on part-year and annual |RESC on part-year and |
|payment summaries. |annual payment summaries.|
|Payers must disclose RESC|Payers do not disclose |
|on the annual withholding|RESC on the annual |
|report provided to the |withholding report |
|Commissioner. |provided to the |
| |Commissioner. |
Detailed explanation of new law
Amendment to the annual report content requirements
231. The amendments in Part 2 of Schedule 3 amend subsection 16-153(2)
of Schedule 1 to the TAA 1953 so that entities that have made RESC
during a financial year will need to provide an annual withholding
report to the Commissioner no later than 14 August after the end of
the financial year in which the RESC were made. [Schedule 3, Part
2, item 12]
232. Under the current law, this report may be in the 'approved form'
(as defined in section 388-50 of Schedule 1 to the TAA 1953) or the
report may consist of copies of a payment summary or payment
summaries that the entity provided in respect of withholding
payments and reportable fringe benefits, plus an accompanying
statement in the approved form.
233. The amendments revise subparagraph 16-153(3)(b)(ii) to include
RESC. This means that entities may provide the Commissioner with a
payment summary or payment summaries they have issued in respect of
RESC made during the financial year as an alternative to providing
the approved form. The entity needs to provide an accompanying
statement in the approved form as well. [Schedule 3, Part 2, item
13]
234. Because the annual report will deal with RESC as well as
withholding payments and reportable fringe benefit amounts, the
heading to section 16-153 is revised to omit the words 'about
withholding payments and reporting fringe benefits'. [Schedule 3,
Part 2, item 12 (note)]
Amendment to the payment summary provisions
235. The amendments in Part 2 of Schedule 3 also revise the requirements
for annual and part-year payment summaries.
236. A new paragraph (d) is inserted in subsection 16-155(1) so that
payers will need to provide an annual payment summary to an
individual where they have made RESC for that individual during the
year in respect of the individual's employment. [Schedule 3, Part
2, item 14]
237. The amendments also insert a new paragraph (c) in subsection 16-
155(2) so that an annual payment summary will need to cover the
total RESC made by the payer during the financial year, with the
exception of any contributions reported on a previous part-year
payment summary that was provided to the recipient. [Schedule 3,
Part 2, item 15]
238. As a result of the legislative instrument issued by the ATO on
16 May 2008 exempting entities from the need to provide a copy of
the payment summary, new paragraph (c) does not include the words
'(and a copy of it)' like the other paragraphs in subsection 16-
155(2). This is because, from 1 July 2008, entities have been
relieved from the requirement to provide a copy of the payment
summary.
239. There is also an amendment to subsection 16-170(1), which deals
with the form and content of a payment summary, to require payment
summaries to specify the RESC they cover (if any) and the income
year to which the contribution(s) relate. [Schedule 3, Part 3,
item 18]
240. These amendments in respect of RESC and payment summaries ensure
that payers have the same reporting obligations for RESC on payment
summaries as currently apply for other employment benefits such as
salary or wages and reportable fringe benefit amounts.
241. The amendments also alter the part-year payment summary provisions
in section 16-160 to include RESC. As a result, payers will need
to provide a part-year payment summary if a recipient asks for one
covering any RESC made by the payer in respect of the recipient's
employment during the financial year. [Schedule 3, Part 3, items
16 and 17]
242. Pursuant to subsection 16-170(2) of Schedule 1 to the TAA 1953,
this part-year payment summary must be provided to the recipient no
later than 14 days after the payer received the request.
Application and transitional provisions
243. These amendments will commence the day after Royal Assent.
244. These amendments apply to payment summaries, and annual withholding
reports, that are issued in the 2009-10 income year and later
income years.
Chapter 5
Amendment of income tests
Outline of chapter
1. Part 3 of Schedule 3 to this Bill amends income tests across
various Acts to include reportable superannuation contributions;
reportable employer superannuation contributions (RESC), and total
net investment losses where appropriate.
2. The Acts amended, and the programs to which the amendments relate,
are outlined in Table 5.1.
1.
|Act |Program(s) |
|A New Tax System (Family |Child Care Benefit |
|Assistance) Act 1999 |Family Tax Benefit |
| |Baby Bonus |
|A New Tax System |Medicare levy surcharge |
|(Medicare Levy Surcharge | |
|- Fringe Benefits) | |
|Act 1999 (ANTS (MLS) Act | |
|1999) | |
|Medicare Levy Act 1986 |Medicare levy surcharge |
|(MLA 1986) | |
|Child Support |Child support |
|(Assessment) Act 1989 | |
|Higher Education Support |Higher Education Loan |
|Act 2003 |Program |
|Income Tax Assessment Act|Senior Australians tax |
|1936 (ITAA 1936) |offset |
| |Tax offset for trustees |
| |(section 160AAAB) |
|Income Tax Assessment Act|Deduction for personal |
|1997 (ITAA 1997) |superannuation |
| |contributions |
| |Mature age worker tax |
| |offset |
| |Spouse superannuation |
| |contributions tax offset |
| | |
| |Tax offset for Medicare |
| |levy surcharge (lump sum |
| |payments in arrears) |
|Social Security Act 1991 |Commonwealth Seniors |
|(SS Act 1991) |Health Card |
| |Student Financial |
| |Supplement Scheme |
| |Youth Allowance |
|Student Assistance Act |Student Financial |
|1973 |Supplement Scheme |
|Superannuation |Government superannuation|
|(Government |co-contribution scheme |
|Co-contribution for Low | |
|Income Earners) Act 2003 | |
|Veterans' Entitlement Act|Commonwealth Seniors |
|1986 |Health Card |
Context of amendments
3. The various definitions of income used to assess eligibility for
particular tax and transfer payments are located in different Acts.
For some programs, the means test arrangements are located in non-
legislative instruments or guidelines.
4. There is no single definition of income for all means-tested tax
and transfer programs. As a result, income definitions for
individual programs must be amended to provide for the new income
components.
Summary of new law
5. Part 3 of Schedule 3 amends relevant income definitions to include
reportable superannuation contributions, RESC and total net
investment losses where appropriate. In some instances, to avoid
duplication, references to net rental property losses are repealed
as these losses are a component of the new 'total net investment
loss' definition to be included in the ITAA 1997.
6. In respect of the Medicare levy surcharge, the ANTS (MLS) Act 1999
and the MLA 1986 are amended to recognise the new definition of
'income for surcharge purposes' which is to be included in the
ITAA 1997.
7. The amendments also revise the parental income test, and family
actual means test, which are used to determine a dependant's
eligibility for Youth Allowance, to ensure that the particular
superannuation contributions and losses that are assessed as income
for the purposes of those tests align with the reportable
superannuation contributions and 'total net investment loss'
definitions.
Detailed explanation of new law
Amendment of the A New Tax System (Family Assistance) Act 1999
8. The A New Tax System (Family Assistance) Act 1999 provides the
means test arrangements for family assistance programs such as
Family Tax Benefit, Child Care Benefit and Baby Bonus. Eligibility
for these programs is assessed against 'adjusted taxable income'
which is defined in Schedule 3 to the A New Tax System (Family
Assistance) Act 1999.
9. Part 3 of Schedule 3 amends the definition of 'adjusted taxable
income' in clause 2 of Schedule 3 to include an individual's total
net investment loss and RSC. [Schedule 3, Part 3, items 19 and 20]
10. This means an individual's 'total net investment loss' and
reportable superannuation contributions will be assessed as income
in determining their eligibility for Family Tax Benefit (Parts A
and B); Child Care Benefit; and Baby Bonus.
11. The reference to net rental property losses in the current
'adjusted taxable income' definition is substituted with a
reference to an individual's total net investment loss, as the
definition of 'total net investment loss' captures an individual's
net rental property loss.
12. The definition of 'net rental property loss' in clause 6 of
Schedule 3 to the A New Tax System (Family Assistance) Act 1999 is
repealed. [Schedule 3, Part 3, item 21]
Amendment of the A New Tax System (Medicare levy surcharge - Fringe
Benefits) Act 1999 and the Medicare Levy Act 1986
13. Part 3 of Schedule 3 amends the ANTS (MLS) Act 1999 and the MLA
1986 which provide the arrangements for determining whether an
individual is liable to pay the Medicare levy surcharge.
14. The ANTS (MLS) Act 1999 determines whether an individual is liable
to pay the Medicare levy surcharge in respect of a reportable
fringe benefits total they or their spouse may have. The MLA 1986
determines whether an individual is liable to pay the Medicare levy
surcharge in respect of their, or their spouse's, taxable income.
15. The test for whether an individual must pay the Medicare levy
surcharge depends on whether the individual's modified taxable
income and reportable fringe benefits total (if any) exceed
prescribed income thresholds.
16. Under the current law, taxable income is modified by different
provisions of the two Acts. In particular, the Acts include
modified definitions of 'taxable income' in section 9 of the ANTS
(MLS) Act 1999 and subsection 3(2A) of the MLA 1986.
17. These definitions apply in determining an individual's liability to
pay the Medicare levy surcharge. Further adjustments to modified
'taxable income' are made where the taxpayer or their spouse is the
beneficiary of a trust estate whose trustee is liable to be
assessed under section 98 of the ITAA 1936.
18. The amendments revise the ANTS (MLS) Act 1999 and the MLA 1986 to
recognise the new 'income for surcharge purposes' definition. A
cross-reference to the 'income for surcharge purposes' definition
in the ITAA 1997 is inserted in the definition sections of both
Acts. [Schedule 3, Part 3, items 22 and 48]
19. 'Income for surcharge purposes' includes the modifications to
taxable income that are made by section 9 of the ANTS (MLS) Act
1999 and subsection 3(2A) of the MLA 1986. As such, the amendments
repeal section 9. The amendments also repeal the definition of
'taxable income' which cross-references section 9 from the list of
definitions in section 3 of the ANTS (MLS) Act 1999. [Schedule 3,
Part 3, items 24 and 25]
20. Further, the amendments simplify the definition of 'reportable
fringe benefits total' in the ANTS (MLS) Act 1999 and remove the
'reportable fringe benefits total' definition from the MLA 1986 as
the need to refer separately to reportable fringe benefits is
removed by references to 'income for surcharge purposes' which
includes reportable fringe benefits. [Schedule 3, Part 3, items 23
and 49]
21. Although subsection 3(2A) of the MLA 1986 currently amends 'taxable
income' for the purposes of sections 8B to 8G, the amendments do
not alter this provision. As a result, any reference to 'taxable
income' in those provisions should continue to be read as being
modified by subsection 3(2A). That is, the Medicare levy surcharge
continues to be 1 per cent of an individual's taxable income (as
modified by subsection 3(2A)).
22. Under the ANTS (MLS) Act 1999 and the MLA 1986, separate sections
prescribe the income tests to apply in respect of periods where a
taxpayer is a single person without dependants, a single person
with dependants, or person with a spouse.
23. The income tests used in respect of a single person without
dependants are contained in section 12 of the ANTS (MLS) Act 1999
and section 8B of the MLA 1986. The amendments modify the income
test in these sections so that 'income for surcharge purposes'
substitutes for references to taxable income. [Schedule 3, Part 3,
items 26 and 51]
24. The tests used in respect of a single person with dependants are
contained in section 13 of the ANTS (MLS) Act 1999 and section 8C
of the MLA 1986. The amendments modify these sections so that an
individual's 'income for surcharge purposes' is assessed in
determining their Medicare levy surcharge liability. [Schedule 3,
Part 3, items 27 and 52]
25. In respect of a period where a taxpayer has a spouse, the income
relevant in determining their Medicare levy surcharge liability is
both the taxpayer's income and the income of their spouse.
Sections 15 and 16 of the ANTS (MLS) Act 1999 provide the test to
determine an individual's Medicare levy surcharge liability on
their reportable fringe benefits total. The relevant section in
the MLA 1986 is section 8D.
26. The amendments revise the definitions of 'income' used to assess
liability to pay the Medicare levy surcharge in those provisions so
that 'income for surcharge purposes' of both the taxpayer and their
spouse is assessed in determining the taxpayer's Medicare levy
surcharge liability. [Schedule 3, Part 3, items 28, 30, 31 and 53
to 55]
27. Subsection 8D(5) of the MLA 1986 currently includes a modified
definition of 'taxable income' that is to be used for the purposes
of that section. The amendments repeal this definition and insert
a new definition where modifications are made to the taxpayer's
spouse's 'income for surcharge purposes' which is the new income
base used to determine an individual's Medicare levy surcharge
liability rather than their taxable income. [Schedule 3, Part 3,
item 56]
28. The amendments also substitute references to taxable income in
section 8G of the MLA 1986 with references to 'income for surcharge
purposes'. [Schedule 3, Part 3, items 58 and 59]
29. Section 8G of the MLA 1986 requires trustees of a trust estate who
are liable to be assessed under section 98 of the ITAA 1936 in
respect of a share of the net income of a trust estate to which a
beneficiary is presently entitled, to pay the Medicare levy
surcharge where the sum of the beneficiary's trust income and the
beneficiary's spouse's taxable income or reportable fringe benefits
total (if any) is greater than the family surcharge threshold
provided in section 3A of the ITAA 1936.
30. The amendments alter section 8G of the MLA 1986 so that the trustee
of a trust estate will need to pay the Medicare levy surcharge
where the sum of the beneficiary's trust income and the
beneficiary's spouse's 'income for surcharge purposes' exceed the
family surcharge threshold in section 3A of the ITAA 1936.
[Schedule 3, Part 3, item 58]
31. Subsection 8G(3) of the MLA 1986, which is relevant where
section 8G applies to a beneficiary for only some days in the
income year, is amended to substitute references to taxable income
with 'income for surcharge purposes'. [Schedule 3, Part 3, items
59 and 60]
32. The amendments also repeal subsection 8G(4) of the MLA 1986, which
modifies 'taxable income', and insert a new subsection where the
modifications are made to 'income for surcharge purposes' rather
than taxable income. [Schedule 3, Part 3, item 61]
33. The ANTS (MLS) Act 1999 has specific provisions dealing with the
income test that applies where a taxpayer's spouse is a presently
entitled beneficiary in a trust. These are subsections 15(2) and
16(5) of the ANTS (MLS) Act 1999.
34. These subsections prescribe that a taxpayer's spouse's 'taxable
income' should be assumed to include any share in the net income of
a trust estate to which the spouse is presently entitled in respect
of which the trustee of the trust estate is liable to be assessed
under section 98 of the ITAA 1936.
35. The amendments revise subsections 15(2) and 16(5) of the ANTS (MLS)
Act 1999 to substitute references to 'taxable income' with
references to 'income for surcharge purposes'. [Schedule 3, Part
3, items 29 and 32]
36. There is also an amendment to substitute a new subsection 3(2) of
the MLA 1986. This subsection substitutes the reference to
'taxable income' with a reference to 'income for surcharge
purposes'. [Schedule 3, Part 3, item 50]
37. To assist understanding, and more closely relate provisions to the
Medicare levy surcharge, the amendments revise the headings of
current provisions so that they commence with 'Levy Surcharge'
rather than 'Increase in Levy'.
38. Also, section 8F of the MLA 1986 is amended to ensure the wording
used in respect of an individual's 'family surcharge threshold' is
consistent with the wording in other amended provisions. That is,
the wording refers to the 'beneficiary's family surcharge
threshold' rather than the 'family surcharge threshold of the
beneficiary'. [Schedule 3, Part 3, item 57]
Amendment of the Child Support (Assessment) Act 1989
39. Part 3 of Schedule 3 amends the Child Support (Assessment) Act 1989
to include a parent's total net investment loss and reportable
superannuation contributions in the person's 'adjusted taxable
income'. 'Adjusted taxable income' is used to determine a parent's
capacity to meet the costs of his or her children. [Schedule 3,
Part 3, items 34 and 35]
40. The definition of 'net rental property' loss in the Child Support
(Assessment) Act 1989 is repealed as net rental property losses are
included in the definition of 'total net investment loss'.
[Schedule 3, Part 3, item 33]
Amendment of the Higher Education Support Act 2003
41. Part 3 of Schedule 3 amends the Higher Education Support Act 2003
(HESA 2003) to include a person's total net investment loss and
reportable superannuation contributions in the definition of
'repayment income'. The amendments also simplify the language used
to describe a person's exempt foreign income. [Schedule 3, Part 3,
items 36 and 37]
42. Repayment income is assessed in determining whether an individual
is required to make a compulsory repayment of an accumulated 'HELP
debt' (defined in the HESA 2003). If an individual's repayment
income exceeds the minimum repayment income for the income year, as
determined in accordance with the HESA 2003, the individual must
make a compulsory repayment towards any accumulated HELP debt.
43. The components of repayment income currently include an
individual's taxable income; exempt foreign income, as defined in
the HESA 2003; and an individual's reportable fringe benefits
total. The definition also includes an individual's net rental
property loss.
44. The amendments repeal provisions in respect of net rental property
losses as those losses are included in an individual's total net
investment loss. [Schedule 3, Part 3, items 38 and 39]
45. The 'total net investment loss' definition includes losses from
property that is held by an individual as a member of a
partnership. This is because the 'total net investment loss'
definition is intended to capture all income and losses derived by
an individual from rental investments.
Amendment of the Income Tax Assessment Act 1936
46. Part 3 of Schedule 3 amends the ITAA 1936 to extend the income
definitions used for the purposes of the senior Australians tax
offset (SATO) and the tax rebate in section 160AAAB for trustees
assessed under section 98 of the ITAA 1936.
Senior Australians tax offset
47. To be eligible for the SATO, taxpayers must satisfy particular age
and income requirements, and not be in gaol for the whole income
year. The income assessed in determining whether income
requirements are met is currently taxable income. These amendments
mean that the new concept of an individual's 'rebate income', as
defined in the ITAA 1997, will be the relevant income definition
that is assessed in determining eligibility for the SATO.
[Schedule 3, Part 3, item 40]
48. Where a taxpayer has a spouse, the current income definition in
subsection 160AAAA(4) of the ITAA 1936 assesses the taxpayer's
taxable income; the actual taxable income of their spouse (reduced
by any amount included in the spouse's assessable income under
section 100 of the ITAA 1936); and any share of the net income of a
trust estate to which the spouse is presently entitled and that is
assessed under section 98 of the ITAA 1936.
49. These amendments repeal the current subsection 160AAAA(4) of the
ITAA 1936 and insert a new subsection that replaces references to
'taxable income' with 'rebate income' so that components such as
reportable superannuation contributions and total net investment
losses are assessed for both the taxpayer and their spouse.
[Schedule 3, Part 3, item 41]
Tax offset in section 160AAAB for particular trustees assessed
under section 98 of the ITAA 1936
50. Section 160AAAB of the ITAA 1936 provides a tax offset for trustees
who are assessed under section 98 of the ITAA 1936 in respect of a
beneficiary's share of the net income of a trust estate, provided
particular conditions in subsections 160AAAB(2) and (3) of the
ITAA 1936 are met.
51. In particular, the relevant beneficiary must satisfy requirements
that would entitle them to the SATO. That is, the beneficiary must
have income below the relevant thresholds, and meet age or pension
entitlement requirements and not have been in gaol for the entire
income year.
52. Depending on whether the beneficiary has a spouse or not will
affect the actual income assessed against the income thresholds.
Subsection 160AAAB(4) deems a single beneficiary's taxable income
to be their share in the net income of the trustee's trust estate.
53. The taxable income of a beneficiary with a spouse is assumed to be
half the sum of the beneficiary's share of the net income of the
trust estate; any share of the trust estate to which the
beneficiary's spouse is presently entitled and that is assessed
under section 98 of the ITAA 1936; and the spouse's actual taxable
income (reduced by any amount included in the spouse's assessable
income under section 100 of the ITAA 1936).
54. These amendments extend the definition of 'beneficiary income' that
is assessed in determining the trustee's entitlement for an offset
under section 160AAAB of the ITAA 1936 to include other components
of rebate income.
55. This means the income of a single beneficiary that will be assessed
in determining the trustee's offset entitlement is the
beneficiary's rebate income, as defined in the ITAA 1997, modified
so that 'taxable income' equates to the beneficiary's share of the
net income of the trust estate. [Schedule 3, Part 3, items 42 and
43]
56. In respect of a beneficiary that has a spouse, the income to be
assessed is that income which would have been assessed under the
current law but modified to include what extra amounts would be
assessed if the beneficiary did not have a spouse together with the
rebate income of the beneficiary's spouse (reduced by any amount
included in the spouse's assessable income under section 100 of the
ITAA 1936). [Schedule 3, Part 3, item 43]
Amendment of the Income Tax Assessment Act 1997
57. Part 3 of Schedule 3 amends the ITAA 1997 to extend the income
definitions used for the purposes of the mature age worker tax
offset; the tax offset for the Medicare levy surcharge (lump sum
payments in arrears); the spouse superannuation contributions tax
offset; and deduction for personal superannuation contributions.
Mature age worker tax offset
58. The mature age worker tax offset is available to Australians aged
55 or over at the end of an income year who derive income from
employment-related activities, known as 'net income from working',
and that income is within particular thresholds.
59. Current components of 'net income from working' under section 61-
570 of the ITAA 1997 include net personal services income and net
business income, plus amounts included in income as a result of the
repayment of a farm management deposit. Specific income excluded
from the 'net income from working' definition by subsection 61-
570(2) of the ITAA 1997 includes amounts of superannuation lump
sums in employment termination payments and amounts of unused
annual leave or long service leave.
60. 'Net income from working' is designed to capture assessable income
that is primarily a reward for an individual's personal efforts or
skills, less any related deductions. Salary or wages from
employment are an example of 'net income from working'.
61. RESC represent amounts of salary or wages that have been taken in
the form of contributions to a superannuation fund. That is, RESC
are amounts paid in the form of superannuation contributions that
are made in respect of an individual's personal efforts or skills.
62. The amendments revise the 'net income from working' definition to
include RESC. [Schedule 3, Part 3, item 44]
Tax offset for the Medicare levy surcharge (lump sum payments in
arrears)
63. Subdivision 61-L of the ITAA 1997 provides a tax offset for
taxpayers who are liable to pay additional Medicare levy surcharge
because a 'MLS lump sum' was paid to them or their spouse in the
current income year.
64. 'MLS lump sums' are lump sum amounts of unpaid salary or wages from
previous years that are included in an individual's assessable
income. 'MLS lump sums' may also include lump sum payments
included in an individual's exempt foreign employment income (but
only to the extent that the payments accrued during a period ending
more than 12 months before the date on which the lump sum was
paid).
65. To qualify for the offset, the total of the MLS lump sums paid to
a taxpayer must be greater than, or equal to, one-eleventh of the
income that would be assessed in determining whether that
individual is liable to pay the Medicare levy surcharge. That is,
the income test used to determine an individual's Medicare levy
surcharge liability should be consistent with the income test used
to determine whether an individual is eligible for the offset.
66. The income test for the purposes of the Medicare levy surcharge is
amended to include an individual's reportable superannuation
contributions and total net investment loss as a result of the
introduction of the 'income for surcharge purposes' definition.
For consistency, the income definition used to determine
eligibility for the offset should also be amended to include
reportable superannuation contributions and total net investment
losses. [Schedule 3, Part 3, item 45]
Deduction for personal superannuation contributions
67. The ITAA 1997 allows an individual to deduct contributions made to
a superannuation fund or a retirement savings account, subject to
certain conditions. In particular, the contribution must be made
to a complying superannuation fund and the individual must have
provided the fund or the retirement savings account provider with a
valid notice, in the approved form and in accordance with the
relevant timeframes, of their intent to claim the deduction. The
trustee of the fund or the retirement savings account provider must
give the individual an acknowledgement of this notice. There are
also age-related conditions to claiming a deduction for personal
superannuation contributions.
68. Section 290-160 of the ITAA 1997 limits an individual's capacity to
deduct personal contributions where the individual has derived
income from activities that resulted in them being treated as an
employee for the purposes of the Superannuation Guarantee
(Administration) Act 1992 (SGAA 1992). To be eligible to deduct
the personal contribution in these circumstances, less than 10 per
cent of the individual's assessable income and reportable fringe
benefits total must be attributable to the activities. This is
designed to ensure that only primarily self-employed individuals
may claim the deduction.
69. Under the current arrangements, individuals may reduce the
proportion of their income that is related to employee activities
by entering into an arrangement with their employer to have some or
all of their income from those activities contributed to
superannuation by their employer. These amounts would ordinarily
be attributable to activities that result in the individual being
treated as an employee for the purposes of the SGAA 1992. However,
as a result of the arrangement, the amounts are not included in the
assessable income of the individual.
70. The amendments include RESC in the income base that is used in
determining whether personal superannuation contributions may be
deducted. [Schedule 3, Part 3, item 46]
71. The amendments do not add reportable superannuation contributions
or an individual's total net investment loss to income as the
income base is assessable income which is an individual's gross
income before deductions are applied.
Spouse superannuation contributions tax offset
72. Under section 290-230 of the ITAA 1997, a taxpayer is entitled to a
tax offset in an income year for a contribution they make in that
year to a superannuation fund or the retirement savings account for
the purpose of providing a superannuation benefit for their spouse.
73. However, to qualify for the offset, the taxpayer and their spouse
must satisfy particular conditions in subsection 290-230(2) of the
ITAA 1997, including a requirement that the spouse's assessable
income and reportable fringe benefits total be less than $13,800
per annum.
74. The amendments extend this income definition to include any RESC of
the spouse. [Schedule 3, Part 3, item 47]
75. This means a spouse's assessable income, reportable fringe benefits
total and RESC will need to be less than $13,800 per annum for the
taxpayer to be eligible for the offset. The amendments do not add
reportable superannuation contributions or an individual's total
net investment loss to income as the income base is assessable
income which is an individual's gross income before deductions are
applied.
Amendment of the Social Security Act 1991
76. Part 3 of Schedule 3 amends the Social Security Act 1991
(SS Act 1991) to extend income definitions used for the purposes of
the parental income test on Youth Allowance; the Commonwealth
Seniors Health Card; and the Student Financial Supplement Scheme to
include total net investment losses and reportable superannuation
contributions where appropriate.
Commonwealth Seniors Health Card
77. The amendments to point 1071-3 of the SS Act 1991 expand the
definition of income used to determine eligibility for the
Commonwealth Seniors Health Card to include an individual's total
net investment loss. [Schedule 3, Part 3, item 81]
78. The amendments also repeal the definition of 'net rental property
loss' in section 10A of the SS Act 1991, and references to net
rental property losses in points 1071-3 and 1071-8. [Schedule 3,
Part 3, items 62, 63, 82 and 83]
79. Net rental property losses are assessed as income for the purposes
of the Commonwealth Seniors Health Card. However, because the
'total net investment loss' definition includes net rental property
losses, it is no longer necessary for those losses to be separately
defined.
Parental income test, Youth Allowance
80. Where a Youth Allowance applicant is considered to be dependent on
their parents, a parental means test will apply to assess the
extent to which the individual's parents can financially support
the applicant while they are studying or looking for work.
81. The amendments to point 1067G-F10 of the SS Act 1991 revise the
parental income test to include the parent's reportable
superannuation contributions and the parent's total net investment
loss amount for the income year. [Schedule 3, Part 3, item 73]
82. This will ensure a broader range of resources are assessed for
parental means test purposes.
83. The amendments also repeal the concept of 'net passive business
losses'. These losses, which were defined as losses from
particular business activities in which a person is usually engaged
for less than 17.5 hours per week, are replaced by the concept of
an individual's total net investment loss. [Schedule 3, Part 3,
items 74 to 76]
84. This ensures the definition of losses assessed for the
Youth Allowance parental income test is consistent with the losses
added to income for other means-tested programs. The 'total net
investment loss' definition captures aspects of the former 'net
passive business loss' definition such as losses from share trading
activity and rental property investments.
Family actual means test, Youth Allowance
85. The 'family actual means test' is provided for in Module G of Part
3.5 of the SS Act 1991. The test is used to determine the income
of 'designated parents' such as those who are self-employed; have a
business loss or an interest in a company or trust; or have
overseas income or assets worth $2,500 or more.
86. The 'family actual means test' assesses the actual means of a
parent, defined in subpoint 1067G-G8(1) of the SS Act 1991 as an
amount equal to the total spending and savings of the person in the
relevant tax year. There are specific exclusions from the actual
means definition.
87. For example, paragraph 1067G-G9(3)(a) of the SS Act 1991 excludes
an amount equal to what would be an allowable deduction under the
income tax law for the individual because the amount was
necessarily incurred in carrying on the business. This exclusion
is qualified by subpoint 1067G-G9(4) which limits the amount
allowed as a deduction in respect of superannuation contributions.
88. The amendments to point 1067G-G9 of the SS Act 1991 revise this
qualification so that reportable superannuation contributions are
the excess superannuation contributions that are effectively
included in a person's actual means. [Schedule 3, Part 3, item 77]
89. The amendments also repeal references to net passive business
losses from the 'family actual means test' provisions. This
includes the definitions of 'net passive business loss' and
'passive business' from the family actual means test definitions
section in section 10B of the SS Act 1991. [Schedule 3, Part 3,
items 65 and 66]
90. The definition of 'business' from section 10B is revised to reflect
the definition of 'business' from subpoint 1067G-F19A(2) of the
SS Act 1991 which is repealed by item 76. Also, a definition of
'total net investment loss' is inserted in subsection 10B(2).
[Schedule 3, Part 3, items 64 and 67]
91. The concept of net passive business losses is replaced by the
'total net investment loss' definition to ensure greater
consistency in the definition of losses added to income definitions
across the tax and transfer systems. The amendments substitute
references to net passive business losses in the 'family actual
means test' provisions with references to an individual's 'total
net investment loss. [Schedule 3, Part 3, items 78 to 80]
92. Further, the definition of 'designated parent', which is used in
determining whether the 'family actual means test' applies, is
amended to substitute a reference to 'net passive business loss'
with 'total net investment loss'. [Schedule 3, Part 3, items 69
and 72]
93. The amendments ensure the 'family actual means test' assesses a
consistent definition of excess superannuation contributions to
that which will be assessed as income for the purposes of other
means-tested tax and transfer programs, including the Youth
Allowance parental income test.
Student Financial Supplement Scheme
94. The amendments to section 1061ZZFA of the SS Act 1991 extend the
definition of 'repayment income', which is used to determine an
individual's obligation to repay an accumulated Financial
Supplement debt under the now closed Student Financial Supplement
Scheme, to include an individual's total net investment loss and
reportable superannuation contributions for the income year.
[Schedule 3, Part 3, items 70 and 71]
95. The amendments also repeal provisions dealing with the definition
of 'rental property loss' as rental property losses are included in
the definition of 'total net investment loss'. [Schedule 3, Part
3, items 69 and 72]
Amendment of the Student Assistance Act 1973
96. Part 3 of Schedule 3 amends section 12ZL of the Student Assistance
Act 1973 to include an individual's total net investment loss and
reportable superannuation contributions for the income year in the
'repayment income' definition under that Act. [Schedule 3, Part 3,
items 85 and 86]
97. Because the 'total net investment loss' definition includes an
individual's net rental property losses, references to net rental
property losses are removed. [Schedule 3, Part 3, items 84 and 87]
98. The 'repayment income' test is used to assess an individual's
obligations to repay an accumulated Student Financial Supplement
Scheme debt.
Amendment of the Superannuation (Government Co-contribution for Low Income
Earners) Act 2003
99. Part 3 of Schedule 3 amends the Superannuation (Government Co-
contribution for Low Income Earners) Act 2003 to expand the
definition of income that is used to determine an individual's
entitlement under the Government's superannuation co-contribution
scheme, to include the individual's RESC. [Schedule 3, Part 3,
item 88]
100. The amendments do not add reportable superannuation contributions
or an individual's total net investment loss to income as the
income base is assessable income which is an individual's gross
income before deductions are applied.
Amendment of the Veterans' Entitlement Act 1986
101. Part 3 of Schedule 3 amends section 118ZZA of the Veterans'
Entitlement Act 1986 to include a person's total net investment
loss in the definition of 'adjusted taxable income' provided for in
that section. This definition is used to determine an individual's
eligibility for the Commonwealth Seniors Health Card for the
purposes of the Veterans' Entitlement Act 1986. [Schedule 3, Part
3, item 89]
102. The definition of 'adjusted taxable income' currently includes an
individual's accepted estimate of their net rental property losses
for the income year. The amendments repeal references to net
rental property losses or replace references with a reference to an
individual's total net investment loss. [Schedule 3, Part 3, items
90 and 91]
Application and transitional provisions
103. The amendments in this chapter will commence the day after Royal
Assent.
104. The amendments will apply to income assessments made in the 2009-10
income year and later income years.
105. The amendments will not apply in relation to a claim for Baby Bonus
under the A New Tax System (Family Assistance) Act 1999 if the
relevant income period commenced before 1 July 2009 (even if the
period continues after 1 July 2009).
106. Further, the amendments will not apply in respect of both the real
and estimated adjusted taxable income that is assessed for the
remainder of a child support period following an election under
section 60 of the Child Support (Assessment) Act 1989, if the
remaining period commenced before 1 July 2009.
107. The amendments will not apply in determining the actual amount that
would be the parents adjusted taxable income for the purposes of
subsection 60A(1) of the Child Support Assessment Act 1989 if the
relevant remaining period commenced before 1 July 2009.
Chapter 6
Regulation impact statement
Introduction
245. The following regulation impact statement assesses the costs and
benefits of a proposal to include certain 'salary sacrificed'
contributions to superannuation in the income tests of means-tested
government assistance programs. This proposal is discussed in
Chapters 3, 4 and 5.
Problem
246. Generally, government support payments in the Australian tax and
transfer system are means- or income-tested. This approach
promotes the underlying principle of government support that
individuals with greater means to support themselves receive less
support than those with fewer resources or those in greater need of
assistance. Income tests are generally comprised of different
types of income, such as income from work-related activities or
income from investments.
247. At present, there are some inconsistencies in the treatment of
certain types of income to determine eligibility for government
support payments. While many types of income are assessed, certain
contributions to superannuation - for employees sometimes referred
to as employer 'salary sacrificed' contributions to superannuation
- that could have been received as present disposable income by
individuals to support themselves are not assessed when determining
eligibility to government support. This treatment produces
inequity and inefficiency in the provision of government financial
assistance. It allows individuals and families to access more
government support payments than others with similar levels of
resources or than would be possible if their total remuneration
were paid as wages or salary income. Further, it favours those who
have access to these types of remuneration arrangements over those
who do not.
248. Remuneration arrangements of this kind have become more widespread
over time. At present, there are an estimated 540,000 employees
whose employers' salary sacrifice part of their income into
superannuation. While not all of these individuals access
government support, their number has increased substantially since
these remuneration arrangements began in the early 1990s and is
expected to increase further in the future.
249. It is estimated that the cost of inaction would be approximately
$160-170 million each year over the period 2009-10 to 2011-12.
This cost of inaction is expected to increase over time. It is
inefficient because expenditure is directed at individuals and
families with sufficient resources to support themselves. They are
getting by without wage and salary income and are benefiting from
programs designed to support those in genuine need of assistance.
They are also benefiting from significant concessional tax
treatment of their superannuation contributions.
250. The following government programs are affected by this treatment of
income:
. income support payments paid under the Social Security
Act 1991 for people below age pension age (noting that
payments paid to those of age pension age already define
income as is proposed by this structural reform);
. parental income tests for Youth Allowance and ABSTUDY;
. Commonwealth Seniors Health Card;
. Family Tax Benefit (Parts A and B);
. Child Care Benefit;
. Child Support;
. Additional Boarding Allowance; Assistance for Isolated
Children scheme;
. dependency tax offsets;
. mature age worker tax offset;
. senior Australians tax offset;
. offset for trustees under section 160AAAB of the Income
Tax Assessment Act 1936;
. pensioner tax offset;
. Medicare levy surcharge;
. Higher Education Loan Program and Student Financial
Supplement Scheme;
. deduction for personal superannuation contributions under
Subdivision 290-C of the Income Tax Assessment Act 1997;
. spouse superannuation contributions offset; and
. Government superannuation co-contribution scheme.
251. There are other benefits in respect of employment that are commonly
salary sacrificed. These include vehicles and some expense
payments. Benefits, such as the former, are captured by the fringe
benefits tax arrangements. They are considered reportable fringe
benefits and are treated as income for most government support
programs. Others, such as the latter, are non-reportable and not
considered as income. 'Salary sacrificed' superannuation is exempt
from fringe benefits tax and not assessed as income for means-
testing purposes.
252. The consequences of not assessing certain 'salary sacrificed'
contributions to superannuation as income impose a medium impact on
the community. It creates inequity in the treatment of individuals
and families with similar resources and inefficiency in the
provision of government assistance.
Policy objective
253. The specific objective of the proposal to assess certain 'salary
sacrificed' contributions to superannuation as income is to broaden
the definition of income that is assessed in determining
eligibility for government support programs.
Implementation options
254. Explicit government regulation is the only feasible option to deal
with inadequate income-testing of government support programs. It
is compared to the case of doing nothing.
No change option
255. At present, income that could have been used by individuals to
support themselves may be instead sacrificed as contributions to
superannuation. This income is not assessed for the purposes of
determining entitlement to government support programs. This
creates inequity among individuals and families with similar means
as it allows some to access government support while others who
receive their remuneration as wages or salary are unable to do so.
256. The current situation provides perverse incentives for individuals
to cost shift from private means to public funds. It is an
inefficient use of government resources to provide support, which
is intended for people in genuine need of assistance, to
individuals who can afford to 'salary sacrifice' all or part of
their income.
257. Inadequate and out-dated income-testing will continue to produce
stress on government expenditure. Treasury estimates this
expenditure to be around $160-170 million per year between 2009-10
and 2011-12.
Explicit government regulation - include certain 'salary sacrificed'
contributions to superannuation in the income tests used to determine
eligibility to government support programs
258. Explicit government regulation (black letter law) is the preferred
regulatory approach to achieve the desired outcome due to the
complexity and universality of the legislative definition required.
259. At the core of the proposal is the requirement to draft and
implement a robust and workable definition of 'salary sacrificed'
contributions to superannuation - those that could have been
received by individuals as cash income - that should be assessed as
income for a range of income-tests in the tax and transfer system
(eg, adjusted taxable income, separate net income, net income from
working). Mandated employer contributions to superannuation on
behalf of employees will not be assessed as income as they could
not have been received by employees as current income.
260. Universal application of the definition is required across
different remuneration arrangements and industrial instruments.
For example, some employers 'salary sacrifice' mandated
contributions on behalf of their employees in addition to non-
mandated contributions. Further, mandated arrangements can vary.
The minimum stated in the superannuation guarantee legislation is 9
per cent of ordinary time earnings. However, many industrial
instruments mandate higher levels of compulsory employer
superannuation contributions.
261. The definition of 'salary sacrificed' superannuation contributions
to be assessed as income will also have to take into account the
different types of contributions to superannuation. In the case of
defined benefit schemes, employer contributions, in addition to and
sometimes well above those required under superannuation guarantee
law, will not be assessed as these contributions could not have
been taken by the employee as cash. However, in some defined
benefit schemes, where post-tax contributions can be converted to
pre-tax contributions, these will be assessed because they could
have been used by the employee to support themselves.
262. The definition will need to anticipate contrived arrangements
between employees and employers to circumvent the policy intent.
There will remain incentive to minimise assessable income in order
to maintain eligibility for government financial assistance.
263. Implementation of the proposal will require employers to record
superannuation contributions that are assessed as income on the
payment summaries of their employees. Employees in turn will
record these amounts on their tax return. The Australian Taxation
Office (ATO) will undertake information and education campaigns for
employers, tax intermediaries and individuals. The ATO estimates
that around 61,000 employers will be affected by the proposal.
264. The new definition of income will include deductible personal
superannuation contributions as these contributions are
conceptually similar to 'salary sacrificed' contributions made by
employees. The proposal is due to commence from 1 July 2009 (2009-
10 income year). Once implemented, the income tests of government
support programs will be more comprehensive and treatment of income
between those who receive their income as wages or salary and those
who receive this income as contributions to superannuation will be
more equitable.
Assessment of impacts
Explicit government regulation - include certain 'salary sacrificed'
contributions to superannuation in the income tests used to determine
eligibility to government support programs
265. The impact analysis of the proposed regulation has been compared to
leaving the current situation unchanged, that is, where salary
sacrificed contributions to superannuation are not assessed as
income to determine government support program eligibility.
Impact group identification
266. The groups in the community that are affected by salary sacrificing
remuneration arrangements are:
. Individuals (employees and the self-employed). The ATO
estimates that around 540,000 employees alone are salary
sacrificing above 9 per cent employer superannuation
contributions. There will also be self-employed people
who contribute to superannuation.
. Employers including small business. The ATO estimates
that around 61,500 employers will be affected by the
proposal, of which around 1,500 are large, 25,000 are
small to medium in size and 35,000 are micro-sized
(source: number of businesses lodging Fringe Benefits Tax
returns, ATO statistics 2004-05).
. Tax practitioners. The ATO estimates that a small
proportion of the 22,000 tax practitioners would be
affected by the proposal.
. Other intermediaries (eg, software developers, payroll
providers and financial planners). The ATO estimates that
a proportion of the 7,000 financial planners will be
affected, as will other intermediaries.
. Australian Government. There will be additional
administrative and compliance costs on the ATO and
Centrelink, and additional departmental costs in affected
government agencies.
. The Australian community. The Australian people will
benefit from the proposal through more effective targeting
of government support programs to those they are designed
to assist (eg, low- and middle-income individuals and
families). The proposal promotes greater equity in the
treatment of resources available to individuals and
families to determine eligibility to support programs. It
also treats the employment-related income of those with
and without salary sacrifice superannuation arrangements
in a like way.
Analysis of costs/benefits
Individuals
267. Individuals, who claim government support at present, will no
longer be entitled to that support if their income including salary
sacrificed contributions to superannuation is above means-test
thresholds. These individuals will need to re-evaluate their
remuneration arrangements. Some may need to use private income in
lieu of government assistance to support themselves. In cases
where private income from other (non-employment) sources is
unavailable, retirement savings in the form of salary sacrificed
contributions to superannuation may decrease. It is possible that
some people will lose access to government financial assistance and
concessional tax treatment on their superannuation contributions
which they can no longer afford to make.
268. Receiving parents and their children will benefit from the proposal
through increased child support payments from paying parents, whose
more comprehensive measure of available resources will now be taken
into account when determining these child support payments.
269. Some low- and middle-income individuals may receive greater support
under the proposed changes. This will occur in programs with a
phase-in threshold, such as the mature age worker tax offset and
the government co-contribution scheme. Whether individuals receive
greater government support overall will depend on what other
programs they access.
270. Individuals, whose employers do not provide access for them to, or
they themselves cannot afford to, salary sacrifice income into
superannuation will not be affected by the proposal. They will
continue to receive government support if their assessable
resources permit.
271. Individuals that enter into salary sacrifice remuneration
arrangements with their employers will be required to report the
total amount of 'salary sacrificed' superannuation contributions on
their annual income tax returns. This information will be provided
by employers on (annual) payment summaries.
272. Self-employed people will continue to report their annual personal
superannuation deductions on their income tax return. Individuals
with both employee and self-employed income in any given year will
need to report both components of superannuation in their annual
tax returns.
Employers (including small business)
273. There will be a medium-implementation burden and medium-ongoing
impact on employers who offer these remuneration arrangements.
Employers will need to be aware of the change and understand its
potential implications as they will be a key contact for their
employees. Employers will need to understand the distinction
between mandated and greater-than mandated contributions to
superannuation so that they can report the latter on employee
payment summaries. Employers with a mix of employees entitled to
different levels of mandated contributions will face added
complexity. Employers will need to update their software and
systems by 1 July 2009 to report salary sacrificed contributions on
employee payment summaries for the 2009-10 income year. Employers
will have ongoing procedural and record-keeping costs.
274. There may be a relatively disproportionate burden on small
businesses that offer these arrangements to their employees.
275. There is no direct benefit to employers. Those that offer these
arrangements will continue to receive a tax deduction in respect of
these contributions.
Tax practitioners and other intermediaries
276. Tax practitioners and other intermediaries (eg, software
developers, human resource service providers, financial planners)
will need to be aware of the change and understand its potential
implications for their clients.
Australian Government
277. The cost to the Government of administering the proposal is
estimated at around $5.5 million per year from 2008-09 to 2011-12
for the ATO alone. The cost to Government reflects a large
implementation cost of $10 million in 2009-10, around $8 million of
which will be spent on stakeholder education. Ongoing costs beyond
the forward estimates are expected to be around $2.8 million per
year. These are comprised of processing, client contact, debt
collection and compliance costs.
278. There will be additional administration costs in Centrelink and
other affected agencies. The Government will need to provide
information and conduct education campaigns for individuals,
employers and other stakeholders.
279. The fiscal impact of the proposal is a saving of around
$160 million to $170 million each year from 2009-10 to 2011-12.
Australian community
280. The Australian community stands to benefit from the proposal
through more equitable provision of government support and more
efficient redistribution of income collected by government.
Risks
281. It will be difficult to prescribe in legislation the definition of
superannuation contributions that should be assessed as income for
government support programs. At present, there is no legislative
definition of these contributions and there are many superannuation
contribution arrangements between employers and employees. There
is a risk that employees and employers may enter into contrived
remuneration arrangements to circumvent the policy intent.
Tax Compliance Cost Calculator
282. The ATO has assessed the potential compliance-cost impact to be
medium, which is comprised of a medium-implementation impact and a
medium-ongoing impact. It has identified that significant system
changes may be required by employers.
283. Table 6.1 contains a summary of potential direct compliance-cost
impacts only and is a partial estimate of the potential compliance-
cost impact. The compliance costs are mainly borne by employers
with a small impact on individuals. The cost to employers in
different market segments is higher. For example, a large company
would have a start-up cost of $9,114 and an ongoing cost of $702
each year. The start-up and ongoing costs for small and medium
enterprises and micro-employers are $648 and $33, and $504 and $27
respectively. Ongoing costs to individuals are assumed to be nil.
However, supporting evidence is weak as firm data is not available,
requiring estimates to be made.
284. Data used in calculating suggested times (average hours) are
informed by ATO expertise and information derived from the ATO-ATAX
compliance-cost survey; New Zealand SME survey; ATO time-box form
data; and post-implementation reviews conducted by the Board of
Taxation.
1. : Estimated cost of regulation to taxpayers and employers,
Australia, 2008
|Client type |Number of |Cost per |Total |
| |clients |client |potential |
| | | |cost of |
| | | |regulation |
| | |($ per |($ per year) |
| | |year) | |
|Implementation | | | |
|cost | | | |
| Individuals |540,000 |18 |9,719,999 |
| Large |1,473 |9,114 |13,424,922 |
|businesses | | | |
| Small to medium|25,000 |648 |16,200,000 |
|businesses | | | |
| Micro |35,000 |504 |17,640,000 |
|businesses | | | |
| Total |601,500 |95 |56,984,921 |
|implementation | | | |
|cost | | | |
|Ongoing cost | | | |
| Individuals |540,000 |0 |0 |
| Large |1,473 |702 |1,034,046 |
|businesses | | | |
| Small to medium|25,000 |33 |825,000 |
|businesses | | | |
| Micro |35,000 |27 |945,000 |
|businesses | | | |
| Total ongoing |601,500 |5 |2,804,046 |
|cost | | | |
Cumulative regulatory burden
Individuals
285. There is a small increase in regulatory burden for employees that
have entered this type of remuneration arrangement with their
employer. These employees will be required to report 'salary
sacrificed' superannuation contributions on annual tax returns.
Employees will report the amount recorded by employers on annual
payment summaries. The self-employed already report personal
deductible contributions on tax returns.
286. Some individuals will need to review their remuneration
arrangements. Some may be inclined to seek arrangements which
circumvent the policy to maintain access to government support.
Businesses
287. There will be a medium increase in regulatory burden for employers.
On implementation, they will face a medium burden as they will be
required to update their systems by 1 July 2009 to record employer
contributions to superannuation - to be defined in legislation -
made on behalf of their employees. Employers will also have a
medium-ongoing regulatory burden in the form of continued
procedural and record-keeping costs.
288. Employers are already required to report total employer
contributions to superannuation made on behalf of each employee to
superannuation funds. However, this amount does not discretely
identify the various components of these contributions (eg,
mandated contributions, salary sacrificed contributions).
Data sources, assumptions and data gaps
289. Personal income tax data (2004-05) and superannuation surcharge
(2004-05) data has been used to obtain estimates of deductible
superannuation contributions. The Treasury's STINMOD model, which
uses Australian Bureau of Statistics' Survey of Income and Housing
data (2002-03 and 2003-04), has been used to estimate fiscal
impacts on income support and family assistance programs. A range
of employer data has been used to estimate employer burden.
Consultation
Who has been consulted?
290. The affected Government agencies have been consulted, namely:
. Treasury;
. Department of Finance and Deregulation;
. Department of Families, Housing, Community Services and
Indigenous Affairs;
. Department of Education, Employment and Workplace
Relations;
. Department of Human Services;
. Department of Health and Ageing;
. Child Support Agency;
. Department of Veterans' Affairs;
. Department of Agriculture, Fisheries and Forestry;
. ATO; and
. Centrelink.
What are their views?
291. All relevant agencies support the policy.
292. Treasury has developed the policy and appropriate mechanism for
putting the policy into practice. Treasury has also highlighted
the challenges in drafting effective legislation.
293. The ATO has also highlighted complexities for particular groups
(eg, self-employed, transition to retirement) and noted the
legislative difficulty.
294. Centrelink applies the policy to people of age pension age.
295. The Department of Finance and Deregulation has cleared the program
(administered) and departmental costs.
What was the consultation process?
Policy development
296. Treasury prepared a discussion paper outlining the rationale and
mechanism for the policy proposal in consultation with the
Department of Families, Housing, Community Services and Indigenous
Affairs. Treasury and the Department of Families, Housing,
Community Services and Indigenous Affairs consulted affected line
agencies to seek comment and support.
297. Treasury consulted internally to refine the policy and in
particular the mechanism for change (eg, superannuation
contributions to be reported on payment summaries). Treasury also
consulted the ATO and Centrelink to determine the integrity of the
proposal and seek advice on compliance and administrative costs.
298. Consultation did not occur with individuals, businesses and other
stakeholders as the proposal was being developed and put forward in
the context of the 2008-09 Budget.
Draft legislation
299. Public consultation on draft legislation giving effect to this
proposal and other reforms to income tests announced in the 2008-09
Budget took place from 5 November 2008 to 7 December 2008 from the
Treasury website (www.treasury.gov.au). Stakeholders were advised
via email when the consultation period commenced. There was also a
reminder of a final opportunity to submit comments sent via email
on 12 December 2008.
300. Key stakeholders were identified following consultation with
relevant agencies. The ATO also notified members of its
stakeholder committees that the consultation period had commenced
and details of the changes are available from the ATO and
Centrelink websites.
Conclusion and recommended option
301. Government support programs in the Australian tax and transfer
system are generally means-tested to target them to groups with
certain levels of resources. However, many income tests omit
important components of remuneration and other income. In the case
of 'salary sacrificed' contributions to superannuation, this is a
relatively modern form of remuneration and one that has been
increasing in popularity.
302. The inclusion of 'salary sacrificed' superannuation contributions
in income is a structural reform of the tax and transfer system,
which broadens the concept of remuneration. It treats this type of
income in the same way as other forms of income, such as salary and
wages. Further, it treats people with access to this type of
remuneration equally to those without access to these arrangements.
More equitable treatment of government support recipients means
that those with similar levels of private resources receive similar
levels of government support.
303. Explicit government regulation defined in legislation is the
recommended approach due to the complexity and universality of the
definition required to achieve the desired outcome. To leave the
current situation unchanged would most likely make the problem of
inequitable treatment of income more widespread as salary
sacrificed superannuation arrangements are used by greater numbers
of individuals to access government support payments. The
recommendation has support from agencies (eg, ATO, Centrelink) that
will administer the proposal. Centrelink already assesses this
type of income for people of age pension age. The Department of
Veterans' Affairs also assesses this type of income for its
clients.
304. There is some risk that the proposal will be compromised where
individuals enter into contrived remuneration arrangements to
circumvent the policy.
Implementation and review
305. 'Salary sacrificed' superannuation contributions made on behalf of
employees will need to be recorded and reported by employers on
employee annual payment summaries. The proposal will increase the
reporting burden on employers, but its design is similar to other
employee entitlements already reported by employers on payment
summaries (eg, reportable fringe benefits). Employees will report
these amounts on annual tax returns. The ATO will determine
eligibility for the government support programs it administers when
it undertakes individual assessments. The ATO will forward this
information to the Child Support Agency and Centrelink. The ATO
has estimated administration costs of around $20 million over four
years from 2008-09 to 2011-12, though around half of these costs
occur in the implementation year 2009-10. Future administrative
costs are estimated to be around $2 million per year.
306. Centrelink clients will provide details of 'salary sacrificed'
contributions to the agency when they apply for government support
programs administered by it (eg, income support payments, family
assistance). At present, Centrelink collects this information from
clients of age pension age only. The proposal extends collection
to clients below age pension age.
307. The proposal will be implemented from 1 July 2009 (2009-10 income
year) to enable individuals, businesses and government agencies to
update their systems over the preceding 13 months. The ATO will
inform individuals of the changes to ensure they have sufficient
time to make changes to their arrangements if they wish. The ATO
will also communicate to individuals in the lead up to Tax Time
2010. The ATO will also inform employers of the changes well
before 1 July 2009 to ensure they will be able to capture necessary
data for contributions made from 1 July 2009. The ATO will inform
employers of their obligations in relation to payment summaries in
the lead up to 30 June 2010. The ATO will also inform
intermediaries such as software developers, payroll providers and
salary packaging providers of the changes.
308. The ATO will undertake some compliance work in relation to correct
reporting by employers on payment summaries as part of its existing
employer compliance framework. This would add time to a review or
audit and may also require some targeted selection for reviews in
the first few years.
309. While there is no formal review mechanism foreshadowed, the design
of the proposal enables its effectiveness to be assessed in the
future. The proposal relies on individuals self-reporting their
salary sacrificed contributions to superannuation (as recorded by
their employers). Employers make employer contributions to
superannuation funds, which in turn provide the information to the
ATO on individual member contribution statements. While not part
of this proposal, it would be possible for the ATO to match
information on annual tax returns with that obtained through member
contribution statements.
Chapter 7
Exclusion of certain employer superannuation contributions from test for
exceptional circumstances relief payment
Outline of chapter
310. Part 4 of Schedule 3 to this Bill amends the Farm Household Support
Act 1992 to ensure that particular employer superannuation
contributions, which would have been assessed as income for
exceptional circumstances (EC) relief payment purposes due to
reforms to income tests announced in the 2008-09 Budget, are
disregarded.
311. However, the amendments do not exclude those superannuation
contributions made by or on behalf of an individual that are
currently considered in determining an individual's income for EC
relief payment purposes
Context of amendments
312. EC relief payment provides assistance to farmers living in
'EC declared areas' that are experiencing difficulty in meeting
living expenses. EC relief payment is also available to small
business operators whose gross business turnover and therefore
income has been significantly reduced by the effects on farmers,
farm workers and their families of living in an 'EC declared area'.
313. There are guidelines stating that EC are rare and severe events
outside those that a farmer could normally be expected to manage
using responsible farm management strategies. An EC event is
expected to occur once every 20 to 25 years on average and have an
impact on farm income for a prolonged period. An EC event cannot
be used to define part of long-term structural adjustment processes
or normal fluctuations in commodity prices.
314. 'EC declared areas' are the result of a declaration from the
Australian Government Minister for Agriculture, Fisheries and
Forestry. Applications for an EC declaration are typically made by
state or territory governments on behalf of an affected region or
relevant industry body.
315. There is no set duration for EC declarations although such
declarations are initially issued for two years. EC declarations
are reviewed prior to cessation and, if required, are generally
extended for 12 months.
316. Once an EC declaration covers an area, farmers and small business
operators located in that area may apply for EC relief payment.
However, to be eligible under the Farm Household Support Act 1992,
applicants must hold an EC certificate from Centrelink to prove
they reside in the 'EC declared area'.
317. The rate of EC relief payment for farmers and small business
operators is the fortnightly rate of Newstart Allowance to which
the individual would be entitled. If the applicant is of 'youth
allowance age', as defined in the Social Security Act 1991 (SS Act
1991), the fortnightly rate is the amount of Youth Allowance to
which the individual would be entitled.
318. Through this means, the income assessed for Newstart and Youth
Allowance purposes is relevant in determining an individual's rate
of EC relief payment.
319. From 1 July 2009, income test reforms announced in the 2008-09
Budget will extend what income is assessed for income support
purposes to include the new concept of 'reportable employer
superannuation contributions' (RESC) where those contributions are
made in respect of an individual below age pension age. This
ensures that such contributions are treated consistently as income
with how they are treated where made in respect of an individual
above age pension age.
320. These reforms, which are to be made through administrative changes
with no need for legislative reform, are part of broader 2008-
09 Budget reforms to include 'reportable superannuation
contributions' in income across means-tested tax and transfer
systems.
321. Reportable superannuation contributions are an individual's RESC
and their deductions for personal superannuation contributions
under Subdivision 290-C of the ITAA 1997. These deductible
personal contributions are currently assessed as income for income
support payments made under the SS Act 1991.
322. The 2008-09 Budget reforms would mean that, from 1 July 2009, the
income assessed in determining a farmer or small business
operator's rate of EC relief payment would include the individual's
RESC for individuals below age pension age. The test already
includes contributions similar to RESC for farmers and small
business operators above age pension age.
Summary of new law
323. Part 4 of Schedule 3 excludes contributions that would have become
income for the purposes of EC relief payment from 1 July 2009, as a
result of reforms announced in the 2008-09 Budget, from the
definition of income used to determine a farmer or small business
operator's rate of EC relief payment.
324. The amendments mean that the income definition used for EC relief
payment purposes will be unchanged following 1 July 2009.
Comparison of key features of new law and current law
|New law |Current law |
|No change. |RESC of below age pension|
| |age individuals are not |
| |assessed as income for EC|
| |relief payment. |
Detailed explanation of new law
325. The amendments provide for certain superannuation contributions,
which would have been assessed as income for EC relief payment
purposes as a consequence of reforms announced in the 2008-09
Budget, to be disregarded in determining an individual's rate of EC
relief payment.
326. This reform is made in recognition of the difficult conditions
faced by many of Australia's farmers and small business operators
in 'EC declared areas'.
327. From 1 July 2009, the definition of income used to determine a
farmer's rate of EC relief payment under section 24A of the Farm
Household Support Act 1992 will be unchanged from what was assessed
before 1 July 2009. [Schedule 3, Part 4, item 92]
328. Similarly, the amendments to section 24AA of the Farm Household
Support Act 1992 mean the definition of income assessed in
determining a small business operator's rate of EC relief payment
will be unchanged. [Schedule 3, Part 4, item 93]
329. However, those contributions which are currently assessed as income
for EC relief payment will continue to be assessed from
1 July 2009.
330. For example, under the current Newstart Allowance income
definition, contributions broadly equating to RESC are assessed as
income of individuals above age pension age. Deductible personal
superannuation contributions are also assessed.
331. Further, the amendments do not alter the inclusion of
superannuation contributions in the definition of income for
Newstart Allowance purposes as a result of the attribution of
income rules in Part 3.18 of the SS Act 1991.
332. Under the SS Act 1991, income and assets of companies and trusts
may be attributed to individuals in some circumstances. For an
entity's income to be attributed to an individual, the company or
trust must be a controlled private company or trust of the
individual and the individual must be an 'attributable stakeholder'
as defined in section 1207X of the SS Act 1991.
333. If an individual is an 'attributable stakeholder', ordinary income
of the company or trust will be attributed to them pursuant to
section 1207Y of the SS Act 1991. As a result, that income will be
assessed in determining the individual's entitlement for income
support payments under the SS Act 1991 which affects their rate of
EC relief payment.
334. Section 1208B of the SS Act 1991 allows business or investment
income of a company or trust to be reduced by any amounts that
would be allowed as a tax deduction against that income. Section
1209C also allows company or trust income from a 'primary
production enterprise' (as defined in section 1207A of the SS Act
1991) to be reduced by any amounts that would be tax deductible
against that income.
335. These provisions reduce the company or trust's income and,
therefore, the amount of income that may be subject to the
attribution rules.
336. However, subsections 1208B(2) and 1209C(2) of the SS Act 1991 do
not allow 'ineligible deductions' to be applied against business or
investment income or income from a primary production enterprise.
The power to specify particular expenses as an 'ineligible part' of
a deduction is in subsections 1208B(5) and 1209C(5) of the
SS Act 1991.
337. The Social Security (Attribution of Income - Ineligible Deductions)
Determination 2004, made on 1 April 2004, provides that
superannuation contributions made by a company or trust on behalf
of an 'attributable stakeholder', or prescribed associate of an
'attributable stakeholder', are an 'ineligible part' of a deduction
if they exceed the contribution required to be made under
superannuation guarantee legislation.
338. That is, these excess contributions cannot be applied against a
company or trust's business or investment income, or the income of
a primary production enterprise. As a result, their amount will be
added to the income of the company or trust that will be attributed
as income to the relevant 'attributable stakeholder' under section
1207Y of the SS Act 1991.
339. By excluding contributions made by a company or trust to an
'attributable stakeholder', or associate of an 'attributable
stakeholder' such as a relative or business partner, the new
subsection 24A(9) of the Farm Household Support Act 1992 does not
alter the current assessment of such contributions in determining
an individual's rate of EC relief payment.
1.
Simon is an employee of XYP Pty Ltd (XYP). XYP manages
Simon's farm in an 'EC-declared area' and he is the
company's sole director. As such, Simon is an 'attributable
stakeholder' of XYP and the company's net income should be
attributed to him in accordance with section 1207Y of the SS
Act 1991. XYP makes superannuation contributions on Simon's
behalf and $2,000 of the annual contributions total exceed
what is required to have been made under superannuation
guarantee law. This $2,000 is added to the remainder of
XYP's net income and the total (including the $2,000) is
attributed as income to Simon. That total is then taken
into account in determining Simon's rate of EC relief
payment.
340. New subsection 24A(9) means, from 1 July 2009, individuals below
age pension age will have these excess contributions, which would
fall within the RESC definition, assessed in determining their rate
of EC relief payment. This is unchanged from the current
contributions assessed for these individuals.
Application and transitional provisions
341. These amendments will commence the day after Royal Assent.
342. The amendments apply in relation to income years starting on or
after 1 July 2009.
Chapter 8
Dependency tax offsets
Outline of chapter
343. Part 5 of Schedule 3 to this Bill amends the Income Tax Assessment
Act 1936 (ITAA 1936) to replace all current income definitions used
to determine eligibility for the dependency tax offsets with
'adjusted taxable income'. 'Adjusted taxable income' is the income
definition used to determine eligibility for family assistance
payment purposes.
344. Part 5 also extends the income cap on eligibility for the
dependency tax offsets, introduced as part of the 2008-09 Budget,
so that it applies to the combined adjusted taxable income of the
taxpayer and their spouse (where appropriate). The exception is
the income cap on eligibility for the dependent spouse tax offset
which will continue to apply to the taxpayer's income only.
Context of amendments
345. The dependency tax offsets are available to taxpayers that maintain
a dependant during an income year. To qualify for the offsets, a
taxpayer and their dependant must have income below particular
thresholds. For example, the dependant must have 'separate net
income' below $282 if the taxpayer is to qualify for the maximum
offset.
346. 'Separate net income' is broadly defined as gross income that the
dependant earned or received while being maintained by the taxpayer
less expenses that are regarded, according to ordinary accountancy
and commercial principles, as a direct charge against that income.
Separate net income includes some exempt income that would not
ordinarily be included in the taxpayer's assessable income such as
disability support pensions.
347. Where a dependant's separate net income is above $282 then the
maximum offset available to the taxpayer will reduce by $1 for
every $4 by which the dependant's separate net income exceeds $282.
The formula to calculate the offset in these circumstances is as
follows:
Tax offset available = maximum tax offset - (separate
net income - 282)/4
348. From 1 July 2008, taxpayers must have taxable income of $150,000 or
less to be eligible for the dependency tax offsets. This change
was introduced as part of the Families, Housing, Community Services
and Indigenous Affairs and Other Legislation Amendment (2008 Budget
and Other Measures) Act 2008 (No. 63 of 2008).
349. The $150,000 threshold was announced in the 2008-09 Budget and will
be indexed in accordance with the indexation arrangements applying
to the $150,000 combined adjusted taxable income threshold that has
applied on eligibility for Family Tax Benefit (Part B) from
1 July 2008.
350. Dependants for the purposes of the dependency tax offsets are the
taxpayer's spouse; child-housekeeper; housekeeper; invalid-
relative; or taxpayer's parent or parent-in-law. Housekeeper is
defined as any person who was wholly engaged in keeping house in
Australia for the taxpayer and in caring for particular dependants
of the taxpayer. A child-housekeeper is any child of the taxpayer
who was wholly engaged in keeping house for the taxpayer during the
income year.
351. Taxpayers cannot claim both the dependent spouse tax offset and
either the child-housekeeper or housekeeper tax offsets in respect
of the same year or period of a year. Pursuant to subsection
159L(3) of the ITAA 1936, taxpayers cannot claim both the child-
housekeeper and housekeeper tax offsets in respect of the same
period in a year. Further, a taxpayer is unable to claim the
dependent spouse, child-housekeeper or housekeeper tax offsets for
any part of an income year where they or their spouse are eligible
for Family Tax Benefit (Part B).
352. The fact a taxpayer is precluded from claiming the dependency tax
offsets due to their eligibility for Family Tax Benefit (Part B)
does not affect their entitlement for some other tax offsets whose
amount increases depending on the taxpayer's dependants. For
example, when determining a taxpayer's 'relevant rebate amount'
under section 79A of the ITAA 1936 for the purposes of the zone tax
offset, the fact a taxpayer is precluded from claiming the
dependent spouse tax offset due to eligibility for Family Tax
Benefit (Part B) is to be ignored.
353. Similarly, the fact a taxpayer has been precluded from claiming a
dependency tax offset because their income exceeds the income cap
is to be ignored for the purposes of the medical expenses tax
offset. Paragraph (e) of the 'dependant' definition for the
purposes of the medical expenses tax offset in section 159P of the
ITAA 1936 includes a taxpayer's dependent spouse; child-
housekeeper; invalid relative; or parent/parent-in-law even if the
taxpayer is precluded from claiming a tax offset in respect of
maintaining for such dependants because their income exceeds the
income cap.
354. This extension of the 'dependant' definition was made by the
Families, Housing, Community Services and Indigenous Affairs and
Other Legislation Amendment (2008 Budget and Other Measures) Act
2008 (No. 63 of 2008).
355. If a taxpayer is eligible for a dependency tax offset for only part
of the income year then a formula applies for calculating a pro
rata offset.
356. The reforms to the dependency tax offsets should reduce workforce
participation disincentives that can be associated with the
dependency tax offsets and more closely align the eligibility
criteria used for these offsets with those applying for family
assistance.
357. The reforms replace all existing income definitions used to
determine eligibility for the dependency tax offsets with 'adjusted
taxable income', as defined in the A New Tax System (Family
Assistance) Act 1999. As part of this Bill, 'adjusted taxable
income' is amended to include 'reportable superannuation
contributions' and a broader definition of losses from
discretionary activities.
358. This ensures greater consistency between the income arrangements
for family assistance payments and the dependency tax offsets.
Summary of new law
359. Part 5 of Schedule 3 amends all income definitions used to
determine eligibility for the dependency tax offsets so that they
become 'adjusted taxable income', which is the income definition
used for family assistance payment purposes. As part of this
process, Part 5 repeals the definition of 'separate net income'
from the ITAA 1936.
360. Part 5 also links the current $150,000 income cap on eligibility
for the dependency tax offsets to the income limit on eligibility
for Family Tax Benefit (Part B) and extends the income test to
assess the combined income of the taxpayer and their spouse for the
purposes of the child housekeeper; housekeeper; invalid relative;
and parent/parent-in-law tax offsets. The income cap on
eligibility for the dependent spouse tax offset will continue to
apply to the taxpayer's income only. However, the income assessed
in determining the dependant's income will be 'adjusted taxable
income'.
Comparison of key features of new law and current law
|New law |Current law |
|With the exception of the|A person is eligible for |
|dependent spouse tax |the dependency tax |
|offset, eligibility for |offsets if their taxable |
|the dependency tax |income is $150,000 or |
|offsets will be assessed |less and their |
|having regard to whether |dependant's income is |
|the combined adjusted |below applicable low |
|taxable income of the |income thresholds. |
|taxpayer and their spouse| |
|is $150,000 (indexed) or | |
|less. The income of the | |
|taxpayer's dependant will| |
|still need to be below | |
|applicable unchanged low | |
|income thresholds. | |
|The dependant's 'adjusted|The dependant's separate |
|taxable income' will be |net income is assessed in|
|assessed in determining |determining the |
|the taxpayer's |taxpayer's eligibility |
|eligibility for a |for a dependency tax |
|dependency tax offset. |offset. |
|The concept of separate | |
|net income will be | |
|repealed. | |
Detailed explanation of new law
361. Part 5 of Schedule 3 amends the definition of income used for the
purposes of the $150,000 cap on eligibility for the dependency tax
offsets from taxable income to 'adjusted taxable income'.
'Adjusted taxable income' has the same meaning as that concept
would have in the A New Tax System (Family Assistance) Act 1999 if
clauses 3 and 3A of Schedule 3 of that Act were taken not to have
been enacted. [Schedule 3, Part 5, item 97]
362. The amendments also align the $150,000 income cap with the indexed
income limit applied on eligibility for Family Tax Benefit
(Part B). A definition of the 'income limit for Family Tax Benefit
(Part B)' is inserted in subsection 159J(6) of the ITAA 1936.
[Schedule 3, Part 5, item 98]
363. Linking the income cap on eligibility for the dependency tax
offsets with the income limit for Family Tax Benefit (Part B)
prevents some taxpayers, who will be precluded from being eligible
for Family Tax Benefit (Part B) due to the income cap, becoming
eligible for the dependency tax offsets.
364. The 'income limit for Family Tax Benefit (Part B)' will apply
to the combined adjusted taxable income of the taxpayer and their
spouse in respect of the child-housekeeper; invalid relative; and
parent/parent-in-law tax offsets. The income limit on eligibility
for the dependent spouse tax offset will apply to the taxpayer's
income only. [Schedule 3, Part 5, item 94]
365. Given the already low income permitted of a spouse as a condition
of taxpayers being eligible to claim the dependent spouse tax
offset, it was not considered necessary to extend the income cap to
a spouse's income for the purposes of that offset.
366. The income limit on eligibility for the housekeeper tax offset was
included subsection 159L(3B) of the ITAA 1936. The amendments
substitute subsection 159L(3B) with a new subsection that
references the revised income cap on eligibility for the other
dependency tax offsets in new subsection 159J(1AC). [Schedule 3,
Part 5, item 100]
367. The income assessed in determining the dependant's income for the
purposes of the dependency tax offsets has altered from separate
net income to 'adjusted taxable income' so the amendments repeal
the definition of separate net income. [Schedule 3, Part 5, item
99]
368. The amendments also replace references to the separate net income
concept with 'adjusted taxable income'. [Schedule 3, Part 5, items
95 and 96]
369. These amendments mean a taxpayer's offset entitlement will reduce
by $1 for every $4 by which a dependant's 'adjusted taxable income'
exceeds $282 pursuant to subsection 159J(4) of the ITAA 1936.
1.
Heather and Jane are partners in a same-sex couple. Heather
earns $90,000 per annum in salary and wages. Jane is on
unpaid leave. Heather wishes to claim the maximum dependent
spouse tax offset in respect of Jane for the 2009-10 income
year.
While Jane has no employment income, she and Heather jointly
own an investment property. The rental income for the
property in 2009-10 is $13,000 but the total expenses
related to the property are $17,500. That is, the property
has made a net rental property loss of $4,500. As joint
owners, Heather and Jane split this loss so that both have a
$2,250 net rental property loss in 2009-10. Jane has no
other income or deductions from investment activities so her
total net investment loss is $2,250. As Jane had no other
income or fringe benefits amounts for the income year, her
'adjusted taxable income' is $2,250. Heather is ineligible
for the maximum dependent spouse tax offset as Jane's
adjusted taxable income exceeds $282. However, Heather
would still be eligible for some dependent spouse tax offset
in accordance with subsection 159J(4) of the ITAA 1936.
370. Where a taxpayer has a spouse for only part of the income year, or
has multiple spouses in a year, the amendments include a formula
for determining the taxpayer's combined income for the purposes of
the income limit on eligibility. [Schedule 3, Part 5, item 94]
371. Because the amendments to the income cap on eligibility for the
dependency tax offsets substitute the former subsection 159J(1AB)
with a new subsection, the fact a taxpayer is ineligible to claim a
dependent spouse; child-housekeeper; invalid relative; or
parent/parent-in-law tax offset due to their income continues to be
ignored in determining the taxpayer's dependants for the purposes
of the medical expenses tax offset. This is a result of paragraph
(e) of the definition of 'dependant' for the purposes of the
medical expenses tax offset in subsection 159P(4) of the ITAA 1936.
1.
Michael wishes to claim the medical expenses tax offset for
medical expenses incurred in respect of his mother-in-law
during the 2009-10 income year. Michael's combined adjusted
taxable income with his spouse is $158,000 so he is not
eligible to claim the parent-in-law tax offset. However,
this fact is ignored for the purposes of the medical
expenses tax offset 'dependant' definition. As a result,
Michael's mother-in-law is considered one of his dependants
for the purposes of the medical expenses tax offset and he
may claim the offset for amounts paid in respect of her
medical expenses.
Application and transitional provisions
372. These amendments will commence the day after Royal Assent.
373. The amendments will apply to assessments for the 2009-10 income
year and later income years.
Consequential amendments
374. The amendments replace a reference to 'separate net income' in the
family actual means test provisions of the Social Security Act 1991
with a reference to 'adjusted taxable income. [Schedule 3, Part 5,
item 101]
Index
Schedule 1: PAYG instalment reduction for small businesses etc
|Bill reference |Paragraph |
| |number |
|Items 1 and 2 |1.26 |
|Item 3, subsection 45-400(3) of Schedule 1 |1.11 |
|to the TAA 1953 | |
|Item 3, subsection 45-400(4) of Schedule 1 |1.13 |
|to the TAA 1953 | |
|Item 3, subsection 45-400(5) of Schedule 1 |1.14 |
|to the TAA 1953 | |
|Item 3, subsection 45-400(6) of Schedule 1 |1.16 |
|to the TAA 1953 | |
|Item 3, paragraphs 45-400(6)(a) to (c) of |1.18 |
|Schedule 1 to the TAA 1953 | |
|Item 3, subsection 45-400(7) of Schedule 1 |1.23 |
|to the TAA 1953 | |
|Item 4 |1.25 |
|Item 5 |1.27 |
Schedule 2: Unclaimed superannuation money
|Bill reference |Paragraph |
| |number |
|Items 1 to 5, section 7 |2.7 |
|Items 6, 28 and 29, sections 8 and 20AA and |2.8 |
|paragraphs 20C(1)(b) to (d) | |
|Item 7, section 8 |2.12 |
|Item 8, section 8 |2.13 |
|Item 9 |2.9 |
|Item 10, subsection 13(1) |2.10 |
|Item 11, section 15A |2.14 |
|Item 12, subsection 16(1) |2.24 |
|Item 12, subsections 16(1) and (2A) |2.21 |
|Item 12, subsections 16(1) and (3) |2.18 |
|Item 12, subsection 16(1A) |2.22 |
|Item 12, subsection 16(2) |2.27 |
|Item 12, paragraph 16(2)(b) |2.28 |
|Items 13 and 14, subsection 16(7) |2.29 |
|Item 15, section 16A |2.31 |
|Items 16 and 20, subsections 17(1) and 18(2)|2.36 |
|Item 16, subsection 17(1A) |2.38 |
|Item 16, subsection 17(1B) |2.39 |
|Item 16, subsection 17(1C) |2.45 |
|Item 16, paragraphs 17(2)(a) and (d) |2.47 |
|Item 16, paragraphs 17(2)(b) and (c) and |2.48 |
|subsection 17(2AA) | |
|Item 16, subsection 17(2AA) |2.49 |
|Item 17, subsection 17(2A) |2.50 |
|Item 18 |2.46 |
|Items 18 and 19 and subsection 17A(2) |2.52 |
|Items 18 and 23, subsection 18A(1) |2.55 |
|Item 19, subsection 17A(1) |2.51 |
|Items 20 and 21, subsections 18(2) and (4) |2.42 |
|Items 21 and 22, subsections 18(4) and (5) |2.41 |
|Item 23, Part 3AA |2.66 |
|Item 23, subsection 18A(2) |2.56 |
|Item 23, section 18B |2.59 |
|Item 23, paragraph 18B(4)(a) |2.60 |
|Item 23, subsection 18B(8) |2.61 |
|Item 23, section 18C |2.63 |
|Items 24 and 25, paragraphs 19(1)(a) and (b)|2.68 |
|Item 26, paragraphs 19(1)(c) and (d) |2.67 |
|Items 27 to 29, sections 20A and 20AA and |2.78 |
|paragraphs 20C(1)(b) to (d) | |
|Items 28 and 70, subsection 20AA(2) |2.79 |
|Items 30 to 32, paragraphs 20L(1)(a) and (b)|2.81 |
|and subparagraph 20E(1)(b)(iii) | |
|Items 33 to 35, subsections 23(1) and (5) |2.69 |
|Item 36, subsection 25(1) |2.70 |
|Item 37, subsection 26(2) |2.71 |
|Items 38 and 39 |2.72 |
|Items 40 and 41, subsections 46(4) and 48(5)|2.73 |
|Item 42, paragraph 18(4B)(ca) of the |2.89 |
|Financial Transaction Reports Act 1988 | |
|Item 43, section 301-125 of the ITAA 1997 |2.110 |
|Item 44, paragraph 306-15(1)(d) of the ITAA |2.111 |
|1997 | |
|Item 45, subsection 306-15(1) of the ITAA |2.112 |
|1997 | |
|Items 46 and 47, subsection 307-5(1) of the |2.91 |
|ITAA 1997 | |
|Item 48, paragraph 307-120(2)(e) of the ITAA|2.92 |
|1997 | |
|Item 49, item 1 in the table in subsection |2.97 |
|307-142(3) of the ITAA 1997 | |
|Item 49, item 2 in the table in |2.98 |
|subsection 307-142(3) of the ITAA 1997 | |
|Item 49, item 3 in the table in subsection |2.99 |
|307-142(3) of the ITAA 1997 | |
|Item 49, column 1 in the table in subsection|2.96 |
|307-142(3) of the ITAA 1997 | |
|Item 49, subsection 307-142(2) of the |2.95 |
|ITAA 1997 | |
|Item 49, subsection 307-142(4) |2.101 |
|Item 50, subsection 307-145(1) of the |2.115 |
|ITAA 1997 | |
|Item 51, subsection 307-300(2) of the ITAA |2.103 |
|1997 | |
|Item 51, item 3 in the table in subsection |2.107 |
|307-300(3) of the ITAA 1997 | |
|Item 51, column 1 in the table in subsection|2.104 |
|307-300(3) of the ITAA 1997 | |
|Item 51, item 1 in the table in subsection |2.105 |
|307-300(3) of the ITAA 1997 | |
|Item 51, item 2 in the table in subsection |2.106 |
|307-300(3) of the ITAA 1997 | |
|Item 51, subsection 307-300(4) |2.109 |
|Item 52, subsection 307-350(2B) of the ITAA |2.113, 2.114 |
|1997 | |
|Items 53 to 57, sections 4, 14, 62 and 67A |2.82 |
|of the SSAA 1995 | |
|Items 58 and 59, sections 6 and 56 of the |2.87 |
|Co-contribution Act | |
|Items 60 to 63, sections 65, 65AA, 65A, 66 |2.84 |
|and 67 of the SGAA 1992 | |
|Item 64, subsection 8AAB(5) of the TAA 1953 |2.74 |
|Item 65, subsection 15-10(2) in Schedule 1 |2.75 |
|to the TAA 1953 | |
|Item 66, subsection 250-10(2) in Schedule 1 |2.76 |
|of the TAA 1953 | |
|Item 67 |2.116 |
|Item 68 |2.33, 2.117 |
|Item 69 |2.44, 2.53, |
| |2.58, 2.62, |
| |2.64, 2.118 |
|Item 70 |2.119 |
|Item 71 |2.88, 2.120 |
|Subitem 67(1) |2.16 |
|Subitem 67(2) |2.15, 2.17 |
Schedule 3: Reforms to income tests
|Bill reference |Paragraph |
| |number |
|Part 1, item 1 |3.23 |
|Part 1, item 2 |3.28 |
|Part 1, items 4 and 8 |3.38 |
|Part 1, items 5 and 10 |3.66 |
|Part 1, item 6 |3.62 |
|Part 1, item 7 |3.32 |
|Part 1, item 11 |3.37 |
|Part 2, item 12 |4.14 |
|Part 2, item 12 (note) |4.17 |
|Part 2, item 13 |4.16 |
|Part 2, item 14 |4.19 |
|Part 2, item 15 |4.20 |
|Part 3, items 16 and 17 |4.24 |
|Part 3, item 18 |4.22 |
|Part 3, items 19 and 20 |5.9 |
|Part 3, item 21 |5.12 |
|Part 3, items 22 and 48 |5.18 |
|Part 3, items 23 and 49 |5.20 |
|Part 3, items 24 and 25 |5.19 |
|Part 3, items 26 and 51 |5.23 |
|Part 3, items 27 and 52 |5.24 |
|Part 3, items 28, 30, 31 and 53 to 55 |5.26 |
|Part 3, items 29 and 32 |5.35 |
|Part 3, item 33 |5.40 |
|Part 3, items 34 and 35 |5.39 |
|Part 3, items 36 and 37 |5.41 |
|Part 3, items 38 and 39 |5.44 |
|Part 3, item 40 |5.47 |
|Part 3, item 41 |5.49 |
|Part 3, items 42 and 43 |5.55 |
|Part 3, item 43 |5.56 |
|Part 3, item 44 |5.62 |
|Part 3, item 45 |5.66 |
|Part 3, item 46 |5.70 |
|Part 3, item 47 |5.74 |
|Part 3, item 50 |5.36 |
|Part 3, item 56 |5.27 |
|Part 3, item 57 |5.38 |
|Part 3, item 58 |5.30 |
|Part 3, items 58 and 59 |5.28 |
|Part 3, items 59 and 60 |5.31 |
|Part 3, item 61 |5.32 |
|Part 3, items 62, 63, 82 and 83 |5.78 |
|Part 3, items 64 and 67 |5.90 |
|Part 3, items 65 and 66 |5.89 |
|Part 3, items 69 and 72 |5.92, 5.95 |
|Part 3, items 70 and 71 |5.94 |
|Part 3, item 73 |5.81 |
|Part 3, items 74 to 76 |5.83 |
|Part 3, item 77 |5.88 |
|Part 3, items 78 to 80 |5.91 |
|Part 3, item 81 |5.77 |
|Part 3, items 84 and 87 |5.97 |
|Part 3, items 85 and 86 |5.96 |
|Part 3, item 88 |5.99 |
|Part 3, item 89 |5.101 |
|Part 3, items 90 and 91 |5.102 |
|Part 4, item 92 |7.18 |
|Part 4, item 93 |7.19 |
|Part 5, item 94 |8.22, 8.28 |
|Part 5, items 95 and 96 |8.26 |
|Part 5, item 97 |8.19 |
|Part 5, item 98 |8.20 |
|Part 5, item 99 |8.25 |
|Part 5, item 100 |8.24 |
|Part 5, item 101 |8.32 |
