The 45th Federal Parliament commenced sitting on 30 August 2016 for the final Spring session of Parliament for the 2016 calendar year. Commonwealth revenue measures introduced into Parliament or registered as legislative instruments or regulations since our previous TaxTalk publication include the following:
Budget Savings (Omnibus) Bill 2016 was introduced into the House of Representatives on 31 August 2016 and has since completed its passage through Parliament with amendments, and subsequently received Royal Assent on 16 September 2016. The measures included in this Act give effect to some of the Australian Government’s budget savings agenda.
In relation to taxation matters, the measures adopted by this Act include the following:
Reduction in the rates of the Research and Development (R&D) tax offset with effect for income years starting on or after 1 July 2016. Specifically, for the first $100 million of eligible R&D expenditure, the relevant R&D tax offset rate is reduced by 1.5 percentage points so that the higher rate of the tax offset (refundable) is reduced from 45 per cent to 43.5 per cent and the lower rate of the tax offset (non-refundable) is reduced from 40 per cent to 38.5 per cent.
Introduction of Single Touch Payroll with transitional application from 1 January 2017. Refer to the Employment Tax Update section for more information.
Other measures in the Act which have residual taxation consequences include:
A new minimum repayment threshold for Higher Education Loan Program (HELP) debts
Pause the income thresholds that determine the tiers for the imposition of the Medicare Levy Surcharge and the rebate on private health insurance at the 2014-15 rates until 2020-21
Change the treatment of fringe benefits under the income tests for family assistance and youth income support payments and for other related purposes
Amend the family assistance indexation provisions as relevant to the Family Tax Benefit (FTB) Part A and amend the primary earner income limit for FTB Part B
Remove the exemption from the income test for FTB Part A recipients and the exemption from the parental income test for dependent young people receiving youth allowance and Aboriginal Study Grants Scheme (ABSTUDY) living allowance in certain circumstances
Provide an income limit of $80,000 on payment of the FTB Part A supplement
Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016, which was introduced into the House of Representatives on 1 September 2016, proposes to give effect to the following 2016-17 Federal Budget proposals:
progressively reduce the corporate tax rate to 25 per cent progressively over 10 years, with the first reduction to 27.5 per cent to apply to “small business entities” in the 2016-17 income year
increase the tax discount for unincorporated small businesses progressively to 16 per cent of net small business income by the 2026-27 income year, with the first increase to the offset to apply from the 2016-17 income year
increase the small business entity aggregated turnover threshold from $2 million to $10 million so as to result in greater access to certain small business concessions including the proposed corporate tax rate reduction, the immediate deductibility of small business startup expenses and certain prepaid business expenses, the simpler depreciation and trading stock rules, roll-over relief for restructures of small businesses, and accounting for and paying goods and services tax (GST).
The Bill has been referred to the Senate Economics Legislation Committee and a report is due by 10 October 2016.
Treasury Laws Amendment (Income Tax Relief) Bill 2016, which was introduced into the House of Representatives on 1 September 2016, proposes to TaxTalk Monthly October 2016 PwC 7 increase the third personal tax bracket for resident individuals from $80,000 to $87,000 with effect from 1 July 2016 (as announced in the 2016-17 Federal Budget). The Bill has been referred to the Senate Economics Legislation Committee which is due to report by 10 October 2016.
Although the Bill has not yet been enacted, in anticipation of the change, the ATO has issued updated PAYG withholding tax tables to give effect to the increased threshold. The revised PAYG withholding rates apply to all employers from 1 October 2016. Any tax overpaid beforehand will be refunded by the ATO on assessment after the end of the 2016-17 financial year.
Tax and Superannuation Laws Amendment (2016 Measures No 2) Bill 2016, which was introduced into the House of Representatives on 14 September 2016, proposes the following measures which were previously included in a Bill that lapsed with the proroguing of Parliament earlier this year:
provide the Commissioner of Taxation with a statutory remedial power to resolve certain unforeseen or unintended outcomes in the tax and superannuation laws
allow primary producers to access income tax averaging 10 income years after choosing to opt out
provide relief from luxury car tax to certain public institutions that import or acquire luxury cars for the sole purpose of public display
make other miscellaneous amendments to taxation, superannuation and other laws including style and formatting changes, repeal of redundant provisions, correction of anomalous outcomes and corrections.
International Tax Agreements Amendment Bill 2016, which was introduced into the House of Representatives on 1 September 2016, proposes to give domestic effect to the new tax treaty between Australia and Germany.
Excise Tariff Amendment (Tobacco) Bill 2016 and Customs Tariff Amendment (Tobacco) Bill 2016, which were both introduced and passed by both Houses of Parliament in September 2016 and subsequently given Royal Assent, give effect to the Federal Budget measure to increase the rates of excise and excise-equivalent customs duty on tobacco by way of four annual increases in duty of 12.5 per cent each, commencing on 1 September 2017.
Income Tax Assessment (Infrastructure Project Designation) Amendment Rule 2016, which was made on the 24 August 2016, amends the Income Tax Assessment (Infrastructure Project Designation) Rule 2013 (the 2013 Rule) to update references to statutory positions and extrinsic documents, and to make other minor technical amendments. The 2013 Rule provides a process for the Infrastructure Coordinator to receive and consider applications for Designated Infrastructure Project (DIP) status to access the tax loss incentive for DIPs.
Fuel Tax Regulations 2016, made and registered on 1 September 2016, repeals and remakes the Fuel Tax Regulations 2006 and simplifies the provisions by consolidating repeated requirements and improves readability. In addition to remaking the former regulations, the Government has identified opportunities to improve and streamline some of the arrangements in the Fuel Tax Act 2006.
PAYG withholding variation for foreign resident Capital Gains Tax (CGT) withholding
By making of a legislative instrument, the Deputy Commissioner of Taxation has varied to nil the rate of withholding required under the foreign resident CGT withholding regime on the transfer of relevant assets to a legal personal representative, a beneficiary of the estate or a surviving joint tenant as a result of the death of an individual. The instrument has effect from 7 September 2016.