Commonwealth revenue measures since our last update include:
Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014, introduced into the House of Representatives on 13 May 2014, is the lead Bill in a suite which propose to implement the 2014-15 Federal Budget measure which will require individual taxpayers with taxable income over $180,000 to pay a 'Temporary Budget Repair Levy' of 2 per cent on income in excess of $180,000. This will apply both to resident and non-resident taxpayers.
The Temporary Budget Repair Levy is imposed by the Income Tax Rates Amendment (Temporary Budget Repair Levy) Bill 2014 which amends the Income Tax Rates Act 1986 to increase relevant rates of tax applicable under various provisions mentioned in that Act for three income years starting from the 2014-15 income year.
This package of Bills also makes amendments to incorporate the imposition of the Temporary Budget Repair Levy into various other tax rates that are currently based on the top personal marginal tax rate to maintain integrity and fairness of the tax system, and to minimise opportunities for avoiding the levy. These amendments include a temporary increase in the fringe benefits tax CFBn rate to 49 per cent.
In addition, Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 ensures that:
- only excess foreign income tax offsets may be applied against the Temporary Budget Repair Levy, and other non-refundable tax offsets cannot be applied against the levy, and
- the FBT concessions provided to public benevolent institutions, health promotion charities, public and not-for-profit hospitals, public ambulance services and other tax exempt entities (such as charitable institutions) are maintained by increasing the FBT rebate and relevant concessional caps.
The Temporary Budget Repair Levy and consequential amendments apply to the 2014-15, 2015-16 and 2016-17 financial years, except for those amendments in relation to fringe benefits tax, which commence on 1 April 2015 and will cease on 31 March 2017.
Tax and Superannuation Laws Amendment (2014 Measures No 2) Regulation, registered on 16 May 2014 amends the Income Tax Assessment Regulations 1997 to provide the meaning of'defined benefit contributions' and to specify a method of determining an individual's defined benefit contributions for the 2013-14 financial year and subsequent years.
For an individual with an interest in a defined benefit plan, the individual's defined benefit contributions are relevant to the imposition of Division 293 tax under Division 293 of the Income Tax Assessment Act 1997 (Cth) which applies broadly to those individuals whose income and concessionally taxed superannuation contributions exceed $300,000 in an income year.
Under Division 293, individuals are liable to pay the tax imposed at 15 per cent on certain superannuation contributions that exceed the $300,000 threshold. The tax is designed to ensure that the tax concession received by these individuals on superannuation contributions is more closely aligned with the concession received by average income earners. Division 293 tax applies to taxable contributions made since 1 July 2012. In respect of the 2012-13 financial year, an interim Regulation for determining defined benefit contributions was made on 17 February 2014.
A New Tax System (Goods and Services Tax) Waiver of Tax Invoice Requirement (Motor Vehicle Incentive Payment Made to Motor Vehicle Dealer) Legislative Instrument 2014, registered on 21 May 2014, waives the requirement for a recipient making a creditable acquisition to hold a tax invoice for an input tax credit to be attributable to a tax period, where:
- the recipient makes a creditable acquisition of a motor vehicle from a motor vehicle dealer (the supplier); and
- the supplier receives or is entitled to receive a motor vehicle incentive payment for the supply of the motor vehicle to the recipient in addition to the consideration it receives from the recipient; and
- the recipient holds a document that meets the requirements prescribed in this instrument.
Tax and Superannuation Laws Amendment (2014 Measures No 3) Bill 2014, introduced into the House of Representatives on 29 May 2014, gives effect to the 2013-14 Federal Budget proposal relating to expenditure on mining information and mining rights first used for exploration. Under the proposed change to the income tax law, an immediate deduction for expenditure on mining information and mining rights first used for exploration will only apply to:
- mining rights and mining information acquired from an Australian Government authority;
- geological and geophysical data packages acquired from mining information providers; or
- newly created mining information.
Expenditure on mining rights and mining information that satisfy the first use test but are no longer eligible for the immediate deduction may be deducted for income tax purposes over the shorter of the effective life of the information or mining right or 15 years, and may be written off at the taxpayer's choice if exploration is unsuccessful (ceases).
This measure is proposed to apply to acquisitions of mining rights and mining information that occur after the announcement of the measure at 7.30 pm Australian Eastern Standard Time, on 14 May 2013.
However, the amendments do not apply to mining rights or mining information that commenced to be held by a taxpayer after that time, if such commencement was by virtue of an arrangement that the taxpayer had before the time of the announcement. In this respect, the arrangement must be one that was in place continuously from the time before the announcement until the time the taxpayer became the holder of the mining right or mining information, and all terms and conditions of the arrangement, including the consideration for the right or information, must have been agreed prior to the time of the announcement.
It is important to note that the original Budget announcement in respect of this measure made specific reference to the measure not applying where the non-cash cost of a mining right was acquired under an eligible 'farm-in, farm-out arrangement'. This carve out has not been included in this Bill, and is likely to cause concerns for the mining industry.
Tax Laws Amendment (Implementation of the FATCA Agreement) Bill 2014, introduced into the House of Representatives on 29 May 2014, gives effect to the Inter-Government Agreement (IGA) between Australia and the United States of America (USA) (signed on 28 April 2014) to set out the basis upon which financial institutions in Australia will be treated as complying with the USA's Foreign Account Tax Compliance Act (FATCA).
Specifically, the Bill amends Schedule 1 to the Taxation Administration Act 1953 to require Australian financial institutions to collect information about their customers that are likely to be taxpayers in the USA, and to provide that information to the Commissioner of Taxation who will, in turn, provide that information to the USA Internal Revenue Service.
The amendments are to apply from 1July 2014.
Tax and Superannuation Amendment (2014 Measures No 2) Bill 2014, introduced into the House of Representatives on 29 May 2014, proposes the following:
- to amend the Medicare Levy Act 1986 to increase the Medicare levy low-income threshold for families and the dependent child-student component of the threshold. This measure applies to the 2013-14 income year and later income years.
- to amend the Income Tax Assessment Act 1936 to ensure outcomes are preserved in relation to tax assessments where taxpayers have reasonably and in good faith anticipated the impact of identified announcements made by a previous Government that the tax law would be amended with retrospective effect, and the current Government has now decided that the announced proposal to change the law will not proceed.
- to amend the Income Tax Assessment Act 1997 to introduce an integrity rule to limit the ability of taxpayers to obtain a tax benefit from 'dividend washing'. This measure applies to distributions made on or after 1 July 2013.