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Taxation Laws Amendment Bill (No. 6) 2000
Date Introduced: 11 May 2000
Commencement: Royal Assent
contained in this Bill are:
- measures to provide the Community Development Employment
Projects (CDEP) Scheme Participant Supplement with the same tax
treatment as the equivalent payment made to Newstart and Youth
Allowance recipients (Schedule 1) , and
- measures to exempt income attributable to GST direct assistance
certificates from income tax (Schedule 2).
As this Bill contains no central theme the
background to the various measures is included in the discussion of
the main provisions.
CDEP Scheme Participant
Supplement (Schedule 1)
The measures in Schedule 1 will
provide the CDEP Scheme Participant Supplement with the same tax
treatment as the equivalent payment made to Newstart and Youth
Allowance recipients involved in labour market programs.
The Further 1998 Budget Measures Legislation
Amendment (Social Security) Act 1999 provided CDEP scheme
participants with a new supplement. The supplement is paid at the
rate of $20 per fortnight and corresponds to a similar payment
received by Newstart and Youth Allowance recipients involved in
labour market programs. The CDEP supplement is ordinary income and
assessable under section 6-5 of the Income Tax Assessment Act
1997 (the 1997 Act).
Existing subsection 160AAA(1) of the Income
Tax Assessment Act 1936 (the 1936 Act) will be amended to make
the CDEP Scheme Participation Supplement eligible for a rebate
under subsection 160AAA(3) (Items 1 and
2). This measure will make the CDEP Scheme
Participation Supplement qualify for the tax rebates available to
corresponding Newstart and Youth Allowance payments.
The CDEP Participant Supplement will be subject
to the current PAYE and the new PAYG withholding requirements.
Proposed paragraph (h) in the definition of salary
and wages in subsection 221A(1) of the 1936 Act will make the CDEP
Participant Supplement subject to the PAYE scheme (Item
5). Proposed paragraph 12-110(1)(d) of
Schedule 1 to the Taxation Administration Act 1953 will
make the CDEP Participant Supplement subject to the PAYG
withholding scheme (Item 7).
As a consequence of the withholding arrangements
applying to the CDEP Scheme Participation Supplement, the rules on
the Tax File Number (TFN) system will be amended (Items
3 and 4). This will bring the TFN rules
for the CDEP Scheme Participation Supplement into line with the
current rules applying to Newstart and Youth Allowance
- The amendments made by items 1,
2 and 6 apply to assessments for
the 1999-2000 income and subsequent income years (Subitem
- The amendment made by items 3 and
4 apply in relation to the quotation of TFNs on or
after 11 November 1999 (Subitem 8(2)).
- The amendment made by item 5 applies to
payments made on or after 11 November 1999 (Subitem
- The amendment made by item 7 applies to
payments made on or after 1 July 2000 (Subitem
Exempting value received from GST Direct
The measures in Schedule 2 will
exempt income attributable to GST direct assistance certificates
from income tax. Income may arise from the receipt or redemption of
The Government is providing redeemable direct
assistance certificates to small and medium businesses and
community sector groups to assist the implementation of GST. The
maximum value of the certificates is $200. The certificates are
issued by the GST Start-Up Assistance Office to eligible
enterprises which have registered for GST by 31 May 2000.
Recipients of certificates may redeem the certificates with a
registered supplier in exchange for goods and services that will
assist the implementation of the GST for that enterprise.
An amount received by a taxpayer may be
assessable as either ordinary income (section 6-5 of the 1997
Act) or statutory income (section 6-10 of the 1997 Act). A
requirement of ordinary income is that if a benefit is received it
must be convertible to cash. If the benefit is not convertible to
cash the benefit is not ordinary income. If the benefit a taxpayer
receives from the redemption of a certificate, such as software,
can be sold to another person, the benefit is convertible to cash.
This will result in the taxpayer being assessable on the value of
the benefit. A benefit may, however, be statutory income if it is
expressly made assessable by a specific provision. The redemption
of a GST certificate will give rise to a capital gains tax
liability. The redemption of a certificate would be a CGT event C2
under section 104-25. Under CGT event C2 a taxpayer will be
assessable on the capital proceeds from ending the CGT asset. It
would appear that GST a certificate will generally result in the
value of the certificate being assessable in the hands of the
Exempt income is defined in section 6-20 of the
1997 Act as an being an amount of ordinary or statutory income that
is exempt income because it is made tax exempt by a provision of
the 1997 Act or another Commonwealth law. Exempt income is not
included in a taxpayer's assessable income.
The aim of the measures is treat the GST direct
assistance certificate as exempt income. Proposed section
51-60 of the 1997 Act will treat a GST direct assistance
certificate as exempt income for the 1999-2000 and 2000-01 income
years (Item 2). The capital gains provisions will
also be amended to make gains from the redemption of GST direct
assistance certificates exempt from tax. Proposed section
118-14 of the 1997 Act will exempt from capital gains tax
any gains in the 1999-2000 or 2000-01 income years that are
attributable to the redemption of a GST direct assistance
certificate (Item 3).
The measures in Schedule 2
apply for the 1999-2000 and 2000-01 income years (Items
2 and 3).
The GST assistance certificate system has been
controversial because it viewed as being inadequate and merely a
token gesture.(1) The GST compliance costs for business
were estimated by accounting firm, Arthur Andersen, to be $24
billion. The Australian Labor Party was arguing that the compliance
costs imposed on small business rendered the $200 GST assistance
certificates as meaningless.(2) Small businesses have
reported that they have incurred significant costs to implement the
GST. The Government was reported as stating that the GST assistance
certificates were merely part of a comprehensive assistance
program.(3) The same article stated that businesses are
entitled to an immediate tax deduction for information technology
equipment acquired for implementing the GST, before 1 July 2000.
The article stated that the Government was of the view that small
business was compensated for its compliance burden.
- The Australian, 'Advisers Ride the Wave', 29 May
- The Financial Review, 'Bureaucratic bungle causes a
stir', 15 February 2000.
2 June 2000
Bills Digest Service
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