The Tax Laws Amendment (2011 Measures No. 9) Bill 2011 is
similar to other tax amendment bills in that it has a package of measures
designed to fine tune or improve the tax law. During the inquiry, some of the
measures received express endorsement in submissions. For example, the Australian
Institute of Superannuation Trustees and the Association of Superannuation
Funds of Australia supported the provisions on the electronic portability form.
This will be a system whereby super fund members will be able to electronically
request the consolidation of their super through the Australian Taxation Office
(ATO). It will assist individuals who are reunited with their superannuation
funds in consolidating the different amounts.
Some measures did not receive comment from stakeholders, but
are beneficial to taxpayers and should be supported. For example, under current
law, taxpayers can obtain a capital gains tax (CGT) roll-over for a capital
gain or loss that arises from their interest in a company or trust because of
the demerger of an entity from the group of which the company or trust is the
head entity. However, this is not available where the head entity is a
corporation sole or complying superannuation entity. Schedule 2(2) of the Bill
makes this roll-over available for these types of bodies.
The Goods and Services Tax (GST) and hire purchase
amendments remove a tax-induced distortion between chattel mortgage and hire
purchase. Under current law, chattel mortgage is more attractive because the
GST input tax credits are up front for small businesses that use cash
accounting for GST, whereas they are only available on a payment basis under
hire purchase. Small businesses now rarely use hire purchase for this reason,
despite its other advantages over chattel mortgage.
The Bill also reduces compliance costs for small business by
increasing the financial acquisitions threshold from $50,000 to $150,000. If a
small business makes financial acquisitions below this amount, then it is
outside the financial supply regime and can claim input tax credits for its
financial supplies. Increasing this threshold takes more small businesses outside
the financial supply regime and allows more businesses to claim input tax
credits on their financial supplies.
The amendments for GST and new residential premises will
reverse the effect of the court case Gloxinia Investments, which found
that, where a particular combination of strata titles and leases were involved,
newly constructed residential premises were not subject to GST. The Bill will
re-affirm the policy intent that newly constructed homes should be subject to
GST. They will also protect the revenue that funds Government services that
assist the whole community.
The Bill comprises measures that are important refinements
to the tax system.
The Institute of Chartered Accountants in Australia (ICAA)
was the only stakeholder to raise concerns about the Bill. These applied to the
provisions to enable businesses acquiring assets through hire purchase to
obtain their GST input tax credits up front and the provisions to reverse the
effect of the recent court decision of Gloxinia Investments. The ICAA’s
concerns related to whether the provisions would implement the policy intent,
rather than the policy itself.
Despite the ICAA’s comments, there are several reasons why
the provisions in the Bill are the best available solution. For example, in
relation to hire purchase, the ATO believes it has sufficient legislative basis
for its interpretation and there have been no court actions disputing them.
Further, in consultations in the review of GST and financial supply,
stakeholders rejected the more fundamental reforms of the GST implied by ICAA’s
submission. Finally, the equipment finance industry itself is ‘delighted’ with
In relation to GST for new residential premises, the ICAA
has again suggested a wider reform than that supported in consultations.
Treasury has noted that there is a risk of further court action in this area if
the Bill proceeds, but this is part of bedding down what is still a relatively
After scrutinising Treasury and the ICAA, and noting the
many positive measures in the Bill, the committee is of the view that it should
I would like to thank the organisations that assisted the
committee during the inquiry through submissions or participating in the
hearing in Canberra. I also thank my colleagues on the committee for their
contribution to the report.
Julie Owens MP