BILLS DIGEST NO. 79, 2011–12, 21 November 2011

Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011

Kai Swoboda
Economics Section

Date introduced:  2 November 2011

House:  House of Representatives

Portfolio:  Treasury

Commencement:  Schedules 1 and 3 commence on Royal Assent. Schedule 2, Part 1 and Schedule 4 commence on the later day of Royal Assent of the Bills giving effect to the Minerals Resource Rent Tax and the Royal Assent of this Bill. Schedule 2, Part 2 commences on the later day of commencement of Schedule 2, Part 1 of this Bill and the Royal Assent of the Clean Energy Bill 2011.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose

The Bill contains four schedules, each with a different purpose:

•       abolish the entrepreneurs’ tax offset (Schedule 1)

•       increase the small business instant asset write-off threshold from $1000 to $6500 and simplify tax depreciation pooling arrangements (Schedule 2)

•       allow small businesses to claim an accelerated initial deduction for motor vehicles acquired in the 2012-13 and subsequent income years (Schedule 3), and

•       provide for the payment of the tax paid on superannuation contributions for employees with an income of less than $37 000 per year into the employee’s superannuation fund, up to a maximum of $500 (Schedule 4).

The implementation of the changes proposed by Schedules 2 and 4 of this Bill are dependent on the passage of the Minerals Resource Rent Tax Bills, with the provisions not coming into effect unless the four Bills that relate to the proposed Minerals Resource Rent Tax are passed by the Parliament and receive Royal Assent. A part of Schedule 2 also relies on the Clean Energy package of legislation (which passed the Parliament on 8 November 2011) receiving Royal Assent.

Committee consideration

The Bill has been referred to the House of Representatives Standing Committee on Economics for inquiry and report by 21 November 2011 as part of the Minerals Resource Rent Tax package of Bills. Details of the inquiry are at http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=economics/mineralstax/index.htm.[1]

The Bill has also been referred to the Senate Economics Committee for inquiry and report by 14 March 2012 as part of the Minerals Resource Rent Tax package of Bills.[2] Details of the inquiry are at http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=economics_ctte/MRRT_Bill_2011/index.htm.[3]

Schedule 1-Abolishing the entrepreneurs’ tax offset

Background

The entrepreneurs’ tax offset (ETO) was introduced in July 2005 and provides up to 25 per cent tax offset on the income tax liability attributable to business income of small businesses that have an annual turnover of less than $75 000.[4] The ETO phases out for annual turnover above $50 000 and eligibility ceases when turnover reaches $75 000.[5] An income test also applied from July 2008 that restricts the eligibility of individuals whose income is over a threshold amount ($75 000 for single persons and $120 000 if they have a family).[6]

In 2008-09 (the latest year for which data is available), a total of 402 485 taxpayers claimed the offset, accounting for $177 million in deductions.[7] According to the Treasury’s 2010 Tax Expenditures Statement, the cost of the ETO over the period 2012-13 to 2013-14 exceeded $350 million.[8]

The decision to abolish the ETO was announced by the Government as part of the 2011–12 Budget.[9] The Government linked the abolition of the offset with an instant tax write-off of the first $5000 of any motor vehicle purchased from 2012–13 (see Schedule 3 of this Bill below).[10]

The Henry Tax Review, conducted over the period May 2008 to December 2009[11], recommended that the ETO, as well as several other tax offsets, be abolished.[12] The Review noted:

Removing the ETO would reduce compliance and administration costs and provide a more equitable and neutral treatment between self-employment and employment income. The ETO is very complex to administer and provides problematic incentives related to business structure.[13]

The Coalition shadow spokesperson on small business was critical of the Government’s decision to abolish the ETO, noting that ‘the Government’s decision to scrap the Entrepreneurs Tax Offset runs completely contrary to Julia Gillard and Wayne Swan’s endorsement of importance of rewarding enterprise and entrepreneurship’.[14]

The peak body for small business, the Council of Small Business of Australia, was disappointed by the Government’s decision, noting that:

Many people from within the accounting industry and the tax community believe the ETO was complicated and not well used but other figures show that almost 400,000 small business people accessed this support. Some people only received perhaps $500 as a result of the ETO but when your earnings are $35k that is still a lot of money. We should have been consulted prior to this announcement for an opinion from the small business community on the value of the ETO.[15]

Financial implications

Abolishing the offset is expected to lead to a revenue gain of $365 million over the forward estimates period (2011–12 to 2014–15).[16]

Key provisions

Amendments to the Income Tax Assessment Act 1997

Items 1 and 2 amend section 13-1 of the Act to remove references to the ETO in the list of available tax offsets included in the Act.

Item 3 repeals subdivision 61-J, which includes the substantive provisions relating to the ETO, thereby removing it from the Act.

Items 4 to 6 are consequential amendments that remove references to the ETO from a list of concessions available to small business (subsection 328-10(2)(note)) and definitions of terms relevant to the assessment of the ETO (subsection 995-1)(1)-definition of net small business income and definition of small business entity turnover)) that were contained in subdivision 61-J.

Amendments to the Income Tax (Transitional Provisions) Act 1997

Items 7 and 8 are consequential amendments that remove references to the ETO from a list of small business tax concessions that apply for former Simplified Tax System taxpayers that are winding up a business (paragraph 328-112(2)(c)) and for the eligibility for certain small business concessions (paragraph 328-112(3)(c)).

Amendments to the Taxation Administration Act 1953

Item 9 is a consequential amendment that removes the ETO form a list of tax concessions/offsets used to calculate the adjusted tax liability (section 45-340 in schedule 1 (method statement, step 1, paragraph (c))).

Application

The amendments made in Schedule 1 apply in relation to the 2012–13 income year and later income years.

Schedule 2-Increase to the small business instant asset write-off threshold

Background

Under current depreciation arrangements, small businesses can choose the capital allowance arrangements in subdivision 328-D of the Income Tax Assessment Act 1997 to depreciate assets.[17]

The existing capital allowance arrangements for small businesses allow low cost assets to be written off in the year the small business first started to use the asset or had it installed ready for use. A low cost asset (except a horticultural plant) is defined as one which has a cost of less than $1000 at the end of the income year in which the asset started to be used or is installed ready for use, for a taxable purpose.[18]

Other depreciating assets, generally those costing $1000 or more, are allocated to one of two depreciation pools, depending on the effective life of the asset,[19] the long life small business pool (depreciated at a rate of 5 per cent) or the general small business pool (depreciated at a rate of 30 per cent).[20]

The Bill proposes to amend the Income Tax Assessment Act 1997 to:

•       increase the small business instant asset write-off threshold from $1000 to $6500, and

•       consolidate the long life small business pool and the general small business pool into a single pool to be written off at one rate.[21]

The increase in the instant asset write-off is proposed to apply from 1 July 2012, with the increase from $1000 to $5000 dependent on the passage of the Minerals Resource Rent Tax package of Bills and the further increase to $6500 linked to the Clean Energy package of measures.

The measure was first announced by the Government as part of its response to the Henry Tax Review in May 2010.[22] The increase in the threshold from $5000 to $6500 was announced as part of the Clean Energy package in July 2011.[23]

The Henry Tax Review included a recommendation that the threshold for determining low-value assets be raised to $10 000 and that depreciation arrangements for small business be further simplified by allowing any remaining depreciating assets (other than buildings) that are not immediately written off to be grouped in a single pool, rather than the two existing pools, with the entire pool written off at a single declining balance rate on the basis that a single pool of assets.[24]

The proposal to lift the threshold to $5000 was supported by the Council of Small Businesses of Australia, who considered:

The depreciation changes announced today will significantly enhance small business cash flow and will decrease the compliance costs of tracking assets for the purposes of depreciation...

Naturally small businesses would have preferred an increase in the instant write-off threshold to $10 000 as recommended by the Henry Review, however the $5000 threshold represents a significant improvement on the current arrangements.[25]

Draft legislation relating to the proposal was released by the Treasury on 13 September 2011.[26] One submission was received by the Treasury, which did not recommend any changes to the exposure draft legislation, but did however recommend areas in the Explanatory Memorandum where further explanation would benefit small businesses and their advisors.[27]

Financial implications

The Explanatory Memorandum notes that the measure will have a cost of $2.3 billion over the forward estimates, with $1.160 billion relating to 2013-14 and $1.140 billion relating to 2014-15[28]

The cost of increasing the threshold from $1000 to $5000 was reported as being $1.030 billion in 2013-14 in the 2010-11 Budget Papers.[29] The increase from $5000 to $6500 was estimated to cost $100 million in each of 2013–14 and $2014–15.[30]

Key provisions

Amendments to the Income Tax Assessment Act 1997

The majority of items in Part 1 make amendments to reflect the consolidation of the long life small business pool and the general small business pool into one pool. Items 9 to 13 implement the increase in the threshold for the instant asset write-off from $1000 to $5000.

The majority of items in Part 2 relate to further increasing the instant asset write‑off threshold from $5000 to $6500.

While each Part is to apply in relation to the 2012-13 income year and later years, the provisions of item 2 of the Bill make the amendments proposed by Part 1 dependent on the passage of the Minerals Resource Rent Tax package of Bills and the amendments proposed by Part 2 dependent on the passage of the Clean Energy package of Bills.

Schedule 3-Small business entities’ deductions for motor vehicles

Background

Under current depreciation arrangements, small businesses can choose the capital allowance arrangements in subdivision 328-D of the Income Tax Assessment Act 1997 to depreciate assets, including motor vehicles.

The Bill proposes to amend the Income Assessment Act 1997 to allow small businesses that choose to use the capital allowances in Subdivision 328-D to claim up to $5000 as an immediate deduction for a motor vehicle in the year they start to use the motor vehicle, or have it installed ready for use, for a taxable purpose.[31] The remainder of the purchase cost is then deprecated as part of the general small business pool, at 15 per cent in the first year and 30 per cent in later years.

The measure provides a tax benefit. Taking the example of a new vehicle which is purchased for $33 960 in 2012–13, the net tax benefit is $1275 in 2013–14.  This net benefit is the amount over and above what a small business would be entitled to under the existing depreciation rules, and takes account of the flat $5000 write-off, plus 15 per cent depreciation for the remainder of the motor vehicle value ($28 960).[32]

The proposal to allow small business owners to claim an accelerated initial deduction for motor vehicles acquired in the 2012-13 and subsequent income years was first announced by the Government in May 2011, as part of the 2011–12 Budget.[33] As previously noted, the measure was proposed to replace the ETO, which is proposed to be abolished by Schedule 1 of this Bill.

Expert opinion on the abolition of the ETO and its replacement with the car tax write-off is divided, with some commentators citing the abolition of the ETO as a disincentive for business growth and others suggesting that the $5000 motor vehicle deduction sends the wrong signal to small business owners starting out in business.[34] Although the majority of small businesses (85 per cent) did not qualify for the ETO tax offset, those businesses which were eligible for the tax offset found it supportive. Other tax experts noted that the write-off of the first $5000 of any new motor vehicle purchase should be viewed in tandem with other initiatives announced in response to the Henry Tax Review which include a reduction in the company tax rate to 29 per cent in 2013–14 and immediate write-off of all business assets valued at under $5000 from 1 July 2012.[35]

The car tax write-off is a stimulatory measure that will lead to increased motor vehicle sales. The measure is also budget-neutral as the savings from terminating the tax offset cover the estimated $350 million cost of the car tax write-off. A technical argument can be made in favour of early-stage assistance to self-funded business operators as against applying a tax concession to a broader group of taxpayers who were eligible for the small business tax break announced in the 2009–10 Budget.[36] The car tax write-off underpins the ongoing assistance to the car industry at a time of falling car exports, and motor vehicle production at 1962 levels.[37]

Draft legislation relating to the proposal was released by the Treasury on 13 September 2011.[38] One submission was received by the Treasury, which did not recommend any changes to the exposure draft legislation, but did however recommend areas in the Explanatory Memorandum where further explanation would benefit small businesses and their advisors.[39]

Financial implications

The Explanatory Memorandum notes that the measure will have a cost of $350 million over the forward estimates.[40]

Key provisions

Amendments to the Income Tax Assessment Act 1997

Item 3 inserts proposed new section 328-237 to provide for an immediate deduction for motor vehicles of up to $5000 in certain circumstances.[41] Item 7 provides that the proposed amendments apply to assets that small businesses start to hold in the 2012–13 and later income years.

Schedule 4-Low income superannuation contribution

Background

Under the Superannuation (Government Co-contribution for Low Income Earners) Act 2003, low income earners who make a contribution to a superannuation fund are eligible for a matching payment by the Government up to a maximum value of $1000.[42]

The Bill proposes to establish a separate, and additional, government superannuation contribution for low income earners—defined to be individuals who have an ‘adjusted taxable income’ of less than $37 000—that seeks to compensate them for the 15 per cent concessional tax paid on contributions to superannuation up to a maximum value of $500.[43] Neither the income threshold, nor the payment value, are indexed.

The maximum contribution of $500 is based on the tax that would be paid on the Superannuation Guarantee payment for an employee with a taxable income of $37 000.[44] The contribution will be paid directly by the ATO to the employee’s nominated superannuation fund or retirement savings account.

Unlike the co-contribution scheme, low income earners do not need to make a personal contribution to qualify for a payment, with a range of payments made on their behalf, including payments made under the Superannuation Guarantee, qualifying them for the payment.[45] Further, the Bill proposes to remove any requirement for an individual to be proactive in claiming the payment, with the Tax Commissioner given the power to determine eligibility based on information available to the Australian Taxation Office.[46]

In designing the administrative arrangements for the low income government superannuation contribution, a consultation process was conducted by the Treasury in June and July 2011.[47] Submissions to Treasury in response to the consultation paper highlighted issues such as:

•       the non-indexation of the income threshold or the contribution rate[48]

•       tying the value of the contribution to the level of income tax rates, which will rise from 15 per cent to 19 per cent under the Clean Energy package of measures[49]

•       the decrease in value associated with the payment if the Superannuation Guarantee rate increases above 9 per cent[50]

•       the use of ‘adjusted taxable income’ rather than ‘taxable income’ to calculate the income threshold[51]

•       the absence of a taper to the $37 000 income threshold so that those earning above this get no benefit from a government superannuation contribution[52]

•       the potential inequity in including some types of superannuation contributions to be eligible for the superannuation contribution but not others, such as allocations from reserves[53], and

•       a requirement to submit an income tax return to claim the contribution.[54]

The final package of measures as proposed by the Bill included one major change to the proposed arrangements in that there is no longer a requirement to lodge a tax return to be eligible to receive the payment.

The measure was first announced by the Government as part of its response to the Henry Tax Review in May 2010.[55] The low income superannuation contribution was one of several superannuation-related changes announced at the time, the others including an increase in the rate of the Superannuation Guarantee from 9 to 12 per cent, increasing the maximum Superannuation Guarantee contribution age from 70 to 75 and the retention of concessional contribution caps for those nearing retirement.[56] Those proposals relating to changes in arrangements relating to the Superannuation Guarantee are the subject of a separate Bill before the Parliament, the Superannuation Guarantee Amendment (Administration) Bill 2011. A separate Bills Digest has been prepared for this Bill.

Superannuation industry groups and several other groups have been supportive of the proposal to introduce a low income superannuation contribution.[57]

Superannuation of low income earners

As expected, low income earners accumulate less superannuation over their working lives than higher income earners. For example, the latest estimates by the Australian Bureau of Statistics are that households had an average balance of $89 100 in superannuation in 2009, with households in the lowest 20 per cent of incomes having an average balance of $30 100 and households in the top 20 per cent of incomes having an average balance of $200 400.[58]

According to the Australian Tax Office, the number of taxpayers with a taxable income of less than $40 000 (including those with a no taxable income) is around 7 million, accounting for 57 per cent of total individual taxpayers.[59]

The value of the income tax concession for superannuation contributions (15 per cent) is the same as the marginal income tax rate of 15 per cent for income between $6000 and $37 000 and lower than the 30 per cent for income over $37 000 to $80 000.[60] For those earning incomes of more than $180 000, the value of the superannuation tax concession is significant, where a marginal tax rate of 45 per cent applies.[61]

The Government estimates that 3.6 million people, including around 2.1 million women, receive no (or minimal) tax benefit from contributing to superannuation, due to the fact that the 15 per cent superannuation contribution tax is above or equivalent to their income tax rate.[62]

The Henry Tax Review noted that the 15 per cent concessional tax on superannuation contributions was considered by some to be inequitable:

Many submissions to the Review have stated that taxing contributions at a flat rate of 15 per cent is unfair to low-income earners. They argue that many low-income earners would pay less tax if the contributions were paid as wages. They note that low-income earners receive a significantly smaller concession than high-income earners.[63]

The recommendations of the Henry Tax Review relating to superannuation—which included abolishing the tax on superannuation contributions and superannuation co-contribution and introducing treating superannuation as income taxed at marginal personal income tax rates and an offset for all superannuation contributions up to $25 000—were partly aimed at addressing the inequity of current arrangements.[64]

Financial implications

The Explanatory Memorandum notes that the cost of the proposed measure over the forward estimates is around $1.9 billion.[65]

Excluding the low income superannuation contribution to members of constitutionally protected funds

In the Bill as presented to the Parliament the Government has not included contributions from ‘constitutionally protected funds’ as qualifying for the low income superannuation contribution payment.[66]

This was despite submissions to the consultation process highlighting that the omission of contributions from constitutionally protected funds would lead to the inequitable treatment of low income earners based on the type of superannuation fund to which they belonged. The Western Australian Government Employees Superannuation Board noted that:

The design of the ... measure unfairly discriminates against individuals who are members of CPFs or untaxed funds. The fundamental reason is that similar to individuals who are members of untaxed funds, individuals who are in untaxed funds or CPFs also pay tax on their superannuation contributions and investment earnings. However, an eligible individual in a taxed fund would be entitled to payment but an individual who is a member of a CPF or untaxed fund would be entitled to zero payment even if they satisfy the eligibility criteria. Eligible individuals in a CPF or untaxed fund are effectively penalised because of the status of the super fund they are a member of.[67]

The Western Australian Treasury expressed a similar view, noting that:

[I]t appears that State employees who are members of West State Super and/or GESB Super accumulation schemes will be excluded from the contribution. Many employees, and in particular casual and part time employees, would be in a position where they will be below that $37 000 income threshold for receipt of the contribution but will not benefit from the arrangements. This disadvantages and is discriminatory against this group of employees.[68]

While many constitutionally protected funds are closed to new members and cover judges, governors and for some states members of parliament, there remain a few open untaxed schemes that do cover individuals who may qualify as low income earners.[69]

It is unclear what the policy reasons are for excluding payments to constitutionally protected funds from eligibility for the low income superannuation contribution, although it may be based on the tax arrangements for these funds and the administrative complexity required to calculate a notional contributions tax rate for contributions made to CPFs or employer contributions forming the untaxed element in the fund.[70]

Key provisions

Amendments to the Superannuation (Government Co-Contribution for Low Income Earners) Act 2003

Item 2 inserts the substantive provisions relating to the low income superannuation contribution. These cover:

•       persons who are entitled to the contribution (proposed section 12C)

–      a specified contribution was made by the person during the income year

–      the individual’s ‘taxable income’ for the income year does not exceed $37 000[71]

–      the individual is not a holder of a temporary resident visa, and

–      the individual satisfies an income test in which 10 per cent or more of their income is derived from business or employment.

•       the types of superannuation contributions that need to be made to attract a contribution (proposed section 12D)

–      the contribution was or is made on or after 1 July 2012

–      the contribution is a ‘concessional contribution’ for the financial year that corresponds to the income year in which the contribution was or is made[72], and

–      the contribution was or is made for the purpose of providing superannuation benefits for the person.

•       the amount of low income superannuation contribution (proposed section 12E)

–      a maximum payment of $500 and a minimum payment of $20 (if less than $20 no payment is to be made), and

–      for amounts between $20 and $500 a payment of 15 per cent of the contributions made under proposed section 12D above by or for the person during the income year.

Item 3 amends subsection 14(1) to add to the matters that the Commissioner of Taxation has regard to in making a determination to also include other information held or obtained by the Commissioner under or for the purposes of a taxation law and information that ‘the Commissioner considers is reasonably necessary to make the determination’.

Application

Item 7 provides that the amendments provided for by Schedule 4 apply to the 2012–13 income year and later years.

Concluding comments

The measures in the Bill relating to the increase in the instant asset write-off (Schedule 2) and payment of a superannuation low income contribution (Schedule 4) are dependent on the passage of the Minerals Resource Rent Tax package of measures.

All of these measures proposed by the Bill were considered in the recent Henry Tax Review and the proposed changes generally address the issues raised.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2495.

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ISSN 1328-8091

[1].               House of Representatives Standing Committee on Economics, Inquiry into the Minerals Resource Rent Tax Bills 2011, 2 November 2011, viewed 16 November 2011, http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=economics/mineralstax/index.htm

[2].               Australia, Senate, Journals, no. 67, 10 November 2011, p. 1823, viewed 16 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fjournals%2F20111110_SJ067%2F0000%22 

[3].               Senate Economics Committee, Inquiry into the Minerals Resource Rent Tax Bill 2011 and related bills, 10 November 2011, viewed 16 November 2011, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=economics_ctte/MRRT_Bill_2011/index.htm

[4].               Australian Taxation Office (ATO), ‘Entrepreneurs tax offset’, Income Tax Assessment Act 1997, section 61-500 and section 61‑525; ATO website, 29 June 2010, viewed 8 November 2011, http://www.ato.gov.au/businesses/content.aspx?doc=/content/00149627.htm

[5].               Australian Taxation Office (ATO), ‘Entrepreneurs tax offset’, ATO website, 29 June 2010, viewed 8 November 2011, http://www.ato.gov.au/businesses/content.aspx?doc=/content/00149627.htm

[6].               Ibid.

[7].               Australian Taxation Office, ‘Part D: tax offset items’, Taxation statistics 2008-09, Table 21: personal tax, ATO website, 18 October 2011, viewed 7 November 2011, http://www.ato.gov.au/corporate/content.aspx?menuid=0&doc=/content/00268761.htm&page=8&H8

[8].               Treasury, ‘Tax Expenditures Statement 2010’, Commonwealth of Australia, Canberra, 2011, p. 89, viewed 8 November 2011, http://www.treasury.gov.au/documents/1950/PDF/2010_TES_consolidated.pdf

[9].               B Shorten (Assistant Treasurer and Minister for Financial Services and Superannuation) and N Sherry (Minister for Small Business), Supporting Australian small business, joint media release, no. 044, 8 May 2011, viewed 8 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F752617%22

[10].               Ibid.

[11].               Treasury, ‘Australia’s future tax system’, Timeline, Treasury website, viewed 8 November 2011, http://taxreview.treasury.gov.au/content/Content.aspx?doc=html/timeline.htm

[12].               Treasury, ‘Australia’s future tax system: report to the Treasurer’, Part two: detailed analysis, vol. 1 of 2, December 2009, p. 32, viewed 9 November 2011, http://taxreview.treasury.gov.au/content/downloads/final_report_part_2/AFTS_Final_Report_Part_2_Vol_1_Consolidated.pdf

[13].               Ibid., p. 89.

[14].               B Billson, Swans tax chat words at odds with reality – Labor making it harder for small business, media release, 4 October 2011, viewed 8 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F1134008%22

[15].               Council of Small Business of Australia (COSBOA), ‘Response to the 2011 Budget’, COSBOA website, 18 May 2011, viewed 8 November 2011, http://www.cosboa.org/webs/cosboa/cosboa.nsf/dx/05182011064321AMYODSB6.htm

[16].               Explanatory Memorandum, p. 3.

[17].               A ‘small business entity’ is defined in section 328.110 of the Income Tax Assessment Act 1997 and generally covers a requirement to carry on a business and have aggregate turnover of less than $2 million.

[18].               Income Tax Assessment Act 1997, section 40.425.

[19].               Income Tax Assessment Act 1997, section 328.185.

[20].               Income Tax Assessment Act 1997, section 328.190.

[21].               Explanatory Memorandum, p. 9.

[22].               K Rudd (Prime Minister) and W Swan (Treasurer), Stronger, Fairer, Simpler: a tax plan for our future, joint media release, no. 028, 2 May 2010, viewed 13 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2FKSQW6%22 

[23].               G Combet (Minister for Climate Change and Energy Efficiency) and N Sherry (Minister for Small Business), Helping small business adjust to a carbon price, joint media release, no. 077, 10 July 2011, viewed 17 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F915196%22 

[24].               Treasury, ‘Australia’s future tax system: report to the Treasurer’, Part two: detailed analysis, December 2009, vol. 1 of 2, viewed 18 November 2011, op. cit., p. 173, http://taxreview.treasury.gov.au/content/downloads/final_report_part_2/AFTS_Final_Report_Part_2_Vol_1_Consolidated.pdf

[25].               Council of Small Business of Australia, Small business win from Henry Tax Review, media release, 3 May 2010, viewed 17 November 2011, http://www.cosboa.org.au/webs/cosboa/cosboa.nsf/dx/small-business-win-from-henry-tax-review.htm?opendocument&comments#anc1

[26].               Treasury, ‘Small Business Tax Law Amendments’, Exposure draft, Treasury website, 13 September 2011, viewed 17 November 2011, http://www.treasury.gov.au/contentitem.asp?ContentID=2147&NavID=066

[27].               Ibid.

[28].               Explanatory Memorandum, p. 5.

[29].               Australian Government, Budget measures: budget paper no. 2: 2010–11, Commonwealth of Australia, Canberra, 2010, p. 6.

[30].               Revised Explanatory Memorandum, Clean Energy Bill 2011, p. 40.

[31].               Explanatory Memorandum, p. 17.

[32].               W Swan (Treasurer), B Shorten (Minister for Financial Services and Superannuation) and N Sherry (Minister for Small Business), op. cit.

[33].               Ibid.

[34].               B.B. Whitehouse Group, ‘Government to replace entrepreneurs tax offset with $5000 car tax break’, B.B. Whitehouse Group blog, 9 May 2011, viewed 16 November 2011, http://bbwgroup.com.au/blog/?entry=entry110509-142809

[35].               Ibid.

[36].               Small businesses were able to claim a bonus tax deduction of up to 50 per cent (up from 30 per cent) on the cost of new motor vehicles purchased between 13 December 2008 and 31 December 2009. The recovery in motor vehicle sales following the global financial crisis was attributable to increased business sales due to the small business tax break. See: Federal Chamber of Automotive Industries, Tax break spurs exceptional new car sales results, media release, Federal Chamber of Automotive Industries, 3 December 2009, viewed 16 November 2011, http://www.fcai.com.au/news/2009/12/231/tax-break-spurs-exceptional-new-car-sales-result

[37].               Australian Automotive Intelligence, Yearbook 2011, Tables: Vehicle Production, Automotive exports and imports, April 2011, pp. 66–71.

[38].               Treasury, ‘Small Business Tax Law Amendments’, Exposure draft, op. cit.

[39].               Treasury, ‘Small Business Tax Law Amendments’, Exposure draft, consultation summary, Treasury website, viewed 17 November 2011, http://www.treasury.gov.au/documents/2147/DOC/2147_consultation_summary.doc

[40].               Explanatory Memorandum, p. 5.

[41].               A ‘motor vehicle’ is defined by subsection 995-1(1) to be any motor-powered road vehicle (including a 4 wheel drive vehicle).

[42].               Superannuation (Government Co-contribution for Low Income Earners) Act 2003, section 10.

[43].               Explanatory Memorandum, p. 27.

[44].               B Shorten (Minister for Financial Services and Superannuation), ‘Second reading speech: Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011’, House of Representatives, Debates, 2 November 2011, p. 5, viewed 13 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F3641b583-a42e-4045-9472-07db51574a42%2F0013%22

[45].               Explanatory Memorandum, p. 29.

[46].               Ibid., p. 30.

[47].               Treasury, ‘Low Income Earners Government Superannuation Co-Contribution’, consultation paper, Treasury website, 16 June 2011, viewed 13 November 2011, http://www.treasury.gov.au/contentitem.asp?NavId=&ContentID=2071

[48].               Australian Council of Trade Unions, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, 15 July 2010, p. 1, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/Australian_Council_of_Trade_Unions.PDF; CPA Australia, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, consultation paper, 19 July 2011, p. 1, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/CPA_Australia.pdf; Industry Superannuation Network, Submission to Treasury on the Low Income Earners Government Contribution, July 2011, p. 4, viewed 11 November 2011, http://www.treasury.gov.au/documents/2119/PDF/Industry_Super_Network.PDF

[49].               Association of Superannuation Funds of Australia, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, consultation paper, 15 July 2011, p. 2, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/The_Association_of_Superannuation_Funds_of_Australia_Limited.PDF

[50].               Australian Institute of Superannuation Trustees, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, consultation paper, July 2011, p. 3, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/Australian_Institute_of_Superannuation_Trustees.PDF; FPA Australia, op. cit., p. 1; Financial Planning Association of Australia, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, 15 July 2011, p. 1, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/Financial_Planning_Association_of_Australia.PDF

[51].               Australian Institute of Superannuation Trustees, op. cit.

[52].               Brotherhood of St Lawrence, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, p. 2, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/Brotherhood_of_St_Laurence.pdf; Mercer, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, 14 July 2011, p. 2, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/Mercer.PDF

[53].               Commonwealth Bank of Australia, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, 15 July 2011, p. 1, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/Commonwealth_Bank.PDF; Government Employees Superannuation Board, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, consultation paper, p. 1, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/Government_Employees_Superannuation_Board.PDF; Mercer, op. cit., p. 1; Association of Superannuation Funds of Australia, op. cit., p. 2; Government of Western Australia Department of Treasury, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, consultation paper,13 July 2011, p. 1, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/Western_Australian_Government_Department_of_Treasury.pdf

[54].               Australian Council of Trade Unions, op. cit., p. 1; CPA Australia, op. cit.; Industry Superannuation Network, op. cit., p. 4; Mercer, op. cit., p. 1; Association of Superannuation Funds of Australia, op. cit.

[55].               K Rudd (Prime Minister) and W Swan (Treasurer), op. cit.

[56].               W Swan (Treasurer) and C Bowen (Minister for Financial Services, Superannuation and Corporate Law), Stronger, fairer, simpler superannuation banking the benefits of the boom, Joint media release, no. 027, 2 May 2010, viewed 13 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2FX5LW6%22 

[57].               These include: the Australian Institute of Superannuation Trustees, the Brotherhood of St Lawrence, the Australian Council of Trade Unions, the Commonwealth Bank, the Financial Planning Association of Australia, the Financial Services Council, the Industry Superannuation Network, the Government Employees Superannuation Board, Seniors Australia and the Association of Superannuation Funds of Australia (see Treasury, Submissions: consultation paper‑ Low Income Earners Government Superannuation Contribution, viewed 17 November 2011, http://www.treasury.gov.au/contentitem.asp?ContentID=2119&NavID)

[58].               Australian Bureau of Statistics (ABS), ‘Household wealth and wealth distribution’, Australia, 2009–10, ABS Cat no. 6554.0, Table 12: Gross Income quintiles, Household assets and liabilities, 14 October 2011, viewed 12 November 2011, http://www.ausstats.abs.gov.au/Ausstats/subscriber.nsf/0/51342DFD54324472CA257928001107B4/$File/65540_2009-10.pdf

[59].               Australian Government, ‘Taxation statistics 2008–09, Table 11: personal tax selected items, by age, sex, taxable status and taxable income, 2008–09 income year’, ATO website, viewed 3 October 2011, http://www.ato.gov.au/content/downloads/cor00268761_2009PER11.pdf

[60].               Australian Taxation Office (ATO), ‘Individual income tax rates’, ATO website, 18 October 2011, viewed 19 November 2011, http://www.ato.gov.au/individuals/content.aspx?doc=/content/12333.htm&mnu=42583&mfp=001/002

[61].               Ibid.

[62].               B Shorten (Minister for Financial Services and Superannuation), ‘Second reading speech: Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011’, House of Representatives, Debates, 2 November 2011, p. 5, viewed 13 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F3641b583-a42e-4045-9472-07db51574a42%2F0013%22

[63].               Treasury, ‘Australia’s future tax system: report to the Treasurer’, Part two: detailed analysis, vol. 1 of 2, op. cit., p. 98.

[64].               Ibid., p. 100.

[65].               Explanatory Memorandum, p. 5.

[66].               Constitutionally protected funds are untaxed super funds that do not pay income tax on contributions or earnings they receive and are operated by some state governments in Australia for their employees. A list of constitutionally protected funds is specified in the Income Tax Assessment Regulations 1997, Regulation 995-1.04.

[67].               Government Employees Superannuation Board, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, consultation paper, p. 1, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/Government_Employees_Superannuation_Board.PDF

[68].               Government of Western Australia Department of Treasury, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, consultation paper, p. 1, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/Western_Australian_Government_Department_of_Treasury.pdf

[69].               Income Tax Assessment Regulations 1997, Schedule 4 (Constitutionally protected superannuation funds — state legislation), Regulation 955-1.04.

[70].               Government Employees Superannuation Board, Submission to Treasury on the Low Income Earners Government Superannuation Contribution, consultation paper, p. 3, viewed 13 November 2011, http://www.treasury.gov.au/documents/2119/PDF/Government_Employees_Superannuation_Board.PDF

[71].               ‘Taxable income’ is established under Schedule 3 of the A New Tax System (Family Assistance) Act 1999 and includes the individual's taxable income for that year, the individual's adjusted fringe benefits total for that year, the individual's target foreign income for that year, the individual's total net investment loss (within the meaning of the Income Tax Assessment Act 1997) for that year and the individual's tax free pension or benefit for that year.

[72].               ‘Concessional contribution’ is defined in sections 292- 25 and 292-165 of the Income Tax Assessment Act 1997. Examples of concessional contributions that will be eligible include Superannuation Guarantee contributions, notional taxed contributions, allocations from reserves that are concessional contributions and contributions an employer makes under a salary sacrifice arrangement.