Budget Measures: Budget Paper No. 2: 2014–15 provides information on the further decisions the Australian Government has taken to restore the integrity of the Australian tax system (ATS). These decisions relate to the action proposed to clear the backlog of taxation and superannuation measures that were announced by former governments but not legislated. These proposed measures are estimated to cost the Budget $358.1 million over the forward estimates period.
These measures are in addition to the decisions set out in the joint media release of the Treasurer and Assistant Treasurer on 6 November 2013 and the media release of the Assistant Treasurer on 14 December 2013.
The Minister for Finance and the Acting Assistant Treasurer provided additional information in a media release of 13 May 2014.
Outline of further decisions reflected in the 2014–15 Budget
Briefly, the Australian Government announced the following measures in Budget Paper No. 2.
Multiple entry consolidated groups
The government will not proceed with the proposal of the previous government to remove inconsistencies between the tax treatment of multiple entry consolidated groups and ordinary consolidated groups. A consolidated group generally consists of an Australian resident head company and all of its wholly-owned Australian resident subsidiaries. Specific rules allow certain resident wholly-owned subsidiaries of a foreign holding company to consolidate by forming a multiple entry consolidated group.
A tripartite working group review, chaired by the Treasury, private sector tax specialists and the Australian Taxation office had concluded in April 2014 that there is limited scope to address the inconsistencies without considering the broader international tax policy issues. A report was made to the present government in April 2014.
The decision not to proceed with this proposal is estimated to cost revenue $140 million over the forward estimates.
Integrity measures for foreign resident capital gains tax regime
The government proposes to modify integrity measures proposed by the previous government in relation to the foreign resident capital gains tax regime. This is estimated to have no impact on revenue over the forward estimates period.
Integrity measures for consolidated group
The government will refine the consolidated integrity package announced in the 2013–14 Budget to ensure that it operates as intended. The impact on revenue over the forward estimates period is unquantifiable.
Deferral of the start date of the following proposed measures
The following dates will apply:
(a) The start date of the new tax system for managed investment trusts will be deferred by 12 months to 1 July 2015. This is estimated to have a gain to revenue of $75.0 million over the forward estimates period.
(b) The start date of reforms to the offshore banking unit regime will be deferred to income years commencing on or after 1 July 2015. This is estimated to have a cost to revenue of $180.0 million over the forward estimates period.
(c) The start date of the legislative elements of the measure to improve tax compliance through third party reporting and data matching will be deferred to 1 July 2016. This is estimated to have a cost to revenue of $113.1 million over the forward estimates period.
Previous decisions taken by the current Australian Government to restore integrity in the Australian tax system
The Mid-year Economic and Fiscal Outlook 2013–14 gave details of the decisions taken previously by the current Australian Government after examining the backlog of 92 taxation and superannuation measures not yet legislated. The decision was taken to proceed with 34 measures, amend three measures and not proceed with 55 measures. The cost to the Budget of these amendments and not proceeding with the remaining 55 measures was estimated at $3.1 billion over the forward estimates period. The government added that in underlying cash terms, the cost to the Budget is $2.9 billion over the forward estimates period. Details of these measures were given in the joint media release by the Treasurer and Assistant Treasurer on 6 November 2013 and the Assistant Treasurer's media release on 14 December 2013.
The information in the media releases includes the following details for each measure: measure title and description, announcement, date of effect and net financial impacts ($m, underlying cash balance).
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