Bills Digest no. 15 2007–08
Tax Laws Amendment (2007
Measures No. 4) Bill 2007
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Schedule 1 New foreign income tax offset
rules
Schedule 2 Capital gains tax roll-over for
medical defence organisations
Schedule 3 Investment by superannuation funds in
instalment warrants
Schedule 4 Trustee beneficiary reporting rules
for certain closely held trusts
Schedule 5 Superannuation amendments
Schedule 6 Specific listings of deductible
gift recipients
Schedule 7 Minor amendments
Schedule 8 Family trusts Increasing
flexibility
Conclusion
Endnotes
Contact officer & copyright details
Passage history
Date
introduced: 21 June
2007
House: House of Representatives
Portfolio: Treasury
This
Bills Digest deals with the Tax Laws Amendment (2007 Measures No.
4) Bill 2007 (the Bill) and the companion Taxation (Trustee
Beneficiary Non-Disclosure Tax) Bill (No.1) 2007 (the No. 1 Bill)
as well as the companion Taxation (Trustee Beneficiary
Non-Disclosure Tax) Bill (No.2) 2007 (the No. 2 Bill). The
Explanatory Memorandum covers the three Bills.
Commencement:
-
The
Tax Laws Amendment (2007 Measures No. 4)
Act 2007 commences on the day it receives the Royal
Assent. The amendments made by the Schedules to this Act commence
and apply at various dates which are indicated in the commentaries
under each Schedule.
-
Sections 1 and 2 of the Taxation
(Trustee Beneficiary Non-disclosure Tax) Act (No. 1)
2007 commence on the day they receive the Royal Assent.
Sections 3 and 4 commence at the same time as Schedule 4 to the
Tax Laws Amendment (2007 Measures No. 4)
Act 2007 commences.
-
Links:
The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
There are eight Schedules
in the main Bill and the purpose of the amendments in each Schedule
is briefly set out below.
-
Schedule 1 This Schedule establishes and
rewrites new simplified foreign income tax offset rules in the
Income Tax Assessment Act 1997 (ITAA 1997), replacing the
current foreign loss and foreign tax credit quarantining rules in
the Income Tax Assessment Act 1936 (ITAA 1936).
-
Schedule 2 This Schedule provides a capital
gains tax (CGT) roll-over relief when a membership interest in a
medical defence organisation (MDO) is replaced with a similar
membership interest in another MDO.
-
Schedule 3 This Schedule modifies several
sections of the Superannuation Industry (Supervision) Act
1993 (the SIS Act) to:
-
Schedule 4 This Schedule provides for
trustees of closely held trusts to provide the Commissioner with
details of trustee beneficiaries that are presently entitled to
income of the trust instead of the ultimate beneficiaries of trust
income.
-
Schedule 5 This Schedule amends various Acts
to assist in the transition to the Simplified
Superannuation regime.
-
Schedule 6 This Schedule amends the ITAA
1997 to update the list of deductible gift recipients (DGRs).
-
Schedule 7 This Schedule makes technical
corrections and other minor amendments to improve readability and
correct errors.
-
Schedule 8 This Schedule amends the trust
loss provisions in Schedule 2F of the ITAA 1936 to enable family
trust elections and interposed entity elections to be revoked or
varied in certain limited circumstances. It also changes the
definition of family trust to include lineal descendants.
The No. 1 Bill imposes the trustee beneficiary
non-disclosure tax on the failure of the trustee to make a correct
statement. This is to impose the tax to reflect the amendments
proposed in Schedule 4 the main Bill. Tax is levied on the trustee
beneficiary s share of net income at 46.5 per cent.
The Taxation (Trustee Beneficiary
Non-Disclosure Tax) Bill (No.2) 2007 (the No. 2 Bill) imposes a
penalty tax of 46.5 per cent on the whole or part of the untaxed
part of the net income. This addresses the proposed amendments in
Schedule 4 to the main Bill. A share of net income of a closely
held trust is included in the assessable income of a trustee
beneficiary when the trustee of the closely held trust becomes
entitled to the whole or part of that net income. This penalty tax
is intended to discourage income flowing to and from a chain of
trusts without reaching an ultimate beneficiary.
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Background and Main provisions
The amendments in Schedule 1 of the Bill give
effect to the Government's announcement in the May 2005-06 Budget
to relieve double taxation by providing a tax offset in certain
circumstances.
In the Treasurer's
Press Release on 10 May 2005, the Treasurer announced the
Government s decision to remove the existing rules that limit the
utilisation of foreign losses and which require the allocation of
foreign tax credits against separate classes of income. [1] The Treasurer stated that
the removal of the foreign loss and foreign tax credit quarantining
rules are part of the changes arising from the Government s Review
of International Tax Arrangements (RITA) that were announced on 10
May 2005:
The reforms are part of an ongoing process that
the Government is undertaking to ensure that Australia has a
competitive international tax system. By attracting foreign capital
to supplement local savings, higher rates of economic growth and
employment levels are possible, resulting in higher standards of
living for Australians than otherwise could be achieved.
On 28 February 2003, the Board of Taxation
(the Board) reported to the Government on the outcome of its
consultation processes and its recommendations (based on
consultation paper prepared by Treasury titled
Review of International Taxation Arrangements - A Consultation
Paper. [2]
On 13 May 2003, the Treasurer released the
Board s report titled Review
of International Taxation Arrangements, and the Government
s response to the report. [3] The Treasurer s
Press Release indicated the relative priorities of the taxation
reforms by assigning them to particular tranches of legislation.
[4]
The introduction of the Bill follows a period
of consultation with interested parties and the accounting
profession. The Institute of Chartered Accountants has welcomed the
new rules with minor reservations:
The Institute is pleased to see these amendments
finally being introduced, following a series of confidential
consultations with Treasury spanning over two years. Whilst these
amendments provide some improvements to the foreign loss and
foreign tax credit measures, there are aspects of these amendments
that are not so favourable. For example, the ongoing ability to
carry forward excess foreign tax credits has been removed. However,
at least partly due to our lobbying efforts, a transitional rule
has been included to allow the carrying forward of excess foreign
tax pertaining to the five years prior to the commencement of the
new rules. (See
FTEs, abolition
of foreign loss & foreign tax offsets quarantining.)
On 21 June 2007, the Bill was referred to the
Senate Economics Legislation Committee for inquiry and its
report was tabled on 1 August 2007. [5]
In its submission to the inquiry, the
Australian Bankers Association (ABA) supported the general thrust
of the Bill and new foreign income tax offset rules, but
recommended a number of changes to the offshore banking provisions
in the Bill to overcome some new and unintended consequences:
Whilst the ABA strongly welcomes the abolition
of foreign loss and foreign tax credit quarantining and the
simplification to the current law proposed under the TLAB No. 4,
the ABA believes the amendments as they impact Offshore Banking
Units is in conflict with the policy intent behind the Offshore
Banking regime, instead weakening Australia s attractiveness as a
financial centre. In addition, the current proposed amendments
create inconsistencies between the way double taxation is relieved
with respect to Offshore Banking (OB) income and non-OB income.
(See Submission No. 1,
Australian Bankers Association.)
The main effect of the measures in Schedule 1
of the Bill is to remove the existing foreign loss and foreign tax
credit quarantining rules and replace them with new simplified
foreign tax offset rules. Schedule 1 also contains transitional
rules dealing with existing foreign losses and credits as well as a
mechanism to provide relief from economic double taxation arising
from transfer pricing adjustments.
In their private commentary on the measures in
Schedule 1 of the Bill, Greenwoods & Freehills noted that the
basic elements of the current foreign tax credit (FTC) system are
unchanged and that the proposed measures formalise many of the tax
rulings by the Australian Taxation Office on the FTC system:
In an unexpected move, the drafter has taken the opportunity to
re-write this legislation in its entirety. The re-write
addresses some of the existing problems in the FTC system, but it
can be safely predicted that the changes in terminology will
introduce some new and unintended issues. In addition to the
unintended changes, several aspects of the FTC system policy have
been deliberately changed in the re-written provisions. The
Bill also formalises many of the current administrative fixes that
the Australian Taxation Office has adopted over the years in a
multitude of tax rulings to make the FTC system work properly.
Many of the basic elements of the foreign income tax offset
system are the same as the existing FTC system:
-
The tax offset is available for foreign tax on
amounts included in Australian assessable income.
-
A tax offset is only available for foreign
income taxes. Some taxes will not qualify as income taxes,
and the Bill retains the current exclusion for a credit absorption
tax or unitary tax. The Explanatory Memorandum (
EM ) to the Bill states that a tax offset is
available for national income taxes, sub-national income taxes, and
even supra-national income taxes it gives the example
of income taxes paid to the EU. The Bill also continues the
existing reversal of the offset if the foreign tax is subsequently
refunded or is otherwise reimbursed to the taxpayer.
-
The amount of tax offset is limited to the
greater of the amount for foreign tax paid or the Australian tax
payable.
-
The foreign tax must be one which the taxpayer
has paid or, in some cases, borne. Current law expresses this
requirement in a rule that the tax must be one for which the
taxpayer was personally liable. According to the EM,
the Bill removes this additional requirement because it is
unnecessary a simpler formula will achieve what is
required, namely, that a person who pays tax in a representative
capacity is not entitled to the tax offset. Other provisions
in the Bill provide that a person who has borne the cost of tax
imposed by law on, and paid by, another, or paid by another under
an arrangement, will be entitled to the tax offset. (See,
Further International Tax
Reforms.)
Greenwoods & Freehills also noted that
the measures in Schedule 1 of the Bill make important changes to
the current policy, namely:
Item 1 in Part
1 of Schedule 1 of the Bill amends the
ITAA 1997 to introduce new foreign tax offset provisions that will
allow taxpayers to claim relief in the form of a tax offset for
foreign income tax paid on an amount included in their assessable
income. The amendments also cap the foreign tax offset by reference
to the amount of Australian tax payable on double-taxed amounts and
other assessable income amounts that do not have an Australian
source.
Proposed section 770-75
inserts a limit on the tax offset for a year. According to the
Explanatory Memorandum to the Bill, the rationale for the foreign
tax offset limit will allow a greater average capacity and is the
rationale for the removal of the carry-forward of excess foreign
tax credits:
In ascertaining the amount of the foreign tax
offset, taxpayers will no longer be required to quarantine
assessable foreign income amounts into four separate classes.
Rather, a taxpayer can combine all assessable foreign income
amounts when working out a tax offset entitlement, allowing the
taxpayer a greater averaging capacity than under the old foreign
tax credits. This greater averaging capacity will minimise the
amount of foreign tax that goes unrelieved. Consequently, the
mechanism allowing the carry-forward of excess foreign income tax
will be removed.
[6]
The amendments in Part 2 of
Schedule 1 to the ITAA 1936 and the ITAA 1997
provide that an Australian taxpayer who is attributed with income
from holding an interest in a controlled foreign company (CFC) or
foreign investment fund (FIF) is entitled to a tax offset for the
underlying tax that the CFC or FIF has paid.
Part 3 of Schedule
1 inserts transitional provisions to the Income Tax
(Transitional provisions) Act 1997 concerning the treatment of
pre-commencement foreign losses.
Part 4 of Schedule
1 inserts consequential amendments to various Acts.
As the amendments in
Schedule 1 of the Bill in fact rewrite the
provisions of the ITAA 1936 relating to foreign income tax offsets
into the ITAA 1997 it is beyond the scope of this Bills Digest to
make a detail commentary of the main provisions. The reader is
therefore referred to paragraphs 1.18 to 1.29 on pages 14 to 21 of
the Explanatory Memorandum for a summary of the new law and tables
setting out a comparison between the new law and the current
law.
The Explanatory Memorandum on page 3 states
that the cost to revenue of the new foreign income tax offset rules
will be $40 million per annum.
The new foreign income tax offset rules
commence for the income year that starts on or after 1 July, after
the Bill receives Royal Assent (under item 2 in
the table in clause 2 of the Bill). The earliest
date for the commencement of the new rules is 1 July 2008 for the
2008-09 income year.
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The Review of Business Taxation (the Review)
in its report titled A
New Tax System Redesigned recorded that a number of
submissions suggested that the then existing CGT provisions were an
impediment to corporate acquisition activity in Australia. [7] The review noted that
entities may be forced to pay a premium when making an acquisition
to induce equity holders with potential CGT liabilities to accept
an offer. This did not contribute to an efficient use of resources.
The Review therefore recommended a scrip-for-scrip
roll-over relief to resident taxpayers. The effect of the roll-over
relief will be that resident taxpayers will retain the value of
their membership interests represented by the original scrip and
will not be required to pay tax on capital gains at the time of the
takeover. The CGT payable will be deferred until the ultimate
disposal of the new scrip.
In consequence of accepting this
recommendation of the Review, Subdivision 124-M was inserted into
the ITAA 1997 to provide a CGT scrip-for-scrip roll-over by Act No
165 of 1999. Subdivision 124-M allows a person to choose a
roll-over where post-CGT shares or trust interests owned by that
person are replaced with other shares or interests.
However, in the case of companies limited by
guarantee (where there are no shareholders but only members who
have a membership interest), the roll-over relief is not available
under Subdivision 124-M where the membership interest in a company
limited by guarantee is exchanged for a membership interest in a
like company.
On 14 February 2007, the Minister for Revenue
and Assistant Treasurer announced in a
Press Release that the Government had decided to amend the ITAA
1997 to extend the CGT scrip-for-scrip roll-over to membership
interests in companies limited by guarantee that are medical
defence organisations (MDOs). [8] The press release indicated that the amendments
will ensure that CGT need not be an impediment to mergers of
MDOs.
Item 5 of Schedule
2 inserts proposed Subdivision 124-P into
the ITAA 1997 to provide roll-over relief where a person exchanges
his or her interest as a member of a MDO for an interest as a
member of another MDO.
Proposed section 124-980 of
Subdivision 124-P sets out the conditions when roll-over relief is
available to an entity. These are:
(a) an entity
exchanges an interest (the original interest) in an MDO (the
original MDO) as a member of the original MDO for a similar
interest (the replacement interest) in another MDO (a new MDO),
and
(b) both the
original MDO and the new MDO are companies limited by guarantee,
and
(c) the
exchange is in consequence of a single arrangement that satisfies
proposed subsection 124-980(3), and
(d) the entity
would make a capital gain, apart from the roll-over, and
(e) the entity
chooses to obtain the roll-over, and
(f) the
entity acquired the original interest on or after 20 September
1985.
Proposed subsection
124-980(3) sets out the types of arrangement for the
exchange of membership interests. These are that the arrangement
must:
(a) result in
the new MDO becoming the sole member of the original MDO, and
(b) be one where
holders of interests in the original MDO must be able to
participate as members of the new MDO on substantially the same
terms.
In other words, the new MDO must takeover all
the member interests in the old MDO and provide substantially
similar membership interests in the new MDO to the members of the
old MDO.
A MDO is defined in section 5 of the
Medical Indemnity Act 2002 and is adopted for the purposes
of the ITAA 1997. MDOs provide indemnity insurance to members of
the medical profession through wholly-owned captive insurers.
The Explanatory Memorandum to the Bill on page
4 states that the financial impact of this measure is nil.
Item 6 of Schedule
2 provides that the amendments made by this Schedule apply
to CGT events happening on or after 14 February 2007.
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Instalment warrants allow investors to obtain
an interest in a share or asset by paying part of the purchase
price upfront and the remaining part in instalments. [9] Traditionally instalment
warrants have involved investments in listed shares but, more
recently, warrants have also been available on other assets such as
managed funds and property. [10]
While precise figures are unavailable on the
extent to which superannuation funds (and self-managed funds more
specifically) have invested in instalment warrants over time, the
Minister for Revenue and Assistant Treasurer, the Hon. Peter
Dutton, MP, in a
Press Release stated that:
the practice is long standing and widespread and
superannuation fund investment comprises a significant proportion
of the instalment warrant market.
[11]
The attractiveness of instalment warrants
(particularly for self-managed superannuation funds) lies in part
in their set and forget nature they allow investors to purchase an
interest in a share or asset through an initial part payment and to
then pay the remainder at a later date, with the assistance of an
income stream (dividends and franking assets) from the underlying
share or asset. The Australian Financial Markets Association
(AFMA), in a submission to the Senate Economics Committee inquiry
into the Bill have also suggested that instalment warrants offer a
number of other important benefits, including:
-
leveraged investment exposure to the movement
of the underlying asset s capital value,
-
the investor is entitled to tax benefits from
deductions and franking credits, and
-
capital protection for the amount of the loan
exists because the completion payment for the underlying asset is
not compulsory.
[12]
A number of provisions within previous
legislation are relevant to the investment in instalment warrants
by superannuation funds. These provisions are listed on pp. 121-122
of the Explanatory Memorandum, and include:
-
section 67 of the SIS Act, which prohibits
superannuation fund trustees from borrowing money (with certain
exceptions, primarily relating to short term liquidity).
-
sections 82 and 83 of the SIS Act, which
prohibit superannuation fund trustees from retaining or acquiring
in-house assets representing more than 5 per cent of the value of
all the fund s assets, and subsection 71 (1), which states that an
investment in a related trust of the fund is an in-house asset of
the fund (subject to certain exceptions), and
-
regulation 13.14 of the Superannuation
Industry (Supervision) Regulations 1994 which prohibits a
trustee from giving a charge over, or in relation to, an asset of
the fund (except in relation to certain charges which are unrelated
to instalment warrants).
Recent regulatory interpretation of these
provisions has created uncertainty about ongoing superannuation
fund investment in warrants. In November 2006 the Hon. Peter
Dutton, MP, announced that both the Australian Taxation Office and
the Australian Prudential Regulation Authority had concluded that
instalment warrants entailed a borrowing for the purposes of
section 67 of the SIS Act and were therefore not an allowable
investment under current legislation. [13] The Assistant Treasurer also
announced at this time that, following industry consultation, the
Government intended to legislate to allow a continuation of
investment by superannuation funds in instalment warrants.
Thus, as the Senate Standing Committee on
Economics (2007) states, the changes contained with Schedule 3:
are intended to provide superannuation funds
with greater flexibility in their investment options, while still
maintaining the integrity of the risk provisions that apply to
superannuation funds.
[14]
The proposed Schedule 3 amendments have
received broad support from the superannuation industry. Several
commentators have described the amendments as providing a welcome
clarification of the investment status of instalment warrants,
particularly the so-called new generation of warrants involving
assets such as managed funds and property. [15] The amendments have also been seen by
the industry as providing much needed clarity for the self-managed
superannuation funds sector, where investment in instalment
warrants is popular. [16]
In its recent submission to the Senate
Standing Committee on Economics (2007), AFMA suggested that the
wording of Schedule 3 should be altered to include investments in
instalment warrants by superannuation funds that do not involve
borrowing. [17] It
states:
Instalment-style investments that are structured so they do not
feature a borrowing (and, hence, are already compliant with section
67) cannot access this exception under the current wording.
Instead, they must rely on the Excluded Instalment Trust exception
which is limited under the subsection 10(1) definition to listed
securities.
It seems strange that instalment arrangements that feature a
borrowing enjoy a broader exception than those which do not.
Accordingly we recommend the subsection 10(1) definition be
expanded, and offer the following wording to illustrate how this
might be achieved (expanded term in bold font):
"excluded instalment trust", of a superannuation fund, means a
trust:
(a) that arises because a trustee or investment manager of the
superannuation fund makes an investment under which a listed
security (within the meaning of subsection 66(5))(the underlying
security) an asset which the superannuation fund is not
otherwise prohibited by this or any other Act from
acquiring is held in trust until the purchase price of the
underlying security is fully paid. [18]
In response to this point, Treasury stated
that it:
had not formulated a position on the issues
raised by AFMA about instalments with no borrowing because
(a) these issues are essentially outside the
scope of the bill; and
(b) that particular part of the market appears
to be small.
[19]
Item 1 of Schedule
3 inserts proposed subsection 67(4A) into
the SIS Act. This provides for an exception to the prohibition on
borrowing in section 67 of the Act and will allow superannuation
fund trustees to borrow money under certain conditions. These
conditions are described on p. 123 of the Explanatory Memorandum as
follows:
-
the borrowing is used to acquire an asset that
is held on trust so that the superannuation fund trustee receives a
beneficial interest and a right to acquire the legal ownership of
the asset (or any replacement) through the payment of
instalments,
-
the lender s recourse against the
superannuation fund trustee in the event of default on the
borrowing and related fees, or the exercise of rights by the fund
trustee, is limited to rights relating to the asset, and
-
the asset (or any replacement) must be one
which the superannuation fund trustee is permitted to acquire and
hold directly.
Item 2 of Schedule
3 inserts proposed subsections 71(8) and
(9) into section 71 of the SIS Act which contain the
in-house asset rules. This is to provide that investment in a
related trust will only be deemed to be an in-house asset where the
original or replacement asset is an in-house asset of the fund.
This essentially means that an investment in an instalment warrant
will not be automatically counted against an in-house asset limit.
[20]
The Explanatory Memorandum to the Bill on page
5 states the above measures will have the revenue implications set
out in the following table.
|
2006-07
|
2007-08
|
2008-09
|
2009-10
|
|
-$50m
|
-$90m
|
-$100m
|
-$110m
|
The amendments by Schedule 3
apply from the day on which this Act receives the Royal Assent.
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Background and Main provisions
The genesis of Division 6D can be traced to
the announcement made by the Government on presenting the package
of measures in the
A New Tax System (ANTS package) in August 1998 to address
tax minimisation through the use of complex trust structures.
[21]
A full background and history is at Attachment
A of this Bills Digest.
As part of the 2006-07 Budget, on 9 May 2006
the Treasurer announced that a range of simplified tax arrangements
would be introduced, including for family trust elections, ultimate
beneficiary reporting and distributions to non-residents by trusts
and managed funds. [22] The Treasurer stated that the changes relating to
ultimate beneficiary reporting would simplify the reporting
requirements under the ultimate beneficiary rules
so that trustees of closely held trusts need only identify and
report first-tier trustee beneficiaries in receipt of trust
distributions. The ultimate beneficiary rules in operation at
present require these trustees to trace through chains of trusts to
identify the ultimate beneficiaries of distributions from the
trust. Currently a trustee could be liable to pay ultimate
beneficiary non-disclosure tax if a mistake is made by any trust
anywhere along the chain. [23]
The main purpose of Division 6D will be
changed from requiring the trustee of a closely held trust to
disclose the ultimate beneficiaries of the trust to one requiring
the trustee to advise the Commissioner details of the trustee
beneficiaries that are presently entitled to a share of the income
or of a tax-preferred amount. These trustee beneficiaries are
generally referred to as the first-tier trustee beneficiaries.
Item 1 of Schedule 4 repeals
subsection 102UA(1) and substitutes proposed subsection
102UA(1) to state the changed purpose of Division 6D.
Items 2 and 3 amend subsections
102UA(2) and (3) as a consequence to this altered purpose of
Division 6D.
The concept of Correct UB statement in section
102UG is being replaced by the concept of Correct TB statement.
Item 15 of Schedule 4 repeals
section 102UG titled Correct UB statement, and substitutes
proposed section 102UG titled - Correct TB
statement, under which the trustee of a closely held trust must
advise the Commissioner, in the form approved by the Commissioner,
of certain details about each trustee beneficiary that is entitled
to a share of the trust s net income or tax-preferred amounts.
Item 16 repeals section 102UH
which deals with UB statement period and substitutes it with
proposed section 102UH dealing with TB statement
period. The TB statement must be provided by the due date for
lodgment of the closely held trust s tax return (or further period
allowed by the Commissioner).
Under proposed subsection
102UK(1A) the Commissioner can make a determination by
legislative instrument that a specified class of trustees is not
required to make a TB statement for a year of income.
Proposed subsection 102UK
(1B) provides that a determination made under
proposed subsection 102UK(1A) may be expressed to
be subject to conditions and may be for one or more years of
income. Note proposed subsection 102UK(2)(a)
imposes the liability to pay the relevant tax which is separately
levied by virtue of Bill No. 1.
Family trusts (and related trusts) will be
excluded from the reporting requirements on the basis that any
outside distributions are already subject to penalty tax.
A closely held trust as defined in section
102UC currently includes:
-
any fixed trust where up to 20 individuals have
between them, directly or indirectly, fixed entitlements to 75 per
cent or greater share of the income or capital of the fixed trust
(paragraph 102UC(1)(a), or
-
a discretionary trust that is, trusts with a
discretionary element (paragraph 102UC(1)(b).
However, the following are not closely held
trusts as they come within the definition of excluded trusts as
defined in subsection 102UC(4):
-
complying superannuation funds, complying
approved deposit funds and pooled superannuation trusts
-
deceased estates up to the end of the year of
income in which the fifth anniversary of the death occurs,
and
-
fixed trusts where income tax exempt bodies
have fixed entitlements to all the income and capital of the
trusts.
The Explanatory Memorandum to the Bill on page
6 states that the overall cost to revenue of these amendments is
unquantifiable but expected to be minimal against the forward
estimates.
Item 51 of Schedule
4 provides that the amendments made by this Schedule apply
to the first income year starting on or after the day on which this
Act receives the Royal Assent and later income years.
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In the May 2006 Budget the Government
announced its intention to simplify and streamline superannuation
processes. [24]
Schedule 5 contains measures designed to streamline tax reporting
requirements in a number of areas. These include:
-
new provisions to facilitate the provision of
tax file numbers (TFN) to superannuation and retirement savings
account providers,
-
changes to the tax treatment of income derived
from assets which are segregated current pension assets,
-
extension of relief from capital gains tax
(CGT) for small business on the proceeds of CGT events used for
retirement to events occurring prior to the Simplified
Superannuation transitional period (10 May 2006 to 30 June
2007) or the 2007-08 income period, and
-
a rewrite of superannuation tax law in several
areas, including changes to the way in which the tax-free component
of pensions is calculated; several amendments affecting the
taxation treatment of superannuation death benefits; and an
insertion to enable employers to claim a deduction for
contributions made on behalf of employees (as defined in section 12
of the Superannuation Guarantee (Administration) Act 1992)
who are not engaged in producing the entity s assessable income or
engaged in the entity s business.
Items 8, 26 and 27 of
Schedule 5 insert new provisions in the ITAA 1997,
the SIS Act and the Retirement Savings Account Act 1997 to
ensure that where a TFN is provided for employment purposes it is
automatically taken to be quoted for superannuation purposes. Thus,
the individual is taken to have quoted their TFN where the
Commissioner of Taxation gives notice of their TFN to a
superannuation or RSA provider. The higher rate of taxation will
therefore not apply to contributions made by that individual.
The ITAA 1997 gives complying superannuation
funds an exemption for income derived from assets which, at the
time of derivation, are segregated current pension assets. [25] Item
5 of Schedule 5 amends the ITAA 1997 to
provide that assets which are not included in a pension account
balance will not be considered as segregated current pension
assets. Any income derived from such assets will therefore no
longer be exempt from tax.
Item 28 of Schedule
5 amends the application provisions within the
Superannuation Legislation Amendment (Simplification) Act
2007 to provide for CGT events happening in the 2006-07
and later income years.
Schedule 5 also contains a
number of other items to ensure the consistency of the rewritten
provisions to ITAA 1997, contained in the Tax Laws Amendment
(Simplified Superannuation) Act 2007, with current
policy. These include the following:
-
Items 19 to 25 contain
amendments and insertions to the
Income Tax (Transitional
Provisions) Act 1997 to require that amounts of a
superannuation income stream purchased with amounts rolled over
prior to July 1994, and any tax-free components a member has
received since 1 July 2007, be considered in the calculation of the
tax-free component at a trigger event (for example, the pensioner
reaches age 60),
[26]
-
Items 9 to 12, which amend
ITAA 1997 to extend the period of time that a superannuation
benefit must be paid and still be treated as a superannuation death
benefit for tax purposes. The previous requirement that a benefit
must be paid within six months of the death, or within three months
of the grant of probate, in order to be treated as a superannuation
death benefit, is to be extended to six months after the cessation
of legal action or after contact is made with the potential
beneficiaries,
[27]
-
Item 25 inserts section
307-290 into the Tax (Transitional Provisions) Act 1997 so
that deductions claimed for insurance premiums paid for life
insurance on behalf of the member under section 279 or 279B of the
ITAA 1936 are to be treated as deductions under section 295-465 or
295-470 of the ITAA 1997 respectively, and
-
Items 1 and 2 involve an
insertion into the ITAA 1997 to enable an employer to claim a
deduction for superannuation contributions made on behalf of
employees (as defined by the Superannuation Guarantee
(Administration) Act 1992) or engaged in producing the entity
s assessable income or engaged in the entity s business.
The Explanatory
Memorandum to the Bill on page 7 states that the amendments to
prevent individuals from circumventing the minimum drawdown
requirements for account-based pensions will result in a revenue
gain of $20 million over the forward estimates as set out in the
following table.
|
2007-08
|
2008-09
|
2009-10
|
2010-11
|
|
$4m
|
$5m
|
$5m
|
$6m
|
Application
Item 48, paragraph
(1) of Schedule 5 provides that the
amendments made by this Schedule apply to the 2007-08 year.
Paragraphs (2) to (5) modify the
application of paragraph (1).
Back to top
Background and Main provisions
Income tax law allows taxpayers to claim
income tax deductions for certain gifts to the value of $2 or more
to deductible gift recipients (DGRs). To be a DGR, an organisation
must fall within a category of organisations set out in Division 30
of the ITAA 1997 and be endorsed by the ATO, or be
specifically listed under that Division. The amendments in
items 2, 4 and 6
of Schedule 6 include as DGRs the organisations
specified in the table below.
|
Name of organisation
|
Date of announcement
|
Special conditions
|
|
Australian Peacekeeping Memorial Project Incorporated
|
Announced by the Hon Peter Dutton MP, the Minister for Revenue and
Assistant Treasurer in
Press Release No. 040 of 30 April 2007.
|
The gift
must be made after 29 April 2007 and before 1 January 2009.
|
|
Social
Ventures Australia Limited
|
Announced by the Hon Peter Dutton MP, the Minister for Revenue and
Assistant Treasurer in
Press Release No. 043 of 4 May 2007.
|
The gift
must be made after 3 May 2007.
|
The amendments made by items
1, 3 and 5 of
Schedule 6 recognise the change in the name of AAP
Mawson s Huts Foundation Limited, a DGR listed as item 6.2.23 in
the table in subsection 30-55(2) as a specific environment
recipient, to Mawson s Huts Foundation Limited.
The Explanatory Memorandum
to the Bill on page 8 states the above measures will have the
revenue implications set out in the following table.
|
2007-08
|
2008-09
|
2009-10
|
2010-11
|
2011-12
|
|
$0.62m
|
$2.4m
|
$2.2m
|
$2.3m
|
$2.3m
|
The amendments by Schedule 6
apply on the day on which this Act receives the Royal Assent.
Back to top
Background and Main provisions
Schedule 7 includes
amendments to correct certain minor errors as well as other
amendments. For example, the purpose of extending the definition of
tertiary course is to extend tax deductibility for gifts to courses
which include Masters or Doctoral courses. The reader is referred
to the Tables on pages 172 to 191 of the Explanatory Memorandum to
the Bill for a detailed explanation of the effect of the
amendments.
The other amendments are listed in the
Explanatory Memorandum in paragraph 7.5 on pages 171 and 172 as
follows:
7.5 Other amendments include:
-
providing for income tax deductibility for gifts
to certain scholarship funds for Masters or Doctoral courses as
originally intended (see explanation of item 2);
-
correcting the formula for calculating the
fringe benefits tax (FBT) depreciation rate for a car, to align it
with the income tax diminishing value capital allowance figure
(currently, 200 per cent) rather than the previous 150 per cent
(see explanation of item 7);
-
preventing unintended tax file number (TFN)
withholding from payments to exempt foreign superannuation funds
(see explanation of item 16); and
-
preventing an unintended capital gains tax (CGT)
exemption for certain not-for-profit mutual organisations (see
explanation of item 37).
The Explanatory Memorandum on page 9 states
that the financial impact of the amendments is follows.
-
The change in the definition of tertiary course
in the A New Tax System (Goods and Services Tax) Act 1999
will result in a small reduction in income tax collections because
it allows a deduction for gifts to funds for scholarships for
masters or doctoral courses. There will be no change in GST
revenue.
-
The change in the car depreciation rate in the
Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) will
result in the following gain to revenue.
|
2007-08
|
2008-09
|
2009-10
|
2010-11
|
2011-12
|
|
Nil
|
$4m
|
$8m
|
$9m
|
$8m
|
The table to subclause 2(1) of the Bill
provide for the following commencement dates.
-
Item 1 of Schedule
7 commences on the day the Act receives the Royal
Assent
-
Items 2 to 6
of Schedule 7 commence on 1 July 2006
-
Items 7 to
104 commence on the day the Act receives the Royal
Assent.
Item 8 of Schedule
7 provides that the change in the car depreciation rate in
the FBTAA 1986 applies to the FBT year starting on 1 April 2008 and
to all later FBT years.
Schedule 7 has all various application dates
for some of the other changes.
Back to top
In the 2006-07 Budget, the Government
announced that it will make changes to the family trust election
rules to increase flexibility for family trusts in relation to the
concession under the trust loss, company loss and imputation rules.
These were referred to in broad outline in Budget Measures
2006, Budget
Paper No, 2 pages 18 and 19 as follows.
The Government will make changes to the family trust election
rules to increase flexibility for family trusts. This measure will
have effect from the income year in which the enabling legislation
receives Royal Assent.
A family trust election allows a trust to receive concessional
treatment under the trust loss, company loss and imputation rules.
A company, trust or partnership is required to make an interposed
entity election if it is to be included as part of the family group
specified under the family trust election. These elections are
generally irrevocable.
This measure will allow family trust elections
and interposed entity elections to be revoked or varied in certain
limited circumstances. The definition of a family group will be
broadened to include lineal descendants of family group members. In
addition, trust distributions to former spouses, and to widows or
widowers of family group members with new spouses, will also be
exempted from family trust distribution tax.
Attachment C to the Treasurer s
Press Release of 9 May 2006 also referred to the proposed
changes. [28]
The amendments proposed in Schedule
8 implement these changes.
Schedule 2F of the ITAA 1936 inserted by
Taxation Laws Amendment (Trust Loss and Other Deductions) Act
1998 (Act No. 17, 1998) sets out the conditions under
which trust losses and other deductions are allowed in working out
the net income of a trust for an income year for tax purposes.
These are referred to as the trust loss measures and the main
condition for deducting prior year losses in working out the net
income of a trust is that there should be no change in beneficial
ownership or control of the trust between incurring the loss and
recouping it in a subsequent year.
Briefly, as explained in section 265-5 of
Schedule 2F, if there is a change in ownership or control of a
trust or an abnormal trading in its units, the trust:
-
may be prevented from deducting its tax losses
of earlier income years, and
-
may have to work out in a special way its net
income and tax loss for the income year, and
-
may be prevented from deducting certain amounts
in respect of debts incurred in the income year or earlier income
years.
The policy underlying the trust loss measures is
to prevent the tax benefit from the recoupment of trust losses and
bad debt deductions being passed on to persons who did not bear the
economic loss or bad debt when it was incurred in the interest of
maintaining the integrity of the tax system. This is achieved by
examining whether there has been a change of ownership or whether
there has been a sham scheme.
The reader is referred to a fact sheet on the
ATO website titled
Broad overview of the trust loss measures for more
information on the operation of the trust loss measures.
The trust loss measures do not generally apply
to what tax law describes as an excepted trust. Excepted trusts as
defined in section 272-100 of Schedule 2F of the ITAA 1936 are
family trusts, certain superannuation funds, and deceased estates
within a five year administration period, and unit trusts with unit
holders that are exempt from income tax.
A family trust is a trust where the trustee of
the trust has made a family trust election (FTE) under subsection
section 272-80(1) of Schedule 2F of the ITAA 1936 that it is a
family trust at all times after the beginning of a specified income
year. Currently the FTE must under subsection 272-80(3) specify the
individual (the test individual) whose family group must be taken
into account in relation to the individual. The FTE must also under
subsection 272-80(4A) specify the year from which the FTE will
commence.
Under subsection 272-80(5) the FTE is
irrevocable except in the limited circumstance of a family trust
that is a fixed trust subject to certain conditions set out in
subsection 272-80(6).
Item 2 of Schedule
8 repeals subsections 272-80(5) and substitutes
proposed subsections 272-85(5),
(5A) and (5B) to enable the
variation of a FTE. In addition, item 3 of
Schedule 8 inserts proposed subsections
272-80(6A) and (6B) to provide for
additional cases for revoking of a FTE.
To summarise the proposed changes, a FTE will
be capable of being revoked unless:
(a) the trust, or another entity, has incurred a tax loss and
had its assessable income reduced by part or all of the loss during
the following period. The period concerned is that:
(i) starting at the beginning of the income
year specified in the FTE , and
(ii) finishing at the end of the income year immediately prior
to the income year specified in the revocation
and the trust or other entity, could not have had its assessable
income so reduced had the FTE not been in force (proposed
paragraph 272-80(6A)(a))
(b) the trust, or another entity has claimed a deduction for bad
debts during the period mentioned in paragraph (a) above, and the
trust or other entity could not have claimed the deduction had the
FTE not been in force (proposed paragraph
272-80(6A)(b))
(c) a beneficiary of the trust in an income
year during the period mentioned in paragraph (a) above received a
franked distribution indirectly through the trust and paragraph
207-150(1)(a) of the ITAA 1997 would have applied in relation to
this distribution had the FTE not been in force. If paragraph
207-150(1)(a) had applied the entity would not have been entitled
to the tax offset in relation to the franked distribution.
The reader is referred to paragraphs 8.15 to
8.21 and the examples on pages 197 to 201 of the Explanatory
Memorandum for further details of the proposed changes.
An interposed entity election (IEE) may be
made by a company, the partners in any partnership or the trustee
of any other trust, under subsection 272-85(1) of Schedule 2F. The
effect of the election is that the company, partnership or trust
will be included at all times after a specified day in a specified
income year in the family group of the individual specified in the
family trust election made under subsection 272-80(3).
The company, partnership or trust in the IEE
must pass the control test in section 272-80 for inclusion in the
family group.
A number of changes have been made to allow an
IEE to be revoked by item 6 of Schedule
8. This item repeals subsections 272-85(5) and (6) in
Schedule 2Fand substitutes proposed subsections
272-85(5), (5A), (5B),
(5C).
All interposed entity elections made in
respect of a family trust for which a family trust election has
been revoked are automatically revoked at the same time as the
revocation of the family trust election (proposed
subsection 272-85(5B)).
The reader is referred to paragraphs 8.22 to
8.28 on page 202 of the Explanatory Memorandum for a summary of the
details of revocations of interposed entity elections.
The current definition of family in section
272-95 in Schedule 2F will be repealed by item 10 of
Schedule 8 and replaced by a new definition in
proposed section 272-95. Under the proposed
definition the family of an individual (the test individual) will
consist of the individual and all of the following (if
applicable):
(a) any parent, grandparent, brother or sister
of the test individual or of the test individual s spouse
(proposed paragraph 272-95(1)(a)),
(b) any nephew, niece or child of the test
individual or the test individual s spouse (proposed
paragraph 272-95(1)(b)),
(c) any lineal descendant of a nephew, niece
or child referred to in paragraph (b) (proposed paragraph
272-95(1)(c)), or
(d) the spouse of the test individual or of
anyone who is a member of the test individual s family because of
paragraphs (a), (b) and (c) (proposed paragraph
272-95(1)(d))
Basically, the definition of family is widened to include any
lineal descendant of a nephew, niece or child of a test individual
or the test individual s spouse.
The Explanatory Memorandum states on page 10
that the revenue impact of the measures in Schedule 8 is as
indicated in the following table.
|
2006-07
|
2007-08
|
2008-09
|
2009-10
|
|
Nil
|
-$8m
|
-$8m
|
-$8m
|
Item 14 of Schedule
8 provides that the amendments made by this Schedule apply
to the income year in which this Act receives the Royal Assent and
to later income years.
Back to top
The amendments in Schedule 4 provide for
trustees of closely held trusts to give the Commissioner details of
trustee beneficiaries that are presently entitled to the net income
of the trust and tax-preferred amounts.
As indicated in the commentary on the
Background to the measures proposed in Schedule 4 above, the
current law requires the trustees to identify and report to the
Commissioner the ultimate beneficiaries of closely held trusts. The
current ultimate beneficiary reporting rules were put in place as
part of the A New Tax System package in 1999 to enhance
the integrity of the tax system. These rules were intended to be an
interim measure until the Entity Tax Regime proposed in
the A New Tax System package of measures proposed in 1998
were implemented. Under the Entity Tax Regime, trusts
would have been taxed like companies so that trust income would be
taxed at source like company profits, obviating the need for the
Commissioner to ensure that ultimate beneficiaries include their
share of net income of trusts in their assessable income. However,
the implementation of the Entity Tax Regime was abandoned
in 2001 as the Board of Taxation had reported that the draft
legislation to implement the entity tax regime under consideration
at that time was not workable.
As the Regulation Impact Statement (RIS) to
the Bills under consideration relating to the changes in the
trustee beneficiary reporting rules states at paragraph 4.52 on
page 143 of the
Explanatory Memorandum the amendments were aimed at
addressing arrangements whereby taxpayers used complex chains of
trusts to effectively obscure the ultimate beneficiary of the
assessable trust income .
The RIS also at paragraph 4.66 on page 146 of
the Explanatory Memorandum makes the following comments on
Impact group identification:
The proposal will impact on trustees of closely
held trusts which distribute to trustee beneficiaries. These are
closely held trusts spread across micro, small, medium and large
businesses across different industries. Precise data on how may of
these trusts distribute to trustee beneficiaries is not
available.
The RIS concludes in paragraphs 4.79 to 4.80
on page 148 that Treasury and the ATO should monitor this taxation
measure, as part of the whole taxation system, on an
ongoing basis and review it five years after introduction, if not
earlier.
The cautious tone of the concluding comments
of the RIS is a pointer that the Entity Tax Regime
solution may have to be revisited before long.
Attachment A
The
A New Tax System (ANTS package) in August 1998 addressed
tax minimisation through the use of complex trust structures.
[29]
The Government indicated in the ANTS package
on page 121 that the entity tax regime would address a wide range
of tax minimisation opportunities available through the different
treatment of trusts and companies. It also indicated on page 122
that pending the introduction of the entity tax regime, the
Government had decided to introduce an anti-avoidance measure aimed
at such practices.
A significant aspect of the anti-avoidance
measure was for the trustees to identify ultimate beneficiaries of
trusts. The Australian Taxation Office (ATO) had failed to follow
the trail of distributions from trust to trust where there was
chain of trusts or multiple trusts. The paragraphs from page 122 of
the ANTS package making this admission of the difficulties faced by
the ATO and offering a remedial anti-avoidance measure pending the
introduction of the entity tax regime, are set out below.
Trustees to identify ultimate beneficiaries
The Tax Office has evidence that certain taxpayers are using
complex chains of trusts to minimise tax. There are many legitimate
reasons for tax structures containing multiple trusts.
Nevertheless, some taxpayers are using multiple trust arrangements
to make it difficult for the Tax office to piece together the trail
of distributions from trust to trust to establish tax
liability.
A special anti-avoidance rule will be introduced, with immediate
effect. It will require the identification by trustees of
discretionary and closely held fixed trusts of the individual or
company beneficiaries, and their tax file numbers if they are
residents that are ultimately entitled to trust distributions. This
will apply regardless of the number of trusts through which the
distributions may pass. The measure will help establish tax
liabilities by providing an administrative audit trail.
Details of the measure are provided separately. [30]
It should therefore be noted that the special
anti-avoidance measure was directed at tax minimisation by
arranging distributions through multiple trust structures where
there were some individual and company beneficiaries as well.
The details of the special anti-avoidance
rules were set out in a press release titled:
Distributions made through chains of trusts, on 13 August
1998 by the Hon. Peter Costello, MP. [31] The details are set out bellow for
ease of reference.
Details of the measure
A widely held trust is any trust that is listed for quotation in
the official list of an approved Australian stock exchange or a
trust where more than 20 individuals hold 75 per cent or more of
the interests in income or capital of the trust. A closely held
trust is any trust that is not a widely held trust. Discretionary
trusts will also be treated as closely held trusts.
Where the trustee fails, or is unable, to disclose the required
identity of the individual or company, and the distribution is made
out of the trust s net income, the trustee will generally be taxed
at the highest marginal rate plus the Medicare levy in respect of
any distribution out of net income for tax purposes. This will
build upon the existing section 99A of the Income Tax
Assessment Act 1936 (the 1936 Act) dealing with the net income
of trusts to which no beneficiary is presently entitled.
Consistent with the design of Division 6 of the 1936 Act, trust
distributions subject to tax under this measure will not be taxed
again in the hands of beneficiaries.
In situations in which the trustee has failed to identify and
disclose correctly the ultimate beneficiary, or fails to withhold a
required amount of tax from a distribution, the trustee will be
liable to pay the amount that should have been withheld. Special
rules will apply to prevent double taxation where the ultimate
beneficiary is later identified.
The Treasurer in the press release of 13
August 1998 made it clear that the special anti-avoidance measures
were a temporary measure to be superseded by the entity tax
regime.
The disclosure and withholding requirements
are an ant-avoidance measure which is intended to apply until
superseded by the entity tax system outlined in the A New Tax
System.
The A New Tax System (Closely Held Trusts)
Act 1999 which received the Royal Assent on 8 July 1999 was
one of the measures to implement A New Tax System by
amending the income tax law in respect of certain closely held
trusts, and for related purpose. This Act inserted Division 6D to
Part III of the ITAA 1936 which required the trustee to disclose
the ultimate beneficiaries in certain circumstances. At the same
time:
-
the A New Tax System (Ultimate Beneficiary
Non-Disclosure Tax) Act (No. 1) was enacted to impose the
Ultimate Beneficiary Non-disclosure Tax (UBNT) in the case of
failure to disclose the identity of ultimate beneficiaries to net
income of the closely held trust, and
-
the A New Tax System (Ultimate Beneficiary
Non-Disclosure Tax) Act (No. 2) was enacted to impose the UNBT
1999 in the case where there are no ultimate beneficiaries to net
income of the closely held trust.
These measures applied to income years of the
trust in which 13 August 1998 occurred.
A fact sheet titled
Closely held trusts and ultimate beneficiary schedules on
the Australian Taxation Office (ATO) website gives details of the
operation of the beneficiary reporting rules in relation to closely
held trusts under Division 6D.
The Regulation Impact Statement (RIS) which
was included in the
Explanatory Memorandum to the relative Bills made the following
assessment of the impact of the measures that were enacted.
SUMMARY OF REGULATION IMPACT STATEMENT
Policy objective:
The policy objective of this measure is to ensure that the
assessable income of ultimate beneficiaries correctly includes any
required share of net income, and that the net assets of ultimate
beneficiaries reflect the receipt of tax-preferred amounts.
Impact: Low.
Main points:
Compliance costs will be kept to a minimum because:
ENTITY TAXATION
In October 2000 the Government released exposure draft
legislation providing for the taxation of trusts like
companies.
Following the release of the exposure draft legislation, the
Government received a great number of submissions which raised
technical problems particularly in relation to distinguishing the
source of different distributions, and valuation and compliance
issues that meant that the draft legislation is not workable.
The Government has also taken advice from the Board of Taxation
which recommended that the Bill not proceed and suggested looking
at alternative approaches.
As a consequence the Government is withdrawing the draft
legislation and will not be legislating it. It will begin a new
round of consultations on principles which can protect legitimate
small business and farming arrangements whilst addressing any tax
abuse in the trust area. The Board will be part of
consultation.
Claims that the cost to revenue of this decision amount to $1
billion are false. A New Tax System policy statement
costed this measure in conjunction with revenue bring forward under
PAYG which has already been introduced and on a 36 per cent tax
rate. Stripping out PAYG which has been introduced and allowing for
a reduced tax rate at 30 per cent (as will apply from 1 July 2001),
the cost of this decision in the full financial year 2001-2002 is
of the order of $110 million.
Thus until the Board of Taxation made an alternative approach to
enable the ATO to check that ultimate beneficiaries disclosed their
share of net income from trusts the interim role of Division 6D was
to continue.
On 5 September 2001, the Commissioner released
ATO Practice Statement Law Administration PS LA 2001/12, under
which lodgment of an ultimate beneficiary statement is only
required for the 2000-01 subsequent years where the trustee has a
UNBT liability for the year under consideration or the Commissioner
requests an ultimate beneficiary statement. This was in response to
complaints that Division 6D imposed an onerous compliance burden on
trustees of closely held trusts which included family trusts.
Thus in practice many trustees have not been
required to lodge an ultimate beneficiary statement since
2000-01.
Back to top
Endnotes
[5]. Senate Standing Committee on Economics:
Tax Laws Amendment (2007 Measures No.
4) Bill 2007 [Provisions]
Taxation (Trustee Beneficiary
Non-disclosure Tax) Bill (No. 1) 2007 [Provisions]
Taxation (Trustee Beneficiary
Non-disclosure Tax) Bill (No. 2) 2007 [Provisions] (August
2007)
[6]. Explanatory Memorandum, p. 15.
[7]. A New Tax
System Redesigned (July 1999), the report of the Review of
Business Taxation under the Chair of Mr John Ralph AC, p. 61.
[9]. The Explanatory Memorandum for the proposed Bill states
(p. 122): Traditionally, such arrangements provide the investor
with the right, but not the obligation, to buy the underlying asset
through the payment of instalments. Investors in instalment
warrants have a beneficial interest in the underlying asset,
subject to a security interest held by the issuer that secures the
payment of later instalments. Once the investor has made the first
instalment they are likely to be entitled to income from the
underlying asset (eg, dividends from shares).
[14]. Senate Standing Committee on Economics, 2007. Tax
Laws Amendment (2007 Measures No. 4) Bill
2007 [Provisions], Taxation (Trustee Beneficiary
Non-Disclosure Tax) Bill (No.1)
2007 [Provisions], Taxation (Trustee Beneficiary
Non-Disclosure Tax) Bill (No. 2)
2007 [Provisions],
Final Report, August, p. 5.
[19]. Senate
Standing Committee on Economics, 2007,
Final Report, op. cit, p.15.
[20]. Explanatory Memorandum, p. 124
[26]. Explanatory Memorandum, p. 160.
[27]. Explanatory Memorandum, p. 162.
[29]. Tax Reform not a new tax a new tax system,
op. cit.
Anthony Housego, Michael Priestley and Bernard
Pulle
8 August 2007
Economics Section
Parliamentary Library
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