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CONTENTS
Passage History
Purpose
Background
Main Provisions
Other Comments
Contact Officer and Copyright Details
Taxation Laws Amendment (CPI Indexation)
Bill 1999
Date Introduced: 11 March 1999
House: House of Representatives
Portfolio: Treasury
Commencement: Royal Assent (Items 3 and 4 of
Schedule 1, however, make technical amendments to the Fringe
Benefits Tax Assessment Act 1986 and are taken to have
commenced on the day on which the Taxation Laws Amendment (FBT
Cost of Compliance) Act 1995 received Royal Assent).
The purpose of this Bill is to ensure that falls
in the Consumer Price Index (CPI) do not disadvantage taxpayers in
relation to fringe benefits tax on car parking arrangements, the
level of certain indexed income tax rebates under the Income
Tax Assessment Act 1936 and the frequency of sales tax
remittances. The Bill also makes some technical amendments to the
Fringe Benefits Tax Assessment Act 1986.
The CPI fell by 0.2 per cent in the 12 months to
the March Quarter 1998. Furthermore, the average level of the CPI
for the four quarters to 31 March 1998 was 0.1 per cent lower than
the average for the preceding four quarters. This fall in the CPI
has implications under the current law for assessing fringe
benefits tax on car parking arrangements, determining the maximum
levels of certain income tax rebates and deciding how frequently
sales tax returns must be lodged and, accordingly, sales tax
remitted.
The 1998-99 Budget addressed the issue of falls
in the CPI and the proposed amendments give effect to this aspect
of the Budget.
Fringe benefits tax on car parking
facilities
Section 39A of the Fringe Benefits Tax
Assessment Act 1986 provides that fringe benefits tax (FBT) is
payable by employers that provide car parking facilities within one
kilometre of a commercial parking station where the parking station
ordinarily charges more than the CPI-indexed threshold amount for
all-day car parking at the start of the FBT year. As the threshold
amount is currently indexed to the CPI, it would be reduced when
the CPI falls in the twelve months before the start of the FBT
year, such as the 0.2 per cent fall in the 12 months to the March
Quarter 1998. This would result in affected employers having an
increased FBT liability.
Concessional income tax rebates
Section 159HA of the Income Tax Assessment
Act 1936 provides an indexation formula for establishing the
level of certain concessional rebates for the 1990-91 income year
and years after that. The formula uses the average of the CPI for
the last four quarters, which in the four quarters to 31 March 1998
was 0.1 per cent lower than the average for the preceding four
quarters, with the result that the dollar value of these rebates
would be reduced.
Wholesale sales tax returns
Section 62 of the Sales Tax Assessment Act
1992 allows a person to remit sales tax on a quarterly basis
(rather than a monthly basis) if their sales tax liability for the
previous financial year did not exceed a threshold amount for the
current year, and they either have no outstanding liability or they
were a 'quarterly remitter' for the previous quarter. The formula
used to calculate the threshold uses the average of the CPI over
the last four quarters, which in the four quarters to 31 March 1998
was 0.1 per cent lower than the average for the preceding four
quarters, with the result that the threshold would be reduced and
more taxpayers would have to remit sales tax on a monthly basis
rather than a quarterly basis.
Fringe benefits tax amendments
Schedule 1 amends the
Fringe Benefits Tax Assessment Act 1986 (FBTA Act) in
relation to car parking fringe benefits. Section 39A of the FBTA
Act provides that FBT is payable by employers that provide car
parking facilities for employees where a commercial parking station
is located within a 1 kilometre radius, and the station usually
charges more than a threshold amount for all-day car parking on the
first business day of the FBT year. The threshold amount is indexed
to the CPI, and under the current provision of paragraph 39A(2)(b)
of the FBTA Act would be reduced if the CPI falls in the twelve
months prior to the start of the FBT year.
Item 1 inserts new subsection
39A(2A) into the FBTA Act to provide that the car parking threshold
will be adjusted by a factor of 1 (that is, it will remain at the
previous year's level) if the CPI falls. The amendment takes effect
in relation to each fringe benefits tax year starting on or after 1
April 1998 (item 2). The threshold amount for the
1998-99 FBT year will therefore remain at $5.25 per day, as it was
in 1997-98.
Item 3 and item
4 make technical amendments to the Fringe Benefits Tax
Assessment Act which apply in relation to each FBT year
starting on or after 1 April 1995 (item 5).
Concessional income tax rebates
amendments
Schedule 2 amends section 159HA
of the Income Tax Assessment Act 1936 (ITA Act) in
relation to certain concessional income tax rebates. Section 159HA
was inserted by the Taxation Laws Amendment (Rates and Rebates)
Act 1989 which commenced on 21 June 1989. It sets out the
basis for calculating the maximum level of rebate allowable for the
following rebates:
-
- Dependant spouse (without child), child-housekeeper (with and
without child), invalid relative, taxpayer's parent or
parent-in-law (section 159J)
-
- sole parent (section 159K), and
-
- housekeeper (with and without child) (section 159L).
Subsection 159HA(3) provides a
formula for working out the indexation factor which is used to
establish the level of concessional rebates for the 1990/91 income
years and later years, using the average of the CPI for the four
quarters ending with the 31 March quarter. The effect of this would
be to reduce the amount of rebate if the average CPI as calculated
fell.
Item 1 of Schedule
2 inserts new subsection 159HA(6A) into
the Act. The new subsection provides that if the indexation factor
is less than 1.000, which occurred when the average level of the
CPI for the four quarters to 31 March 1998 was 0.1 per cent lower
than the average for the preceding four quarters, the maximum
rebate amount for each of the affected rebates will not fall. The
rebate levels for the 1998-99 year of income will therefore be the
same as the levels for the 1997-98 year.
Item 2 provides that the
amendment applies to assessments for the 1998-99 year of income and
later years of income.
Wholesale sales tax returns
amendments
Schedule 3 amends the Sales
Tax Assessment Act 1992.Section 62(2) of the
STA Act currently allows taxpayers to lodge sales tax returns on a
quarterly basis if their liability does not exceed a certain
threshold. The formula for calculating the threshold is set out in
section 62(3). Where the liability is higher than this threshold,
sales tax returns must be lodged on a monthly basis. The threshold
is indexed to the CPI, with the result that if the average CPI as
calculated falls, the threshold is lowered and a greater number of
taxpayers will have to lodge sales tax returns on a monthly
basis.
Item 2 of Schedule
3 inserts new subsection 62(5A) into the
STA Act, so that where there is a decrease in the CPI, the
quarterly remitter threshold for the year is the same as that for
the financial year immediately before. The amendment applies to the
quarterly remitter threshold for the 1998-99 financial year and
later financial years (item 3). Its effect is to
maintain the threshold at the 1997-98 level of $57,570.
No 'clawback' mechanism
The proposed amendments do not include a
mechanism such that any decrease in the CPI must offset subsequent
CPI increases before any consequential increases in the relevant
thresholds and rebates occur. The legal position is therefore that
any increase in the CPI will increase the relevant thresholds and
rebates.
Fiona Walker
24 March 1999
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
© Commonwealth of Australia 1999
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