The remaining schedules of the bill
Schedule 3 – Exempt annuity business of life insurance companies
The amendments proposed in Schedule 3 of the bill are intended to
clarify the operation of the existing law.
The need for these amendments arose as a result of the transfer of the
provisions from the ITAA 1936 to the ITAA 1997 and subsequent changes that were
made under the Simplified Superannuation amendments in 2007-08. These events
have raised questions about the interpretation of the provisions.
The proposed changes will ensure that the law clearly identifies those
situations where annuity income
derived by life insurance companies will be classified as non-assessable
The explanatory memorandum to the bill explains that the income derived
by life insurance companies from immediate annuity business should be exempt
from tax to prevent double taxation given that the policy holder of the annuity
will be taxed on any annuity income they receive.
The changes proposed by Schedule 3 are designed to operate
- the amendments retrospective to 1 July 2000 are designed to
correct the provisions that were drafted to update and replace those of
the ITAA 1936 to ensure that they operate consistently with the former
the amendments retrospective to 1 July 2007 will ensure that the
do not apply to annuity policies that are superannuation income streams.
Views on Schedule 3 – exempt
Division 320 of the ITAA 1997 specifies the tax treatment of life
insurance companies containing provisions to ensure that their tax treatment is
comparable to that of other providers of superannuation income streams.
The changes proposed by Schedule 3 of the bill propose amendments to
subdivision 320-H (Segregation of assets to discharge exempt life insurance
policy liabilities) designed to ensure:
(i) that the non-assessable non-exempt income of life insurance companies
includes income from assets supporting immediate annuity policies; and
(ii) that the annuity conditions will not apply to immediate annuity policies
of life insurance companies where those annuities are superannuation streams.
These changes were announced by the Assistant Treasurer and Minister for
Competition and Consumer Affairs, the Hon. Chris Bowen MP, on 12 May 2009.
None of the ten submissions mentioned the amendments proposed by
After consideration of the proposed operation of the
amendments and the government's policy intent, the committee recommends the
Senate pass Schedule 3 without amendment.
Schedule 4 – Deductible gift recipients
Schedule 4 of the bill provides for the addition of two organisations to
the list of deductible gift recipients (DGRs) and a change in the name of one
organisation already included as a DGR.
The income tax law allows taxpayers to claim income tax deductions for
gifts of $2 or more that are made to a DGR. The ITAA 1997 provides a list of
DGR organisations in section 30-15.
The inclusion of an organisation on the DGR list encourages support by
offering tax deductions to those making donations.
The two funds to be added to the DGR list are The Green Institute
Limited, and United States Studies Centre Limited.
The Green Institute Limited aims to engender 'education, exchange,
research and debate' on:
the principles of environment, social justice, non-violence
and democracy. The key aim of the Green Institute is to promote those
principles through training, networking, and research and policy development.
The date of effect has been made retrospective to 24 June 2009; special
conditions attached to the amendments provide that gifts made to this
organisation after 23 June 2009 may be claimed as a deduction.
The United States Studies Centre Limited is an organisation which aims
to promote relations between the peoples of the United States, Australia and
New Zealand through cultural awareness. Section 4.7 of the Explanatory
Memorandum states that the aim of the fund is to:
[r]esearch, debate and create new knowledge on American
political, economic, social and cultural issues.
The inclusion of the United States Studies Centre Limited on the list
has also been made retrospective to 27 July 2009, thereby allowing gifts made
to the fund after 26 July 2009 to be claimed as a tax deduction.
Schedule 4 amendments also propose that the name of the Dymocks Literacy
Foundation Fund Limited, an existing education DGR, be changed to the Dymocks
Children's Charities Fund, with the effect date 4 June 2009.
Division 30 of the ITAA 1997 sets out the rules for deductions for
certain gifts and contributions.
No submissions raised concerns or made comment in respect of Schedule 4.
The committee recommends the Senate pass Schedule 4 without
Schedule 5 – Income Recovery Subsidy for the North Western Queensland
Schedule 5 makes provision for the Income Recovery Subsidy for the North
Western Queensland floods to be exempt from income tax and kept apart from
'separate net income'.
The amendment will ensure that the law expressly states that this particular
subsidy is exempt from income tax.
The subsidy was an emergency measure made available to Australian
residents over 16 years of age whose income was adversely and directly affected
by the North Western Queensland floods of January and February 2009. It formed
part of a raft of measures such as services, payments and assistance that were
already available to those taxpayers affected by the flooding.
The payment was available to be claimed by victims of the floods after 24
February 2009. As a result, the income tax exemption proposed by Schedule 5
will be retrospective, the change effective from the 2008-09 income year.
The amendment intends to lessen financial hardship.
Submissions received to this inquiry did not comment on the changes
proposed by Schedule 5.
The committee recommends the Senate pass Schedule 5 without
Schedule 6 – Excise manufacture and spirits
Schedule 6 of the bill proposes amending the Excise Act 1901 to
ensure that the blending of imported and domestic high strength neutral spirits
constitutes 'excise manufacture'. This will ensure that high strength neutral
spirits are imported at a free rate of duty under the Excise Tariff Act 1921
concessional spirits regime.
The concessional regime ensures that in those circumstances where
particular spirits are imported for specified industrial, manufacturing,
scientific, medical, veterinary or educational purposes, they are free of duty.
The amendment proposed is required as although the Excise Act contains
provision to deem the blending of fuel to constitute excise manufacture, there
is no equivalent provision for the blending of high strength neutral spirits.
In the absence of the deeming provision, importers rely on an
alternative method to ensure that the spirit is essentially free from duty.
Schedule 6 will also provide the Commissioner of Taxation with the
discretion to make determinations exempting certain activities from
constituting excise manufacture.
The amendments, if passed, will commence from the date of Royal Assent.
Views on Schedule 6 – Excise
manufacture and spirits
As explained, Schedule 6 of the bill will introduce an addition to the Excise
Act 1901 to address a current legislative deficiency and ensure that
imported high strength neutral spirits that are imported for specific purposes
fall within the concessional spirits regime of the Excise Tariff Act 1921.
The submissions received did not refer to Schedule 6.
After consideration of the proposed amendment, the committee
recommends the Senate pass Schedule 6 without amendment.
Senator Annette Hurley
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