Federal Register of Legislation - Australian Government

Primary content

A Bill for an Act to amend the law relating to taxation, and for related purposes
Administered by: Treasury
For authoritative information on the progress of bills and on amendments proposed to them, please see the House of Representatives Votes and Proceedings, and the Journals of the Senate as available on the Parliament House website.
Registered 04 Sep 2014
Introduced HR 04 Sep 2014
Table of contents.

2013-2014

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Tax and superannuation laws amendment (2014 measures no. 5) bill 2014

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by the authority of the
Treasurer, the Hon J. B. Hockey MP)

 


Table of contents

Glossary.............................................................................................................. 1

General outline and financial impact............................................................ 3

Chapter 1              Abolishing the mature age worker tax offset................... 7

Chapter 2              Abolishing the seafarer tax offset.................................... 13

Chapter 3              Research and development tax incentive:  reducing the tax offset rates  17

Chapter 4              Deductible gift recipients.................................................. 23

Index................................................................................................................. 27

Do not remove section break.


 

The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

ABN

Australian Business Number

DGR

deductible gift recipient

ITAA 1997

Income Tax Assessment Act 1997

MAWTO

mature age worker tax offset

TAA 1953

Taxation Administration  Act 1953


Abolishing the mature age worker tax offset

Schedule 1 to this Bill amends the Income Tax Assessment Act 1997 and the Taxation Administration Act 1953 to abolish the mature age worker tax offset.

Date of effectThis measure applies to the 2014-15 income year and later income years.

Proposal announcedThis measure was announced in the 2014‑15 Budget.

Financial impactThis measure will have the following revenue impacts:

2013-14

2014-15

2015-16

2016-17

2017-18

-

-

$290m

$255m

$215m

Human rights implications:  This Schedule does not raise any human rights issue.  See Statement of Compatibility with Human Rights — Chapter 1, paragraphs 1.19 to 1.33.

Compliance cost impactAs the measure impacts only on an individual’s ability to claim a tax offset, there is no impact on business or the not‑for‑profit sector.  The compliance costs for individuals will be reduced by $0.55 million per year.

Abolishing the seafarer tax offset

Schedule 2 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to abolish the seafarer tax offset.

Date of effectThis measure applies to assessment for 2015-16 and later income years.

Proposal announcedThis measure was announced in the 2014‑15 Budget.

Financial impactThis measure will have the following fiscal impact over the forward estimates:

2013-14

2014-15

2015-16

2016-17

2017-18

-

-

$4m

$4m

$4m

Human rights implications:  This Schedule does not raise any human rights issues.  See Statement of Compatibility with Human Rights — Chapter 2, paragraphs 2.14 to 2.19.

Compliance cost impactThis measure was assessed as resulting in a compliance cost reduction of around $4,000 each year.

Research and development tax incentive:  reducing the tax offset rates

Schedule 3 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to reduce the rates of the tax offset available under the research and development tax incentive by 1.5 percentage points.  The higher (refundable) rate of the tax offset will be reduced from 45 per cent to 43.5 per cent and the lower (non-refundable) rates of the tax offset will be reduced from 40 per cent to 38.5 per cent. 

The reduction in the tax offset rates is consistent with the Government’s commitment to cut the company tax rate from 1 July 2015, with the gain to revenue and savings from this measure to be redirected to repairing the budget.

Date of effectThis measure applies to income years starting on or after 1 July 2014.

Proposal announcedThis measure was announced in the 2014‑15 Budget on 13 May 2014.

Financial impact:  This measure has the following fiscal impact over the forward estimates period:

2013-14

2014-15

2015-16

2016-17

2017-18

-

$70m

$160m

$200m

$190m

Human rights implications:  This Schedule does not raise any human rights issues.  See Statement of Compatibility with Human Rights — Chapter 3, paragraphs 3.25 to 3.32.

Compliance cost impactThis measure does not affect compliance costs.

Deductible gift recipients

Schedule 4 to this Bill amends the Income Tax Assessment Act 1997 to update the list of specifically listed deductible gift recipients.

Date of effectThe listing of The Minderoo Foundation Trust applies to gifts made on or after 1 January 2014.  The listing of Australian Schools Plus Ltd applies to gifts made on or after 1 April 2014.  The East African Fund applies to gifts made on or after 1 July 2014.

Proposal announced:  The listing of Australian Schools Plus Ltd was announced in the 2013 Economic Statement as the ‘Schools Philanthropy Fund’.  The listing of The Minderoo Foundation Trust was announced in the Mid-Year Economic and Fiscal Outlook 2013-14.  The listing of the East African Fund was announced in the 2014‑15 Budget.

Financial impactThe revenue implications of this measure are as follows:

Organisation

2013-14
$m

2014-15
$m

2015-16
$m

2016-17
$m

2017-18
$m

Australian Schools Plus Ltd

‒0.7

‒2.7

‒2.7

‒2.7

East African Fund

The Minderoo Foundation Trust

Human rights implications:  This Schedule does not raise any human rights issue.  See Statement of Compatibility with Human Rights —paragraphs 4.17 to 4.20. 

Compliance cost impact:  Nil.

 


Chapter 1         
Abolishing the mature age worker tax offset

Outline of chapter

1.1                  Schedule 1 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) and the Taxation Administration Act 1953 (TAA 1953) to abolish the mature age worker tax offset (MAWTO).

Context of amendments

1.2                  The MAWTO is a concessional tax offset that is intended to provide an incentive to mature age workers to remain in the workforce.  The MAWTO was introduced in 2004-05 and is worth up to $500 per year.

1.3                  The MAWTO was intended to reward and encourage mature age workers to remain in the workforce.

1.4                  The MAWTO can be received from the first dollar of net income from working (which is generally income from personal exertion less any work related expense deductions), at the rate of five cents per dollar.  Taxpayers eligible for the MAWTO may receive the maximum value of $500 while their net income from working is between $10,000 and $53,000.  Once net income from working reaches $53,000, the MAWTO is withdrawn at the rate of five cents per dollar until it has completely phased out by $63,000.  If the value of the offset is greater than the taxpayer’s tax liability, the excess tax offset is wasted.

1.5                  The former Government started to phase out the MAWTO, by restricting access to the MAWTO to taxpayers born before 1 July 1957, with effect from 1 July 2012, with an estimated gain in revenue at the time of $255 million over the then forward estimates.  That is, taxpayers aged 55 years or older on or before 30 June 2012 retained eligibility to claim the MAWTO.  Prior to the former Government’s changes in 2012, the MAWTO was available to taxpayers who were aged 55 or over, and who had net income from working.

1.6                  The MAWTO is a complicated tax offset that is not well understood and is not a cost effective way of encouraging continuing engagement in the workforce by mature age workers.  This is because the $500 maximum value of itself is generally not a sufficient incentive to remain in work, and many mature age workers who benefit from the MAWTO are likely to choose to remain in the workforce regardless of whether they receive the offset or not.

1.7                  In the 2014-15 Budget, the Government announced the Restart programme which will encourage employers to hire mature age job seekers.  This builds on the Government’s election commitment to introduce a seniors employment incentive payment that was announced in the Mid-Year Economic and Fiscal Outlook 2013-14.

1.8                  Through Restart, from 1 July 2014, a subsidy of up to $10,000 will be available to employers who hire a mature age job seeker (aged 50 years or over) who has been receiving income support for a minimum of six months, on a full time basis (30 hours or more per week). Employers who hire on a part time basis (12 to 29 hours per week) will be eligible for a pro-rated subsidy commensurate with the actual hours worked.

Summary of new law

1.9                  Schedule 1 to this Bill amends the ITAA 1997 and the TAA 1953 by repealing Subdivision 61-K of the ITAA 1997 (entitlement to MAWTO) and making consequential changes to the pay-as-you-go instalment rules in Schedule 1 to the TAA 1953.

Comparison of key features of new law and current law

New law

Current law

The MAWTO will no longer be available to individual taxpayers.

Note: A new expenditure programme being delivered by the Department of Employment, Restart, will provide alternative support by way of subsidy to employers.

Individual taxpayers born before 1 July 1957 can receive MAWTO each year from the first dollar of net income from working, at the rate of five cents per dollar.  Taxpayers eligible for the MAWTO may receive the maximum value of $500 while their net income from working is between $10,000 and $53,000.  Once net income from working reaches $53,000, the MAWTO is withdrawn at the rate of five cents per dollar until it has completely phased out by $63,000.

Detailed explanation of new law

1.10              Schedule 1 to this Bill repeals Subdivision 61-K of the ITAA 1997 to abolish the MAWTO.  [Schedule 1, item 2]

1.11              Subdivision 61-K entitles an Australian resident individual taxpayer to a tax offset if they were born on or before 30 June 1957 and worked during the current year.

1.12              The amount of the offset depends on the amount of the taxpayer’s net income from working, but is capped at a maximum of $500 per financial year.

1.13              ‘Net income from working’ is basically the total of amounts of assessable income that are mainly a reward for an individual’s personal efforts or skills or assessable income from a business the taxpayer carries on, less any relevant income tax deductions.

1.14              The repeal of Subdivision 61-K will remove future individual entitlements to the MAWTO.

Consequential amendments

Income tax

1.15              The list of tax offsets in section 13-1 of the ITAA 1997 has been updated to reflect the removal the MAWTO.  [Schedule 1, item 1]

1.16              The definition of ‘net income from working’ has been removed from the Dictionary in section 995-1 of the ITAA 1997.  The definition is no longer required following the abolition of the MAWTO.  [Schedule 1, item 3]

Taxation administration

1.17              References to the MAWTO in the pay-as-you-go instalment rules have been removed as a result of the repeal of the MAWTO.  The pay-as-you-go instalment rules required the MAWTO to be disregarded when working out a taxpayer’s pay as you go instalment rate.  With the removal of the MAWTO, there is no longer a need to disregard the offset as it can no longer be taken into account in determining a taxpayer’s instalment rate.  [Schedule 1, items 4 and 5]

Application and transitional provisions

1.18              Schedule 1 commences on the day following Royal Assent and applies to the 2014-15 income year and all later income years.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Abolishing the mature age worker tax offset

1.19              This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

1.20              Schedule 1 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) and the Taxation Administration Act 1953 (TAA 1953) to abolish the mature age worker tax offset (MAWTO).

1.21              The MAWTO is a concessional tax offset that is intended to provide an incentive to mature age workers to remain in the workforce.  The MAWTO is worth up to a maximum of $500 per year.

Human rights implications

1.22              This Schedule does not engage any of the applicable rights or freedoms.

1.23              However, the Parliamentary Joint Committee on Human Rights has previously raised comments around the engagement of the right to an adequate standard of living with regard to taxation measures.  For the purpose of completeness, the assessment against that right has been included below.

Right to an adequate standard of living

1.24              The person’s right to an adequate standard of living is contained in article 11 of the International Covenant on Economic, Social and Cultural Rights.  Article 11 ensures the realisation of this right, recognising the essential importance of an adequate standard of living.

1.25              The right to an adequate standard of living, including food, water and housing provides that everyone is entitled to adequate food, clothing and housing and to the continuous improvement of living conditions.

1.26              The Committee has commented that a change in tax liabilities could limit the standard of living available to Australians.

1.27              This Schedule achieves a legitimate objective in that it contributes to the process of repairing the nation’s finances. 

1.28              The MAWTO is a complicated tax offset that is not well understood and is not a cost-effective way of encouraging continuing engagement in the workforce by mature age workers.  This is because the $500 maximum value is not generally a sufficient incentive to remain in work of itself, and many mature age workers who benefit from the MAWTO are likely to choose to remain in the workforce regardless of the availability of the offset.

1.29              As announced in the 2014-15 Budget, the Government will strengthen incentives to encourage employers to hire mature age job seekers.  From 1 July 2014, the Restart programme will provide a subsidy of up to $10,000 to employers who hire a mature age job seeker (aged 50 years or over) who has been receiving income support for a minimum of six months.

1.30              The MAWTO is not designed to provide individuals with support towards their cost of living but to instead encourage mature age individuals to remain within the workforce.  The progressivity of the tax system, ensuring that those who can afford to contribute more do so, remains unchanged as does an individual’s right to social security under Australia’s social security laws.

1.31              The removal of the offset is reasonable, necessary and proportionate to the task of repairing the nation’s finances by removing ineffective and inefficient programs.  The removal of the MAWTO will have little impact on those affected.

Conclusion

1.32              This Schedule is compatible with human rights as it does not raise any human rights issues.

1.33              If this Schedule did engage the right to an adequate standard of living, the Schedule is nonetheless compatible with human rights because  of the extent that it could be argued they may limit human rights; those limitations are reasonable, necessary and proportionate.


Chapter 2         
Abolishing the seafarer tax offset

Outline of chapter

2.1                  Schedule 2 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to abolish the seafarer tax offset.

Context of amendments

2.2                  The seafarer tax offset was introduced in 2012 to provide an incentive for companies to employ Australian seafarers. 

2.3                  A company is entitled to the seafarer tax offset in an income year in respect of an Australian resident individual if:

       the company engaged the individual for at least 91 days in the income year under a contract of employment or an arrangement that results in a payment that is subject to pay as you go withholding under subsection 12-60(1) in Schedule 1 to the Taxation Administration Act 1953;

       the individual was engaged as a seafarer (a master, deck officer, integrated rating, steward or engineer) on a voyage to or from a place outside Australia; and

       an entity holds a certificate for the vessel(s) on which the individual is engaged under Part 2 of the Shipping Reform (Tax Incentives) Act 2012 (broadly, for a company to obtain a certificate, the vessel must meet certain tonnage, registration and usage requirements).

(section 61-705 of the ITAA 1997)

2.4                  The amount of the tax offset is equal to 30 per cent of the amounts either paid to the individual (or individuals) in respect of their employment (including leave entitlements), or paid for the training of the individual (or individuals) that is relevant to their employment (section 61-710 of the ITAA 1997).

2.5                  The offset is refundable, allowing the company to receive a refund of up to the full amount of the offset from the Commissioner of Taxation if they have no income tax liability to firstly offset (see section 67‑23 of the ITAA 1997).

2.6                  The rationale for the introduction of the seafarer tax offset was to stimulate opportunities for Australian seafarers to be employed on overseas voyages and to gain maritime skills.  Since its introduction in 2012, the seafarer tax offset has been claimed annually by fewer than 20 taxpayers, in respect of, in total, around 250 employees.

2.7                  The low level of claims for the seafarer tax offset indicates that it has not achieved its policy intent.  It has not been an effective stimulant for the employment of Australian seafarers on overseas voyages.

2.8                  The savings from this measure will be redirected by the Government to help repair the Budget and fund other policy priorities.

Summary of new law

2.9                  Schedule 2 amends the ITAA 1997 by repealing Subdivision 61‑N of the ITAA 1997 to abolish the seafarer tax offset for the 2015-16 income year and later income years.

Comparison of key features of new law and current law

New law

Current law

The seafarer tax offset will no longer be available.

Companies that satisfy the eligibility requirements may claim the seafarer tax offset.

Detailed explanation of new law

2.10              Schedule 2 amends the ITAA 1997 to repeal Subdivision 61‑N of the ITAA 1997.  [Schedule 2, item 2, Subdivision 61-N of the ITAA 1997]

2.11              Subdivision 61-N provided for the seafarer tax offset, setting out which entities were eligible and the amount of the offset.  As a result of the repeal, the offset will cease to be available.

Consequential amendments

2.12              Schedule 2 also makes a number of minor consequential amendments to the ITAA 1997 and the Shipping Reform (Tax Incentives) Act 2012 to remove references to the seafarer tax offset elsewhere in these Acts.  [Schedule 2, items 1, 3, and 4, tables in sections 13-1 and 67-23 of the ITAA 1997 and the note to section 4 of the Shipping Reform (Tax Incentives) Act 2012]

Application and transitional provisions

2.13              The repeal of the seafarer tax offset (and the related consequential amendments) will apply to assessments for 2015-16 and later income years.  [Schedule 2, item 5]

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Abolishing the seafarer tax offset

2.14              This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

2.15              The seafarer tax offset is available to companies that employ Australian residents as a seafarer on a voyage on an eligible vessel to or from a location outside Australia.  To be an eligible vessel, an entity must hold a certificate under Part 2 of the Shipping Reform (Tax Incentives) Act 2012 in respect of the vessel.  Broadly, such a certificate can be obtained where the vessel meets certain size requirements, is intended for travel on international waters and is registered on an Australian shipping register.

2.16              Companies eligible for the concession receive a tax offset for 30 per cent of the costs of the engagement of the Australian resident.  This offset is refundable.

Human rights implications

2.17              This Schedule does not engage any of the applicable rights or freedoms.

2.18              The offset is only available to companies and the benefit it provides is, at most, minor.

Conclusion

2.19              This Schedule is compatible with human rights as it does not raise any human rights issues.


Outline of chapter

3.1                  Schedule 3 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to reduce the rates of the tax offset available under the research and development tax incentive by 1.5 percentage points.  The higher (refundable) rate of the tax offset will be reduced from 45 per cent to 43.5 per cent and the lower (non-refundable) rates of the tax offset will be reduced from 40 per cent to 38.5 per cent. 

3.2                  The reduction in the tax offset rates is consistent with the Government’s commitment to cut the company tax rate from 1 July 2015 by maintaining the relative value of the offsets.  The gain to revenue and savings from this measure will be redirected to repairing the Budget.

Context of amendments

Research and development tax incentive

3.3                  The research and development tax incentive is the primary mechanism by which the Commonwealth seeks to encourage companies to undertake research and development activities in Australia.

3.4                  Broadly, the incentive provides:

       a 45 per cent refundable tax offset to eligible entities with a turnover of less than $20 million, and which are not controlled by income tax‑exempt entities, for their expenditure on eligible research and development activities in Australia; and

       a 40 per cent non‑refundable tax offset to all other eligible entities for their expenditure on eligible research and development activities in Australia.

(See subsection 355‑100(1) of the ITAA 1997)

3.5                  In determining what rate applies, an entity will be considered to be controlled by an exempt entity or entities if, broadly, the exempt entity or exempt entities hold an interest in the entity of at least 50 per cent at any time in the income year (see section 355-100 of the ITAA 1997).

3.6                  The tax offset rates of 40 per cent or 45 per cent of the eligible research and development expenditure replace any income tax deduction or other offset that would otherwise be available in respect of the expenditure.  As a result, research and development expenditure generally results in a greater net benefit than an income tax deduction for research and development expenditure at the corporate tax rate.

3.7                  Eligible research and development activities include both core activities, being experimental activities undertaken for the purpose of acquiring new knowledge, and supporting activities, which are activities either directly related to core activities or are undertaken for the dominant purpose of supporting core activities (sections 355-20 to 355-30 of the ITAA 1997).

3.8                  Eligible entities are Australian resident corporations, Australian permanent establishments of foreign corporations and certain public trading trusts (section 355-35 of the ITAA 1997) who have registered under Part III of the Industry Research and Development Act 1986.

3.9                  Provisions exist to claw back the additional tax benefit provided by the research and development tax incentive for eligible expenditure where an entity obtains a recoupment from government for the expenditure or where the expenditure relates to feedstock that has been or is sold (see Subdivisions 355-G and 355-H of the ITAA 1997).

Company tax rate cut and the research and development tax incentive

3.10              In its 2013 election campaign, the Coalition committed to lowering the company tax rate from 30 per cent to 28.5 per cent for the income year beginning on or after 1 July 2015, and for all subsequent income years.  This is intended to make Australia a more competitive destination for investment.

3.11              As a result of this change, the benefit provided by the research and development tax incentive would increase relative to the standard treatment of normal business expenses. 

3.12              To preserve the relative value of the research and development tax incentive and assist in repairing the Budget, the tax offset rates will be reduced by 1.5 percentage points, consistent with the proposed reduction in the company tax rate.

Tax Laws Amendment (Research and Development) Bill 2013

3.13              The Tax Laws Amendment (Research and Development) Bill 2013 is currently before the Parliament.  It would amend the ITAA 1997 to deny access to the research and development tax incentive for companies with aggregated assessable income of $20 billion or more for an income year. 

3.14              The amendment is intended to better target the research and development tax incentive to businesses that are more likely to increase their research and development spending in response to government incentives, delivering a greater return for taxpayers.

Consultation

3.15              Targeted confidential consultation was undertaken on exposure draft legislation with affected stakeholder bodies.  No concerns were raised during consultation.

Summary of new law

3.16              Schedule 3 to this Bill amends the ITAA 1997 to reduce the refundable and non-refundable rates of the tax offset available under the research and development tax incentive from 45 per cent to 43.5 per cent and from 40 per cent to 38.5 per cent (respectively).

3.17              The changes do not affect the eligibility of entities to claim the research and development tax incentive or the administration of the research and development tax incentive more generally. 

Comparison of key features of new law and current law

New law

Current law

Eligible entities:

       with annual turnover of less than $20 million; and

       which are not controlled by an exempt entity or entities

may obtain a refundable tax offset equal to 43.5 per cent of their eligible research and development expenditure.

Eligible entities:

       with annual turnover of less than $20 million; and

       which are not controlled by an exempt entity or entities

may obtain a refundable tax offset equal to 45 per cent of their eligible research and development expenditure.

All other eligible entities may obtain a non-refundable tax offset equal to 38.5 per cent of their eligible research and development expenditure.

All other eligible entities may obtain a non-refundable tax offset equal to 40 per cent of their eligible research and development expenditure.

Detailed explanation of new law

3.18              Schedule 3 to this Bill amends the three rates of the tax offset available as part of the research and development tax incentive detailed in the table in section 355-100 of the ITAA 1997.

3.19              The first rate in the table in section 355-100 applies to entities with a turnover of less than $20 million (and to which the second rate does not specifically apply).  These entities previously received a tax offset equal to 45 per cent of their eligible research and development expenditure.  They will now receive an offset equal to 43.5 per cent of their eligible expenditure.  [Schedule 3, item 1, item 1 in the table in subsection 355-100(1) of the ITAA 1997]

3.20              The second rate in the table applies to entities which, at any time during the income year, are controlled by an entity that is exempt from income tax (an ‘exempt entity’), including entities which would otherwise meet the criteria for the first rate to apply.  These entities previously received a tax offset equal to 40 per cent of their eligible research and development expenditure.  They will now receive an offset equal to 38.5 per cent of their eligible expenditure.  [Schedule 3, item 2, item 2 in the table in subsection 355-100(1) of the ITAA 1997]

3.21              The third rate in the table applies to all other eligible entities.  These entities previously received a tax offset equal to 40 per cent of their eligible research and development expenditure.  They will now receive an offset equal to 38.5 per cent of their eligible expenditure.  [Schedule 3, item 3, item 3 in the table in subsection 355‑100(1) of the ITAA 1997]

3.22              There is also a note to the table which previously referred to the 45 per cent rate.  The note now refers to the 43.5 per cent rate.  [Schedule 3, item 4, note to subsection 355‑100(1) of the ITAA 1997]

3.23              For simplicity, no change has been made to the provisions providing for the adjustment of tax benefits in respect of eligible research and development expenditure, where the entity obtains a recoupment for the expenditure or sells feedstock to which the expenditure relates.  Following the proposed reduction in the company tax rate, the tax outcomes for entities to which these provisions apply will be largely the same as before these amendments.

Application and transitional provisions

3.24              These amendments apply in respect of assessment for income years commencing on or after 1 July 2014.  [Schedule 3, item 5]

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Research and development tax incentive:  reducing the tax offset rates

3.25              This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

3.26              The research and development tax incentive is the primary tax mechanism by which the Commonwealth seeks to encourage companies to undertake research and development activities in Australia.

3.27              Broadly, under the research and development tax incentive, eligible entities (Australian resident corporations, Australian permanent establishments of foreign corporations and certain public trading trusts (section 355-35 of the ITAA 1997) who have registered under Part III of the Industry Research and Development Act 1986) are entitled to receive a tax offset for a certain percentage of their eligible expenditure on research and development.

3.28              As a result of the amendments, the refundable tax offset rate will be reduced from 45 per cent to 43.5 per cent for taxpayers with annual turnover under $20 million that were not controlled by entities that are exempt from income tax at any point during the income year, and the non‑refundable tax offset rate will be reduced from 40 per cent to 38.5 per cent for all other taxpayers.

3.29              The reduction in the tax offset rates is consistent with the Government’s commitment to cut the company tax rate from 1 July 2015, with the gain to revenue and savings from this measure to be redirected to repairing the budget. 

Human rights implications

3.30              This Schedule does not engage any of the applicable rights or freedoms.

3.31              The change only affects the amount of tax offset that can be claimed by corporate taxpayers which engage in eligible research and development activities. 

Conclusion

3.32              This Schedule is compatible with human rights as it does not raise any human rights issues.


Chapter 4         
Deductible gift recipients

Outline of chapter

4.1                  Schedule 4 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to update the list of specifically listed deductible gift recipients (DGRs).

Context of amendments

4.2                  The income tax law allows income tax deductions for taxpayers who make gifts of two dollars or more to DGRs.  To be a DGR, an entity must fall within one of the general categories set out in Division 30 of the ITAA 1997 or be specifically listed by name in that Division.

4.3                  DGR status helps eligible entities and funds attract public financial support for their activities.

Summary of new law

4.4                  The amendments add Australian Schools Plus Ltd, East African Fund and The Minderoo Foundation Trust as specifically listed DGRs.

Detailed explanation of new law

Australian Schools Plus Ltd (ABN 65 164 622 459)

4.5            Taxpayers may claim a tax deduction for gifts made to Australian Schools Plus Ltd on or after 1 July 2014.  [Schedule 4, item 1, item 2.2.43 in the table in subsection 30-25(2) of the ITAA 1997]

4.6                  Australian Schools Plus promotes the education of students in schools facing disadvantage.  Its primary purpose is to collect tax deductible donations from members of the public and distribute them to disadvantaged schools.

East African Fund (ABN 86 966 180 821)

4.7                  Taxpayers may claim a tax deduction for gifts made to the East African Fund on or after 1 July 2014.  [Schedule 4, item 2, item 9.2.15 in the table in subsection 30-80(2) of the ITAA 1997]

4.8                  The East African Fund promotes the education of children in rural communities in East Africa.  It also runs the School of St Jude which educates children in the Arusha region of Tanzania.

The Minderoo Foundation Trust (ABN 24 819 440 618)

4.9                  Taxpayers may claim a tax deduction for gifts made to The Minderoo Foundation Trust on or after 1 January 2014.  [Schedule 4, item 3 , item 13.2.21 in the table in section 30-105 of the ITAA 1997]

4.10              The main objects of the Trust are advancing Indigenous and disadvantaged Australians.  The Minderoo Foundation Trust can also promote any purpose which is charitable at law as approved by the Australian Charities and Not-for-profits Commission or the Commissioner of Taxation.

4.11              The specific listing of The Minderoo Foundation Trust is subject to the Trust not accepting tax deductible gifts for the purposes of primary or secondary education, childcare or religion unless the relevant activities would be deductible under one or more of the general DGR categories.

Consequential amendments

4.12              The amendments also update the index in Division 30 of the ITAA 1997 to add the new listings.  [Schedule 4, items 4 to 6, section 30-315 of the ITAA 1997]

Application and transitional provisions

4.13              The listing of The Minderoo Foundation Trust applies to gifts made on or after 1 January 2014.

4.14              The listing of Australian Schools Plus Ltd applies to gifts made on or after 1 April 2014.

4.15              The listing of the East African Fund applies to gifts made on or after 1 July 2014.

4.16              These amendments commence on Royal Assent.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Deductible gift recipients

4.17              This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

4.18              Schedule 4 to this Bill amends the Income Tax Assessment Act 1997 to update the list of specifically listed deductible gift recipients.

Human rights implications

4.19              This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

4.20              This Schedule is compatible with human rights as it does not raise any human rights issues.

 


 

 

Schedule 1:  Abolishing the mature age worker tax offset

Bill reference

Paragraph number

Item 1

1.15

Item 2

1.10

Item 3

1.16

Items 4 and 5

1.17

Schedule 2:  Abolishing the seafarer tax offset

Bill reference

Paragraph number

Items 1, 3, and 4, tables in sections 13-1 and 67-23 of the ITAA 1997 and the note to section 4 of the Shipping Reform (Tax Incentives) Act 2012

2.12

Item 2, Subdivision 61-N of the ITAA 1997

2.10

Item 5

2.13

Schedule 3:  Rates of R&D tax offset

Bill reference

Paragraph number

Item 1, item 1 in the table in subsection 355-100(1) of the ITAA 1997

3.19

Item 2, item 2 in the table in subsection 355-100(1) of the ITAA 1997

3.20

Item 3, item 3 in the table in subsection 355‑100(1) of the ITAA 1997

3.21

Item 4, note to subsection 355‑100(1) of the ITAA 1997

3.22

Item 5

3.24

Schedule 4:  Deductible gift recipients

Bill reference

Paragraph number

Item 1, item 2.2.43 in the table in subsection 30-25(2) of the ITAA 1997

4.5

Item 2, item 9.2.15 in the table in subsection 30-80(2) of the ITAA 1997

4.7

Item 3 , item 13.2.21 in the table in section 30-105 of the ITAA 1997

4.9

Items 4 to 6, section 30-315 of the ITAA 1997

4.12

 

Do not remove section break.