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25 May 06 2006 Measures No 3 Bill and Untainting Bill introduced

On 25 May 2006, Tax Laws Amendment (2006 Measures No 3) Bill 2006 was introduced into the House of Representatives. The following are extracts from the Explanatory Memorandum.

SCHEDULE 1 to the Bill amends the ITAA 1936 and the ITAA 1997 to extend eligibility for the beneficiary tax offset to farmers and small business owners in receipt of Cyclone Larry income support payments: The beneficiary tax offset applies to Cyclone Larry income support payments for the 2005-06, 2006-07 and 2007-08 years of income. This measure has not previously been announced.

SCHEDULE 2 to the Bill provides tax-free status for certain Australian Government payments to businesses adversely affected by Cyclone Larry. This measure will apply to all relevant payments made in the 2005-06 and 2006-07 income years. This measure was announced by the Prime Minister in his press releases of 22 and 26 March 2006.

SCHEDULE 3 to the Bill amends the ITAA 1936 and the ITAA 1997 to extend eligibility for the beneficiary tax offset to drought affected taxpayers in receipt of interim income support payments. The beneficiary tax offset applies to interim income support payments for the 2005-06 income year and later income years. This measure was announced in the 2006-07 Budget.

SCHEDULE 4 to the Bill amends the ITAA 1997 to ensure that a company’s share capital account will become tainted if it transfers certain amounts to that account. If a company taints its share capital account, a franking debit arises in the company’s franking account. If the company chooses to untaint its share capital account, an additional franking debit may arise and untainting tax may be payable. The new share capital tainting rules will apply to transfers made to a company’s share capital account after 25 May 2006. Some consequential amendments apply from 1 July 1998. This measure was announced in the then Minister for Revenue and Assistant Treasurer’s Press Release No. C104/02 of 27 September 2002.

In conjunction with this measure, New Business Tax System (Untainting Tax) Bill 2006 was also introduced into the House of Representatives on 25 May 2006.

SCHEDULE 5 to the Bill amends the ITAA 1997 to exempt the recipients of the Unlawful Termination Assistance Scheme, the Alternative Dispute Resolution Assistance Scheme and similar expense-reimbursing government grants from capital gains tax (CGT). This Schedule makes a further amendment to ensure capital losses, and not just capital gains, are exempt from CGT. These amendments will apply to income tax assessments from 1 July 2005. This measure has not previously been announced.

SCHEDULE 6 to the Bill amends the ITAA 1997 to provide an offset to certain taxpayers in respect of their Medicare levy surcharge liability where that liability arose, or significantly increased, as a result of the taxpayer receiving an eligible lump sum payment in arrears. These amendments will apply to assessments for income years commencing on or after 1 July 2005. This measure was announced in the then Minister for Revenue and Assistant Treasurer’s Press Release No. 029 of 10 May 2005.

SCHEDULE 7 to the Bill amends the Superannuation Guarantee (Administration) Act 1992 to require superannuation providers to report details of superannuation contributions to the ATO. This measure applies to the 2005-06 income year and later years. This measure was announced in the Minister for Revenue and Assistant Treasurer’s Press Release No. 001 of 3 February 2006.

SCHEDULE 8 to the Bill amends the Fringe Benefits Tax Assessment Act 1986 to exclude from reporting, fringe benefits provided to address certain security concerns relating to the personal safety of an employee, or an associate of the employee, arising from the employee’s employment. Date of effect: 1 April 2004. This measure was announced in the then Minister for Revenue and Assistant Treasurer’s Press Release No. 079 of 8 September 2005.

SCHEDULE 9 to the Bill amends the ITAA 1936 to prevent the inappropriate use of pre-1 July 1988 funding credits (funding credits). These amendments apply to the use of funding credits on or after 9 May 2006, the date this measure was announced in the 2006-07 Budget.

SCHEDULE 10 to the Bill amends the A New Tax System (Goods and Services Tax) Act 1999 and the A New Tax System (Australian Business Number) Act 1999 to allow certain funds that raise money for other deductible gift recipients, to obtain an Australian Business Number so that those funds can be exempt from income tax and receive input tax credits for goods and services tax (GST) paid and other GST benefits. Date of effect: 1 July 2005. This measure was announced in the 2006-07 Budget.

SCHEDULE 11 to the Bill amends the ITAA 1997 to create 5 new general categories of deductible gift recipient to cover war memorials, disaster relief, animal welfare, charitable services and educational scholarships. Date of effect: 1 July 2006.These amendments were announced by the Government in the 2005-06 Budget and in the Treasurer’s Press Release No. 49 of 10 May 2005.

SCHEDULE 12 to the Bill amends the A New Tax System (Goods and Services Tax) Act 1999 to ensure that:
- the GST charity concessions apply as originally intended; and
- charities operating retirement villages, like other charities, are required to be endorsed in order to access the GST charitable retirement village concession.

These amendments will apply for tax periods that begin on or after Royal Assent. The amendment dealing with gift-deductible entities was announced in the Treasurer’s Press Release No. 049 of 29 August 2002. The amendment dealing with the endorsement of charitable institutions was announced in the Treasurer’s Press Release No. 031 of 11 May 2004.

SCHEDULE 13 to the Bill amends the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005 to clarify that the repeal of the 6-year amendment period for general anti-avoidance (Part IVA) amendments only applies to assessments for the 2004-05 income year and later income years, as originally intended by the Government. This amendment will apply immediately after the commencement of the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005, (19 December 2005). This measure was announced in the 2006-07 Budget.

SCHEDULE 14 to the Bill enhances the Government’s assistance to the wine industry by increasing the maximum amount of wine equalisation tax (WET) producer rebate claimable by a wine producer (or group of producers) each financial year. This measure takes effect on and from 1 July 2006.

SCHEDULE 15 to the Bill amends the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to ensure that following the decision of the Full Federal Court of Australia in Marana Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 307 supplies of certain types of real property continue to be input taxed. This confirms the Government’s policy intent. Date of effect: 1 July 2000. This measure was announced in the Minister for Revenue and Assistant Treasurer’s Press Release No. 006 of 27 February 2006.

For a PDF copy of Tax Laws Amendment (2006 Measures No 3) Bill 2006, go here

For a PDF copy of New Business Tax System (Untainting Tax) Bill 2006, go here

For a PDF copy of the EM, go here

For a copy of the Minister for Revenue's press release, No 2006/031, go here

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