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24 May 1212 2012 Measures No 2 Bill and related PAYG Bill introduced

On 24 May 2012, Tax Laws Amendment (2012 Measures No 2) Bill 2012 was introduced into the House of Representatives.

The following is extracted from the Explanatory Memorandum.

SCHEDULE 1 to the Bill strengthens directors’ obligations to cause their company to comply with its existing Pay As You Go (PAYG) withholding and superannuation guarantee requirements. These amendments reduce the scope for companies to engage in fraudulent phoenix activity or escape liabilities and payments of employee entitlements by:

  • extending the director penalty regime to make directors personally liable for their company’s unpaid superannuation guarantee amounts;
  • ensuring that directors cannot discharge their director penalties by placing their company into administration or liquidation when PAYG withholding or superannuation guarantee remains unpaid and unreported three months after the due date; and
  • in some instances, making directors and their associates liable to PAYG withholding non-compliance tax where the company has failed to pay amounts withheld to the Commissioner of Taxation.

The tax on directors and their associates is imposed by the Pay As You Go Withholding Non-compliance Tax Bill 2012, which was also introduced into the House of Representatives on 24 May 2012.

Broadly, these amendments will commence on the day on which the Bill receives Royal Assent.

SCHEDULE 2 to the Bill amends the taxation of financial arrangements (TOFA) consolidation interaction provisions in the ITAA 1997 and the transitional provisions in the Tax Laws
Amendment (Taxation of Financial Arrangements) Act 2009 (TOFA Act).

The amendments to the TOFA consolidation interaction provisions ensure that the tax treatment of financial arrangements that are part of a joining/consolidation event is consistent with the TOFA tax timing rules and that the tax treatment of liabilities that are, or are part of, a financial arrangement takes into account changes in the value of the liability other than the repayment of the liability.

The amendments to the TOFA transitional provisions ensure that the TOFA consolidation interaction provisions apply where:

  • a joining/consolidation event occurred prior to a consolidated group starting to apply the TOFA provisions in relation to its financial arrangements; and
  • the head company has made an election to apply the TOFA provisions to its existing financial arrangements.

Date of effect: The TOFA consolidation interaction and TOFA transitional amendments commence from the commencement of the TOFA Act (that is, 26 March 2009). The TOFA consolidation interaction provisions apply from taxpayers’ first TOFA applicable income year. The TOFA transitional amendments apply from their commencement.

SCHEDULE 3 to the Bill amends the ITAA 1997 to modify the consolidation tax cost setting and rights to future income rules so that the tax outcomes for consolidated groups are more consistent with the tax outcomes that arise when assets are acquired outside the consolidation regime.

Date of effect: The changes affecting a corporate acquisition will depend on the time when the acquisition took place. That is, different changes apply to, broadly, acquisitions before 12 May 2010, after 30 March 2011 and the intervening period. For corporate acquisitions that, broadly, took place before 12 May 2010, the changes prevent the retrospective operation of unintended effects of, and perceived weaknesses in, amendments to the law that were made in 2010.

SCHEDULE 4 to the Bill makes consequential amendments to the Taxation Administration Act 1953 to give effect to the increase in the concessional MIT final withholding tax rate imposed by the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012.

The Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 amends the Income Tax (Managed Investment Trust Withholding Tax) Act 2008 to increase the Managed Investment Trust (MIT) final withholding tax from 7.5% to 15% on fund payments made in relation to income years that commence on or after 1 July 2012.

The amendments apply from 1 July 2012.


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