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07 May 14 Draft amendments to taxation laws

The Commonwealth Treasury has released an exposure draft Bill and draft explanatory memorandum covering proposed miscellaneous amendments to the taxation laws. The Bill is entitled the Tax and Superannuation Laws Amendment (2014 Measures No 3) Bill 2014.

The community’s views are sought on these amendments. The closing date for submissions is Friday, 6 June 2014.

The amendments seek to ensure the law operates as intended by correcting technical or drafting defects, removing anomalies and addressing unintended outcomes.

The proposed amendments are in the following areas:

  • amendments to the style of references to specific Ministers, Departments and Secretaries, and the repeal of redundant provisions
  • excise-related amendments, to remove references to the indexation of rates of duty on aviation fuel under the Excise Tariff Act 1921
  • renumbering of sections to correct errors in previous amending Acts
  • other technical amendments to principal Acts, and
  • other corrections to previous amending Acts.

The more significant amendments are as follows.

Repeal of assessed net amount concept in the GST Act

Section 17-15 of the GST Act provides that a taxpayer’s net amount for a tax period is worked out in accordance with the information provided in the taxpayer's GST return. For tax periods commencing on or after 1 July 2012, this outcome is achieved through the self-assessment process under s 155-15 in Schedule 1 to the Taxation Administration Act 1953 (TAA 1953). Therefore, s 17-15 of the GST Act is removed as it is redundant as a result of the adoption of a self-assessment system for GST.

Section 155-15 provides that, on lodgment of a taxpayer’s GST return for a tax period, the Commissioner is taken to have made an assessment of the taxpayer’s net amount for that tax period. Section 155-15(3) together with table item 1 of s 155-15(1) provide that the amount assessed is worked out in accordance with the information set out in the GST return.

This amendment will apply in relation to tax periods starting on or after the day this Bill receives Royal Assent.

Time at which input tax credit entitlements cease

Section 93-15 of the GST Act ensures that the input tax credit entitlement for a creditable acquisition ceases if the GST is no longer payable on a supply that would otherwise give rise to that credit.

For tax periods starting prior to 1 July 2012, s 93-15 denied an input tax credit where the GST had ceased to be payable because the Commissioner was out of time to recover it. This was primarily due to s 105-50 in Schedule 1 to the TAA 1953 which set a four-year time limit on recovery of amounts that were payable to the Commissioner.

As s 105-50 does not apply to tax periods starting on or after 1 July 2012, there is no longer another provision that uses the term “ceases to be payable”. Therefore, the amendment makes it clear that an entitlement to an input tax credit concerning GST on a supply ceases when the Commissioner is no longer able to amend an assessment of an assessable amount relating to the GST.

This amendment will apply to creditable acquisitions for which the GST on the related supply is attributable to a tax period starting on or after the day this Act receives Royal Assent.

Creditable acquisitions relating to reimbursements

Section 111-5(3) of the GST Act sets out the situations where a taxpayer is not entitled to claim an input tax credit, notwithstanding that the taxpayer reimbursed an employee for expenses that were directly related to the employee’s duties.

The wording of s 111-5(3) is amended to clarify that taxpayers are disentitled from claiming input tax credits if they satisfy one or more of the paragraphs in that subsection.

This amendment will apply to acquisitions made on or after 1 July 2000. Although the amendment will apply retrospectively, it will not alter the substance or operation of the section.

Clarifying the continuity of ownership test following the death of a beneficial owner of shares

The concessional treatment for deceased estates only applies in respect of ownership, not voting power and control. Therefore, the concession does not currently operate effectively for the purpose of applying the alternate continuity of ownership test.

The proposed amendments will ensure that, for the purposes of applying both the primary test and the alternative test, the deceased individual is considered to retain all voting power, dividend entitlements and capital distributions so long as the shares are owned by either the trustee of the deceased person’s estate or by a beneficiary of the estate.

The amendments apply to assessments for the 1997-98 income year and later income years.

Other technical amendments

Technical amendments are also proposed in other areas, including the following:

  • correcting an error in the new special conditions for deductible gift recipients as a result of the introduction of the ACNC
  • removing technical defects in the franking deficit tax offset rules
  • clarifying the operation of the consolidation tax cost setting rules for depreciating assets
  • clarifying the operation of the consolidation provisions where an entity joins or leaves a group holding a bad debt
  • benefit certificates for defined benefit superannuation schemes
  • amendments to withholding matters and declarations
  • machinery provisions for penalties
  • hardship discretion and the General Interest Charge
  • disclosure of protected taxpayer information to Centrelink.
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