The Coalition is determined to provide stable and predictable Government.
Soon after the Government was elected we were advised that 96 tax and superannuation announcements, with one dating back as far as March 2001, had not been legislated.
Four of these have been dealt with as part of the carbon and mining tax repeal packages.
Today we are dealing with the final backlog of 92 measures of announced but unlegislated tax and superannuation measures.
This backlog has created significant operational uncertainty for businesses and consumers.
The Government is determined to resolve all policies relating to these matters by 1 December 2013 for inclusion in the Mid‑Year Economic and Fiscal Outlook (MYEFO).
The Government intends that the bulk of legislation that is to be progressed should be passed by the Parliament by 1 July 2014.
Of the 92 unlegislated and unresolved tax and superannuation changes, the Government will proceed with 18 initiatives. A further three initiatives will be significantly amended.
The Government will not proceed with seven initiatives.
Assistant Treasurer Arthur Sinodinos, with assistance from the Board of Taxation will undertake consultation with tax experts, including a number drawn from the Board's advisory panel over the next two weeks with a disposition not to proceed with the remaining 64 measures.
It will be an expedited and thorough review with industry, focusing on whether there are any unintended consequences from not proceeding with the measures or whether there are compelling reasons why the measure should proceed. We are advised that the fiscal impact of the vast bulk of the remaining 64 initiatives is expected to be minimal.
This package of taxation measures will provide certainty to business and significantly reduce red tape and associated costs.
Importantly it will provide consumers, particularly those with significant education costs, with certainty.
This package will prevent an estimated 10 Bills and hundreds of pages of legislation from proceeding.
In addition, there will be legislated protection for any taxpayer who has self‑assessed with announced changes that the Government will not proceed with.
Moreover taxpayers that have complied with previous announcements that will no longer proceed, and have paid additional taxation, will be entitled to a refund. We are advised by the Treasury that the financial impact of this initiative is expected to be minimal.
This is part of our ongoing process to restore simplicity and fairness to the Australian tax system.
The integrity of our tax system will further be enhanced by a range of other reforms to be announced in coming months.
Among the seven measures the Government will not proceed with are:
- Self‑Education Expenses Cap (Announced as part of the 2013‑14 Budget, and delayed for one year in the 2013 Economic Statement)
The Government will not proceed with Labor's announcement to put a $2,000 cap on the amount people can deduct as self‑education expenses, including training and educational courses, textbooks and other accreditation expenses.
Not proceeding with this measure means that these expenses will continue to be deductible according to the normal rules.
The highest number of self‑education claims over $2000 (ie 80%) come from people earning less than $80,000 per annum.
We have been advised that there is no credible evidence of substantial abuse of this deduction. If credible evidence of systematic abuse emerges, then the Government will revisit this issue. Moreover the economic cost of this initiative is substantial. This was recognised by the previous Government which delayed the implementation of their proposal
- Labor's $1.8 billion Fringe Benefits Tax hit on the car industry. (Labor announced the measure on 16 July 2013 and documented it in the 2013 Economic Statement)
During the 2013 election the Coalition pledged not to continue with Labor's $1.8 billion Fringe Benefits Tax change that would make it harder for people to have a company or salary sacrificed vehicle. The Coalition Government today confirms it will not proceed with this measure.
- Tax on Superannuation Pensions – tax on earnings on super assets supporting retirement income streams (Announced in April 2013 and documented in the 2013‑14 Budget)
The Coalition Government will not proceed with Labor's announcement which would have taxed people's superannuation pension earnings above $100,000 in the draw‑down phase.
The complexity and compliance costs associated with this initiative are extreme and essentially undeliverable.
This is a demonstration of the Government's commitment to provide certainty for superannuation fund members by making no adverse unexpected changes to superannuation during our first term.
The Government acknowledges that not proceeding with these and other measures will negatively impact on the underlying cash balance by $2.4 billion over the current forward estimates period.
The Government will also amend three measures, with a Budget cost of $700 million over the forward estimates, including:
- Thin Capitalisation Changes – relating to tax structures that seek to shift profits through debt loading. (Announced as part of the 2013‑14 Budget)
The Coalition will not proceed with Labor's proposal to deny deductions made under section 25‑90 of the Income Tax Assessment Act 1997 because the revenue is essentially unrealisable and it would impose unreasonable compliance costs on Australian businesses. Australian companies have been able to claim deductions for interest and other debt‑related expenses for their overseas investment, thanks to a Coalition measure in 2001, and will be able to continue to do so now that the Coalition will not proceed with this measure. We will instead introduce a targeted anti‑avoidance provision after detailed consultation with stakeholders. Details of this consultation will be announced before the end of the year.
- Offshore Banking Unit (Announced as part of the 2013‑14 Budget)
The Government will not proceed with the part of this measure that excludes all related party transactions but have a targeted integrity measure to provide certainty for the industry. It will help Australian banks compete on a level playing field overseas, through access to a competitive tax rate, and attract activity to their Australian operations.
The Government will continue to work closely with stakeholders to develop targeted rules to address the integrity issues with the current rules. Consultation with industry will begin soon.
The Government will proceed with 18 un‑enacted measures, maintaining close to $11 billion in revenue over the forward estimates, including:
- Tobacco Tax Changes (Announced as part of the 2013‑14 Budget and the 2013 Economic Statement)
One measure indexes the tobacco excise and customs duty to Average Weekly Ordinary Time Earnings (AWOTE) instead of the Consumer Price Index (CPI). Indexing to AWOTE means that it will increase at a faster rate. The indexation occurs twice a year.
The second measure implements 4 additional increases to tobacco excise and customs duty on 1 December 2013, 1 September 2014, 1 September 2015, and 1 September 2016
- Net Medical Expenses Tax Offset (NMETO) phase out (Announced as part of the 2013‑14 Budget)
The NMETO provides an offset for people when their medical expenses are high. The phasing out will allow current claimants to remain eligible for the offset until 2014‑15.
The Government provides support for people with high medical expenses through Medicare safety nets. The NMETO provides no assistance to those with high medical expenses but no tax liability.
- Managed Investment Trusts
The new tax regime for Managed Investment Trusts along with the third tranche of the Investment Manager Regime reaffirms our commitment to growing Australia's financial services industry by making them more attractive in foreign markets. It will establish MITs in their own right with a transparent framework, aimed at driving demand.
- Farm finance – Support for farmers
The Government will support regional Australia by increasing the non‑primary production income eligibility threshold for Farm Management Deposits from $65,000 to $100,000.
Attachment
| Proceed as announced | |||||
|---|---|---|---|---|---|
| Item | Measure title and description | Announcement | Date of effect | Net financial impacts ($m, UCB) already provisioned in the forward estimates^ | |
| 1 | Anti‑smoking strategy — staged increases in excise on tobacco and tobacco‑related products. 12.5 per cent increases in tobacco excise on 1 Dec 2013, and 1 Sept 2014, 2015 and 2016. | EconomicStatement 2013 | 1‑Dec‑13 | 5,240.0 | |
| 2 | Protecting the corporate tax base from erosion and loopholes — targeting the deduction for exploration to genuine exploration activity. Restricts the immediate deduction for the cost of acquiring mining rights, so that it is only available for genuine exploration activities (as originally intended). | 2013‑14 Budget14‑May‑2013 | 14‑May‑13 | 1,100.0 | |
| 3 | A plan for Australian jobs — research and development tax incentive — better targeting. Denies access to the R&D tax incentive for large companies with incomes of $20 billion or more. |
2013‑14 Budget14‑May‑2013Media release17‑Feb‑13 | 1‑Jul‑13 | 1,050.0 | |
| 4 | Personal income tax — net medical expenses tax offset phase out. Proceeds with phasing out the net medical expenses tax offset, with transitional arrangements for current claimants. | 2013‑14 Budget14‑May‑2013 | 1‑Jul‑13 | 963.5 | |
| 5 | Excise and excise‑equivalent customs duty — index tobacco excise to average weekly ordinary time earnings. Indexes tobacco excise to AWOTE instead of CPI, from March 2014. |
2013‑14 Budget14‑May‑2013 | 1‑Mar‑14 | 740.0 | |
| 6 | Protecting the corporate tax base from erosion and loopholes — closing loopholes in the consolidation regime. Improves the integrity of the consolidation regime and prevents entities claiming double deductions. | 2013‑14 Budget14‑May‑2013 | 14‑May‑13 | 540.0 | |
| 7 | Tax compliance — improving compliance through third party reporting and data matching. Enhances the information reported to the ATO to improve taxpayer compliance. | 2013‑14 Budget14‑May‑2013 | 1‑Jul‑14 | 354.0 | |
| 8 | Superannuation reforms — transfer of lost member accounts to the ATO. Increases the threshold below which lost accounts are required to be transferred to the ATO from $2,000 to $4,000, and then to $6,000. | 14 May 2013 and2 August 2013 | 31‑Dec‑15 | 815.9 | |
| 9 | Protecting the corporate tax base from erosion and loopholes — improving the integrity of the foreign resident capital gains tax regime: withholding tax regime and technical amendments. Addresses issues in administering Australia's foreign capital gains tax regime; and also clarifies the operation of Australia's taxing rights over indirect Australian real property interests. | 2013‑14 Budget14‑May‑2013 | 1‑Jul‑1614‑May‑13 | 219.2 | |
| 10 | Managed investment trusts — government response to the Board of Taxation review. Introduces a new tax regime for managed investment trusts which will increase certainty and reduce compliance costs. | 2009‑10 Budget2010‑11 Budget2012‑13 MYEFO | 1‑Jul‑14 | ‑195.0 | |
| 11 | Protecting the corporate tax base from erosion and loopholes — preventing 'dividend washing.' Closes a loophole that enables sophisticated investors to 'double dip' on franking credits. | 2013‑14 Budget | 1‑Jul‑13 | 60.0 | |
| 12 | Farm finance — support for farmers — farm management deposits scheme. Increases the off‑farm income exclusion threshold and facilitates consolidation of deposits. | 2013‑14 Budget14‑May‑2013Media release27‑April‑13 | 1‑Jul‑14 | ‑13.0 | |
| 13 | Philanthropy — updating the list of specifically listed deductible gift recipients— Bali Peace Park. Allows Bali Peace Park to collect gifts that are tax deductible for the donor. | EconomicStatement 2013 | 16‑Dec‑11 | ‑0.4 | |
| 14 | Philanthropy — updating the list of specifically listed deductible gift recipients — National Arboretum Canberra. Allows the National Arboretum Canberra to collect gifts that are tax deductible for the donor. | PEFO 2013 | 1‑Jul‑13 | .. | |
| 15 | Foreign Account Tax Compliance Act — Australia and the US commence discussions. To work towards signing and enacting a treaty‑status IGA with the US to enable the financial sector to comply with US FATCA reporting rules. | Media ReleaseNovember 2012 | Royal Assent | 0.0 | |
| 16 | International tax — revised Australia‑Switzerland tax treaty. Gives force of law to the revised Australia‑Switzerland tax treaty. | EconomicStatement 2013 | 1‑Jul‑15 | 0.0 | |
| 17 | Managed investment trust withholding tax — providing certainty for foreign pension funds. Allows pension funds to access the managed investment trust withholding tax regime (as intended). | EconomicStatement 2013 | 1‑Jul‑08 | 0.0 | |
| 18 | International tax — investment manager regime prospective arrangements (element 3). Extends the conduit income measure to exempt foreign managed funds from tax on gains from the disposal of foreign non‑portfolio investments; and to exempt those funds from tax on gains from the disposal of certain portfolio Australian financial arrangements. | 2012‑13 Budget8‑May‑12Media release6‑Dec‑11 | 1‑Jul‑11 | * | |
| Total | 10,874.2 | ||||
| UCB = Underlying Cash Balance^ The financial impact of agreeing to proceed with these measures is zero since they are already provisioned in the forward estimates | |||||
| Proceed with amendment | |||||
| Item | Measure | Publication | Start date | Net financial impacts ($m, UCB) over forward estimates,as originally announced | Net financial impacts of decisions ($m, UCB) over forward estimates |
| 19 | Protecting the corporate tax base from erosion and loopholes — addressing aggressive tax structures that seek to shift profits by artificially loading debt into Australia — proceed with amendments.
Not proceeding with the abolishment of the section 25‑90 deduction will reduce compliance costs and red tape. |
2013‑14 BudgetMedia Release 71 of 14‑May‑13 | 1‑Jul‑14 | 1,490.0 | ‑600.0 |
| 20 | Protecting the corporate tax base from erosion and loopholes — closing loopholes in the Offshore Banking Unit regime – proceed with amendments. Addresses integrity issues associated with related party dealings and better targets the regime to genuine mobile financial sector activities. The Government will not proceed with the measure to exclude all related party dealings but instead will develop targeted rules to address integrity concerns. | 2013‑14 Budget14‑May‑13 | 1‑Oct‑13 | 320.0 | ‑100.0 |
| 21 | Proceed with previously announced measure to restrict GST refunds — proceed with amendments. Restricts refunds of overpaid GST. Amendments will address a recent AAT finding it doesn't have jurisdiction to consider refund matters. | 2012‑13 MYEFO | 17‑Aug‑12 | ‑2.0 | 0.0 |
| Total | 1,808.0* | ‑700.0 | |||
|
UCB = Underlying Cash Balance
|
|||||
| Do not proceed | |||||
| Item | Measure | Publication | Start date | Net financial impacts ($m, UCB) for not proceeding | |
| 22 | Fringe benefits tax — treatment of car fringe benefits – do not proceed. Does not proceed with an amendment to the fringe benefits arrangements for cars. | EconomicStatement 2013 | 1‑Apr‑14 | ‑1,794.9 | |
| 23 | Imposing a tax for earnings on superannuation assets supporting retirement income streams — do not proceed. Does not proceed with a tax on investment earnings above $100,000 p.a. on superannuation assets supporting retirement income streams. | 2013‑14 Budget14‑May‑13Media release4‑April‑13 | 1‑Jul‑14 | ‑313.0 | |
| 24 | Imposing a cap to work‑related self‑education expenses — do not proceed. Does not proceed with introducing an annual $2,000 cap on work‑related self‑education expense deductions. | 2013‑14 Budgetand EconomicStatement 2013 | 1‑Jul‑15 | ‑266.7 | |
| 26 | Reforms to retirement incomes — establishment of a council of superannuation guardians — do not proceed. Does not proceed with the creation of the Super Council or the Charter of Superannuation Adequacy and Sustainability. | EconomicStatement 2013 | Royal Assent | 7.5 | |
| 27 | Luxury car tax — tax‑free importation of cars by public museums — do not proceed. Does not proceed with legislative amendments to allow public museums and other eligible entities to import cars free of the luxury car tax. | 2011‑12 Budget11‑May‑11 | Royal Assent | 1.5 | |
| 28 | Philanthropy — updating the list of specifically listed deductible gift recipients — Tasmanian Centre for Global Learning — do not proceed. Does not proceed with allowing Tasmanian Centre for Global Learning to collect gifts that are tax deductible for the donor. |
PEFO 20138‑Aug‑13 | 1‑Jul‑13 | .. | |
| 29 | Low value import threshold — set threshold by regulation — do not proceed. Does not proceed with the separation of the low value import threshold for customs duty and GST purposes as the Government has not yet considered the business case on the low value import threshold. | Media Release 152 of 3‑Jan‑12 | N.A. | 0.0 | |
| Total | ‑2,365.6 |
UCB = Underlying Cash Balance; N.A. = not applicable