7 December 2005

Child Care Rebate Assured in Tax Changes

Assistant Treasurer Mal Brough today moved to ensure parents who work less than 15 hours a week will continue to have access to the child care tax rebate.

Mr Brough introduced legislation into Parliament to allow parents to continue to receive the rebate if they work, train or study at some time during the week.

The Welfare to Work package made it a requirement that parents must work, train or study for at least 15 hours a week (or 30 hours over two weeks) to meet the child care benefit test, Mr Brough said.

The changes introduced into Parliament today will ensure that parents who work less than 15 hours a week will not need to satisfy the new hourly requirements and will continue to receive the child care tax rebate if they work, train or study at some time during the week.

This is one of a number of initiatives contained in the Tax Laws Amendment (2005 Measures No 6) Bill.

In addition, the legislation will give effect to the Government's announcement to amend the law to ensure certain not-for-profit organisations are not subject to tax on their mutual receipts, as a result of the Coleambally Federal Court decision handed down on 7 September 2004. The court decision effectively reversed the Tax Office's longstanding practice of allowing not-for-profit community organisations to rely upon the mutuality principle to exclude certain receipts from their assessable income, even though the members were precluded from receiving any surplus funds on a winding up.

The amendment will provide legislative backing for the Tax Office practice. Had the Government not made this change, the mutual receipts of 200,000 to 300,000 not-for-profit bodies including clubs, motoring associations, professional organisations and some friendly societies would potentially become liable for income tax.

In other changes, medical and dental procedures which are considered to be solely cosmetic will no longer be considered eligible medical expenses for the purposes of the Medical Expenses Offset (MEO).

Taxpayers claiming the MEO in respect of cosmetic procedures for legitimate medical or dental needs such as skin grafts, reconstructive surgery or braces will not be affected by this change, Mr Brough said.

The MEO is available to resident taxpayers at a rate of 20 per cent of any net medical expenses above the $1500 threshold in an income year. The MEO does not apply to any proportion of expenses reimbursed by Medicare or a health insurance fund.

The consolidation regime will also be modified to allow consolidated groups to round the available fraction for a bundle of losses to the first non-zero digit, if rounding to the three decimal places would result in an available fraction of nil. This will improve the consolidation regime by ensuring that the available fraction rounding rules do not prevent consolidated groups from being able to deduct losses held by a joining entity at the joining time.

The legislation also adds seven new organisations to the current list of deductible gift recipients and extends the period of DGR listing for one organisation.