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Monday, 19 March 2018
Page: 1370


Senator SESELJA (Australian Capital TerritoryAssistant Minister for Science, Jobs and Innovation) (12:58): by leave—I move request (1) and amendment (2) on sheet GU143 together:

Amendment

(2) Schedule 1, item 66, page 31 (lines 16 to 20), omit subitem (1), substitute:

(1) Despite subsection 418-100(2) of the Income Tax Assessment Act 1997, as inserted by item 2 of this Schedule, an application to the Commissioner for a determination allocating exploration credits to an entity for the 2017-18 income year must be made during the period of one month starting on the later of:

(a) the eleventh business day after the day on which this Act receives the Royal Assent; and

(b) the day on which this item commences.

Request

That the House of Representatives be requested to make the following amendment:

(1) Schedule 1, item 2, page 8 (lines 13 to 23), omit section 418-82, substitute:

418 -82 When does an entity have an unused allocation of exploration credits from an income year

(1) An entity has an unused allocation of exploration credits from an income year if each of the following:

(a) the entity's *exploration credits allocation for the income year;

(b) the total credits issue for investment in the entity for the income year;

exceeds the total amount of all *exploration credits created by the entity for the income year.

(2) The amount of the unused allocation of exploration credits from the income year is the lesser of:

(a) the amount by which the amount mentioned in paragraph (1) (a) exceeds the total amount of all *exploration credits created by the entity for the income year; and

(b) the amount by which the amount mentioned in paragraph (1) (b) exceeds the total amount of all *exploration credits created by the entity for the income year.

(3) If neither the amount mentioned in paragraph (1) (a) nor (1) (b) exceeds the total amount of all *exploration credits created by the entity for the income year, there is no unused allocation of exploration credits from the income year, and the amount of any unused allocation of exploration credits from the income year is nil.

(4) In this section:

total credits issue for investment in the entity (the minerals explorer) for an income year means the total of all *exploration credits that may be issued by the minerals explorer to all other entities in relation to *exploration investment made by those other entities in the minerals explorer in the income year if section 418-120 is complied with.

Parliamentary Counsel

Statement of reasons: why certain amendments should be moved as requests

Section 53 of the Constitution is as follows:

Powers of the Houses in respect of legislation

53. Proposed laws appropriating revenue or moneys, or imposing taxation, shall not originate in the Senate. But a proposed law shall not be taken to appropriate revenue or moneys, or to impose taxation, by reason only of its containing provisions for the imposition or appropriation of fines or other pecuniary penalties, or for the demand or payment or appropriation of fees for licences, or fees for services under the proposed law.

The Senate may not amend proposed laws imposing taxation, or proposed laws appropriating revenue or moneys for the ordinary annual services of the Government.

The Senate may not amend any proposed law so as to increase any proposed charge or burden on the people.

The Senate may at any stage return to the House of Representatives any proposed law which the Senate may not amend, requesting, by message, the omission or amendment of any items or provisions therein. And the House of Representatives may, if it thinks fit, make any of such omissions or amendments, with or without modifications.

Except as provided in this section, the Senate shall have equal power with the House of Representatives in respect of all proposed laws.

Amendment 1

Division 418 of the Income Tax Assessment Act 1997 (the ITAA 97) provides a refundable tax offset under section 67-23 of the ITAA 97 to taxpayers who invest in a minerals explorer, by allowing the minerals explorer to issue those investors with exploration credits.

The Bill extends the refundable tax offset for a further 4 years. Under the Bill, the minerals explorer may apply for an exploration credits allocation for a particular year and cannot issue more credits than allocated. The minerals explorer also cannot issue more exploration credits for an income year than would relate to investment in the minerals explorer during that year. However, if allocation is not used up in one year, investors in that year are given priority in the following year, up to the limit of the unused allocation of exploration credits. Because the allocation of exploration credits for the first year may exceed the amount of exploration credits that would relate to investment in that year, investors in the second year may miss out on exploration credits that could never have been issued to first year investors anyway.

Amendment 1 addresses this problem by redefining the unused allocation of exploration credits. Under the amendment, exploration credits are not "wasted" and are instead available to investors in the second year. As a result, the amount of exploration credits that may result in a refundable tax offset is greater under the amendment than it would be under the Bill (and, given that the Bill extends the offset over 4 more years, under the Act).

The refundable tax offset could entitle a taxpayer to a refund under Division 3A of Part IIB of the Taxation Administration Act 1953. This would increase the amount of expenditure out of the Consolidated Revenue Fund under the standing appropriation in section 16 of the Taxation Administration Act 1953. It is for this reason that the amendment is covered by section 53.

Statement by the Clerk of the Senate pursuant to the order of the Senate of 26 June 2000

Amendment (1)

This amendment will allow the unused allocation of exploration credits for an income year to be available to investors in the subsequent year, thereby increasing the amount of exploration credits available as a refundable tax offset.

The statement of reasons for moving the amendment as a request advises that it will increase expenditure under the standing appropriation in section 16 of the Taxation Administration Act 1953.

The Senate has long followed the practice that it should treat as requests amendments that would result in increased expenditure under a standing appropriation. If that is the effect of the amendment, then it is in accordance with the precedents of the Senate that it be moved as a request.

Senator SESELJA: These two technical amendments are proposed to clarify the operation of the new scheme. The amendments adjust the application period for the 2017-18 income year. The bill previously provided that junior explorers could apply to the ATO from 1 February 2018 for an allocation of credits. It is necessary to adjust the application period as this time frame has passed. The new application period will begin on 11th business day after this bill receives royal assent, or the day of the commencement of the amendments if this is later. Applications will be open for a month. Under the JMEI, the Commissioner of Taxation allocates credits between junior explorers on a first come, first served basis until the annual exploration cap for an income year is reached. The amendments clarify the definition of 'unused allocation of exploration credits' to ensure the scheme operates as intended. Where an explorer raises less capital than expended, they will not be prevented from issuing credits to investors in the following year, to the extent of the shortfall. For example, where an explorer receives an allocation of credits to raise $1 million of capital but is only able to raise $600,000 of capital, only those credits that relate to the $600,000 can be issued to investors. Those credits need to be issued to first-year investors before credits can be issued to investors in subsequent years.