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Taxation Laws Amendment (CPI Indexation) Bill 1999
Bills Digest No. 141 1998-99
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official le gal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Taxation Laws Amendment (CPI Indexation) Bill 1999
Commencement: Royal Assent (Items 3 and 4 of Schedule 1, however, make technical amendments to the Fringe Benefits Tax Assessment Act 1986 and are taken to have commenced on the day on which the Taxation Laws Amendment (FBT Cost of Compliance) Act 1995 received Royal Assent).
The purpose of this Bill is to ensure that falls in the Consumer Price Index (CPI) do not disadvantage taxpayers in relation to fringe benefits tax on car parking arrangements, the level of c ertain indexed income tax rebates under the Income Tax Assessment Act 1936 and the frequency of sales tax remittances. The Bill also makes some technical amendments to the Fringe Benefits Tax Assessment Act 1986 .
The CPI fell by 0.2 per cent i n the 12 months to the March Quarter 1998. Furthermore, the average level of the CPI for the four quarters to 31 March 1998 was 0.1 per cent lower than the average for the preceding four quarters. This fall in the CPI has implications under the current law for assessing fringe benefits tax on car parking arrangements, determining the maximum levels of certain income tax rebates and deciding how frequently sales tax returns must be lodged and, accordingly, sales tax remitted.
The 1998-99 Budget addressed the issue of falls in the CPI and the proposed amendments give effect to this aspect of the Budget.
Section 39A of the Fringe Benefits Tax Assessment Act 1986 provides that fringe benefits tax (FBT) is payable by employers that provide car parking facilities within one kilometre of a commercial parking station where the parking station ordinarily charges more than the CPI-indexed threshold amount for all-day car parking at the start of the FBT year. As the threshold amount is currently indexed to the CPI, it would be reduced when the CPI falls in the twelve months before the start of the FBT year, such as the 0.2 per cent fall in the 12 months to the March Quarter 1998. This would result in affected employers having an increased FBT liability.
Section 159HA of the Income Tax Assessment Act 1936 provides an indexation formula for establishing the level of certain concessional rebates for the 1990-91 income year and years after that. The formula uses the average of the CPI for the last four quarters, which in the four quarters to 31 March 1998 was 0.1 per cent lower than the average for the preceding four quarters, with the result that the dollar value of these rebates would be reduced.
Section 62 of the Sales Tax Assessment Act 1992 allows a person to remit sales tax on a quarterly basis (rather than a monthly basis) if their sales tax liability for the previous financial year did not exceed a threshold amount for the current year, and they either have no outstanding liability or they were a ‘quarterly remitter’ for the previous quarter. The formula used to calculate the threshold uses the average of the CPI over the last four quarters, which in the four quarters to 31 March 1998 was 0.1 per cent lower than the average for the preceding four quarters, with the result that the threshold would be reduced and more taxpayers would have to remit sales tax on a monthly basis rather than a quarterly basis.
Schedule 1 amends the Fringe Benefits Tax Assessment Act 1986 (FBTA Act) in relation to car parking fringe benefits. Section 39A of the FBTA Act provides that FBT is payable by employers that provide car parking facilities for employees where a commercial parking station is located within a 1 kilometre radius, and the station usually charges more than a threshold amount for all-day car parking on the first business day of the FBT year. The threshold amount is indexed to the CPI, and under the current provision of paragraph 39A(2)(b) of the FBTA Act would be reduced if the CPI falls in the twelve months prior to the start of the FBT year.
Item 1 inserts new subsection 39A(2A) into the FBTA Act to provide that the car parking threshold will be adjusted by a factor of 1 (that is, it will remain at the previous year’s level) if the CPI falls. The amendment takes effect in relation to each fringe benefits tax year starting on or after 1 April 1998 ( item 2 ). The threshold amount for the 1998-99 FBT year will therefore remain at $5.25 per day, as it was in 1997-98.
Item 3 and item 4 make technical amendments to the Fringe Benefits Tax Assessment Act which apply in relation to each FBT year starting on or after 1 April 1995 ( item 5).
Schedule 2 amends section 159HA of the Income Tax Assessment Act 1936 (ITA Act) in relation to certain concessional income tax rebates. Section 159HA was inserted by the Taxation Laws Amendment (Rates and Rebates) Act 1989 which commenced on 21 June 1989. It sets out the basis for calculating the maximum level of rebate allowable for the following rebates:
- Dependant spouse (without child), child-housekeeper (with and without child), invalid relative, taxpayer’s parent or parent-in-law (section 159J)
- sole parent (section 159K), and
- housekeeper (with and without child) (section 159L).
Subsection 159HA(3) provides a formula for working out the indexation factor which is used to establish the level of concessional rebates for the 1990/91 income years and later years, using the average of the CPI for the four quarters ending with the 31 March quarter. The effect of this would be to reduce the amount of rebate if the average CPI as calculated fell.
Item 1 of Schedule 2 inserts new subsection 159HA(6A) into the Act. The new subsection provides that if the indexation factor is less than 1.000, which occurred when the average level of the CPI for the four quarters to 31 March 1998 was 0.1 per cent lower than the average for the preceding four quarters, the maximum rebate amount for each of the affected rebates will not fall. The rebate levels for the 1998-99 year of income will therefore be the same as the levels for the 1997-98 year.
Item 2 provides that the amendment applies to assessments for the 1998-99 year of income and later years of income.
Schedule 3 amends the Sales Tax Assessment Act 1992 . Section 62(2) of the STA Act currently allows taxpayers to lodge sales tax returns on a quarterly basis if their liability does not exceed a certain threshold. The formula for calculating the threshold is set out in section 62(3). Where the liability is higher than this threshold, sales tax returns must be lodged on a monthly basis. The threshold is indexed to the CPI, with the result that if the average CPI as calculated falls, the threshold is lowered and a greater number of taxpayers will have to lodge sales tax returns on a monthly basis.
Item 2 of Schedule 3 inserts new subsection 62(5A) into the STA Act, so that where there is a decrease in the CPI, the quarterly remitter threshold for the year is the same as that for the financial year immediately before. The amendment applies to the quarterly remitter threshold for the 1998-99 financial year and later financial years ( item 3 ). Its effect is to maintain the threshold at the 1997-98 level of $57,570.
The proposed amendments do not include a mechanism such that any decrease in the CPI must offset subsequent CPI increases before any consequential increases in the relevant thresholds and rebates occur. The legal position is therefore that any increase in the CPI will increase the relevant thresholds and rebates.