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Tax Laws Amendment (2008 Measures No. 1) Bill 2008

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2008

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

SENATE

 

 

 

TAX LAWS AMENDMENT (2008 MEASURES No. 1) BILL 2008

 

 

 

SUPPLEMENTARY EXPLANATORY MEMORANDUM

 

Amendments to be Moved on Behalf of the Government

 

 

(Circulated by the authority of the

Treasurer, the Hon Wayne Swan MP)

 



The following abbreviations are used throughout this supplementary explanatory memorandum.

Abbreviation

Definition

GST Act

A New Tax System (Goods and Services Tax) Act 1999

GST

goods and services tax

ITAA 1997

Income Tax Assessment Act 1997



G eneral outline and financial impact

Amendment 2 — maintaining existing GST concessions for political parties, independent members and independent candidates

Amendment 2 amends Schedule 1 to the Bill to ensure that political parties, independent members and independent candidates will not lose certain goods and services tax (GST) concessions as a consequence of the removal of income tax deductibility for gifts or contributions to these entities.   

Date of effect The changes made by Amendment 2 will commence when Schedule 1 commences.

Proposal announced Announced in Budget Paper No. 2 of the 2008-09 Budget.

Financial impact This amendment has no financial impact.

Compliance cost impact Low.

Amendments 1 and 3 — removal of Schedules 2 to 6

Amendment 3 removes Schedules 2 to 6 to the Bill.  The amendments in these Schedules were added to Tax Laws Amendment (2008 Measures No. 2) Bill 2008 as Schedules 7 to 11 by amendment in the House of Representatives on 14 May 2008. 

Amendment 1 makes a consequential change to the commencement provision of the Bill.

Date of effect Not applicable.

Proposal announced Not previously announced.

Financial impact These amendments have no financial impact.

Compliance cost impact Nil.

 



1     C hapter 1

Amendments to the Tax Laws Amendment (2008 Measures No. 1) Bill 2008

Explanation of amendments

Amendments 1 and 3

.1       Amendment 3 opposes Schedules 2 to 6.

.2       Amendment 1 omits the Commencement Table, which is replaced with the words ‘This Act commences on the day on which it receives the Royal Assent’. 

.3       There is no longer a need for the Commencement Table, given amendment 3, which opposes Schedules 2 to 6 to the Bill.  The new commencement provision preserves the effect of the existing commencement provision for Schedule 1 (Political contributions and gifts), namely the date on which the Bill receives Royal Assent.

Amendment 2

.4       Items 3 and 9 of Schedule 1 to the Bill remove income tax deductibility for donations to political parties and independent members and independent candidates.  As a result political parties, independent members and independent candidates no longer meet the definition of a ‘gift-deductible entity’ in section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).   As a consequence political parties, independent members and independent candidates lose certain goods and services tax (GST) concessions available to gift-deductible entities in the GST Act.  This amendment restores the ability of political parties, independent members and independent candidates to avail themselves of these GST concessions.

.5       The GST concessions in question enable gift-deductible entities to:

2         hold GST-free raffles or bingo games;

3         treat certain other fund-raising events as input-taxed;

4         receive input tax credits for certain reimbursements made to volunteer workers of the gift-deductible entity;

5         make GST-free supplies for nominal consideration in certain circumstances;

6         make GST-free supplies of second-hand goods (where the goods were donated to, or supplied to, the gift-deductible entity GST-free by another gift-deductible entity);

7         prevent donors requiring adjustments to their input tax credits for making supplies to the entity;

8         account for GST on a cash basis, regardless of turnover;

9         treat branches of a gift-deductible entity, where the gift-deductible entity is a non-profit body, as separate non-profit sub-entities.  This enables the branches to be treated as separate entities for GST purposes.  As a result one or more sub-entities may fall below the GST registration threshold for non-profit organisations when the complete entity would exceed the registration threshold; and

10     assist a trust to form a GST group with other entities.  If a trust only makes distributions to a gift-deductible entity or certain other entities, the trust may be able to form a GST group with other entities.  Intra group transactions are generally ignored for GST purposes.

.1       This amendment replaces the term ‘gift-deductible entity’ with the term ‘concessional entity’ in the GST Act and defines a concessional entity as an entity to which a taxpayer may make a gift or contribution that is deductible to the taxpayer under Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997) or a political party, independent member or independent candidate.  Concessional entities become entitled to the same GST concessions under the GST Act as gift-deductible entities.

.2       This amendment also inserts definitions of ‘independent member’ and ‘independent candidate’ into section 195-1 of the GST Act.  These definitions are intended to have a similar scope to the definitions of ‘independent member’ and ‘independent candidate’ in Subdivision 30-DA of the ITAA 1997 that are repealed.