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Clean Energy (Income Tax Rates and Other Amendments) Bill 2013

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2013

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Clean Energy (Income Tax Rates

and Other Amendments) Bill 2013

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by the authority of the

Treasurer, the Hon J. B. Hockey MP)

 



T able of contents

Glossary.............................................................................................................. 1

General outline and statements..................................................................... 3

Chapter 1               Repeal of the 2015-16 income tax cuts........................... 7

I ndex................................................................................................................. 11

 

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The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

ACCC

Australian Competition & Consumer Commission

Carbon Tax Repeal Bills

The package of bills that provide for the repeal of the carbon tax:

·          Clean Energy Legislation (Carbon Tax Repeal) Bill 2013

·          True-up Shortfall Levy (General) (Carbon Tax Repeal) Bill 2013

·          True-up Shortfall Levy (Excise) (Carbon Tax Repeal) Bill 2013

·          Customs Tariff Amendment (Carbon Tax Repeal) Bill 2013

·          Excise Tariff Amendment (Carbon Tax Repeal) Bill 2013

·          Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Carbon Tax Repeal) Bill 2013

·          Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Carbon Tax Repeal) Bill 2013

CE Act

Clean Energy Act 2011

Charges Acts

Clean Energy (Unit Shortfall Charge - General) Act 2011;

Clean Energy (Unit Issue Charges - Fixed Charge) Act 2011;

Clean Energy (Unit Issue Charges - Auctions) Act 2011;

Clean Energy (Charges - Excise) Act 2011;

Clean Energy (Charges - Customs) Act 2011

ITAA

Income Tax Assessment Act 1997

JCP

Jobs & Competitiveness Program

LITO

low-income tax offset

SGG

Synthetic Greenhouse Gas



Background

Repealing the carbon tax

The Australian Government has a clear commitment to repeal the carbon tax to:

•        boost Australia’s economic growth, increase jobs and enhance Australia’s international competitiveness;

•        remove the cost of living pressures on households resulting from the carbon tax;

•        remove the cost pressures faced by business as a result of the carbon tax; and

•        remove unnecessary, burdensome and costly regulation.

The Government will implement its commitment to remove the carbon tax through introducing a series of bills (together the Carbon Tax Repeal Bills) that will repeal the legislation imposing the carbon tax.  This Bill repeals the personal income tax cuts that were legislated to commence on 1 July 2015, as well as repealing the low-income tax offset that were legislated to commence on 1 July 2015.

The structure of the broader carbon tax repeal package is explained in Table I .

Table I:  Broader Carbon Tax Repeal Package

Bill

Description

Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 (the ‘Main Repeal Bill’)

The Main Repeal Bill:

•        repeals the Clean Energy Act 2011 (CE Act) and the related Charges Acts ( Clean Energy (Unit Shortfall Charge - General) Act 2011 ; Clean Energy (Unit Issue Charges - Fixed Charge) Act 2011 , Clean Energy (Unit Issue Charges - Auctions) Act 2011 , Clean Energy (Charges - Excise) Act 2011 , Clean Energy (Charges - Customs) Act 2011 ;

•        makes consequential amendments to other legislation referring to the CE Act and the carbon pricing mechanism;

•        provides for the collection of all carbon tax liabilities for 2012-13 and 2013-14;

•        introduces new powers for the Australian Competition & Consumer Commission (ACCC) to take action to ensure price reductions relating to the carbon tax repeal are passed on to consumers; and

•        makes arrangements for the finalisation and cessation of industry assistance through the Jobs & Competitiveness Program (JCP), the Energy Security Fund and the Steel Transformation Plan.

True-up Shortfall Levy (General) (Carbon Tax Repeal) Bill 2013

True-up Shortfall Levy (Excise) (Carbon Tax Repeal) Bill 2013

Technical Bills that provide for recovery of the value of over-allocated free carbon units through a constitutionally compliant levy.

Customs Tariff Amendment (Carbon Tax Repeal) Bill 2013

Excise Tariff Amendment (Carbon Tax Repeal) Bill 2013

Amends provisions to remove the equivalent carbon price imposed through excise equivalent customs duty on aviation fuel; and

Amends provisions to remove the equivalent carbon price imposed through excise duty on aviation fuel.

Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Carbon Tax Repeal) Bill 2013

Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Carbon Tax Repeal) Bill 2013

Repeals provisions imposing an equivalent carbon price through levies imposed on the import and manufacture of Synthetic Greenhouse Gases (SGGs).

Climate Change Authority (Abolition) Bill 2013

Abolishes the Climate Change Authority and the Land Sector Carbon & Biodiversity Board.

Clean Energy (Income Tax Rates and Other Amendments) Bill 2013

Repeals the personal income tax cuts that were legislated to commence on 1 July 2015, and repeals the associated amendments to the low-income tax offset.

Clean Energy Finance Corporation (Abolition) Bill 2013

Abolishes the Clean Energy Finance Corporation.

 



 

Repeal of the 2015-16 personal income tax cuts

This Bill amends the Clean Energy (Income Tax Rates Amendments) Act 2011 to repeal the personal income tax cuts that were legislated to commence on 1 July 2015. It also amends the Clean Energy (Tax Laws Amendments) Act 2011 to repeal associated amendments to the low-income tax offset that were legislated to commence on 1 July 2015.

Date of effect

The amendments commence on, and apply from, the day after this Bill receives the Royal Assent.

Proposal announced :

The Prime Minister, the Hon Tony Abbott MP, and the Minister for the Environment, the Hon Greg Hunt MP, announced the Government’s plan to repeal the carbon tax on Tuesday, 15 October 2013, reflecting the Coalition party’s longstanding and public commitment to this policy.

Financial impact

The repeal of the personal income tax cuts that were legislated to commence on 1 July 2015 has no additional revenue impact in the forward estimates period.

At Budget 2013-14, the start date for these income tax cuts was deferred to the income year in which the carbon price was estimated to exceed $25.40 (which at Budget 2013-14 was estimated to occur in 2018-19). The deferral of these income tax cuts provided a gain to revenue of $1.5 billion over the forward estimates period.

2013-14

2014-15

2015-16

2016-17

$0m

$0m

$0m

$0m

Compliance cost impact Nil.



 

Regulation Impact Statement

Since the Clean Energy (Income Tax Rates and Other Amendments) Bill 2013 will have no regulatory impact, there is no need to produce a separate Regulation Impact Statement (RIS) for this bill.

The general RIS for the repeal of the carbon tax is available in the Explanatory Memorandum for the Carbon Tax Repeal Bills .

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Clean Energy (Income Tax Rates and Other Amendments) Bill 2013

This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

This Bill amends the Clean Energy (Income Tax Rates Amendments) Act 2011 to repeal the personal income tax cuts that were legislated to commence on 1 July 2015. It also amends the Clean Energy (Tax Laws Amendments) Act 2011 to repeal associated amendments to the low-income tax offset that were legislated to commence on 1 July 2015.

Human rights implications

This Bill does not engage any of the applicable rights or freedoms.

Conclusion

This Bill is compatible with human rights as it does not raise any human rights issues.

Treasurer, the Hon Joe Hockey MP

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C hapter 1     

Repeal of the 2015-16 income tax cuts

Outline of chapter

1.1                   This Bill amends the Clean Energy (Income Tax Rates Amendments) Act 2011 to repeal the personal income tax cuts that were legislated to commence on 1 July 2015. It also amends the Clean Energy (Tax Laws Amendments) Act 2011 to repeal associated amendments to the low-income tax offset (LITO) that were legislated to commence on 1 July 2015.

Context of amendments

1.2                   Under the former Government’s Clean Energy Future plan, the personal income tax cuts that were legislated to commence on 1 July 2015 were intended to provide assistance for an expected higher floating carbon price in the 2015-16 income year.

1.3                   With the carbon tax removed, assistance in the form of future personal income tax cuts is no longer required.

1.4                   These amendments do not affect the personal income tax cuts that commenced from 1 July 2012.

Summary of new law

1.5                   This Bill repeals Part 2 of Schedule 1 to the Clean Energy (Income Tax Rates Amendments) Act 2011 to repeal the personal income tax cuts that were legislated to commence on 1 July 2015.

1.6                   The tax cuts were to be delivered by rolling more of the LITO into the statutory rates and thresholds. 

1.7                   This Bill also repeals Part 2 of Schedule 1 to the Clean Energy (Tax Laws Amendments) Act 2011 to repeal related amendments to the LITO that were legislated to commence on 1 July 2015. 

Comparison of key features of new law and current law

New law

Current law

There are no personal income tax cuts commencing on 1 July 2015, which entails:

Personal income tax cuts commence on 1 July 2015, which would entail:

•        the tax-free threshold remaining at $18,200;

•        the tax-free threshold increasing to $19,400;

•        the second personal marginal tax rate remaining at 32.5 per cent;

•        the second personal marginal tax rate increasing to 33 per cent;

•        the maximum value of the LITO remaining at $445;

•        the maximum value of the LITO falling to $300;

•        the withdrawal rate of the LITO remaining at 1.5 per cent; and

•        the withdrawal rate of the LITO falling to one per cent; and

•        the threshold below which a person may receive LITO remaining at a taxable income of $66,667.

•        the threshold below which a person may receive LITO increasing to a taxable income of $67,000.

Detailed explanation of new law

1.8                   Schedule 1 to this Bill repeals Part 2 of Schedule 1 to the Clean Energy (Income Tax Rates Amendments) Act 2011 [Schedule 1, item 2]

1.9                   Part 2 of Schedule 1 to the Clean Energy (Income Tax Rates Amendments) Act 2011 contained amendments to be made to subsection 3(1) and Clause 1 of Part I of Schedule 7 to the Income Tax Rates Act 1986 that were to apply to the 2015-16 income year and later income years. Those amendments were to increase the statutory tax-free threshold for individuals to $19,400, and to increase the second personal marginal tax rate to 33 per cent.

1.10               The amendments contained in this Bill mean that rather than the changes described above applying from the 2015-16 income year, the statutory tax-free threshold for individuals remains at $18,200, and the second personal marginal tax rate remains at 32.5 per cent. 

1.11               Schedule 1 to this Bill also repeals item 3 in the table in subsection 2(1) of the Clean Energy (Income Tax Rates Amendments) Act 2011 , which provided for Part 2 of Schedule 1 to commence on 1 July 2015. [Schedule 1, item 1]

1.12               Schedule 2 to this Bill repeals Part 2 of Schedule 1 to the Clean Energy (Tax Laws Amendments) Act 2011 [Schedule 2, item 2]

1.13               Part 2 of Schedule 1 to the Clean Energy (Tax Laws Amendments) Act 2011 contained amendments to subsection 159N of the Income Tax Assessment Act 1936 that were to apply from 2015-16. Those amendments were to decrease the maximum amount of the LITO to $300, increase the threshold in subsection 159N(1) to $67,000, and decrease the withdrawal rate of the LITO in subsection 159N(2) to one per cent.

1.14               The amendments contained in this Bill mean that rather than the changes described above applying from the 2015-16 income year, the maximum amount of the LITO remains at $445, the threshold in subsection 159N(1) remains at $66,667, and the withdrawal rate of the LITO in subsection 159N(2) remains at 1.5 per cent.

1.15               Schedule 2 to this Bill also repeals item 3 in the table in subsection 2(1) of the Clean Energy (Tax Laws Amendments) Act 2011 , which provided for the amendments to Part 2 of Schedule 1 to commence on 1 July 2015. [Schedule 2, item 1]

Application and transitional provisions

1.16               These amendments commence on the day after this Bill receives Royal Assent, and also apply from that date. [Clause 2]

Consequential amendments

1.17               There are no consequential amendments made as a result of this measure.

 

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Clauses

Bill reference

Paragraph number

Clause 2

1.16

Schedule 1:  Clean Energy (Income Tax Rates Amendments) Act 2011

Bill reference

Paragraph number

Item 1

1.11

Item 2

1.8

Schedule 2:  Clean Energy (Tax Laws Amendments) Act 2011

Bill reference

Paragraph number

Item 1

1.15

Item 2

1.12