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Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 1) Amendment (National Disability Insurance Scheme Funding) Bill 2017

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2016-2017

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

HOUSE OF REPRESENTATIVES

 

medicare levy amendment (national disability insurance scheme funding) Bill 2017

Fringe Benefits Tax Amendment (National Disability Insurance Scheme Funding) Bill 2017

Income Tax Rates Amendment (National Disability Insurance Scheme Funding) Bill 2017

Superannuation (Excess Non-concessional Contributions Tax) Amendment (National Disability Insurance Scheme Funding) Bill 2017

Superannuation (Excess Untaxed Roll-over Amounts Tax) Amendment (National Disability Insurance Scheme Funding) Bill 2017

Income Tax (TFN Withholding Tax (ESS)) Amendment (National Disability Insurance Scheme Funding) Bill 2017

Family Trust Distribution Tax (Primary Liability) Amendment (National Disability Insurance Scheme Funding) Bill 2017

Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 1) Amendment (National Disability Insurance Scheme Funding) Bill 2017

Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 2) Amendment (National Disability Insurance Scheme Funding) Bill 2017

Treasury Laws Amendment (Untainting Tax) (National Disability Insurance Scheme Funding) Bill 2017

Nation-building funds repeal (National Disability Insurance scheme funding) Bill 2017

 

EXPLANATORY MEMORANDUM

 

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP and Minister for Finance, Senator the Hon Mathias Cormann)





Table of contents

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

General outline and financial impact............................................................ 3

Chapter 1               Change to the Medicare levy rate...................................... 7

Chapter 2               Closure of the Building Australia and the Education Investment Funds 25

 

 



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

Abbreviation

Definition

ITAA 1936

Income Tax Assessment Act 1936

ITAA 1997

Income Tax Assessment Act 1997

TFN

tax file number

The Board

Future Fund Board of Guardians



Change to the Medicare levy rate

Schedule 1 to the Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017 amends the Medicare Levy Act 1986 to increase the Medicare levy rate from 2 to 2.5 per cent of taxable income for the 2019-20 income year and later income years.

Schedule 1 to each of the following Bills incorporates the change in the Medicare levy rate into other Acts setting tax rates that take the rate of Medicare levy into account:

•        Fringe Benefits Tax Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Income Tax Rates Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Superannuation (Excess Non-concessional Contributions Tax) Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Superannuation (Excess Untaxed Roll-over Amounts Tax) Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Income Tax (TFN Withholding Tax (ESS)) Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Family Trust Distribution Tax (Primary Liability) Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 1) Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 2) Amendment (National Disability Insurance Scheme Funding) Bill 2017; and

•        Treasury Laws Amendment (Untainting Tax) (National Disability Insurance Scheme Funding) Bill 2017.

Date of effect : This measure applies to the 2019-20 income year and later income years. The amendments to the Fringe Benefits Tax Act 1986 apply to the year of tax beginning on 1 April 2019 and later years of tax.

Proposal announced : This measure was announced by the Treasurer as part of the 2017-18 Budget on 9 May 2017.

Financial impact This measure is estimated to result in a gain to revenue of $8,200 million over the forward estimates period comprising:

2016-17

2017-18

2018-19

2019-20

2020-21

-

-

$400m

$3,550m

$4,250m

- Nil

Human rights implications : These Bills do not raise any human rights issues. See Statements of Compatibility with Human Rights , paragraphs 1.48 to 1.87.

Compliance cost impact : Low.

Closure of the Building Australia and the Education Investment Funds

The Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017 implements the Government’s 2016-17 Mid-Year Economic and Fiscal Outlook decision to not proceed with the Asset Recycling Fund. The Bill provides for the repeal of the Nation-building Funds Act 2008 . Uncommitted funds from the Building Australia Fund and the Education Investment Fund will subsequently be credited to the National Disability Insurance Scheme Savings Fund Special Account when it is established.

The Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017 also makes consequential amendments to:

•    COAG Reform Fund Act 2008 ;

•    Future Fund Act 2006 ;

•    DisabilityCare Australia Fund Act 2013 ;

•    Health Insurance Act 1973 ; and

•    Medical Research Future Fund Act 2015 .

Date of effect : The closure of the Building Australia Fund and the Education Investment Fund will take effect from the date of the repeal of the Nation-building Funds Act 2008 , which will be fixed by Proclamation.

Proposal announced : The Government announced the closure of the Building Australia Fund and the Education Investment Fund, as part of the 2016-17 Mid-Year Economic and Fiscal Outlook measure, Asset Recycling Fund - not proceeding , on 19 December 2016.

Financial impact : The closure of the Building Australia Fund and the Education Investment Fund is part of the 2016-17 Mid-Year Economic and Fiscal Outlook measure Asset Recycling Fund - not proceeding, which had the following total impact on fiscal balance:

2016-17

2017-18

2018-19

2019-20

2020-21

-

$23m

$29m

$29m

-

- Nil

Between them, the uncommitted balances of the Building Australia Fund and the Education Investment Fund, will contribute in excess of $7.2 billion to the National Disability Insurance Scheme Savings Fund Special Account when it is established.

Human rights implications : These Bills do not raise any human rights issues. See Statements of Compatibility with Human Rights , paragraphs 2.43 to 2.46.

Compliance cost impact : Low.

 



Chapter 1          

Change to the Medicare levy rate

Outline of chapter

1.1                   Schedule 1 to the Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017 amends the Medicare Levy Act 1986 to increase the Medicare levy rate from 2 to 2.5 per cent of taxable income for the 2019-20 income year and later income years.

1.2                   Schedule 1 to each of the following Bills (in this Chapter referred to as the supporting Bills) incorporates the change in the Medicare levy rate into other Acts setting tax rates that take the rate of Medicare levy into account:

•        Fringe Benefits Tax Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Income Tax Rates Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Superannuation (Excess Non-concessional Contributions Tax) Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Superannuation (Excess Untaxed Roll-over Amounts Tax) Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Income Tax (TFN Withholding Tax (ESS)) Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Family Trust Distribution Tax (Primary Liability) Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 1) Amendment (National Disability Insurance Scheme Funding) Bill 2017;

•        Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 2) Amendment (National Disability Insurance Scheme Funding) Bill 2017; and

•        Treasury Laws Amendment (Untainting Tax) (National Disability Insurance Scheme Funding) Bill 2017.

Context of amendments

1.3                   Th e National Disability Insurance Scheme Act 2013 established the National Disability Insurance Scheme. The National Disability Insurance Scheme ensures that Australians with permanent and significant disability get the support they need, and will allow them to live with dignity and exercise choice and control in accessing the services they require.

1.4                   The Government is increasing the Medicare levy rate by half a percentage point from 2 per cent to 2.5 per cent to fund the Commonwealth’s contribution to the National Disability Insurance Scheme. This provides certainty to people with permanent and significant disability and their families and carers that the National Disability Insurance Scheme will be funded in the long term.

1.5                   One-fifth of the revenue raised by the Medicare levy from 1 July 2019 will be credited to the National Disability Insurance Scheme Savings Fund Special Account, building on the Commonwealth’s share of the DisabilityCare Australia Fund, repurposed disability-related expenditure and other credits to the National Disability Insurance Scheme Savings Fund Special Account to ensure that the Commonwealth’s National Disability Insurance Scheme contribution is fully funded.

1.6                   The Medicare levy currently applies at a rate of 2 per cent to a person’s taxable income. Low income earners receive relief from the Medicare levy through the low income thresholds for singles, families, seniors and pensioners. A number of people are also exempt from the Medicare levy, including blind pensioners, low-income earners, non-residents for tax purposes and Medicare exemption certificate recipients.

1.7                   Increasing the Medicare levy rate also requires a number of consequential amendments to other tax rates that are linked to the top marginal rate and the Medicare levy. Consequential amendments include changes to fringe benefits tax, excess contributions tax and the tax withheld on bank accounts when the account holder has not provided their tax file number (TFN).

Summary of new law

1.8                   Schedule 1 to the Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017 amends the Medicare Levy Act 1986 to increase the Medicare levy rate from 2 per cent to 2.5 per cent for the 2019-20 income year and later income years.

1.9                   The supporting Bills amend taxing Acts that have tax rates that have been set taking the rate of the Medicare levy into account. They include amendments to the rate of fringe benefits tax, excess non-concessional contributions tax and tax withheld on bank accounts when the account holder has not provided their TFN.

Comparison of key features of new law and current law

New law

Current law

Medicare levy

The Medicare levy rate is 2.5 per cent for the 2019-20 income year and later income years.

The Medicare levy rate is 2 per cent.

Fringe benefits tax

The fringe benefits tax rate is 47.5 per cent for the 2019-20 year of tax and later years of tax.

The fringe benefits tax rate is 47 per cent.

Rate of income tax on No-TFN contributions income

The Medicare levy component of the rate of income tax on No-TFN contributions income is 2.5 per cent for the 2019-20 income year and later income years.

The Medicare levy component of the rate of income tax on No-TFN contributions income is 2 per cent.

Superannuation excess non-concessional contributions tax

The superannuation excess non-concessional contributions tax rate is 47.5 per cent for the 2019-20 financial year and later financial years.

The superannuation excess non-concessional contributions tax rate is 47 per cent.

Superannuation excess untaxed roll-over amounts tax

The Medicare levy component of the superannuation excess untaxed roll-over amounts tax rate is 2.5 per cent for the 2019-20 income year and later income years.

The Medicare levy component of the superannuation excess untaxed roll-over amounts tax rate is 2 per cent.

Income tax on ESS interest amounts

The Medicare levy component of the income tax (TFN withholding tax (ESS)) rate is 2.5 per cent for the 2019-20 income year and later income years.

The Medicare levy component of the income tax (TFN withholding tax (ESS)) rate is 2 per cent.

Family trust distribution tax

The family trust distribution tax rate is 47.5 per cent for the 2019-20 income year and later income years.

The family trust distribution tax rate is 47 per cent.

Trustee beneficiary non-disclosure tax (no. 1)

The trustee beneficiary non-disclosure tax (no. 1) rate is 47.5 per cent for the 2019-20 income year and later income years.

The trustee beneficiary non-disclosure tax (no. 1) rate is 47 per cent.

Trustee beneficiary non-disclosure tax (no. 2)

The trustee beneficiary non-disclosure tax (no. 2) rate is 47.5 per cent for the 2019-20 income year and later income years.

The trustee beneficiary non-disclosure tax (no. 2) rate is 47 per cent.

New business tax system untainting tax

The untainting tax rate is 48.5 per cent for the 2019-20 income year and later income years.

The untainting tax rate is 48 per cent.

Detailed explanation of new law

Medicare Levy

1.10               The Medicare levy is imposed by section 5 of the Medicare Levy Act 1986 .

1.11               Section 6 of the Medicare Levy Act 1986 specifies the rate of the Medicare levy. The rate of the Medicare levy payable is increased by these amendments from 2 per cent to 2.5 per cent for the following:

•        a person;

•        a person who is liable to be assessed on a share of the net income of a trust estate as a trustee under section 98 of the Income Tax Assessment Act 1936 (ITAA 1936);

•        a person who is liable to be assessed on the share of the net income of a trust estate as a trustee under section 99 or 99A of the ITAA 1936; and

•        a person in the capacity of a trustee of an attributable managed investment trust (also known as AMIT) in respect of amounts mentioned in subsections 276-405(2), 276-415(2) and 276-420(2) of the Income Tax Assessment Act 1997 (ITAA 1997).

[Schedule 1, item 1 of the Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017, subsections 6(1) to 6(6) of the Medicare Levy Act 1986]

1.12               Section 7 of the Medicare Levy Act 1986 provides that the Medicare levy phases-in at a rate of 10 cents in the dollar for particular taxpayers with taxable income between certain amounts.

1.13               The amendments also provide that the upper phase-in amount for the net income or part of the net income of a trust estate, where a person in the capacity of trustee of a trust is liable to assessment under section 99 of the ITAA 1936, increases from $520 to $555 to reflect the new Medicare levy rate. [Schedule 1, item 2 of the Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017, subsection 7(4) of the Medicare Levy Act 1986]

1.14               Section 8 of the Medicare Levy Act 1986 adjusts the Medicare levy liability for certain persons that have a spouse or dependants. Subsection 8(2) of that Act provides for the Medicare levy of those persons to be reduced if the family income of those persons exceeds the family income threshold but is within the phase-in range for the levy. The Medicare levy rate components of the formula specified for this purpose are amended to reflect the increased rate. [Schedule 1, item 3 of the Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017, subsection 8(2) of the Medicare Levy Act 1986]

Consequential amendments

1.15               The supporting Bills make consequential amendments to ratings Acts to update tax rates where those tax rates incorporate the rate of the Medicare levy.

Fringe benefits tax

1.16               Section 5 of the Fringe Benefits Tax Act 1986 imposes tax on the fringe benefits taxable amount of an employer for each year of tax (within the meaning of the Fringe Benefits Tax Assessment Act 1986 ), and section 6 sets the rate of that tax. Fringe benefits tax applies to an employer that provides an employee with a fringe benefit other than salary and wages, in respect of their employment.

1.17               The fringe benefits tax rate is increased in respect of the fringe benefits taxable amount of an employer for a year of tax from 47 per cent to 47.5 per cent. This amendment ensures that the fringe benefits tax rate continues to be equal to the sum of the maximum income tax rate under Part I of Schedule 7 to the Income Tax Rates Act 1986 (currently 45 per cent) and the increased rate of the Medicare levy (2.5 per cent). [Schedule 1, item 1 of the Fringe Benefits Tax Amendment (National Disability Insurance Scheme Funding) Bill 2017, section 6 of the Fringe Benefits Tax Act 1986]

Rate of income tax on No-TFN contributions income

1.18               Section 29 of the Income Tax Rates Act 1986 specifies the rate of income tax payable by trustees of complying and non-complying superannuation funds, and retirement savings account providers in respect of no-TFN contributions income. No-TFN contributions income comprises contributions for an individual that are included in the superannuation provider’s assessable income if no TFN has been quoted in respect of that individual by the end of the income year in which the contribution is made.

1.19               The rate of tax is calculated in accordance with subsection 29(2) of the Income Tax Rates Act 1986 . This includes a component that is set at the current rate of the Medicare levy. The rate of this component of the tax calculation is increased so that it incorporates the increase in the Medicare levy rate from 2 per cent to 2.5 per cent. [Schedule 1, item 1 of the Income Tax Rates Amendment (National Disability Insurance Scheme Funding) Bill 2017, paragraph 29(2)(b) of the Income Tax Rates Act 1986]

Superannuation excess non-concessional contributions tax

1.20               Section 4 of the Superannuation (Excess Non-concessional Contributions Tax) Act 2007 imposes excess non-concessional contributions tax, which is payable under section 292-80 of the ITAA 1997. Excess non-concessional contributions tax is payable where an individual has excess non-concessional contributions for a financial year.

1.21               An individual has excess non-concessional contributions where their non-concessional contributions exceed their non-concessional contributions cap, and they elect not to release the amount of the excess and associated earnings.

1.22               Subdivision 292-C of the ITAA 1997 provides for the amount of the non-concessional contributions cap and sets out when a contribution is a non-concessional contribution.

1.23               The superannuation excess non-concessional contributions tax rate that applies to an individual’s excess non-concessional contributions for a financial year is increased from 47 per cent to 47.5 per cent. This amendment ensures that the superannuation excess non-concessional contributions tax rate continues to be equal to the sum of the maximum income tax rate under Part I of Schedule 7 to the Income Tax Rates Act 1986 (currently 45 per cent) and the increased rate of the Medicare levy (2.5 per cent). [Schedule 1, item 1 of the Superannuation (Excess Non-concessional Contributions Tax) Amendment (National Disability Insurance Funding) Bill 2017, section 5 of the Superannuation (Excess Non-concessional Contributions Tax) Act 2007]

Superannuation excess untaxed roll-over amounts tax

1.24               Section 4 of the Superannuation (Excess Untaxed Roll-over Amounts Tax) Act 2007 imposes tax on an excess untaxed roll-over amount, which is payable under section 306-15 of the ITAA 1997. An individual may have a benefit that is a roll-over superannuation benefit if the benefit includes an amount that is an element untaxed in the fund (an untaxed roll-over amount). If the untaxed roll-over amount exceeds the individual’s untaxed plan cap amount for the superannuation plan from which the benefit is payable, the individual is liable to tax on the amount of the excess. This tax is the excess untaxed roll-over amounts tax.

1.25               The rate of the excess untaxed roll-over amounts tax is increased from 47 per cent to 47.5 per cent. This amendment ensures that the rate continues to be equal to the sum of the maximum income tax rate under Part I of Schedule 7 to the Income Tax Rates Act 1986 (currently 45 per cent) and the increased rate of the Medicare levy (2.5 per cent). [Schedule 1, item 1 of the Superannuation (Excess Untaxed Roll-over Amounts Tax) Amendment (National Disability Insurance Scheme Funding) Bill 2017, paragraph 5(2)(b) of the Superannuation (Excess Untaxed Roll-over Amounts Tax) Act 2007]

Income tax on ESS interest amounts

1.26               Section 3 of the Income Tax (TFN Withholding Tax (ESS)) Act 2009 imposes additional income tax on amounts that are included in an individual’s assessable income under Division 83A of the ITAA 1997 (ESS interest amounts) if Subdivision 14-C in Schedule 1 to the Taxation Administration Act 1953 applies. Subdivision 14-C applies broadly if an employer provides one or more ESS interests under an employee share scheme, and the employee has not quoted their Australian Business Number or their TFN to their employer by the end of the income year.

1.27                     The rate of income tax that is imposed on ESS interest amounts is increased from 47 per cent to 47.5 per cent. This amendment ensures that the rate of income tax that is imposed on ESS interest amounts continues to be equal to the sum of the maximum income tax rate under Part I of Schedule 7 to the Income Tax Rates Act 1986 (currently 45 per cent) and the increased rate of the Medicare levy (2.5 per cent). [Schedule 1, item 1 of the Income Tax (TFN Withholding Tax (ESS)) Amendment (National Disability Insurance Scheme Funding) Bill 2017, paragraph 4(b) of the Income Tax (TFN Withholding Tax (ESS)) Act 2009]

Family trust distribution tax

1.28               Section 3 of the Family Trust Distribution Tax (Primary Liability) Act 1998 imposes tax payable under sections 271-15, 271-20, 271-25, 271-30 or 271-55 in Schedule 2F to the ITAA 1936 (trust losses and other deductions), on the amount or value of income or capital. Family trust distribution tax is payable at a rate equal to the top marginal rate if a distribution is made to a party that is not a member of the family group of the individual specified in a family trust election.

1.29               The family trust distribution tax rate is increased from 47 per cent to 47.5 per cent. This amendment ensures that the family trust distribution tax rate continues to be equal to the sum of the maximum income tax rate under Part I of Schedule 7 to the Income Tax Rates Act 1986 (currently 45 per cent) and the increased rate of the Medicare levy (2.5 per cent). [Schedule 1, item 1 of the Family Trust Distribution Tax (Primary Liability) Amendment (National Disability Insurance Scheme Funding) Bill 2017, section 4 of the Family Trust Distribution Tax (Primary Liability) Act 1998]

Trustee beneficiary non-disclosure tax (no. 1)

1.30               The Taxation (Trustee Beneficiary Non-disclosure Tax) Act (No. 1) 2007 imposes the additional tax payable under paragraph 102UK(2)(a) of the ITAA 1936. Section 102UK of the ITAA 1936 applies if:

•        a share of the net income of a closely held trust for a year of income is included in the assessable income of a trustee beneficiary of the trust under section 97 of the ITAA 1936; and

•        during the trustee beneficiary statement period, the trustee of the closely held trust is required to give the Commissioner of Taxation a trustee beneficiary statement about the share, but it fails to do so.

1.31               The trustee beneficiary non-disclosure tax (no. 1) rate is increased from 47 per cent to 47.5 per cent. This amendment ensures that the trustee beneficiary non-disclosure tax (no. 1) rate continues to be equal to the sum of the maximum income tax rate under Part I of Schedule 7 to the Income Tax Rates Act 1986 (currently 45 per cent) and the increased rate of the Medicare levy (2.5 per cent). [Schedule 1, item 1 of the Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 1) Amendment (National Disability Insurance Scheme Funding) Bill 2017, section 4 of the Taxation (Trustee Beneficiary Non-disclosure Tax) Act (No. 1) 2007]

Trustee beneficiary non-disclosure tax (no. 2)

1.32               The Taxation (Trustee Beneficiary Non-disclosure Tax) Act (No. 2) 2007 imposes the additional tax payable under paragraph 102UM(2)(a) of the ITAA 1936. It applies where a share of the net income of a closely held trust is included in the assessable income of a trustee beneficiary and the share (or part of it) is income (or a part of income) which the trustee of the closely held trust becomes presently entitled to.

1.33               The trustee beneficiary non-disclosure tax (no. 2) rate is increased from 47 per cent to 47.5 per cent. This amendment ensures that the trustee beneficiary non-disclosure tax (no. 2) rate continues to be equal to the sum of the maximum income tax rate under Part I of Schedule 7 to the Income Tax Rates Act 1986 (currently 45 per cent) and the increased rate of the Medicare levy (2.5 per cent). [Schedule 1, item 1 of the Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 2) Amendment (National Disability Insurance Scheme Funding) Bill 2017, section 4 of the Taxation (Trustee Beneficiary Non-disclosure Tax) Act (No. 2) 2007]

Untainting tax

1.34               Section 3 of the New Business Tax System (Untainting Tax) Act 2006 imposes untainting tax that is payable under section 197-60 of the ITAA 1997.

1.35               Untainting tax is payable if a company’s share capital account has become tainted and it chooses to untaint it. A company’s share capital account will become tainted if it transfers certain amounts to that account. If a company taints its share capital account, a franking debit arises in the company’s franking account and any dividends it distributes while the account is tainted are unfrankable. If the company chooses to untaint its share capital account, an additional franking debit may arise and untainting tax is payable.

1.36               Section 197-60 of the ITAA 1997 sets out the formula to calculate the amount of untainting tax for which a company is liable if it makes the choice to untaint its share capital account. The applicable tax rate for untainting tax is:

•        for a company with only lower tax members in relation to the tainting period is the company’s corporate tax rate for imputation purposes for the income year in which the choice is made; or

•        for a company with higher tax members in relation to the untainting period - the sum of:

-                  the maximum income tax rate payable under Part I of Schedule 7 to the Income Tax Rates Act 1986 (currently 45 per cent); and

-                  3 per cent, being the sum of the 2 per cent Medicare levy rate and the 1 per cent Medicare levy surcharge rate.

1.37               The rate of the Medicare levy and Medicare levy surcharge component of the untainting tax rate is increased from 3 per cent to 3.5 per cent so that it incorporates the increase in the Medicare levy rate from 2 per cent to 2.5 per cent. The note that explains how this component of the untainting tax rate is set is also updated. [Schedule 1, items 1 and 2 of the Treasury Laws Amendment (Untainting Tax) (National Disability Insurance Scheme Funding) Bill 2017, subparagraph (b)(ii) of the definition of applicable tax rate in subsection 197-60(3) and the note following subsection 197-60(3) of the ITAA 1997]

Commencement

1.38               The amendments made by the Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017 commence on the first 1 January, 1 April, 1 July or 1 October to occur after the day the Act receives Royal Assent . [Clause 2 of the Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017]

1.39               The amendments made by the supporting Bills commence at the same time as the Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017 commences. [Clause 2 of the Fringe Benefits Tax Amendment (National Disability Insurance Scheme Funding) Bill 2017; clause 2 of the Income Tax Rates Amendment (National Disability Insurance Scheme Funding) Bill 2017; clause 2 of the Superannuation (Excess Non-concessional Contributions Tax) Amendment (National Disability Insurance Funding) Bill 2017; clause 2 of the Superannuation (Excess Untaxed Roll-over Amounts Tax) Amendment (National Disability Insurance Scheme Funding) Bill 2017; clause 2 of the Income Tax (TFN Withholding Tax (ESS)) Amendment (National Disability Insurance Scheme Funding) Bill 2017; clause 2 of the Family Trust Distribution Tax (Primary Liability) Amendment (National Disability Insurance Scheme Funding) Bill 2017; clause 2 of the Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 1) Amendment (National Disability Insurance Scheme Funding) Bill 2017; clause 2 of the Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 2) Amendment (National Disability Insurance Scheme Funding) Bill 2017 and clause 2 of the Treasury Laws Amendment (Untainting Tax) (National Disability Insurance Scheme Funding) Bill 2017]

Application provisions

1.40               The amendments to the Medicare levy apply to assessments for the 2019-20 income year and later income years. [Schedule 1, item 4 to the Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017]

1.41               The amendment to the rate of fringe benefits tax applies to the year of tax beginning on 1 April 2019 (that is 2019-20 year of tax), and later years of tax. [Schedule 1, item 2 of the Fringe Benefits Tax Amendment (National Disability Insurance Scheme Funding) Bill 2017]

1.42               The amendment to the rate of income tax on No-TFN contributions income applies to assessments for the 2019-20 income year and later income years. [Schedule 1, item 2 of the Income Tax Rates Amendment (National Disability Insurance Scheme Funding) Bill 2017]

1.43               The amendment to the rate of superannuation excess non-concessional contributions tax applies to assessments for the 2019-20 financial year and later financial years. [Schedule 1, item 2 of the Superannuation (Excess Non-concessional Contributions Tax) Amendment (National Disability Insurance Scheme Funding) Bill 2017]

1.44               The amendment for the superannuation excess untaxed roll-over amounts tax applies to excess untaxed roll - over amounts paid on or after 1 July 2019. [Schedule 1, item 2 of the Superannuation (Excess Untaxed Roll-over Amounts Tax) Amendment (National Disability Insurance Scheme Funding) Bill 2017,]

1.45               The amendment to the rate of income tax on ESS interest amounts applies to ESS interests (within the meaning of the ITAA 1997) provided on or after 1 July 2019.  [Schedule 1, item 2 of the Income Tax (TFN Withholding Tax (ESS)) Amendment (National Disability Insurance Scheme Funding) Bill 2017

1.46               The amendment to family trust distribution tax payable under section 271-55 in Schedule 2F to the ITAA 1936 applies for notices mentioned in that section that are given by the Commissioner of Taxation on or after 1 July 2019. Otherwise, the amendment applies to present entitlements conferred, or distributions made, on or after 1 July 2019. [Schedule 1, item 2 of the Family Trust Distribution Tax (Primary Liability) Amendment (National Disability Insurance Scheme Funding) Bill 2017]

1.47               The amendments to the trustee beneficiary non-disclosure tax (no. 1), trustee beneficiary non-disclosure tax (no. 2) and untainting tax rates apply to the 2019-20 income year and later income years. [Schedule 1, item 2 of the Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 1) Amendment (National Disability Insurance Scheme Funding) Bill 2017, Schedule 1, item 2 of the Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 2) Amendment (National Disability Insurance Scheme Funding) Bill 2017, Schedule 1, item 3 of the Treasury Laws Amendment (Untainting Tax) (National Disability Insurance Scheme Funding) Bill 2017]

Statements of Compatibility with Human Rights

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

Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017

1.48               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

1.49               This Bill amends the Medicare Levy Act 1986 toincrease the Medicare levy rate from 2 to 2.5 per cent of taxable income.

Human rights implications

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

Conclusion

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

Fringe Benefits Tax Amendment (National Disability Insurance Scheme Funding) Bill 2017

1.52               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

1.53               This Bill amends the fringe benefits tax rate from 47 per cent to 47.5 per cent. This ensures that the fringe benefits tax rate continues to be equal to the sum of the maximum income tax rate and the increased rate of the Medicare levy.

Human rights implications

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

Conclusion

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

Income Tax Rates Amendment (National Disability Insurance Scheme Funding) Bill 2017

1.56               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

1.57               This Bill amends the component of the income tax rate on No-TFN contributions income that aligns with the Medicare levy increasing the rate of tax from 47 per cent to 47.5 per cent. This ensures that the component of the tax rate that is aligned to the rate of the Medicare levy is increased consistent with the increase in the Medicare levy.

Human rights implications

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

Conclusion

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

Superannuation (Excess Non-concessional Contributions Tax) Amendment (National Disability Insurance Scheme Funding) Bill 2017

1.60               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

1.61               This Bill amends the superannuation excess non-concessional contributions tax rate from 47 per cent to 47.5 per cent. This ensures that the superannuation excess non-concessional contributions tax rate continues to be equal to the sum of the maximum income tax rate and the increased rate of the Medicare levy.

Human rights implications

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

Conclusion

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

Superannuation (Excess Untaxed Roll-over Amounts Tax) Amendment (National Disability Insurance Scheme Funding) Bill 2017

1.64               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

1.65               This Bill amends the component of the superannuation excess untaxed roll-over amounts tax rate that aligns with the Medicare levy thereby increasing the rate of tax from 47 per cent to 47.5 per cent. This ensures that the component of the calculation that is aligned to the rate of the Medicare levy is increased consistent with the increase in the Medicare levy.

Human rights implications

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

Conclusion

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

Income Tax (TFN Withholding Tax (ESS)) Amendment (National Disability Insurance Scheme Funding) Bill 2017

1.68               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

1.69               This Bill amends the component of the income tax rate on ESS interest amounts that aligns with the Medicare levy thereby increasing the rate of tax from 47 per cent to 47.5 per cent. This ensures that the component of the calculation that is aligned to the rate of the Medicare levy is increased consistent with the increase in the Medicare levy.

Human rights implications

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

Conclusion

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

Family Trust Distribution Tax (Primary Liability) Amendment (National Disability Insurance Scheme Funding) Bill 2017

1.72               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

1.73               This Bill amends the family trust distribution tax rate from 47 per cent to 47.5 per cent. This ensures that the family trust distribution tax rate continues to be equal to the sum of the maximum income tax rate and the increased rate of the Medicare levy.

Human rights implications

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

Conclusion

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

Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 1) Amendment (National Disability Insurance Scheme Funding) Bill 2017

1.76               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

1.77               This Bill amends the trustee beneficiary non-disclosure tax (no. 1) tax rate from 47 per cent to 47.5 per cent. This ensures that the family trust distribution tax rate continues to be equal to the sum of the maximum income tax rate and the increased rate of the Medicare levy.

Human rights implications

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

Conclusion

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

Taxation (Trustee Beneficiary Non-disclosure Tax) (No. 2) Amendment (National Disability Insurance Scheme Funding) Bill 2017

1.80               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

1.81               This Bill amends the trustee beneficiary non-disclosure tax (no. 2) tax rate from 47 per cent to 47.5 per cent. This ensures that the family trust distribution tax rate continues to be equal to the sum of the maximum income tax rate and the increased rate of the Medicare levy.

Human rights implications

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

Conclusion

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

Treasury Laws Amendment (Untainting Tax) (National Disability Insurance Scheme Funding) Bill 2017

1.84               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

1.85               This Bill amends the untainting tax rate from 48 per cent to 48.5 per cent. This ensures that the untainting tax rate continues to be equal to the sum of the maximum income tax rate, the increased rate of the Medicare levy and the 1 per cent rate of Medicare levy surcharge.

Human rights implications

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

Conclusion

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

 



 

Outline of chapter

2.1                   Schedule 1 to the Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017 repeals the Nation-building Funds Act 2008 to implement the Government’s decision to close the Building Australia Fund and the Education Investment Fund. The Bill also makes consequential amendments to five other Acts and provides transitional arrangements, primarily to assist reporting.

Context of amendments

2.2                   The Government is closing the Building Australia Fund and the Education Investment Fund, through the repeal of the Nation-building Funds Act 2008 , and will credit the uncommitted balances of the Building Australia Fund and the Education Investment Fund to the National Disability Insurance Scheme Savings Fund Special Account when it is established. This will assist in ensuring that the Commonwealth’s National Disability Insurance Scheme contribution is fully funded.

2.3                   Repealing the Nation-building Funds Act 2008 requires some consequential amendments to five other Acts and some transitional provisions to preserve reporting and other requirements relating to the repealed Building Australia Fund and Education Investment Fund.

Summary of new law

2.4                   Part 1 of Schedule 1 to the Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017 repeals the Nation-building Funds Act 2008 in its entirety.

2.5                   Part 2 of Schedule 1 to the Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017 makes consequential amendments to:

•        COAG Reform Fund Act 2008;

•        DisabilityCare Australia Fund Act 2013;

•        Future Fund Act 2006;

•        Health Insurance Act 1973; and

•        Medical Research Future Fund Act 2015 .

2.6                   Part 3 of Schedule 1 to the Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017 provides transitional provisions relating to: reporting and Annual Report obligations of the Future Fund Board of Guardians (the Board); compliance with statutory duties; and agreements made under the Nation-building Funds Act 2008 . The transitional provisions also allow the Finance Minister to make rules relating to matters of a transitional nature.

Detailed explanation of new law

2.7                   Part 1 of Schedule 1 to the Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017 provides that the Nation-building Funds Act 2008 is repealed. On repeal of the Nation-building Funds Act 2008 , all instruments made under the Act, including the investment mandates, are also be repealed.

Consequential amendments

2.8                   Part 2 of Schedule 1 to the Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017 makes consequential amendments to five other Acts as a result of the repeal of the Nation-building Funds Act 2008 .

COAG Reform Fund Act 2008

2.9                   Items 2 to 4 repeal redundant references to the Nation-building Funds Act 2008 contained in the COAG Reform Fund Act 2008 .

DisabilityCare Australia Fund Act 2013

2.10               Item 5 substitutes the definition of financial asset contained in the DisabilityCare Australia Fund Act 2013 to refer to the definition of financial asset contained in the Future Fund Act 2006 .

2.11               Item 6 amends the DisabilityCare Australia Fund Act 2013 to remove references to the Nation-building Funds Act 2008 in the purposes of the DisabilityCare Australia Fund Special Account.

Future Fund Act 2006

2.12               Item 7 removes a reference to the Nation-building Funds Act 2008 in a note to the simplified outline of the Future Fund Act 2006 .

2.13               Items 8 and 10 repeal definitions of the Building Australia Fund and the Education Investment Fund, special accounts and Ministers that will be redundant as a result of the repeal of the Nation-building Funds Act 2008 .

2.14               Item 9 substitutes a definition of Health Minister to replace the current definition, which refers to the definition contained in the Nation-building Funds Act 2008 .

2.15               Item 11 removes the reference to the Building Australia Fund and the Education Investment Fund from a note in Schedule 2A of the Future Fund Act 2006 , which deals with transfers of amounts from the Future Fund to other Government Investment Funds that are managed by the Future Fund Board of Guardians.

2.16               Item 12 removes references to the Nation-building Funds Act 2008 from the section of the Future Fund Act 2006 , which allows investment managers to be engaged as investment managers of one or more of the Government Investment Funds that are managed by the Future Fund Board of Guardians.

2.17               Item 13 removes a reference to the Nation-building Funds Act 2008 from the simplified outline of the Future Fund Act 2006 that deals with the Future Fund Board of Guardians.

2.18               Item 14 removes the reference to the Nation-building Funds Act 2008 from the list of Acts that confer functions on the Future Fund Board of Guardians.

2.19               Item 15 removes the reference to the Nation-building Funds Act 2008 from the list of Acts that do not apply to the Future Fund Board of Guardians in respect of keeping the responsible Ministers informed and providing reports, document and information to the nominated Minister (i.e. the Finance Minister). The Nation-building Funds Act 2008 was excluded from the application of these provisions in the Future Fund Act 2006 as these responsibilities were instead covered by sections 113 to 115 and 203 to 205 of the Nation-building Funds Act 2008 . Transitional provisions in the Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017 provide for residual reporting requirements relating to the Building Australia Fund and the Education Investment Fund.

2.20               Item 16 removes references to the Nation-building Funds Act 2008 from the list of Acts that are not contravened, in relation to the Board’s or the Chair’s compliance with statutory duties, if an Act in the list required the Board or the Chair to do an act.

2.21               Item 17 removes the subsections, which detail the reporting requirements for the Building Australia Fund and the Education Investment Fund that are required to be included in an Annual Report. Reporting requirements are preserved through transitional provisions in the Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017 .

2.22               Items 18 and 20 remove the references to Ministers that will be redundant as a result of the repeal of the Nation-building Funds Act 2008 .

2.23               Item 19 makes a minor formatting amendment consequential to item 20.

2.24               Item 21 removes the reference to two subsections in the Nation-building Funds Act 2008 under which the Future Fund Board of Guardians may delegate its powers.

2.25               Item 22 removes the reference to the Nation-building Funds Act 2008 , and the references to the Building Australia Fund Special Account and the Education Investment Fund Special Account, from the provision that allows miscellaneous receipts to be credited to the Future Fund Special Account.

2.26               Item 23 removes the subsections, which deal with the handling of miscellaneous receipts received in the Future Fund Special Account that are to be credited to the Building Australia Fund or the Education Investment Fund.

2.27               Items 24 and 25 remove subsequent references to the two subsections removed in item 23.

2.28               Item 26 removes references to subparagraphs in the Nation-building Funds Act 2008 that relate to use of the Future Fund Special Account where that use does not exclusively relate to the Building Australia Fund or the Education Investment Fund.

2.29               Item 27 removes the reference to the Building Australia Fund and the Education Investment Fund from the simplified outline for Schedule 2A (Inter-fund transfers).

2.30               Item 28 repeals the clauses, which deal with inter-fund transfers from the Future Fund to the Building Australia Fund and the Education Investment Fund.

Health Insurance Act 1973

2.31               Item 29 makes a minor amendment to a note in section 46AA(1) of the Health Insurance Act 1973 , which deals with payments relating to the former Health and Hospitals Fund, to reflect that the Nation-building Funds Act 2008 is repealed.

Medical Research Future Fund Act 2015

2.32               Items 30 to 32 make a minor amendment to two simplified outlines and two definitions to reflect that the Nation-building Fund Act 2008 is repealed.

2.33               Item 33 removes redundant references to subparagraphs in the Nation-building Funds Act 2008 in relation to the purposes of the Medical Research Future Fund Special Account.

Application and transitional provisions

Commencement

2.34               Sections 1 to 3 of the Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017 commence on the day that the Act receives the Royal Assent. Schedule 1 to the Bill commences on Proclamation or six months after the day the Act receives the Royal Assent (if Proclamation does not occur).

Savings and transitional provisions

2.35               Items 34 to 38 of Schedule 1 to the Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017 contain transitional and savings provisions to ensure that residual matters relating to the closure of the Building Australia Fund and the Education Investment Fund are managed appropriately.

2.36               Item 34 provides that reporting obligations of the Board relating to the Building Australia Fund and the Education Investment Fund continue to apply despite the repeal of the Nation-building Funds Act 2008 .

2.37               Item 35 ensures that an agreement that is in force immediately before the repeal of the section is taken, after that repeal, to continue in force. If remaining Education Investment Fund project payments are not made by the time the Nation-building Funds Act 2008 is repealed, these payments will be made under the Higher Education Support Act 2003 . Item 35 also allows for the agreement to be varied or revoked by the Minister responsible for the Higher Education Support Act 2003 if required.

2.38               Item 36 provides that the repeal of provisions in the Future Fund Act 2006 relating to the Nation-building Funds Act 2008, which affect compliance with statutory duties, are to apply in relation to acts done after the item commences.

2.39               Item 37 extends the requirement for the Annual Report given by the Future Fund Board of Guardians to the Minister to include information relating to the Building Australia Fund and the Education Investment Fund. This includes debits relating to the Building Australia Fund and the Education Investment Fund that are made from the Future Fund Special Account after the Building Australia Fund and the Education Investment Fund are repealed.

2.40               Item 38 does not allow any residual miscellaneous receipts that may be received after the Building Australia Fund and the Education Investment Fund are repealed, to be credited to the Future Fund Special Account. Instead, these receipts are credited to the Consolidated Revenue Fund, which will allow them to be subsequently credited to the National Disability Insurance Scheme Savings Fund Special Account when it is established.

2.41               Item 39 provides a rule making power to enable detailed rules to be made in relation to transitional matters relating to the amendments or repeals made by the Nation-building Funds Repeal (National Disability Insurance Scheme Funding Bill) 2017 . The areas where rules may not be made are specified.

2.42               This provision is included to allow the Minister to deal with unintended or unforeseen consequences of the amendments or the repeals made by the Nation-building Funds Repeal (National Disability Insurance Scheme Funding Bill) 2017 . Rules made under this item are legislative instruments under the Legislation Act 2003 .

Statement of Compatibility with Human Rights

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

Nation-building Funds Repeal (National Disability Insurance Scheme Funding) Bill 2017

2.43               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

2.44               This Bill repeals the Nation-building Funds Act 2008 , makes consequential amendments to five other Acts and provides transitional arrangements, primarily to assist reporting.

Human rights implications

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

Conclusion

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