2010-2011-2012

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

EXPLANATORY MEMORANDUM

(Circulated by the authority of the

Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

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

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

Chapter 1               Change to managed investment trust final withholding tax rate    5

Chapter 2               Statement of Compatibility with Human Rights.............. 7

Index................................................................................................................... 9

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

Managed Investment Trust final withholding tax rate

The Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 amends the Income Tax (Managed Investment Trust Withholding Tax) Act 2008 to increase the Managed Investment Trust (MIT) final withholding tax from 7.5 per cent to 15 per cent on fund payments made in relation to income years that commence on or after 1 July 2012.

Schedule 1 to Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 makes consequential amendments to the Taxation Administration Act 1953 to give effect to the increase in the concessional MIT final withholding tax rate imposed by the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012.

Date of effect :  The amendments apply from 1 July 2012.

Proposal announced :  The measure was announced as part of the 2012-2013 Budget.

Financial impact :  Expected to generate approximately $260 million, in revenue, over the forward estimates.

Human rights implications :  This Schedule does not raise any human rights issue.  See Statement of Compatibility with Human Rights — Chapter 2, paragraphs 2.1 to 2.4

Compliance cost impact :  Low.

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Outline of chapter

1.1                   The Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 amends the Income Tax (Managed Investment Trust Withholding Tax) Act 2008 to increase the managed investment trust (MIT) final withholding tax from 7.5 per cent to 15 per cent on fund payments made in relation to income years that commence on or after 1 July 2012.

1.2                   Schedule 1 to Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 makes consequential amendments to the Taxation Administration Act 1953 to give effect to the increase in the MIT final withholding tax rate imposed by the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012.

Context of amendments

1.3                   This amendment will increase the MIT final withholding tax from 7.5 per cent to 15 per cent on fund payments made in relation to income years that commence on or after 1 July 2012.

Summary of new law

1.4                   The amendment will increase the MIT final withholding tax rate from 7.5 per cent to 15 per cent.  The MIT final withholding tax rate of 15 per cent will apply to fund payments made in relation to income years that commence on or after 1 July 2012. 

Comparison of key features of new law and current law

Detailed explanation of new law

1.5                   The rate of MIT final withholding tax is prescribed in subparagraph 4(1)(a)(ii) of the Income Tax (Managed Investment Trust Withholding Tax) Act 2008.  

1.6                   The Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 will amend subparagraph 4(1)(a)(ii) to increase the MIT final withholding tax rate from 7.5 per cent to 15 per cent on fund payments made in relation to income years that commence on or after 1 July 2012.  [Schedule 1 to the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012, item 1, subparagraph 4(1)(a)(ii)]

Application and transitional provisions

1.7                   The 15 per cent tax rate will apply to fund payments made in relation to income years that commence on or after 1 July 2012.  [Schedule 1 to  the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012, item 1, subparagraph 4(1)(a)(ii)]

Consequential amendments

1.8                   The MIT final withholding tax rate is also prescribed in subsections 12-390(3) and 12-390(6) of Schedule 1 to the Taxation Administration Act 1953 . 

1.9                   Schedule 1 of to Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 makes consequential amendments to subsections 12-385(3), 12-390(3) and 12-390(6) of Schedule 1 to the Taxation Administration Act 1953 to reflect the new 15 per cent final MIT withholding tax rate.  [Schedule 1 to Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012, items 1 to 3, subparagraphs 12-385(3)(a)(iii), 12-390(3)(a)(iii) and 12-390(6)(a)(iii)]

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

Change to managed investment trust final withholding tax rate

2.1                   The Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 and Schedule 1 to Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 are 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

2.2                   The purpose of the amendment is to raise the managed investment trust final withholding tax rate from 7.5 per cent to 15 per cent.

Human rights implications

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

Conclusion

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

Assistant Treasurer, the Hon David Bradbury

Schedule 1:  Change to managed investment trust final withholding tax rate