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Thursday, 21 June 2001
Page: 28313


Mr HOCKEY (Minister for Financial Services and Regulation) (1:50 PM) —by leave—I present a supplementary explanatory memorandum to the bill. I move government amendments Nos 1 to 36:

(1) Schedule 1, item 1, page 3 (line 18), omit “Subdivision”, substitute “Division”.

(2) Schedule 1, item 1, page 3 (line 20), Omit “Subdivision”, substitute “Division”.

(3) Schedule 1, item 1, page 6 (line 4), after “paid it”, insert “or it was paid for you”.

(4) Schedule 1, item 1, page 6 (line 29), after “paid by you”, insert “or for you”.

(5) Schedule 1, item 1, page 7 (after line 31), insert:

Trading stock

(6) You can deduct for an income year for which you are an *STS taxpayer an amount you incurred and paid before that year if:

(a) the amount was incurred in connection with acquiring an item of *trading stock; and

(b) you could not deduct the amount before that year because of section 70-15; and

(c) the item becomes part of your trading stock on hand during that year.

(6) Schedule 1, item 1, page 10 (line 13), omit “section 40-35”, substitute “section 40-45”.

(7) Schedule 1, item 1, page 10 (line 19), omit “about primary production capital expenditure”, substitute “about capital expenditure of primary producers and other landholders”.

(8) Schedule 1, item 1, page 10 (line 30) to page 11 (line 4), omit subsection (5), substitute:

Exception: horticultural plants

(5) You cannot deduct amounts for *horticultural plants (including grapevines) under this Subdivision.

(9) Schedule 1, item 1, page 11 (line 13), after “Subdivision 40-E”, insert “, or to your pool under the former Subdivision 42-L,”.

(10) Schedule 1, item 1, page 12 (line 3), after “*low-cost assets”, insert “for which you have deducted or can deduct an amount under section 328-180”.

(11) Schedule 1, item 1, page 16 (line 3), after “estimate”, insert “for that year”.

(12) Schedule 1, item 1, page 16 (lines 21 to 24), omit subsection (3), substitute:

(3) The taxable purpose proportion of a *depreciating asset's *adjustable value, or of an amount included in the second element of its *cost, is that part of that amount that represents:

(a) the proportion you estimated under subsection (1) or (2); or

(b) if you have had to make an adjustment under section 328-225 for the asset—the proportion most recently applicable to the asset under that section.

Schedule 1, item 1, page 18 (line 17), omit:

$1,600 [$2,000 x 80% business use estimate]

substitute:

$2,000 x 80% business use estimate = $1,600

(14) Schedule 1, item 1, page 19 (lines 16 to 23), omit subsection (1), substitute:

(1) You must, for each income year (the present year) after the year in which a *depreciating asset is allocated to a pool, make a reasonable estimate of the proportion you use the asset, or have it *installed ready for use, for a *taxable purpose in that year.

(1A) You must make an adjustment for the present year if your estimate for that year under subsection (1) is different by more than 10 percentage points from:

(a) your original estimate (see section 328-205); or

(b) if you have made an adjustment under this section—the most recent estimate you made under subsection (1) that resulted in an adjustment under this section.

(15) Schedule 1, item 1, page 20 (lines 6 to 9), omit paragraph (b), substitute:

(b) for an asset you started to use, or have installed ready for use, for a taxable purpose while you were not an STS taxpayer—its adjustable value at the start of the income year for which it was allocated to a *general STS pool or a *long-life STS pool;

increased by any amounts included in the second element of the asset's *cost from the time mentioned in paragraph (a) or (b) until the end of the income year for which you are making the adjustment.

(16) Schedule 1, item 1, page 21 (before line 16), insert:

Exceptions

(17) Schedule 1, item 1, page 21 (lines 17 and 18), omit “you do not need to make an adjustment for a *depreciating asset if the change in usage occurs at least”, substitute “you do not need to make an estimate or an adjustment under this section for a *depreciating asset for an income year that is at least”.

(18) Schedule 1, item 1, page 24 (line 11), after “income year”, insert “and you have not made a choice under subsection 328-285(2) for that year”.

(19) Schedule 1, item 1, page 25 (line 16), omit “or”, substitute “and”.

(20) Schedule 1, item 1, page 25 (lines 17 to 19), omit paragraph (c), substitute:

(c) the sum of the *adjustable values of the *depreciating assets (for which an amount can be deducted under Division 40, or under this Division apart from this paragraph) that you, and entities (the grouped entities) whose value of business supplies is grouped with yours in accordance with section 328-380, *held at the end of that year is less than $3,000,000.

(21) Schedule 1, item 1, page 25 (line 22), omit “*STS affiliate's”, substitute “grouped entities”.

(22) Schedule 1, item 1, page 25 (line 23), omit “or *long life STS pool”, substitute “, *long life STS pool or low-value pool”.

(23) Schedule 1, item 1, page 25 (line 26), omit “you hold”.

(24) Schedule 1, item 1, page 26 (lines 3 to 10), omit subsections (4) and (5).

(25) Schedule 1, item 1, page 26 (lines 27 to 30), omit subsection (2), substitute:

(2) For the purpose of working out your *STS average turnover under subsection (1) where you or a grouped entity carried on a *business for part only of one or more of those years, use a reasonable estimate of what your *STS group turnover would have been for that year or those years if you and the grouped entity had carried on a business throughout those years.

(26) Schedule 1, item 1, page 27 (line 4), after “present year”, insert “or a reasonable estimate of it”.

(27) Schedule 1, item 1, page 27 (line 9), omit “3”.

(28) Schedule 1, item 1, page 27 (lines 10 to 13), omit subsection (4), substitute:

(4) For the purpose of working out your *STS average turnover under subsection (3) where you or a grouped entity carried on a *business for part only of the present year, use a reasonable estimate of what your *STS group turnover would have been for that year if you and the grouped entity had carried on a business throughout that year.

(29) Schedule 1, item 1, page 27 (lines 31 to 34), omit paragraph (b), substitute:

(b) the value of the business supplies made in the income year by grouped entities while they were grouped with you;

(30) Schedule 1, item 1, page 29 (line 24), omit “or control”.

(31) Schedule 1, item 1, page 30 (after line 29), insert:

(8) An entity is an STS affiliate of yours if the entity acts, or could reasonably be expected to act, in accordance with your directions or wishes, or in concert with you, in relation to the affairs of the entity's *business.

(9) Another partner in a partnership in which you are a partner is not your STS affiliate only because the partner acts, or could reasonably be expected to act, in concert with you in relation to the affairs of the partnership.

(32) Schedule 2, page 33 (after line 17), after item 4, insert:

4A After section 20-155

Insert:

20-157 Exception for STS taxpayers

This Subdivision does not apply to you if, at any time in the income year in which you disposed of the *car, it was allocated to a pool of yours under Division 328.

(33) Schedule 2, item 12, page 34 (lines 13 to 15), omit the item.

(34) Schedule 2, item 19, page 35 (line 23), omit “section 328-365”, substitute “section 328-380”.

(35) Schedule 3, item 9, page 38 (lines 16 to 27), omit the item, substitute:

9 Subsection 82KZMB(7)

Omit “To avoid doubt, the”, substitute “The”.

9A At the end of section 82KZMB

Add:

(8) Subsection (7) does not apply to:

(a) expenditure described in paragraph 82KZMC(1A)(a); or

(b) a taxpayer described in paragraph 82KZMC(1A)(b).

(36) Schedule 3, item 10, page 38 (line 28) to page 39 (line 14), omit the item, substitute:

10 Subsection 82KZMC(1) (before the note)

Insert:

(1A) This section does not apply, for a year of income starting after 30 June 2001, to:

(a) expenditure incurred otherwise than in carrying on a business by a taxpayer who is not an individual; or

(b) a taxpayer who was a small business taxpayer but not an STS taxpayer for that year.

The amendments make minor changes of a technical or clarifying nature. The amendments will ensure that the simplified tax system operates as intended. A number of the amendments are necessary in order to bring this into line with the new division 40 concepts contained in the New Business Tax System (Capital Allowances) Bill 2001, which is being debated cognately with this bill. Amendment No. 1 changes the heading of section 328-5 from `subdivision' to `division'. Amendment No. 2 changes the reference in the `Table of sections' in 328-A from `subdivision' to `division'.


Mr Fitzgibbon —Mr Deputy Speaker, I raise a point of order. The minister indicated that he would table an explanatory memorandum and, to my knowledge, he has not done so.


Mr DEPUTY SPEAKER (Mr Nehl)—If you had been as observant as the chair, you would have seen it tabled.


Mr Fitzgibbon —I am sitting at a different angle from you, Mr Deputy Speaker. It was quite clear that the minister made no attempt to inform us that he had, in fact, tabled the explanatory memorandum.


Mr DEPUTY SPEAKER —I thank the honourable member.


Mr HOCKEY —Amendment No. 3 amends paragraph 328-105(1)(b) to provide for a constructive payment rule by inserting the words `or it was paid for you'. This mirrors the constructive receipt rule contained in subsection 654 of the Income Tax Assessment Act. Amendment No. 4 amends paragraph 328-105(2)(c) to provide for a constructive payment rule by inserting the words `or for you'. Amendment No. 5 amends section 328-110 to insert a new subsection 6, which ensures that section 70-15 of the Income Tax Assessment Act correctly interacts with the STS rules when a taxpayer enters the STS. Where section 70-15 defers a deduction for trading stock, this amendment ensures that a deduction is available to the STS taxpayer when the goods form part of stock on hand, even though the expense had been paid in an earlier year. The amendment is necessary because the STS provisions override the operation of section 70-15 while the taxpayer is within the STS regime.

Amendments Nos 6 and 7 amend subsections 328-175(2) and (3) as a consequence of the new division 40. Amendment No. 8 omits subsection 328-175(5), as buildings are already excluded from the STS under subsection 328-175(2) of the bill. A new provision is inserted in subsection 328-175(5) to provide for the exclusion of horticultural plants, including grapevines, from the STS depreciating asset pool as a consequence of those plants being dealt with under the new division 40. Amendment No. 9 amends subsection 328-175(7) to add a reference to division 42-L. This ensures that assets allocated to pools formed under that division will not also be included in the STS bill. Amendment No. 10 amends subsection 328-185(1) to clarify that low cost assets mentioned in the subsection refer only to those low cost assets deductible under the STS low cost asset provisions of the bill.

Amendment No. 11 amends subsection 328-205(1) to make it clear that an STS taxpayer's estimate of business use of a depreciating asset will be in respect of the first year they use, or have installed ready to use, the depreciating asset as an STS taxpayer. Amendment No. 12 amends subsection 328-205(3) to provide that, if you make an amendment to the taxable use of an asset because there is a change in the business use of that asset, the taxable purpose proportion will be the proportion that was last taken into account because of the change of business use. Amendment No. 13 rewords the example in subsection 328-210(3) to more clearly express the formula. Amendment No. 14 confirms that, for each year an STS taxpayer might have to make an adjustment under section 328-225, they must also make an estimate for that year of the proportion a depreciating asset is used for business purposes. (Extension of time granted) Where the taxpayer's estimate varies by more than 10 percentage points, an adjustment to the pool balance is needed. Amendment No. 15 ensures that the defined term asset value in the formula in subsection 328-225(3) includes not only the original cost of the asset but also the cost of any additions to that asset.

Amendment No. 16 inserts the heading `Exceptions' before subsection 328-225(5) to aid interpretation. Amendment No. 17 amends subsection 328-225(5) to ensure that the exception provided under this subsection applies not only to adjustments but also to estimates. Amendment No. 18 amends subsection 328-295(2) to ensure that the subsection does not apply where the STS taxpayer has chosen to account for trading stock under subsection 328-285(2). Amendment No. 19 amends paragraph 328-365(1)(b) by replacing the reference to `or' with `and'. This ensures that both input tax credits and increasing adjustments are ignored for the purposes of the $1 million turnover threshold for eligibility to enter the STS. Amendment No. 20 amends paragraph 328-365(1)(c) to clarify that the values of both the depreciating assets that you hold and those that are held by your related entities are taken into account when ascertaining whether or not you are eligible to enter STS. Amendments Nos 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 and 36 are as circulated and moved.