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Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019

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2016-2017-2018-2019

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018

 

 

 

 

SUPPLEMENTARY EXPLANATORY MEMORANDUM

 

Amendments to be moved on behalf of the Government

 

 

 

(Circulated by authority of the

Treasurer, the Hon. Josh Frydenberg MP)

 

 



Table of contents

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

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

Chapter 1 ........... Amendments to the Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018            5

Chapter 2 ........... Statement of Compatibility with Human Rights............ 9

 

 



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

Abbreviation

Definition

Bill

Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018

MIT

managed investment trust

NDIS

National Disability Insurance Scheme

 

 



Amendments to the Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018

The amendments to Schedule 1 to the Bill provide that premises that are used primarily for the provision of disability accommodation can receive concessional MIT taxation treatment despite being residential premises.

The amendments to Schedule 1 to the Bill also remove the specific rules concerning the treatment of certain premises used primarily to provide student accommodation. This is in response to views raised by some stakeholders in the inquiry by the Senate Economics Legislation Committee.

Date of effect These amendments do not change the date of effect of Schedule 1 to the Bill which generally applies on and after 1 July 2019.

Proposal announced The amendments were announced on 17 December 2018 in the 2018-19 Mid-Year Economic and Fiscal Outlook.

Financial impact The amendments are estimated to have an unquantifiable cost to revenue over the forward estimates period:

2017-18

2018-19

2019-20

2020-21

2021-22

-

-

*

*

*

- Nil

*Unquantifiable

Human rights implications The amendments do not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 2, paragraphs 2.1 to 2.6.

Compliance cost impact :  The amendments are expected to have minimal compliance cost impact.

 

 



Outline of chapter

1.1                   The amendments to Schedule 1 to the Bill provide that premises that are used primarily for the provision of disability accommodation can receive concessional MIT taxation treatment despite being residential premises.

1.2                   The amendments to Schedule 1 to the Bill also remove the specific rules concerning the treatment of certain premises used primarily to provide student accommodation. This is in response to views raised by some stakeholders in the inquiry by the Senate Economics Legislation Committee.

Detailed explanation of new law

Disability accommodation  

1.3                   The amendments to Schedule 1 to the Bill provide that a dwelling is not a residential dwelling asset, and therefore income from the asset is not non-concessional MIT income, if the dwelling is:

•        both:

-       used primarily to provide specialist disability accommodation (within the meaning of the National Disability Insurance Scheme (Specialist Disability Accommodation Conditions) Rule 2018 ); and

-       enrolled to provide specialist disability accommodation in accordance with the National Disability Insurance Scheme (Specialist Disability Accommodation Conditions) Rule 2018 ; or

•        a dwelling of a kind prescribed by the regulations for this purpose that is used primarily to provide disability accommodation.

[Amendment 2, paragraphs 12-452(1)(d) and (e) in Schedule 1 to the Taxation Administration Act 1953]

1.4                   These amendments ensure that MITs may be entitled to receive concessional tax treatment when investing in dwellings used to provide disability accommodation.

1.5                   Under the amendments a dwelling used to provide specialist disability accommodation will not be a residential dwelling asset if it is enrolled as specialist disability accommodation under the NDIS, as specified under the National Disability Insurance Scheme (Specialist Disability Accommodation Conditions) Rule 2018.

1.6                   The amendments also enable regulations to prescribe further categories of premises used to provide disability accommodation that will not be residential dwelling assets. This ensures this rule can be updated to reflect changes to the NDIS rules or other changes in the way accommodation support is provided to individuals with a disability. [Amendment 2, paragraph 12-452(1)(e) in Schedule 1 to the Taxation Administration Act 1953]

1.7                   The amendments relating to disability accommodation do not affect the general requirement that, for a MIT’s investment in land to be eligible investment business, the investment must be undertaken primarily for the purpose of deriving rent. The amendments also do not affect any of the other circumstances in which the income of a MIT may be non-concessional MIT income.

Student accommodation

1.8                   The amendments to Schedule 1 to the Bill also remove the provisions of the Bill that included premises used primarily to provide accommodation for students (other than in connection with a school) as a residential dwelling asset regardless of whether the premises were residential premises or commercial residential premises. [Amendment 2, paragraph 12-452(1)(c) in Schedule 1 to the Taxation Administration Act 1953]

1.9                   This means that, to the extent such premises are not a residential dwelling asset, the income of a MIT attributable to the premises will not be MIT residential housing income and therefore will not be non-concessional MIT income for that reason.

1.10               As explained in paragraphs 1.31 to 1.32 of the Explanatory Memorandum to the Bill, fund payments attributable to non-concessional MIT income are subject to withholding at a rate of tax equal to the top corporate tax rate.

1.11               As a result of the amendments, Schedule 1 to the Bill will no longer provide any specific rules for the treatment of property principally used to provide student accommodation. Instead, consistent with all other premises, the treatment will depend on whether the premises are residential premises that are not commercial residential premises. This is a question of fact that needs to be assessed in the particular circumstances of each investment. The definitions of residential premises and commercial residential premises are discussed in paragraphs 1.214 to 1.224 of the Explanatory Memorandum to the Bill.

1.12               These amendments respond to views raised by some stakeholders during the Senate Economics Legislation Committee’s inquiry into the Bill.

1.13               The amendments relating to student accommodation do not affect the general requirement that, for a MIT’s investment in land to be eligible investment business, the investment must be undertaken primarily for the purpose of deriving rent. The amendments also do not affect any of the other circumstances in which the income of a MIT may be non-concessional MIT income.

Application and transitional provisions

1.14               The amendments to Schedule 1 to the Bill remove the transitional rule for the treatment of certain premises used primarily to provide student accommodation held by MITs that would have applied on and from 20 September 2018. [Amendment 1 , subsection 12-451(7) in Schedule 1 to the Taxation Administration Act 1953]

1.15               This transitional rule is no longer required because the amendments to Schedule 1 to the Bill remove the specific provisions concerning certain premises used primarily to provide student accommodation.

1.16               The amendments to disability and certain student accommodation do not change the date of effect of Schedule 1 to the Bill which generally applies on and after 1 July 2019.



Chapter 2          

Statement of Compatibility with Human Rights

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

Amendments to the Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018

2.1                   The amendments to Schedule 1 to the Bill 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 amendments to Schedule 1 to the Bill provide that premises that are used primarily for the provision of disability accommodation can receive concessional MIT taxation treatment.

2.3                   The amendments to Schedule 1 to the Bill also remove the specific rules concerning the treatment of certain premises used primarily to provide student accommodation.

2.4                   As a result of the amendments, Schedule 1 to the Bill no longer provides any specific rules for the treatment of property principally used to provide student accommodation. Instead, consistent with all other premises, the treatment will depend on whether the premises are residential premises that are not commercial residential premises.

Human rights implications

2.5                   These amendments do not engage any of the applicable rights or freedoms.

Conclusion

2.6                   These amendments are compatible with human rights as they do not raise any human rights issues.