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THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
EXPLANATORY MEMORANDUM
Glossary............................................................................................................ iii
General outline and financial impact............................................................. 1
Chapter 1: Medicare levy and Medicare levy surcharge income thresholds 7
Chapter 2: Maintaining the Commonwealth Bank superannuation fund guarantee 13
Chapter 3: Tax accounting for primary producer registered emissions units 17
Chapter 4: Cash flow relief for small and medium businesses..... 27
Chapter 5: Enhancements to the Home Guarantee Scheme....... 31
Chapter 6: Statement of Compatibility with Human Rights........... 35
This Explanatory Memorandum uses the following abbreviations and acronyms.
|
Definition |
|
|
Bill |
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023 |
|
CBA Super fund |
Commonwealth Bank Group Super fund |
|
Commissioner |
Commissioner of Taxation |
|
Commonwealth Bank |
Commonwealth Bank of Australia |
|
Commonwealth Banks Act |
Commonwealth Banks Act 1959 |
|
CPI |
Consumer price index |
|
GDP |
Gross domestic product |
|
GST |
Goods and services tax |
|
Investment Mandate |
National Housing Finance and Investment Corporation Investment Mandate Direction 2018 |
|
Income Tax Assessment Act 1997 |
|
|
NHFIC |
National Housing Finance and Investment Corporation (to be renamed by the Treasury Laws Amendment (Housing Measures No. 1) Bill 2023 as Housing Australia) |
|
NHFIC Act |
National Housing Finance and Investment Corporation Act 2018 (to be renamed by the Treasury Laws Amendment (Housing Measures No. 1) Bill 2023 as the Housing Australia Act 2018 ) |
|
PAYG |
Pay as you go |
|
SAPTO |
Seniors and pensioners tax offset |
|
TAA 1953 |
Taxation Administration Act 1953 |
|
Threshold amount |
Medicare levy and Medicare levy surcharge low-income threshold amount |
Schedule 1 - Medicare levy and Medicare levy surcharge income thresholds
Outline
Schedule 1 to the Bill amends the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge — Fringe Benefits) Act 1999 to increase:
· the Medicare levy low-income thresholds for individuals and families (along with the dependent child/student component of the family threshold) in line with movements in the CPI;
· the Medicare levy low-income thresholds for individuals and families eligible for SAPTO (along with the dependent child/student component of the family threshold), in line with movements in the CPI; and
· the Medicare levy surcharge low-income threshold in line with movements in the CPI.
Date of effect
This measure applies to the 2022-23 income year and later income years.
Proposal announced
Schedule 1 to the Bill implements the Personal Income tax - increasing the Medicare levy low-income thresholds measure from the 2023-24 Budget.
Financial impact
This measure is estimated to decrease receipts by $460 million over the forward estimates period ($m):
|
2022-23 |
2023-24 |
2024-25 |
2025-26 |
2026-27 |
|
- |
-100.0 |
-140.0 |
-120.0 |
-100.0 |
- nil
Human rights implications
Schedule 1 to the Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 6.
Compliance cost impact
Nil.
Schedule 2 - Maintaining the Commonwealth Bank superannuation fund guarantee
Outline
As part of the privatisation of the Commonwealth Bank, the Commonwealth Government provided a guarantee to ensure that pre-privatisation members of the CBA Super fund would not risk losing their superannuation following privatisation. Schedule 2 to the Bill ensures that those members will continue to have the assurance of the existing Commonwealth guarantee if the CBA Super fund is merged with another superannuation fund.
Date of effect
Schedule 2 to the Bill will commence on the day after the Bill receives Royal Assent.
Financial impact
Nil.
Human rights implications
Schedule 2 to the Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 6.
Compliance cost impact
Schedule 3 - Tax accounting for primary producer registered emissions units
Outline
Schedule 3 to the Bill amends the ITAA 1997 to allow eligible primary producers to treat certain carbon abatement income as primary production income for the purposes of the Farm Management Deposit Scheme and accessing income tax averaging arrangements for primary producers.
Date of effect
Schedule 3 to the Bill commences on the first 1 January, 1 April, 1 July or 1 October to occur after the date the Bill receives Royal Assent.
Proposal announced
Schedule 3 to the Bill partially implements the Primary Producers - increasing concessional tax treatment for carbon abatement measure from the 2022-23 March Budget. The biodiversity stewardship income aspect of the announced measure has been deferred to 1 July 2024.
Financial impact
Schedule 3 to the Bill was estimated to reduce receipts by $100 million at the time of the 2022-23 March Budget, comprising ($m):
|
2022-23 |
2023-24 |
2024-25 |
2025-26 |
|
- |
-30.0 |
-30.0 |
-40.0 |
- nil
Human rights implications
Schedule 3 to the Bill is compatible with human rights. See Statement of Compatibility with Human Rights — Chapter 6.
Compliance cost impact
It is expected that there will be no more than a minor compliance cost for eligible primary producers as the measure largely operates within the existing tax framework, and there will be no new or additional processes or reporting requirements. Accounting professionals and tax advisers will need to understand the new changes and update their guidance accordingly.
Schedule 4 - Cash flow relief for small and medium businesses
Outline
Schedule 4 to the Bill amends the TAA 1953 to reduce the GDP adjustment factor for the 2023-24 income year to 6 per cent. The GDP adjustment factor is applied by the Commissioner to work out the amount of PAYG and GST instalments payable by a taxpayer in certain circumstances.
Date of effect
This measure will apply for the purposes of working out the amount of PAYG and GST instalments for instalment quarters for the 2023-24 income year.
Proposal announced
Schedule 4 to the Bill implements the Small Business Support - Helping small business manage their tax instalments and improving cashflow measure from the 2023-24 Budget.
Financial impact
Schedule 4 to the Bill is estimated to have the following impact on the underlying cash balance over the forward estimates period ($m):
|
2022-23 |
2023-24 |
2024-25 |
2025-26 |
2026-27 |
|
- |
-1,600 |
1,600 |
- |
- |
- nil
Human rights implications
Schedule 4 to the Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 6.
Compliance cost impact
Nil.
Schedule 5 - Enhancements to the Home Guarantee Scheme
Outline
Schedule 5 to the Bill amends the NHFIC Act to expand the objects of that Act, providing for the NHFIC to improve housing outcomes for Australians by assisting earlier access to the housing market for eligible individuals who have not held an ownership interest in real property in Australia in the preceding 10 years, as well as single legal guardians of children. The amendments to the objects of the NHFIC Act enable the Minister to issue directions to the NHFIC concerning eligibility for the Home Guarantees through the Investment Mandate.
Date of effect
Schedule 5 to the Bill commences from 1 July 2023 or the day after Royal Assent, whichever occurs later. Subject to timing of passage of the Bill, this will allow guarantees to be issued under the expanded group of home buyers as soon as possible from 1 July 2023.
Proposal announced
Schedule 5 to the Bill partially implements the Increasing the Supply of Social and Affordable Housing and Making it Easier to Buy a Home measure in the 2023-24 Budget.
Financial impact
Nil.
Human rights implications
Schedule 5 to the Bill positively engages human rights. See Statement of Compatibility with Human Rights — Chapter 6.
Compliance cost impact
Nil.
Outline of chapter
Context of amendments
Medicare levy low-income thresholds
Medicare levy surcharge low-income threshold
Comparison of key features of new law and current law
Detailed explanation of new law
Medicare levy low-income thresholds
Phase-in limits
Medicare levy surcharge low-income threshold
Commencement, application, and transitional provisions
Outline of chapter
1.1 Schedule 1 to the Bill amends the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 to increase:
· the Medicare levy low-income thresholds for individuals and families (along with the dependent child/student component of the family threshold) in line with movements in the CPI;
· the Medicare levy low-income thresholds for individuals and families eligible for SAPTO (along with the dependent child/student component of the family threshold), in line with movements in the CPI; and
· the Medicare levy surcharge low-income threshold in line with movements in the CPI.
Context of amendments
Medicare levy low-income thresholds
1.2 The Medicare Levy Act 1986 provides that no Medicare levy is payable by low-income individuals and families where their taxable income or combined family taxable income does not exceed the stated threshold amounts.
1.3 The Medicare levy phases in at a rate of 10 cents in the dollar where the taxable income or combined family taxable income does not exceed the stated threshold amounts.
Medicare levy surcharge low-income threshold
1.4 A Medicare levy surcharge of between one and one and a half per cent applies on taxable income in certain cases where taxpayers do not have appropriate private patient hospital cover (sections 8B and 8G of the Medicare Levy Act 1986 ). The Medicare levy surcharge also applies to reportable fringe benefits in certain cases where taxpayers do not have appropriate private hospital cover (sections 12 to 16 of the A New Tax System (Medicare Levy Surcharge — Fringe Benefits) Act 1999 ).
1.5 A family member who otherwise would be liable for the Medicare levy surcharge is not required to pay the surcharge where the total of that person’s income for Medicare levy surcharge purposes does not exceed the individual low-income threshold amount. Unlike the Medicare levy, there is no phase-in of the Medicare levy surcharge above the threshold amount.
Comparison of key features of new law and current law
Table 1.1 Comparison of new law and current law
|
New law |
Current law |
|
Medicare levy low-income thresholds |
|
|
The individual income threshold for the 2022-23 income year is $24,276. |
The individual income threshold for the 2021-22 income year is $23,365. |
|
The family income threshold for the 2022-23 income year is $40,939. |
The family income threshold for the 2021-22 income year is $39,402. |
|
The income threshold for individual taxpayers eligible for the SAPTO for the 2022-23 income year is $38,365. |
The income threshold for individual taxpayers eligible for the SAPTO for the 2021-22 income year is $36,925. |
|
The income threshold for families eligible for the SAPTO for the 2022-23 income year is $53,406. |
The income threshold for families eligible for the SAPTO for the 2021-22 income year is $51,401. |
|
The child-student component of the income threshold for families (whether eligible for SAPTO or not) for the 2022-23 income year is $3,760. |
The child-student component of the income threshold for families (whether eligible for SAPTO or not) for the 2021-22 income year is $3,619. |
|
Phase-in limit |
|
|
The individual phase-in limit for the 2022-23 income year is $30,345. |
The individual phase-in limit for the 2021-22 income year is $29,206. |
|
The phase-in limit for individual taxpayers eligible for the SAPTO for the 2022-23 income year is $47,956. |
The phase-in limit for individual taxpayers eligible for the SAPTO for the 2021-22 income year is $46,156. |
|
The phase-in limit for families for the 2022-23 income year is $51,173. |
The phase-in limit for families for the 2021-22 income year is $49,252. |
|
The phase-in limit for families eligible for the SAPTO for the 2022-23 income year is $66,757. |
The phase-in limit for families eligible for the SAPTO for the 2021-22 income year is $64,251. |
|
The child-student component of the phase-in limit for families (whether eligible for SAPTO or not) for the 2022-23 income year is $4,700. |
The child-student component of the phase-in limit for families (whether eligible for SAPTO or not) for the 2021-22 income year is $4,523. |
Detailed explanation of new law
Medicare levy low-income thresholds
1.6 Schedule 1 to the Bill increases the low-income threshold for individuals and families (including the dependent child-student component of the family threshold) in line with annual movements in the CPI.
1.7 Section 7 of the Medicare Levy Act 1986 states that no levy is payable where a taxpayer has a taxable income at or below the applicable threshold amount as specified in subsection 3(1) of the Medicare Levy Act 1986.
1.8
The individual threshold amount (specified in paragraph (c) of the
definition of the ‘threshold amount’ in subsection 3(1)
of the Medicare Levy Act 1986 ) increases from $23,365, to
$24,276.
[Schedule 1, item 5,
paragraph (c) of
the definition of ‘threshold amount’ in subsection 3(1)
of the Medicare Levy Act 1986 ]
1.9
The level of the ‘family income threshold’ referred to
in subsections 8(5), 8(6) and 8(7) of the Medicare Levy Act
1986 increases from $39,402 to $40,939. For each dependent
child or student, the family income threshold increases by a
further $3,760, instead of the previous amount of $3,619.
[Schedule 1, items
6, 7 and 8, the definition of ‘family income threshold’
in subsection 8(5), and subsections 8(6) and (7) of the Medicare
Levy Act 1986]
1.10 Schedule 1 to the Bill also increases the threshold amount for individual taxpayers eligible for the SAPTO for the 2022-23 income year.
1.11
The threshold amount for individual taxpayers eligible for the
SAPTO (specified in paragraph (a) of the definition of the
‘threshold amount’ in subsection 3(1) of the
Medicare Levy Act 1986 ) increases from $36,925 to
$38,365.
[ Schedule 1, item 4, paragraph (a) of
the definition of ‘threshold amount’ in subsection 3(1)
of the Medicare Levy Act 1986 ]
1.12
The threshold amount for families eligible for SAPTO increases from
$51,401 to $53,406. For each dependent child or student, the income
threshold increases by a further $3,760, instead of the previous
figure of $3,619.
[Schedule 1, item 9, subsection 8(7) of
the Medicare Levy Act 1986]
Phase-in limits
1.13 Section 7 of the Medicare Levy Act 1986 also provides that the Medicare levy applies at a reduced rate to taxpayers with taxable incomes above the threshold amount but not more than the ‘phase-in limit’ specified in subsection 3(1). The rate of Medicare levy payable in these circumstances is limited to 10 per cent of the excess over the threshold amount that is relevant to the particular person.
1.14
The phase-in limit for individuals (specified in paragraph
(c) of the definition of ‘phase-in limit’ in
subsection 3(1) of the Medicare Levy Act 1986 ) increases
from $29,206 to $30,345.
[Schedule 1, item 3, paragraph (c) of the
definition of ‘phase-in limit’ in subsection 3(1) of
the Medicare Levy Act 1986]
1.15
The phase-in limit for individual taxpayers eligible for
SAPTO (specified in paragraph (a) of the definition of
‘phase-in limit’ in subsection 3(1) of the
Medicare Levy Act 1986 ) increases from $46,156 to
$47,956.
[Schedule 1, item 2, paragraph (a) of the
definition of ‘phase-in limit’ in subsection 3(1) of
the Medicare Levy Act 1986]
1.16 There is no phase-in limit for families in the Medicare Levy Act 1986, as the limit changes with the number of dependants. Instead, subsection 8(2) of the Medicare Levy Act 1986 contains a formula that limits the levy payable by persons with families to 10 per cent of the amount of family income that exceeds their family income threshold.
1.17 The increased threshold amounts and phase-in ranges for the 2022-23 income year are as shown in Table 1.2.
Table 1.2 2022-23 Medicare levy low-income thresholds amounts and phasing-in ranges
|
Category of taxpayer |
No levy payable in 2022-23 if taxable income or family income does not exceed (figure for 2021-22) |
Reduced levy in 2022-23 (if taxable income or family income is within range (inclusive) |
Ordinary rate of levy payable in 2022-23 where taxable income or family income is equal to or exceeds (figure for 2021-22) |
|
Individual taxpayer |
$24,276 ($23,365) |
$24,277-$30,345 |
$30,346 ($29,207) |
|
Individual taxpayers eligible for the SAPTO |
$38,365 ($36,925) |
$38,366-$47,956 |
$47,957 ($46,157) |
|
Families eligible for the SAPTO |
$53,406 ($51,401) |
$53,407-$ 66,757 |
$ 66,758 ($64,252) |
|
Families with the following number of children and/or students |
(family income) |
(family income) |
(family income) |
|
0 |
$40,939 ($39,402) |
$40,940-$51 ,173 |
$51 ,174 ($49,253) |
|
1 |
$44,699 ($43,021) |
$44,700-$55,873 |
$55,874 ($53,776) |
|
2 |
$48,459 ($46,640) |
$48,460-$60,573 |
$60,574 ($58,299) |
|
3 |
$52,219 ($50,259) |
$52,220-$65,273 |
$65,274 ($62,822) |
|
4 |
$55,979 ($53,878) |
$55,980-$69,973 |
$69,974 ($67,345) |
|
5 |
$59,739 ($57,497) |
$59,740-$74,673 |
$74,674 ($71,868) |
Medicare levy surcharge low-income threshold
1.18
References to the individual low-income threshold amount of
$23,365 in the Medicare levy surcharge provisions (in sections 8D
and 8G of the Medicare Levy Act 1986 ) in respect of the
Medicare levy surcharge payable on taxable income for a person who
is married (or both married and a beneficiary of a trust) are also
increased to $24,276.
[Schedule 1, items 10 to 13, paragraphs
8D(3)(c) and 8G(2)(c) and subparagraphs 8D(4)(a)(ii) and
8G(3)(a)(ii) of the Medicare Levy Act 1986]
1.19
References to the individual low-income threshold amount of
$23,365 in the Medicare levy surcharge provisions (in sections 15
and 16 of the A New Tax System ( Medicare Levy
Surcharge — Fringe Benefits) Act 1999 ) in
respect of the Medicare levy surcharge on reportable fringe
benefits are also increased to $24,276.
[Schedule 1, item 1, paragraphs 15(1)(c)
and 16(2)(c) of the A New Tax System (Medicare Levy Surcharge
— Fringe Benefits) Act 1999]
Commencement, application, and transitional provisions
1.20 Schedule 1 to the Bill commences on the day after it receives Royal Assent.
1.21 The amendments apply retrospectively from the start of the 2022-23 income year. However, they are beneficial to all affected taxpayers as they retrospectively reduce or remove liability for Medicare levy and the Medicare levy surcharge that would otherwise apply to affected taxpayers.
1.22
Schedule 1 to the Bill applies to assessments for the 2022-23
income year and later income years.
[Schedule 1, item 14]
Outline of chapter
Context of amendments
Comparison of key features of new law and current law
Detailed explanation of new law
Commencement, application, and transitional provisions
Outline of chapter
2.1 As part of the privatisation of the Commonwealth Bank, the Commonwealth Government provided a guarantee to ensure that pre-privatisation members of the CBA Super fund would not risk losing their superannuation following privatisation. Schedule 2 to the Bill ensures that those members will continue to have the assurance of the existing Commonwealth guarantee if the CBA Super fund is merged with another superannuation fund.
Context of amendments
2.2 Generally, a superannuation fund cannot transfer members’ benefits to another fund without the members’ consent. However, superannuation funds are permitted to transfer members to another superannuation fund (without members’ consent), as long as members will receive equivalent benefits from the new fund following the transfer. This process is known as a ‘successor fund transfer’, and the fund receiving the members is the ‘successor fund’.
2.3 This legislative framework ensures members will be no worse off if they are transferred to another superannuation fund (without their consent). Indeed, members of smaller funds may benefit from a transfer to a larger and better performing super fund.
2.4 Members who joined the CBA Super fund prior to privatisation of the Commonwealth Bank have their contributions to, and payments from, that fund guaranteed by the Commonwealth. This guarantee only applies to that fund (in existence at the time of privatisation). This means the Commonwealth guarantee ceases to apply if a pre-privatisation member of the CBA Super fund chooses to leave that fund.
2.5 This also means the Commonwealth guarantee ceases to apply if the CBA Super fund merges with another superannuation fund. As the Commonwealth guarantee could be considered a member benefit, this could be an impediment to the Trustee of the CBA Super fund transferring member members to another fund in accordance with the successor fund rules in the event of a merger between the CBA Super fund and another superannuation fund.
Comparison of key features of new law and current law
Table 2.1 Comparison of new law and current law
|
New law |
Current law |
|
The Commonwealth guarantees payments to and from the CBA Super fund or a successor fund, by the trustee of that fund or by the Commonwealth Bank, in respect of a pre-privatisation member of that fund. |
The Commonwealth guarantees payments to and from the CBA Super fund, by the trustee of that fund or by the Commonwealth Bank, in respect of a pre-privatisation member of that fund. |
Detailed explanation of new law
2.6 Subsection 117(3) of the Commonwealth Banks Act provides the legislative basis for the existing Commonwealth government guarantee. The guarantee only applies to persons who were members, retired members or beneficiaries of the CBA Super fund prior to privatisation of the Commonwealth Bank - collectively referred to as pre-privatisation members of the CBA Super fund. The guarantee also only applies to amounts:
· payable to or from the CBA Super fund; and
· paid by the trustee of the CBA Super fund, or by the Commonwealth Bank.
2.7 Schedule 2 to the Bill inserts a new provision which ensures that the existing Commonwealth guarantee continues to apply to these pre-privatisation members of the CBA Super fund following a successor fund transfer. That is, the amended Commonwealth guarantee only applies to a person who:
· prior to a successor fund transfer—was a pre-privatisation member of the CBA Super fund; and
·
following a successor fund transfer—continues to hold an
interest in the successor fund.
[Schedule 2, item 1, subsection 117(3A) of
Commonwealth Banks Act]
2.8 Consistent with the parameters of the existing Commonwealth guarantee, in the event of a successor fund transfer, the amended guarantee would only apply to amounts:
· payable to or from the successor fund; and
·
paid by the trustee of the successor fund, or by Commonwealth
Bank.
[Schedule 2, item 1, subsection 117(3A) of
Commonwealth Banks Act]
2.9
The amended Commonwealth guarantee would apply if the CBA Super
fund merges with another regulated superannuation fund via a
successor fund transfer, within the legislative frameworks of the
ITAA 1997 and the Superannuation Industry (Supervision) Act
1993 . A regulated superannuation fund has the same meaning as
in the Superannuation Industry (Supervision) Act
1993.
[Schedule 2, items 1 and 2, subsections
117(3A) and (4) of Commonwealth Banks Act]
2.10
These amendments ensure that, for pre-privatisation members, the
Commonwealth guarantee would continue to apply to the successor
fund in the same way that it currently applies to the CBA Super
fund. On that basis, there would be no change in rights between the
CBA Super fund and the successor fund in regard to the guarantee.
For avoidance of doubt these amendments also specify that it is not
necessary to take the Commonwealth guarantee into consideration
when determining whether those members will receive equivalent
rights from the new fund following a successor fund
transfer.
[Schedule 2, item 1, subsection 117(3B) of
Commonwealth Banks Act]
2.11
Any member of a superannuation fund may choose to switch to another
fund. Members of the CBA Super fund have those same rights. The
Commonwealth guarantee no longer applies if a pre-privatisation
member of the CBA Super fund chooses to leave that fund, or if they
choose to leave the successor fund following a successor fund
transfer.
Commencement, application, and transitional provisions
2.12 The amendments commence on the day after Royal Assent.
Outline of chapter
Context of amendments
Comparison of key features of new law and current law
Detailed explanation of new law
Eligibility for concessional tax treatment
Arrangements with carbon service providers
Exclusions
Calculating the taxable primary production income
Consequential amendments
Commencement, application, and transitional provisions
Outline of chapter
3.1 Schedule 3 to the Bill amends the ITAA 1997 to allow eligible primary producers to treat certain carbon abatement income as primary production income for the purposes of the Farm Management Deposit Scheme and accessing income tax averaging arrangements for primary producers.
3.2 All legislative references in this chapter are to the ITAA 1997 unless otherwise stated.
Context of amendments
3.3 Australian carbon credit units are issued by the Clean Energy Regulator for carbon abatement activities undertaken as part of the Australian Government’s Emissions Reduction Fund.
3.4 Currently, primary producers who sell Australian carbon credit units cannot treat the income as primary production income and therefore do not automatically qualify for concessional tax treatment under the Farm Management Deposit Scheme or income tax averaging for such income.
3.5 The Farm Management Deposit Scheme allows eligible primary producers to make deposits under the scheme to reduce their taxable income in years of good cash flow and to draw down on that income by making withdrawals in years when they need the income. Similarly, income tax averaging allows primary producers to even out their income tax liability from year to year by reducing the effect that fluctuations in their taxable income have on the marginal rates of tax that apply to them from year to year.
3.6 Holders of Australian carbon credit units are also currently taxed based on changes in the value of their Australian carbon credit units each income year, which can result in tax liabilities arising prior to sale.
3.7 The Government is taking practical steps to move towards net zero emissions and protect the environment by encouraging primary producers to undertake additional carbon abatement activities. In particular, the Government is providing concessional tax treatment for the net proceeds of sale of Australian carbon credit units and income derived from farm abatement activities with carbon service providers supporting such units.
3.8 Eligible primary producers will be able to treat the net proceeds from the sale of Australian carbon credit units they first held on or after 1 July 2022 as primary production income for the purposes of the Farm Management Deposit Scheme and accessing income tax averaging arrangements, provided they are individuals who meet the specified criteria. Specifically, under the new amendments, income derived indirectly from a trust to an eligible primary producer will be considered net income and income received directly as an individual will be considered gross income.
3.9 The taxing point for Australian carbon credit units held by eligible primary producers will also be changed to the point of sale. Similarly, income derived from farm abatement activities with carbon service providers supporting such units first held on or after 1 July 2022 will be treated as primary production income for the purposes of the Farm Management Deposit Scheme and accessing income tax averaging arrangements.
3.10 This new tax incentive will encourage primary producers to diversify their income by generating and selling Australian carbon credit units and supporting the creation of such units, as it helps to balance out other fluctuations in income derived from farming.
3.11 Deferring the taxation point until the point of sale for eligible individual primary producers also benefits the cash flow position of primary producers, encouraging more primary producers to increase their carbon abatement activities.
3.12 Targeted support to primary producers will further incentivise more carbon abatement projects in the agricultural sector and drive investment in regional communities, while helping Australia achieve its commitment to net zero emissions by 2050.
Comparison of key features of new law and current law
Table 3.1 Comparison of new law and current law
|
New law |
Current law |
|
Proceeds from selling Australian carbon credit units and income derived from farm abatement activities supporting such units, are treated as primary production income for primary producers’ eligibility for concessional tax treatment under the Farm Management Deposit Scheme and tax averaging. Concessional treatment does not apply to companies and trusts. |
Proceeds from selling Australian carbon credit units and income derived from farm abatement activities with carbon service providers supporting such units are treated as non-primary production income and, accordingly, are ineligible for concessional tax treatment under the Farm Management Deposit Scheme and tax averaging. |
|
Holders of primary producer registered emissions units (that is, Australian carbon credit units held by eligible primary producers) are not taxed based on changes in the value of their Australian carbon credit units each year. Instead, eligible primary producers holding primary producer registered emissions units are taxed based on the net proceeds (or net income derived from farm abatement activities supporting such units) in the year they are sold. Subdivision 420-D is still applicable to trusts. Individual beneficiaries will be taxed on the changes of the value of the Australian carbon credit units which are held by the trust. |
Holders of Australian carbon credit units are taxed based on changes in the value of their Australian carbon credit units each year. |
Detailed explanation of new law
Eligibility for concessional tax treatment
3.13 Concessional tax treatment under the Farm Management Deposit Scheme and income tax averaging is available for the net proceeds from the sale of an Australian carbon credit unit or net income derived from another entity that holds such a unit when the following conditions are met:
· the Australian carbon credit unit is first held on or after 1 July 2022;
· the unit is issued under the Carbon Credits (Carbon Farming Initiative) Act 2011 in relation to an ‘eligible offsets project’ (within the meaning of subsection 27(2) of the Carbon Credits (Carbon Farming Initiative) Act 2011 which provides that an offsets project will be considered an eligible offsets project if the Minister declares it to be), or the unit is transferred by a carbon service provider that held a unit issued under the Carbon Credits (Carbon Farming Initiative) Act 2011 in relation to an eligible offsets project;
· at all times while the eligible offsets project is carried on, a primary production business is also carried on in the same area as the offsets project or in an area connected to an area in which the offsets project is carried on; and
· the primary production business mentioned above is carried on by an individual (but not an individual in their capacity as a trustee of a trust) or a trust (which the individual is a beneficiary of) or a partnership (which the individual is a partner in). An individual’s eligibility could be met under one or more of the above criteria depending on their circumstances (that is, they may meet the conditions of an individual, a beneficiary of a trust, a partner in a partnership or a combination at different times).
[Schedule 3, item 3, section 420-13 and note 3 to section 420-13]
3.14
An Australian carbon credit unit that meets the above conditions
deeming eligibility for concessional tax treatment is known as a
primary producer registered emissions unit .
[Schedule 3, item 7, subsection
995-1(1)]
3.15 ‘Hold’ has the same meaning as in section 5 of the Carbon Credits (Carbon Farming Initiative) Act 2011 . An Australian carbon credit unit is held by a person if the person is the registered holder of the unit.
3.16
Existing Subdivision 420-D that sets out the tax treatment
for registered emissions units is intended to continue to apply
unaffected if the above conditions are not met, such as for pre-1
July 2022 units or where the primary production activity is not
carried on as required.
[Schedule 3, item 4, section
420-62]
3.17
The cost of an Australian carbon credit unit issued under the
Carbon Credits (Carbon Farming Initiative) Act 2011 as set
out in section 420-60 of Subdivision 420-D is not affected by
these amendments - that is, the cost of an Australian carbon
credit unit, whether or not it is a primary producer
registered emissions unit , will be its market value
immediately after the holder began to hold the unit.
[Schedule 3, item 4, section
420-62]
Arrangements with carbon service providers
3.18 An entity that carries on the business of providing services wholly or mainly relating to offsets projects, is known as a carbon service provider .
3.19
Such services include those involving the entity carrying out such
projects as the project proponent (within the meaning of section 5
of the Carbon Credits (Carbon Farming Initiative) Act 2011
which provides that the project proponent means the person who is
responsible for carrying out the project and has the legal right to
carry out the project).
[Schedule 3, item 7, subsection
995-1(1)]
3.20
An eligible primary producer may enter an arrangement with a carbon
service provider to undertake carbon abatement activities, which
results in the carbon service provider being issued Australian
carbon credit units. The proceeds that the primary producer
receives from the carbon service provider as part of this
arrangement, whether it be a regular payment or proceeds from the
sale of the Australian carbon credit units, are considered
assessable primary production income. Furthermore, if the carbon
service provider provides the primary producer with Australian
carbon credit units directly as part of their commercial agreement,
these Australian carbon credit units (and proceeds from the sale of
these Australian carbon credit units) are also considered
assessable primary production income.
[Schedule 3 item 2, paragraph
392-80(2)(e)]
3.21 The net proceeds from the sale of units that accrue to the primary producer and net income derived from farm abatement activities supporting such units are eligible for concessional tax treatment (when the above conditions are met).
3.22
However, where the arrangement between the eligible primary
producer and carbon service provider takes a form of a rental or
lease arrangement, then any income or Australian carbon credit
units derived from this arrangement are excluded from the
concessional tax treatment. This ensures that the concessional tax
treatment is only provided to eligible primary producers conducting
carbon abatement activities on their land, rather than leasing
their land to a third party that undertakes the carbon abatement
activity. This is consistent with the treatment that applies
generally under the tax law that income from leasing of farmland is
property income rather than primary production income.
[Schedule 3, item 2, subparagraphs
392-80(2)(e)(iii) and 392-80(3)(d)(iii)]
Exclusions
3.23
Concessional tax treatment is only intended to apply to units
issued under the Carbon Credits (Carbon Farming Initiative) Act
2011 in relation to an ‘eligible offsets project’.
Concessional tax treatment will not apply to subsequent holdings of
units - if a primary producer disposes of a unit, and that
unit is later acquired by a new holder or reacquired by the same
primary producer, concessional tax treatment is not available for
that unit.
[Schedule 3, item 3, notes 1 and 2 to
section 420-13]
3.24 Incorporated farms are excluded, which essentially maintains the current arrangements in relation to eligibility for the Farm Management Deposit Scheme - that is, companies are not eligible for a Farm Management Deposit. The tax treatment set out in existing subdivision 420-D is intended to continue to apply for units held by companies and trusts. When Australian carbon credit units are held by trusts and not disposed of, the beneficiaries will be subject to the existing treatment under Division 420-D in which the Australian carbon credit units will be taxed based on the increase or decrease in the value of the Australian carbon credit units. The derived income from the trusts by beneficiaries in this circumstance will not be considered primary production income.
Calculating the taxable primary production income
3.25
Existing Divisions 392 and 393 set out the rules for the Farm
Management Deposit Scheme and tax averaging. These Divisions apply
in relation to the net proceeds from the sale of units that meet
the eligibility conditions and the net income derived from farm
abatement activities supporting such units.
[Schedule 3, items 5 and 6, subsections
420-65(7) and 420-70(3)]
3.26 Whether the primary producer would have the benefit of income tax averaging or the Farm Management Deposit Scheme will depend on the application of those schemes for the particular income year in which the sale of Australian carbon credit units occurs or net income is derived from farm abatement activities supporting such units.
3.27 Taxable primary production income is taken into account to work out the averaging adjustment for the purposes of averaging of a primary producer’s tax liability. It is also used to determine entitlement to the Farm Management Deposit Scheme.
3.28 Taxable primary production income is worked out using assessable primary production income and primary production deductions.
3.29 For the income year that the sale of a unit occurs, the following can be included in the primary producer’s assessable primary production income:
· any amount included in assessable income for that year because the primary producer ceases to hold the unit;
· if the primary producer is a beneficiary of a trust that is carrying on a primary production business - any amount included in basic assessable income for that year to the extent that that amount is the primary producer’s share of the trust’s net income that is attributable to, or resulted from, an amount included in the assessable income of the trust because the trust ceases to hold the unit;
· if the primary producer is a partner in a partnership that is carrying on a primary production business - any amount included in basic assessable income for that year to the extent that that amount is the primary producer’s share of the partnership’s net income that is attributable to, or resulted from, an amount included in the assessable income of the partnership because one of the partners ceases to hold the unit; and
· if the primary producer is under an arrangement with a carbon service provider - any amount included in basic assessable income for that year that was derived from, or resulted from, the arrangement to the extent that the arrangement relates to the carbon service provider starting to hold, holding or ceasing to hold the unit.
3.31 For the income year that the sale of a unit occurs, the following can be included in the primary producer’s primary production deductions:
· so much of any deductible amounts for that year in relation to expenditure the primary producer incurs in starting to hold, holding or ceasing to hold the unit; and
· if the primary producer is under an arrangement with a carbon service provider - so much of any deductible amounts for that year in relation to expenditure the primary producer incurs under the arrangement to the extent that the arrangement relates to the carbon service provider starting to hold, holding or ceasing to hold the unit.
3.32
The above applies to any unit that meets the eligibility conditions
or would meet the eligibility conditions had the primary producer
started to hold, held and ceased to hold the unit instead of the
provider. For example, if the primary producer is under an
arrangement with a carbon service provider - the primary
producer will put themselves in the place of the provider and see
if the unit would thus satisfy the eligibility conditions to be a
primary producer registered emissions unit.
[Schedule 3, item 2, subsection
392-80(3)]
3.33
A note has been included to clarify that primary producers can
deduct expenditure incurred in preparing or lodging an application
for a ‘certificate of entitlement’ (within the meaning
of section 15 of the Carbon Credits (Carbon Farming Initiative)
Act 2011 ) or an ‘offsets report’ (within the
meaning of section 76 of the Carbon Credits (Carbon Farming
Initiative) Act 2011 ).
[Schedule 3, item 2, note 1 to subsection
392-80(3)]
3.34
A further note has been included to clarify that expenditure
incurred in ceasing to hold a unit is currently a deduction under
existing section 420-42.
[Schedule 3, item 2, note 2 to subsection
392-80(3)]
3.35 Primary producers and other businesses continue to be entitled to deduct amounts under existing Division 8. For example, businesses can deduct expenditure incurred in establishing a carbon farming project (that is, cost of trees (deducted over a number of income years) and water and fertiliser in establishing and maintaining a tree planting project for carbon sequestration). In addition, other related activities which may be undertaken to derive Australian carbon credit units can be deducted under specific provisions such as Division 40-J which provides for deductions for carbon sink forests.
Consequential amendments
3.36
Schedule 3 to the Bill also amends the meaning of the expression
basic assessable income to correct some technical and
typographical errors.
[Schedule 3, item 1, subsection
392-45(2)]
Commencement, application, and transitional provisions
3.37 The amendments commence on the first 1 January, 1 April, 1 July or 1 October to occur after the date the Bill receives Royal Assent.
3.38
The amendments apply to assessments for the income year that
includes 1 July 2022 and later income years Accordingly, the
amendments in Schedule 3 to the Bill have retrospective
application.
[Schedule 3, item 8]
3.39 The amendments apply retrospectively to ensure that primary producers qualify for the concessional tax treatment as announced in the March 2022-23 Budget - that is, if Australian carbon credit units are first held on or after 1 July 2022, concession tax treatment may apply to the units provided they meet the eligibility conditions. The changes provide an overall benefit to persons affected by these amendments because they allow concessional income tax treatment by enabling the smoothing out of income and tax liabilities over income years.
Outline of chapter
Context of amendments
Comparison of key features of new law and current law
Detailed explanation of new law
Commencement, application, and transitional provisions
Outline of chapter
4.1 Schedule 4 to the Bill amends the TAA 1953 to reduce the GDP adjustment factor for the 2023-24 income year to 6 per cent. The GDP adjustment factor is applied by the Commissioner to work out the amount of PAYG and GST instalments payable by a taxpayer in certain circumstances.
Context of amendments
4.2 Most small businesses and some individuals are required to pay instalments toward their expected annual income tax under the PAYG instalment system. The difference between instalment payments and the taxpayer’s final tax liability is reconciled in a wash-up payment or refund at the time an income tax assessment is made (generally at the end of the income year).
4.3 Small and medium business entities that are liable to pay GST may also elect to pay by instalments. The amount of the GST instalments payable by a business entity is worked out by the Commissioner taking into account the GDP adjustment factor.
4.4 There are a number of methods to determine tax instalments based on previous tax outcomes. These include:
· the Instalment Rate method - under this method the amount of the instalment is worked out based on income as a proxy for profit within instalment periods; and
· the Quarterly Instalment Amount method - under this method the amount of the instalment is worked out based on previous tax outcomes that are uplifted based on the nominal increase in GDP over the previous two calendar years.
4.5 Taxpayers can vary their instalments if they consider their income is expected to be lower or higher than the amount determined by the Commissioner.
4.6 The Commissioner has advised that without this amendment, the GDP adjustment factor that will apply to work out instalments for the 2023-24 income year under the Quarterly Instalment Amount method will be 12 per cent.
4.7 The GDP adjustment factor can be unrepresentative of expected profit growth in income years where economic and business conditions change quickly and the expected income of taxpayers changes accordingly. This can cause taxpayers to be required to pay instalments that are too high compared with their actual income, with the overpaid tax being credited to them after the end of the income year when their final tax liability is assessed.
4.8 The current 2023-24 GDP adjustment factor of 12 per cent is high compared to previous years. This significant increase can be attributed to higher commodity prices (especially within the mining sector), inflation, and GDP growth. Therefore, having regard to these economic and business conditions, the GDP adjustment factor that applies to work out the amount of instalments payable is reduced to 6 per cent for the 2023-24 income year.
Comparison of key features of new law and current law
Table 4.1 Comparison of new law and current law
|
New law |
Current law |
|
The GDP adjustment factor used by the Commissioner to work out PAYG instalments under the Quarterly Instalment Amount method for the 2023-24 income year will be 6 per cent. The Commissioner will apply the GDP adjustment factor to work out the amount of GST instalments payable by business entities in the 2023-24 income year. |
The GDP adjustment factor used by the Commissioner to work out PAYG instalments under the Quarterly Instalment Amount method for the 2023-24 income year will be 12 per cent. The Commissioner will apply the GDP adjustment factor to work out the amount of GST instalments payable by business entities in the 2023-24 income year. |
Detailed explanation of new law
4.9 Schedule 4 to the Bill amends section 45-405 in Schedule 1 to the TAA 1953 to reduce the GDP adjustment factor for the 2023-24 income year to 6 per cent.
4.10 Taxpayers who make PAYG and GST instalments on the basis of the Quarterly Instalment Amount method are required to pay a percentage of their GDP adjusted notional tax each quarter as worked out under either section 45-400 or section 45-402 in Schedule 1 to the TAA 1953.
4.11 GDP adjusted notional tax is calculated by the Commissioner under section 45-405 in Schedule 1 to the TAA 1953. Broadly, a taxpayer’s GDP adjusted notional tax is calculated by increasing the taxpayer’s adjusted taxable income from their recent income tax return by the GDP adjustment factor to give the adjusted taxable income for the purposes of calculating their notional tax for the current income year.
4.12
The GDP adjustment factor is generally calculated using the formula
in subsection 45-405(3) in Schedule 1 to the TAA 1953. However, for
the 2023-24 income year, the GDP adjustment factor is set at 6 per
cent.
[Schedule 4, item 1, subsection 45-405(10)
in Schedule 1 of the TAA 1953]
4.13 The Commissioner will apply the reduced GDP adjustment factor to work out the amount of GST instalments payable by eligible taxpayers in the 2023-24 income year.
4.14 Taxpayers may still vary their quarterly instalments if they consider their income is expected to be lower or higher than the amount determined by the Commissioner using the 6 per cent GDP adjustment factor.
4.15 The reduction of the GDP adjustment factor does not alter the relevant taxpayer’s overall tax liability. Instead, the reduction minimises adverse impacts on cashflow for the 2023-24 income year as instalments fall due.
Commencement, application, and transitional provisions
4.16 The amendments commence on the day after Royal Assent of the Bill.
4.17
These amendments will apply for the purposes of working out the
amount of PAYG and GST instalments for instalments quarters of the
2023-24 income year.
[Schedule 4, item 2]
4.18 This will ensure that the measure will apply for the purposes of working out the amount of a taxpayer’s instalments in relation to the 2023-24 income year (including the PAYG instalments payable by a taxpayer that has a substituted accounting period). For relevant taxpayers with substituted accounting periods that are early balancers for the 2023-24 income year, the reduction of the GDP adjustment factor to 6 per cent does not cause a disadvantage as there is a reduction in the applicable instalments.
4.19 To avoid inoperative provisions remaining in the tax laws, the provisions that give effect to this measure will be automatically repealed on 1 July 2028. [Schedule 4, item 1]
Outline of chapter
Context of amendments
Summary of new law
Detailed explanation of new law
Enhancement of the Home Guarantee Schemes
Enhancement of the Family Home Guarantee
The Investment Mandate
Commencement, application, and transitional provisions
Outline of chapter
5.1 Schedule 5 to the Bill amends the NHFIC Act to expand the objects of the Act, providing for the NHFIC to improve housing outcomes for Australians by assisting earlier access to the housing market for eligible individuals who have not held an ownership interest in real property in Australia in the preceding 10 years, as well as single legal guardians of children. The amendments to the objects of the NHFIC Act enable the Minister to issue directions to the NHFIC concerning eligibility for the Home Guarantees through the Investment Mandate.
Context of amendments
5.2 The NHFIC Act establishes the NHFIC and its functions. Directions to the NHFIC regarding the performance of its functions are given by the Minister in the Investment Mandate.
5.3 In giving a direction through the Investment Mandate, the Minister must have regard to the object of the NHFIC Act in section 3 of that Act and any other matters the Minister considers relevant. Further, the Minister must not give a direction that is inconsistent with the NHFIC Act, including the object of the Act (see paragraph 14(b) of the NHFIC Act).
5.4 One of the NHFIC’s functions is to issue guarantees to improve housing outcomes. Directions regarding this function are set out in Part 5A of the Investment Mandate. The guarantees which the amendments apply to include the First Home Guarantee, the Regional First Home Buyer Guarantee and the Family Home Guarantee.
5.5 The Government intends to allow the NHFIC to provide guarantees to support:
· eligible individuals who may not be first home buyers, but who have not held an ownership interest in real property in Australia in the preceding 10 years; and
· legal guardians of children where the legal guardian is single.
5.6 This recognises the importance of housing in providing a foundation for social, economic and emotional wellbeing.
Summary of new law
5.7 Schedule 5 to the Bill expands the objects of the NHFIC Act to make clear the Minister’s power to issue a direction to the NHFIC includes the power to issue directions regarding assisting earlier access, or re-entry, to the housing market by eligible individuals who have not held an ownership interest in real property in Australia in the preceding 10 years. It also provides for the expansion of the Family Home Guarantee to include single legal guardians of children.
Detailed explanation of new law
Enhancement of the Home Guarantee Schemes
5.8
Schedule 5 to the Bill expands the objects of the NHFIC Act to
improve housing outcomes for Australians by assisting earlier
access to the housing market for individuals who have not held an ownership interest in real
property in Australia in the preceding 10
years.
[Schedule 5, item 1,
paragraph 3(g) of the NHFIC Act]
5.9 The purpose of adding this new object to the NHFIC Act is to enable the Minister to issue a direction to the NHFIC for guarantees to be issued to eligible individuals who have not held an ownership interest in real property in Australia in the preceding 10 years , regardless of whether they are first home buyers or previous property owners.
5.10 This would include where two individuals seek to purchase a home together, so that one individual could be a first home buyer whilst the other would qualify if they have not held an ownership interest in a real property in Australia in the past 10 years, or both previously held an ownership interest in real properties in Australia jointly or separately more than 10 years ago.
5.11 The changes recognise the importance of housing in providing a foundation for social, economic and emotional wellbeing, and expands current support beyond first home buyers. Through the addition of the new object, the Government is providing a pathway to allow eligible individuals to return to home ownership. This may include individuals who despite previously owning a property, may have been forced to sell and found it difficult to return to the housing market while paying rent. Accordingly, the amendments allow them to build or purchase a home sooner, subject to their ability to service a loan.
Enhancement of the Family Home Guarantee
5.12
The intention of the Family Home Guarantee is to provide assistance
in entering the housing market to single individuals with
dependants. Schedule 5 to the Bill amends the existing NHFIC Act to
extend support to single individuals who are legal guardians of
children, regardless of whether the individuals are parents.
[Schedule 5, item 1, paragraph 3(f) of the
NHFIC Act]
5.13 The clarification provided by this amendment ensures that all single individuals with dependants, including single legal guardians of children, are able to access support from the NHFIC in entering the housing market. The amendment recognises that opportunities to realise homeownership should be broadened beyond single parents to those who are not natural or adoptive parents of a child.
The Investment Mandate
5.14 The Investment Mandate will be amended to allow some non-first home buyers to access the First Home Guarantee and Regional First Home Buyer Guarantee Schemes. This will apply where they have not held a freehold interest in real property in Australia, a lease of land in Australia (including a renewal or extension of such a lease) or, a company title interest in land in Australia, in each case, in the last 10 years.
5.15 The Investment Mandate will also be amended to allow single legal guardians of children to access the Family Home Guarantee on the same terms that single parents with dependants are able to currently.
5.16 The deposit requirements, caps on taxable income of individuals and the property price caps under the Home Guarantee Schemes will remain unchanged.
5.17 It is appropriate for the details of the guarantees to be included in the Investment Mandate to ensure the scheme promotes consistency with the existing legislative framework already approved by the Parliament and in place under the NHFIC Act. Including the guarantee in the Investment Mandate also allows refinements to be made to reflect new information and changes in market conditions.
5.18 In accordance with item 2 of the table in section 9 of the Legislation (Exemptions and Other Matters) Regulation 2015 , the Investment Mandate is not disallowable as it is a direction by a Minister to a person or body. It is appropriate that the Investment Mandate is not disallowable as it is a ministerial direction, and therefore executive control is intended.
Commencement, application, and transitional provisions
5.19
Schedule 5 to the Bill commences on the later of 1 July 2023 and
the day after Royal Assent.
[Clause 2]
5.20 The commencement provision ensures that, subject to changes to the Investment Mandate, the NHFIC is able to start to issue guarantees under the relevant Home Guarantee Schemes on 1 July 2023. However, if Royal Assent has not occurred by 30 June 2023, guarantees under the Home Guarantee Schemes can be issued from the later date of commencement of Schedule 5 to the Bill.
5.21 Schedule 5 to the Bill amends the NHFIC Act. However, the Treasury Laws Amendment (Housing Measures No. 1) Bill 2023 contains provisions to rename the NHFIC Act as the Housing Australia Act 2018 . If, the NHFIC Act is renamed to the Housing Australia Act 2018 prior to the commencement of these amendments, then references to the NHFIC Act are instead treated as references to the Housing Australia Act 2018. This is in accordance with section 10 of the Acts Interpretation Act 1901 .
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Treasury Laws Amendment (2023 Measures No. 2) Bill 2023
Table of Contents:
Schedule 1 - Medicare levy and Medicare levy surcharge income thresholds
Overview
Human rights implications
Conclusion
Schedule 2 - Maintaining the Commonwealth Bank superannuation fund guarantee
Overview
Human rights implications
Conclusion
Schedule 3 - Tax accounting for primary producer registered emissions units
Overview
Human rights implications
Conclusion
Schedule 4 - Cash flow relief for small and medium businesses
Overview
Human rights implications
Conclusion
Schedule 5 - Enhancements to the Home Guarantee Scheme
Overview
Human rights implications
Conclusion
Schedule 1 - Medicare levy and Medicare levy surcharge income thresholds
Overview
6.1 Schedule 1 to the 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 .
6.2 Schedule 1 to the Bill amends the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999 to:
· increase the Medicare levy low-income thresholds for individuals and families (along with the dependent child-student component of the family threshold) in line with movements in the CPI;
· increase the Medicare levy low-income thresholds for individuals and families eligible for the SAPTO (along with the dependent child-student component of the family threshold), in line with movements in the CPI; and
· increase the Medicare levy surcharge low-income threshold in line the movements in the CPI.
6.3 This will ensure that low-income individuals, families, seniors and pensioners who were exempt from the Medicare levy in the 2021-22 income year continue to be exempt in the 2022-23 income year if their income has increased in line with, or less than, movements in the CPI.
Human rights implications
6.4 Schedule 1 to the Bill does not engage any of the applicable rights or freedoms.
Conclusion
6.5 Schedule 1 to the Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 2 - Maintaining the Commonwealth Bank superannuation fund guarantee
Overview
6.6 Schedule 2 to the 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 .
6.7 As part of the privatisation of the Commonwealth Bank, the Commonwealth Government provided a guarantee to ensure that pre-privatisation members of the CBA Super fund would not risk losing their superannuation following privatisation. Schedule 2 to the Bill ensures that those members will continue to have the assurance of the existing Commonwealth guarantee if the CBA Super fund is merged with another superannuation fund.
Human rights implications
6.8 Schedule 2 to the Bill does not engage any of the applicable rights or freedoms.
Conclusion
6.9 Schedule 2 to the Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 3 - Tax accounting for primary producer registered emissions units
Overview
6.10 Schedule 3 to the 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 .
6.11 Schedule 3 to the Bill amends the ITAA 1997 to allow primary producers to treat certain carbon abatement income as primary production income for the purposes of the Farm Management Deposit Scheme and accessing income tax averaging arrangements for primary producers.
Human rights implications
6.12 Schedule 3 to the Bill promotes the right to an adequate standard of living, including food, water and housing under Article 11 of the International Covenant on Economic, Social and Cultural Rights.
6.13 The right to an adequate standard of living provides that Australia must take appropriate steps towards the realisation of this right in its jurisdiction, and that the relevant standard must be continuously improving.
6.14 Schedule 3 to the Bill improves the standard of living in Australia by providing concessional tax treatment for the net proceeds of sale of Australian carbon credit units and income derived from farm abatement activities supporting such units. Each Australian carbon credit unit represents one tonne of carbon dioxide equivalent greenhouse gas emissions stored or avoided. This targeted support to primary producers will assist in enhancing the welfare of Australians, by further incentivising more carbon abatement projects in the agricultural sector while helping Australia achieve its commitment to net zero emissions by 2050.
6.15 Schedule 3 to the Bill promotes the right to health under Article 12 of the International Covenant on Economic, Social and Cultural Rights.
6.16 The right to health recognises the right of everyone to the enjoyment of the highest attainable standard of physical and mental health. The Committee has stated that the right to health embraces a wide range of socio-economic factors that promote conditions in which people can lead a health life, and extends to the underlying determinants of health, including a healthy environment.
6.17 Schedule 3 to the Bill would work to protect the environment by encouraging primary producers to undertake additional carbon abatement activities. As discussed above, Australian carbon credit units are created from eligible carbon abatement activities for each tonne of carbon dioxide equivalent greenhouse gas emissions stored or avoided. Encouragement of primary producers to support the creation of such units aims to reduce carbon emissions in Australia.
Conclusion
6.18 Schedule 3 to the Bill is compatible with human rights as it promotes the right to an adequate standard of living and the right to health.
Schedule 4 - Cash flow relief for small and medium businesses
Overview
6.19 Schedule 4 to the 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 .
6.20 Schedule 4 to the Bill amends the TAA 1953 to reduce the GDP adjustment factor for the 2023-24 income year to 6 per cent. The GDP adjustment factor is applied by the Commissioner to work out the amount of PAYG and GST instalments payable by a taxpayer in certain circumstances.
Human rights implications
6.21 Schedule 4 to the Bill does not engage any of the applicable rights or freedoms.
Conclusion
6.22 Schedule 4 to the Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 5 - Enhancements to the Home Guarantee Scheme
Overview
6.23 Schedule 5 to the 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 .
6.24 Schedule 5 to the Bill amends the NHFIC Act to expand the objects of the Act to improve housing outcomes for Australians by assisting earlier access to the housing market by eligible individuals who have not held an ownership interest in real property in Australia in the preceding 10 years, as well as single legal guardians of children. The amendments to the objects will enable the Minister to issue directions to the National Housing Finance and Investment Corporation through the Investment Mandate.
Human rights implications
6.25 Schedule 5 to the Bill engages the right to an adequate standard of living, including food, water and housing under Article 11 of the International Covenant on Economic, Social and Cultural Rights.
6.26 The right to an adequate standard of living provides that Australia must take appropriate steps towards the realisation of this right in its jurisdiction, and that the relevant standard must be continuously improving.
6.27 Schedule 5 to the Bill improves the standard of living in Australia by promoting home ownership and housing affordability in Australia.
Conclusion
6.28 Schedule 5 to the Bill is compatible with human rights as it positively engages the right to an adequate standard of living.