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Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016

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2016-2017

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

SENATE

 

 

 

Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016

 

 

SUPPLEMENTARY EXPLANATORY MEMORANDUM

 

Amendments to be moved on behalf of the Government

 

 

(Circulated by authority of the

Treasurer, the Hon Scott Morrison MP)





Table of contents

General outline and financial impact............................................................ 5

Amendments to Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016          7

 

Do not remove section break.



Amendments to Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016

The amendments to the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2017 will ensure that the corporate tax rate for corporate tax entities that are small business entities will be reduced to 27.5 per cent for the 2016-17 income year.

This 27.5 per cent rate will be extended to corporate tax entities that are base rate entities from the 2017-18 income year. A base rate entity will be an entity that carries on a business and:

•        for the 2017-18 income year — has an aggregated turnover of less than $25 million; and

•        for the 2018-19 income year and later income years — has an aggregated turnover of less than $50 million.

The 27.5 per cent rate for base rate entities will subsequently be cut to:

•        27 per cent for the 2024-25 income year;

•        26 per cent for the 2025-26 income year; and

•        25 per cent for the 2026-27 and later income years.

Date of effect The corporate tax rate will start to be reduced from the 2016-17 income year for small business entities.

Proposal announced :  Not previously announced.

Financial impact These amendments are estimated to have the following revenue implications:

2016-17

2017-18

2018-19

2019-20

0

0

0

$100m

The Bill, as amended, will implement the first stage of the Enterprise Tax Plan corporate tax cuts.

Do not remove section break.



Outline of chapter

1.1                   The amendments to the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2017 will ensure that the corporate tax rate for corporate tax entities that are small business entities will be reduced to 27.5 per cent for the 2016-17 income year.

1.2                   This 27.5 per cent rate will be extended to corporate tax entities that are base rate entities from the 2017-18 income year. A base rate entity will be an entity that carries on a business and:

•        for the 2017-18 income year — has an aggregated turnover of less than $25 million; and

•        for the 2018-19 income year and later income years — has an aggregated turnover of less than $50 million.

1.3                   The 27.5 per cent rate for base rate entities will subsequently be cut to:

•        27 per cent for the 2024-25 income year;

•        26 per cent for the 2025-26 income year; and

•        25 per cent for the 2026-27 and later income years.

Detail explanation of new law

Amendment 1 — Modification to the commencement provision

1.4                   Amendment 1 will modify the commencement provision in Clause 2 to this Bill to remove references to those parts of the Bill that have been removed by these amendments.

Amendments 2 and 3 — Modifications to Schedule 1 (Reducing the corporate tax rate)

1.5                   Schedule 1 to the Bill contains amendments to reduce the corporate tax rate.

Amendment 2

1.6                   Amendment 2 will modify this Schedule to remove the provisions that:

•        increase the base rate entity threshold from $50,000 for the 2018-19 income year to $1 billion for the 2022-23 income year; and

•        extend the lower corporate tax rate to all corporate tax entities from the 2024-25 income year.

1.7                   As a consequence of this amendment, the corporate tax rate for corporate tax entities that are small business entities will be reduced to 27.5 per cent for the 2016-17 income year.

1.8                   This 27.5 per cent rate will be extended to corporate tax entities that are base rate entities from the 2017-18 income year. A base rate entity will be an entity that carries on a business and:

•        for the 2017-18 income year — has an aggregated turnover of less than $25 million; and

•        for the 2018-19 income year and later income years — has an aggregated turnover of less than $50 million.

1.9                   The 27.5 per cent rate for base rate entities will subsequently be cut to:

•        27 per cent for the 2024-25 income year;

•        26 per cent for the 2025-26 income year; and

•        25 per cent for the 2026-27 and later income years.

1.10               Consequently, the corporate tax rate for corporate tax entities with an aggregated turnover of $50 million or more will remain at 30 per cent.

Amendment 3

1.11               Amendment 3 will modify the application provision for Schedule 1 to the Bill in item 57 to remove references to Parts 4 to 8 of the Schedule, which have been removed by these amendments.

Amendments 4 and 5 — Modifications to Schedule 4 (Main consequential amendments relating to imputation)

1.12               Schedule 4 to the Bill contains consequential amendments to relating to the operation of the imputation system.

Amendment 4

1.13               Amendment 4 will remove Part 2 of Schedule 4 to the Bill. The amendments in this Part are no longer necessary because the differential corporate tax rate between base rate entities and other corporate tax entities is to be retained.

Amendment 5

1.14               Amendment 3 will modify the application provision for Schedule 4 to the Bill in item 58 to remove the reference to Part 2 of the Schedule, which has been removed by these amendments.

Amendment 6 — Modifications to Schedule 5 (Other consequential amendments)

1.15               Schedule 6 to the Bill contains a range of consequential amendments relating to the reduction in the corporate tax rate for all corporate tax entities proposed in the Bill.

1.16               Amendment 6 removes Parts 3 to 6 of Schedule 6 as the consequential amendments in these Parts are redundant as a consequence of these amendments.