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Termination Payments Surcharge (Assessment and Collection) Bill 1997



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D E P A R T M E N T O F T H E P A R L I A M E N T A R Y L I B R A R Y

Information and Research Services

Termination Payments Surcharge (Assessment and Collection) Bill 1997

Bills Digest

No. 129 1996-97

ISSN 1323-9031

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Information and Research Services

Termination Payments Surcharge (Assessment and Collection) Bill 1997

Chris Field Ian Ireland Law and Bills Digest Group 3 April 1997

Bills Digest No. 129 1996-97

Contents

Purpose ...................................................................................................................................... 1

Background .............................................................................................................................. 1

Main Provisions ........................................................................................................................ 1

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Termination Payments Surcharge (Assessment and Collection) Bill 1997

Date Introduced: 13 February 1997

House: House of Representatives

Portfolio: Treasury

Commencement: Royal Assent

Purpose

To provide for the assessment and collection of a 'surcharge' on termination payments that will be payable by a taxpayer where there income exceeds $70 000.

Background

The reader is referred to the Digest for the Superannuation Contributions Surcharge (Assessment and Collection) Bill 1997.

Main Provisions

For termination payments made before 20 August 2001, the surcharge will apply to the financial year commencing on 1 July 1996. Effectively the surcharge will apply to termination payments made after 7.30 pm on 20 August 1996 (the time of the Budget announcement)(clause 7).

Transitional arrangements will apply to termination payments made before 20 August 2001, so that only that part of the termination payment relating to service after the announcement of the surcharge will be liable. For termination payments made on or after 20 August 2001, the surcharge will apply to the entire termination payment, including

2 Termination Payments Surcharge (Assessment and Collection) Bill 1997

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

service prior to that date. It may be argued that this measure as it applies to entitlements accrued before the announcement is retrospective (clause 9).

The surcharge threshold will be $70 000 for 1996-97 and this amount will be indexed on the movement of the Australian Statistician's estimate of full-time adult average weekly ordinary time earnings, rather than the Consumer Price Index. The indexation factor will be calculated on such movements from March to March each year (clause 10).

Who is liable to pay the surcharge is dealt with in clause 8. The surcharge is payable on any termination payments made to or for a taxpayer. The taxpayer is liable for the surcharge. The surcharge is only payable if a taxpayer's assessable income and superannuation contributions for a financial year is greater than the surcharge threshold for that year. In addition, the surcharge will not be payable by residents, companies and trustees that reside in a Territory for the purposes of Division 1A of Part III of the Income Tax Assessment Act 1936 (ITAA) (such Territories are the external Territories and, depending on certain provisions of the ITAA, are Norfolk Island, the Cocos (Keeling) Islands and Christmas Island).

The Commissioner of Taxation (the Commissioner) is to assess any amount of surcharge that is payable in respect of a financial year and the assessment is to include the total amount of surcharge payable. The surcharge will generally be payable within 1 months of the assessment being made. Notice of an assessment is to be given to the taxpayer (clause 11).

If an assessment of surcharge is amended, the assessment of the amount of surcharge is to be amended to reflect the new assessment of income (clause 12). If an assessment is amended or a new assessment is issued and this results in a higher surcharge liability, the person will also be liable to interest on the difference between the originally assessed surcharge and the newly assessed surcharge. The rate of interest will be based on the rate payable under the ITAA (clause 13).

Clause 14 will allow the Commissioner to use a person's TFN that has been supplied under a law relating to superannuation or taxation for the administration of the Bill.

The remainder of the Bill deals with administrative, rather than policy, matters. More important matters relate to:

• the recovery of unpaid surcharge, or advance instalments, and the imposition of a penalty charge on bodies that fail to comply with the remittance requirements (clause 16);

• the recovery of unpaid surcharge, which will be considered to be a debt to the Commonwealth and so recoverable in a civil action (clause 17);

Termination Payments Surcharge (Assessment and Collection) Bill 1997 3

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

• the review of decisions made by the Commissioner, which, in accordance with normal legislative provisions, provide for an internal review of the decision and review by the Administrative Appeals Tribunal (clause 20) (the review of such decisions may also be subject to review by the Federal and High Courts); and

• the administration of the scheme will be vested in the Commissioner of Taxation and an annual report on the operation of the proposed Act is to be delivered (clauses 21 and 22).