| 1997-98 | 1998-99 | 1999-00 | 2000-01 |
| -3 | -3 | -3 | -3 |
Explanation
In the 1996-97 Budget, the Government announced that a Medicare levy surcharge of one percentage point would be introduced from 1 July 1997 for single individuals with taxable incomes in excess of $50,000 and couples and families with combined taxable incomes in excess of $100,000 (irrespective of the number of children) who do not have private hospital cover through private health insurance.
However, following an amendment made by the Senate to the original legislation, the threshold above which a family without private health insurance is required to pay the Medicare levy surcharge will be increased by $1,500 for each child after the first child. For example, families with one child would still have a threshold of $100,000 while those with two children would have a threshold of $101,500. This amendment is estimated to result in a reduction in revenue of $3 million per annum.
| 1997-98 | 1998-99 | 1999-00 | 2000-01 |
| -1 | 2 | 4 | 6 |
Explanation
In the 1996-97 Budget, the Government announced that the threshold for eligible net medical expenses above which taxpayers are entitled to the Medical Expenses Rebate would be increased from $1,000 to $1,430 for the 1996-97 income year and $1,500 for the 1997-98 and subsequent income years.
However, following amendments made by the Senate to the original legislation, the threshold has been set at $1,250 for 1996-97 and subsequent years. Above this threshold, the rebate will continue to be available, at the rate of 20 cents in the dollar, for eligible expenditure not reimbursed through Medicare or private health insurance.
The combination of the reduced thresholds and an upward revision to the initial revenue estimates (due to revisions to the growth in claims for the rebate) has produced the net changes shown in the above table to the estimates presented in the 1996-97 Budget.
| 1997-98 | 1998-99 | 1999-00 | 2000-01 |
| - | - | - | - |
Explanation
The provisional tax uplift factor has been set at 6 per cent for 1997-98, the same rate as applied in 1996-97. The uplift factor was determined, as set down in the Income Tax Assessment Act 1936, by reference to the nominal increase in Gross Domestic Product for the twelve months ending 31 December immediately before the 1997-98 year of income, as published by the Australian Statistician.
| 1997-98 | 1998-99 | 1999-00 | 2000-01 |
| * | * | * | * |
The Government announced that gifts of $2 or more to the following bodies would qualify as deductible donations, under the gift provisions of the Income Tax Assessment Act 1936, as indicated below:
In addition, since the 1996-97 Budget, there have been 41 admissions to the Register of Cultural Organisations and 7 deletions. A further 10 additions and 10 deletions were also made in response to changes in names of organisations.
There have been 15 admissions to the Register of Environmental Organisations and an additional 7 changes in names of organisations already registered since the 1996-97 Budget.
| 1997-98 | 1998-99 | 1999-00 | 2000-01 |
| - | Ý | Ý | Ý |
On 14 February 1997, the Treasurer announced that the Government would introduce legislation with effect from 12.00 pm (by legal time in the ACT), 14 February 1997 to prevent the lodging of any new Infrastructure Borrowings (IBs) applications; the issue of any further IB certificates (except where, prior to that time, the Development Allowance Authority had given a written undertaking to issue a certificate); and re-engineering (including amendment) in respect of existing certificates to increase tax benefits. This decision is reflected in the Taxation Laws Amendment (Infrastructure Borrowings) Bill 1997 which was introduced into Parliament on 26 March 1997.
The Government decided to prevent future access to the IBs tax concession because the concession was not achieving its objectives and there would have been a significant budgetary cost if pending IB applications were certified. Benefits from the concession were increasingly being captured by financiers and high marginal tax rate investors. Tax aggressive financing schemes were being proposed which would have resulted in an unacceptable cost to all taxpayers without a commensurate reduction in the cost of funding infrastructure projects. If all pending applications had been approved in their current form, the cost to the revenue could have been more than $4 billion over the three years 1996-97 to 1998-99. If tax aggressive schemes were adopted in all applications, the cost would have been substantially higher.
| 1997-98 | 1998-99 | 1999-00 | 2000-01 |
| Ý | Ý | Ý | Ý |
On 3 February 1997, the Government announced measures to address tax avoidance arrangements involving 'eligible finance shares' (EFS) and 'widely distributed finance shares' (WDFS). (EFS are held by Australian financial institutions or their subsidiaries whilst WDFS are held by the general public.) Under these arrangements it was possible to effectively convert assessable foreign interest income into exempt foreign non-portfolio dividends by attaching a 10 per cent voting right to the finance shares. The measures announced will protect revenue by ensuring that dividends paid on EFS or WDFS do not attract non-portfolio dividend status.
| 1997-98 | 1998-99 | 1999-00 | 2000-01 |
| Ý | Ý | Ý | Ý |
On 29 April 1997, the Government announced amendments to Division 8 of Part III of the Income Tax Assessment Act 1936 so that the amount of income of a life insurance company that is exempt from tax because it relates to immediate annuity policies is determined on the basis of average calculated liabilities for policies held during the income year rather than on calculated liabilities at the end of the year of income.
Similar averaging arrangements will be extended to the apportionment of income and capital gains between the different classes of business of a life insurance company.
The amendments are being introduced because the present calculation can cause distortions. This is the case where the proportion of calculated liabilities for all policies that is represented by immediate annuity policies at the end of the income year does not reflect the relative proportions of policies held during the income year. The use of average calculated liabilities produces a better reflection of the amount of income that belongs to each of the classes of policy held by a life insurance company and overcomes these distortions.
Details of the methodology for averaging calculated liabilities for policies held during the income year are to be developed in consultation with the industry.
The amendments will apply to the 1997-98 and subsequent years of income. For the 1996-97 year of income, the amendments will apply where there is a significant change in the respective proportions of calculated liabilities for the various groups of policies held by the life insurance company in the period from 29 April 1997 to the end of their 1996-97 income year.
| 1997-98 | 1998-99 | 1999-00 | 2000-01 |
| - | -90 | -90 | -90 |
Explanation
On 24 March 1997, the Government announced in More Time For Business a further major extension of its initiative to provide capital gains tax (CGT) rollover relief for small business, extending relief to rollover accomplished through the sale of shares. This measure will enable taxpayers actively involved in managing and operating their businesses through companies to obtain rollover relief without separately selling active assets of the company. This provision will allow the sale of business and rollover where this is done through the sale of shares in a company.
An underlying active assets test will prevent rollover relief from applying to gains primarily derived from passive investments and protecting against the extension of relief to sharetraders. The availability of relief is in respect of the sale of shares in an active business for reinvestment in another active business.
The Government will announce further design details of the measure following consultations with the CGT Subcommittee of the Commissioner's National Tax Liaison Group and representatives from the Commissioner's Small Business Consultative Group.
Following that process, the Government will announce further design details of the measure and legislation will be introduced.
The measure will operate with effect from 1 July 1997.
| 1997-98 | 1998-99 | 1999-00 | 2000-01 |
| - | -35 | -35 | -35 |
Explanation
The Government announced in the Prime Minister's 24 March 1997 statement, More Time For Business, that it would extend its 1996-97 Budget measure to provide a capital gains tax exemption on the sale of a small business for retirement to eligible people who operate their small businesses through a private company or trust structure. This will remove the potential for the measure to discriminate against small business people who operate their businesses through such structures.
Legislation to implement this measure was introduced to Parliament on 26 March 1997 in the Taxation Laws Amendment Bill (No. 3) 1997.
| 1997-98 | 1998-99 | 1999-00 | 2000-01 |
| - | Ý | Ý | Ý |
On 29 April 1997, the Government announced it would introduce measures to deny the ability to offset against capital gains certain capital losses artificially created in the past and to prevent the use of such capital losses that may be artificially created in the future. The amendments will not apply where capital losses created prior to this date have been offset against a capital gain in the 1995-96 year of income or an earlier year, or where such losses have been offset in a return for the 1996-97 income year lodged with the Australian Taxation Office (ATO) before 3.00 pm AEST, 29 April 1997. No utilisation of such losses for the current year of income or future income years will be allowed from the date of announcement.
Under the proposed amendments, the income tax law will deny the utilisation of capital losses for the 1996-97 and subsequent years of income (whenever incurred) in strictly defined circumstances outlined below. The amendments will apply to artificial losses created by arrangements entered into before 29 April 1997.
The proposed new provisions will apply where a company which is a member of a corporate group has disposed of an asset to a member of the same group and:
The only exception is that the proposed amendments will not apply where the asset rolled over was plant, machinery or buildings used both before and after the rollover in a manufacturing business carried on by the company which rolled over the asset and the company which acquired the asset. That asset must be used in the manufacturing business of the company which acquired the rolled over asset for not less than twelve months after the acquisition.
The ATO will also apply the existing general anti-avoidance provisions contained in Part IVA of the ITAA, in appropriate cases, to schemes entered into prior to 29 April 1997 where the scheme has as its sole or dominant purpose the creation of artificial capital gains tax (CGT) losses.
The Government also announced that for capital losses created after 3.00 pm AEST, 29 April 1997, Part IVA will be amended to strengthen its application to arrangements which are designed to artificially create CGT losses. The law will be amended so that Part IVA can apply to the creation of capital losses in the year in which they are incurred, rather than applying only to the amount of loss offset against capital gains in a particular year as is now the case.
The ITAA will be amended to ensure that subsection 177C(2) does not apply to any declaration, election, selection, notice or option arising under a provision relating to CGT rollovers or the transfer of CGT losses.
| 1997-98 | 1998-99 | 1999-00 | 2000-01 | |
| Record keeping | -5 | -25 | -20 | -20 |
| Car parking | -25 | -50 | -35 | -35 |
| Taxi travel | * | * | * | * |
In March 1997, the Government responded to the recommendations of the Small Business Deregulation Task Force in the Prime Minister's statement More Time For Business. The response included the following measures.
The employer would be required to recommence record keeping if there was a material change in benefits provided that could result in an increase of more than 20 per cent in benefits compared to the base year (or by more than $100 if this is greater). In this regard, the onus of proof would continue to lie with the taxpayer. The employer would also need to establish a new base year to vary down the annual amount of FBT.
The record keeping exemption will allow a reduction in compliance costs for small FBT payers who do not make a material change in the amount and type of benefits provided each year.
In addition, with effect from 1 July 1997, the Government will remove the provisions that specifically deny deductibility for car parking for self-employed persons in circumstances where FBT would have applied to car parking for employees.
| 1997-98 | 1998-99 | 1999-00 | 2000-01 |
| -1.5 | -1.8 | -1.9 | -1.9 |
Explanation
This measure reflects the Government's decision not to proceed at this time with an increase to the maximum charge which was proposed in the 1996-97 Budget.
