Document Index Budget Paper 2

Part I: Revenue Measures

Table 1: Revenue Measures since MYEFO^(a)

Table 2: Revenue Measures up to MYEFO^(a)

* The nature of this measure is such that a reliable estimate cannot be provided.

1. Cash revenue.
2. A minus sign before an estimate indicates a reduction in revenue; no sign before an estimate indicates a gain to revenue.
3. Descriptions of these measures are provided in the Mid-Year Economic and Fiscal Outlook 1998-99.
4. Further information on client numbers since the Mid-Year Economic and Fiscal Outlook 1998-99 suggests that the impact of this measure may be lower than originally estimated.
5. Measures may not add due to rounding.

 

Measures Introduced in the 1999-2000 Budget

Revenue ($m)

Explanation

Following the completion of a Review of the Pooled Development Fund (PDF) programme, the Government has decided to enhance the programme to improve the effectiveness and attractiveness of PDFs as an investment vehicle, particularly for superannuation funds. The changes more than meet the specific election commitments made by the Government to encourage additional capital raising under the programme and will be effective from the start of the 1999-2000 income year. Specific measures to be introduced are as follows.

• Better define the objective of the programme as ‘to develop and demonstrate the market for patient equity capital, including venture capital, for growing small and medium sized enterprises and to provide a more competitive tax regime for such investments.’

• Permit widely held Australian superannuation funds and similarly regulated overseas pension funds and limited partnerships of such pension funds, to wholly own a PDF.

• Permit PDFs to buy back their own shares and to return capital to their shareholders, subject to a waiting period of two years for a new or merged PDF, and permit PDFs to make loans to equity investees subject to a maximum of 20 per cent of the PDF’s capital base.

• Allow the PDF Registration Board to approve the acquisition of non-transferable options in investee companies as additional investments and to approve the merger of PDFs as long as no cash consideration is paid to shareholders as part of the merger, other than a bona fide dividend.

• Amend the Pooled Development Fund Act 1992 to improve compliance and performance monitoring and to provide the PDF Registration Board with the power to revoke registration for non-compliance with any of the provisions of the Act.

• Change the test that the PDF Registration Board must be satisfied that an applicant for a new PDF ‘can and will’ take certain action in the future to one where the Board must be satisfied that the applicant ‘is, on the evidence presented, reasonably capable of implementing the plan provided to it.’

• Amend the current definition of the term ‘associate’ to state that it does not apply where the association did not exist prior to the persons becoming shareholders in the PDF.

Further Information

The revenue table shows the future reductions in the revenue associated with the programme enhancements. The administrative costs of the programme are shown separately in the expenses measure titled Continuation of funding for the Pooled Development Funds Programme described in Part II of this Budget Paper under the Industry, Science and Resources portfolio.

Revenue ($m)

Explanation

From 1 July 1999, the Government will convert the Tax Incentive for Heritage Conservation (TIHC) into a grants programme. The TIHC is administered under the Income Assessment Act 1936 and provides a rebate of 20 per cent of heritage conservation works completed by taxpaying owners of heritage listed buildings and structures. The 1996-97 Tax Expenditure Review identified the TIHC as a rebate programme suitable for conversion to a grants programme.

Further Information

The cessation of the rebate will provide an estimated additional $1.1 million in revenue per annum.

Under the new programme $1.1 million annually will be allocated for grants to private owners of heritage listed buildings and structures to perform conservation work. See the related expense measure titled Incentives for Heritage Programme described in Part II of this Budget Paper under the Environment and Heritage portfolio.

Revenue ($m)

This measure increases the rate of excise and customs duty on aviation gasoline by 0.467 cents per litre, and the rate of excise and customs duty on aviation turbine fuel by 0.391 cents per litre. The measure is effective from midnight EST on Budget night, 11 May 1999 and will address a shortfall in industry contributions to air safety programmes.

Further Information

Further information on this revenue measure can be found in the expense measure titled Civil Aviation Safety Authority – additional funding described in Part II of this Budget Paper under the Transport and Regional Services portfolio.

Revenue ($m)

Explanation

This measure provides a temporary increase in the rate of excise and customs duty on aviation gasoline and aviation turbine fuel by 0.51 cents per litre effective from midnight EST on Budget night, 11 May 1999. The total revenue to be raised through this measure will be used to help maintain air traffic control services at regional and general aviation airports.

Further Information

Further information on this revenue measure can be found in the expense measure titled Airservices Australia (Location Specific Pricing) Subsidy described in Part II of this Budget Paper under the Transport and Regional Services portfolio.

Revenue ($m)

Explanation

The Telecommunications (Carrier Licence Charges) Act 1997 allows the Australian Communications Authority to undertake full cost recovery for its activities. The measure involves the recovery from industry of costs of the Australian Communications Authority for expenses incurred in connection with:

• Analogue Closure Public Education Programme; and

• Review of Telecommunications Interception Funding Arrangements.

See also the related expense measures under the Communications, Information Technology and the Arts portfolio titled Analogue Closure Public Education Programme and Review of Telecommunication Interception Funding Arrangements.

Revenue ($m)

Explanation

The Government will recover the Australian Broadcasting Authority’s costs associated with the conversion to digital television through a three year temporary surcharge commencing in 1999-2000 on licence fees paid by commercial television broadcasters. The television industry will be direct beneficiaries of this work, hence it is appropriate this sector bears the cost.

In addition, the Government will remove the current fee for service arrangement applicable to commercial television broadcasters under the Television Broadcasting Services (Digital Conversion) Act 1998. Fee for service is being removed because under this arrangement costs were borne disproportionately by regional broadcasters.

Further Information

The Television Licence Fees Act 1964, Broadcasting Services Act 1992, and Television Broadcasting Services (Digital Conversion) Act 1998 will require amendment to allow the administration of the surcharge.

The surcharge will be added to the licence fees payable by each commercial television broadcaster.

Revenue ($m)

Explanation

The Government will phase out the Higher Education Equity Merit Scholarship Scheme from the 2000 academic year. To ensure current scholarship holders are not disadvantaged, the Government has decided that the measure will not affect scholarships already awarded.

Students who may otherwise have received a scholarship are expected to participate in the Higher Education Contribution Scheme (HECS). The income-contingent, interest free, deferred payment arrangements available under HECS are an appropriate means of ensuring that disadvantaged students are not discouraged from participating in higher education.

Further Information

HECS debts which are deferred by students are indexed by CPI. The component in the students’ debt which results from indexation is classified as non-tax revenue to the Commonwealth. The estimate of this amount for students who participate in HECS as a result of this measure is shown in the above table.

See also the related capital and expense measures under the Education, Training and Youth Affairs portfolio titled Phasing out of the Higher Education Equity Merit Scholarship Scheme.

Revenue ($m)

Explanation

The Government will raise the Private Health Insurance Levy to meet the increased operational costs of the Private Health Insurance Ombudsman. This levy applies to registered health benefits organisations. It is based on the level of a health fund’s membership.

Further Information

See the related expense measure under the Health and Aged Care portfolio titled Increase funding for the Private Health Insurance Ombudsman.

Revenue ($m)

Explanation

Consequent upon the passage of the Migration Legislation Amendment Act No. 1 1998, the Government will implement changes in the migration and refugee review system to improve the efficiency, credibility and accountability of immigration decision-making.

The changes proposed include increased cost recovery by:

• setting the fee for the Migration Review Tribunal at $1,400 (which replaces the current application fees of $500 for the Migration Internal Review Office and $850 for the Immigration Review Tribunal). This will move substantially towards full cost recovery for applications to the Tribunal; and

• continuing arrangements for the Refugee Review Tribunal’s post-decision fee of $1,000 for unsuccessful Tribunal applicants whose application was lodged after 1 July 1997. Successful applicants are not liable to pay the fee. The post decision fee was introduced for a two year period from 1 July 1997. Continuation of the fee is currently being considered by the Parliament’s Joint Standing Committee on Migration.

Further Information

The $1,000 post decision fee was introduced as part of a series of measures to deter non-genuine onshore protection visa applicants from applying to the Tribunal for review merely to prolong their stay in Australia.

The fee of $1,000 is sufficient to see a person registered on the Movement Alert List where the fee remains unpaid. A debt to the Commonwealth will prevent grant of a subsequent visa to enter Australia unless arrangements are agreed for its repayment.

For further information, see the related expense measure under the Immigration and Multicultural Affairs portfolio titled Review package – enhancement of portfolio review tribunals and extension of Asylum Seekers Assistance scheme.

Revenue ($m)

Explanation

This measure involves an increase in the application fee for a non-Electronic Travel Authority short-term visitor visa from $50 to $60.

The increased fee is comparable to fees for short-term visitor applications imposed by a range of other countries, that compete with Australia for tourists. This increase will ensure that the costs of visa application processing, and any follow-up compliance action, is not borne by the Australian taxpayer.

Revenue ($m)

Explanation

The increase in the fee from $145 to $170 under this measure is designed to cover costs associated with checking bona-fides and undertaking follow-up compliance action for persons who either seek or obtain long-term visitor visas after arrival in Australia.

The increased fee is comparable to fees imposed by a range of other countries that compete with Australia for tourists, and will ensure that these costs are not borne by the Australian taxpayer.

Further Information

The fee increase will also help to encourage people to apply for the correct visa off-shore in the first instance.

Revenue ($m)

Explanation

The opening of the Australian Consulate-General in Dili, East Timor will generate significant demand in immigration services (for both temporary and permanent entry) and result in increased visa revenue.

Further Information

See also related capital and expense measures in the Foreign Affairs and Trade portfolio entitled Opening of an Australian Consulate-General in East Timor and an Australian Policy liaison office in Lisbon.

Revenue ($m)

Explanation

The Government will not seek to generate revenue of $11 million a year over 1999-2000 to 2001-02. This original decision was taken to offset the provision of $33.6 million to the Australian Geological Survey Organisation (AGSO) for the identification of new oil zones as announced in the 1998-99 Budget.

Further Information

See also the related:

• expense measure under the Industry, Science and Resources portfolio titled Reversal of 1998-99 Budget decision to offset the Australian Geological Geological Survey Organisation's offshore petroleum programme; and

• 1998-99 Budget Primary Industries and Energy portfolio measure titled Offsets for Australian Geological Survey Organisation’s offshore petroleum programme.

Revenue ($m)

Explanation

The Civil Aviation Safety Authority (CASA) has embarked on a major organisational restructure (see the related capital measure under the Transport and Regional Services portfolio titled Civil Aviation Safety Authority restructuring). The restructure will lead to improved efficiency and effectiveness by CASA.

Measures Introduced up to the 1999-2000 Budget

Revenue ($m)

Explanation

The Treasurer announced on 22 February 1999 that cash management trusts would be subject to ‘flow-through’ taxation under the new business entity tax regime outlined in A New Tax System. This means that the income earned and distributed by cash management trusts will not be taxed in the hands of the trustee (as proposed as a basis for consultation in A New Tax System) but rather in the hands of individual investors at their marginal tax rates. On the basis of the proposed timetable in A New Tax System, the measure will commence in the 2000-01 income year.

An in-principle decision has been taken for ‘flow-through’ taxation treatment to also apply to other collective investment vehicles. However there are a number of design details that will be determined after the release of the final report of the Review of Business Taxation. These include the tax treatment of the distributions of the profits of collective investment vehicles that are not paid out of the assessable income of such vehicles (‘tax–preferred’ income). The revenue impact of this measure cannot be determined until these design details are resolved.

Revenue ($m)

Explanation

On 24 March 1999, the Assistant Treasurer announced amendments to the income tax law to provide tax relief on the amount of tax payable on post-judgment interest received in awards for damages in personal injury compensation cases. The amendments will ensure that post-judgment interest received in personal injury cases that accrues between the time of the original award of the damages and the time at which the matter is finalised ¾ either when any right to appeal has expired or when the matter is determined on appeal ¾ will be exempt from tax.

The announcement was a legislative response to the full Federal Court decision in Whitaker v Federal Commissioner of Taxation 98 ATC 4285 that post-judgment interest forms part of assessable income in the year in which it is received.

Revenue ($m)

Explanation

On 26 March 1999, the Prime Minister, Treasurer and Minister for Family and Community Services announced a package of measures to promote corporate and individual philanthropy. The measures included: tax deductibility for donations of property valued over $5,000 regardless of when it was acquired or purchased; a capital gains tax (CGT) exemption for testamentary gifts of property; establishing a new category of ‘private funds’ that will be eligible to receive tax deductible donations without having to seek or receive donations from the general public; a CGT exemption for gifts accepted under the Cultural Gifts Programme; and allowing deductions for gifts accepted under the Cultural Gifts Programme to be apportioned over a period of up to five years. These changes will apply from 1 July 1999.

Revenue ($m)

Explanation

Donations and gifts of $2 or more to the following organisations have been made tax deductible from 1 March 1999: Stolen Children’s Support Fund and the Sir William Tyree Foundation of the Australian Industry Group. The Stolen Children’s Support Fund was established to assist in the counselling, educating and monitoring of Aborigines and Torres Strait Islanders who were removed from their families, while the Sir William Tyree Foundation was established to support the setting up of a Visiting Professorial Chair in Innovation at an Australian university or alliance of institutions. These deductions are for an indefinite period.

In addition since the 1998–99 Budget, there have been:

• 97 admissions to the Register for Cultural Organisations and 36 deletions; and

• 34 admissions to the Register for Environmental Organisations and 1 deletion.

Revenue ($m)

Explanation

The Assistant Treasurer announced on 14 December 1998 several minor legislative changes to the rules to provide for expenditure on systems and application software to be amortised at 40 per cent a year (ie over 2½ years). The amendments are:

• taxpayers will be able to ‘pool’ expenditure on developing software in an income year and write it off at 40 per cent in the following two years and 20 per cent in the third year;

• when software is no longer installed and used a balancing adjustment equal to the undeducted expenditure can be claimed as a deduction at that time; and

• software purchases of up to $300 will be immediately deductible, subject to a multiple purchase rule, so that an immediate write-off is only available where the total expenditure on identical software in an income year is $300 or less.

Further Information

As these amendments affect only a small number of taxpayers, the overall revenue impact is minor.

Revenue ($m)

Explanation

The Assistant Treasurer announced on 23 March 1999 that the advance instalment requirement applying to the surcharge would be removed, effective immediately. This initiative will improve the overall operation and efficiency of the surcharge. The removal of the advance instalment will affect only the timing of surcharge collections.

Revenue ($m)

Explanation

In the 1998-99 Budget, the Government announced changes to the investment rules that apply to superannuation funds. The changes included ensuring that a superannuation fund would not be able to invest more than 5 per cent of its assets in certain investments, including investments in associated trusts and assets leased to associates. As announced, the changes applied from the introduction of the legislation, with funds having until 30 June 2001 to comply for existing investments. On 28 May 1998, the Government announced that the new rules would not apply to investments made before 12 May 1998.

On 22 April 1999, the Government announced further transitional measures, including allowing reinvestment of earnings from pre-12 May 1998 investments until 30 June 2005 and grandfathering transactions covered by contracts entered into before the Budget announcement. In addition, a superannuation fund with less than five members will be able to invest up to 100 per cent of its assets in business real property leased to related parties.

Revenue ($m)

Explanation

The Treasurer announced on 24 March 1999, that from 1 July 2000 a luxury car tax of 25 per cent would apply to cars with a GST-exclusive retail price above the luxury car tax threshold. The luxury car tax threshold will be the car depreciation limit for income tax purposes (currently $55,134). This differs from the $60,000 luxury car tax threshold announced in A New Tax System.

Revenue ($m)

Explanation

The phase down of the 32 per cent Wholesale Sales Tax (WST) rate was to apply from the date of Royal Assent of the A New Tax System (Goods and Services Tax Transition) Bill 1998. However, to allow businesses to plan for this change, this measure will now apply from the 21^st day following the date of Royal Assent.

Revenue ($m)

Explanation

On 3 February 1999, the Treasurer announced a modification to the reform of tobacco taxation outlined in A New Tax System. In response to the change that this represents to the tobacco industry, the new arrangements will now apply from 1 November 1999 rather than 1 July 1999 as previously announced. This is in order to give cigarette manufacturers sufficient time to implement the required changes.

Further Information

The new ‘per stick’ tobacco excise will apply to all cigarettes with a tobacco content up to and including 0.8 grams per cigarette. An excise per kilogram of tobacco will apply to all other tobacco products, including cigarettes heavier than 0.8 grams of tobacco per cigarette, loose tobacco and cigars. Incorporating this measure and parameter changes since MYEFO, the announcement to reform tobacco taxation is expected to raise $440 million in a full year. There will be an increase in revenue in 1999-2000 over that estimated in A New Tax System by around $50 million.

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