Document Index Budget Paper 2

Establishment of the Australian Office of Financial Management

Expense ($m)

Explanation

The Government will establish a specialist agency, the Australian Office of Financial Management (AOFM) within the Treasury portfolio. The new agency will significantly enhance the Commonwealth’s capacity to manage its net debt portfolio, offering the prospect of savings in debt service costs and an improvement in balance sheet net worth over time. The AOFM will commence operations from 1 July 1999. The Office will assume responsibility for the Commonwealth’s existing debt management activities, currently undertaken within the Department of the Treasury.

Further Information

The AOFM will be established within the Treasury portfolio as a ‘prescribed’ agency under the Financial Management and Accountability Act 1997.

See also the related capital measure under the Treasury portfolio titled Establishment of the Australian Office of Financial Management.

Australian Business Number

Expense ($m)

Explanation

Funding will be provided to the Australian Taxation Office (ATO) to meet the administrative costs associated with the introduction of the Australian Business Number (ABN).

The Australian Business Number (ABN) is a key element of the Government’s A New Tax System (ANTS) framework. The introduction of the ABN will allow businesses to have a single business identifier for all Commonwealth purposes. This will be more efficient for business and will also provide an important opportunity to improve compliance. The system will also be available to State, Territory and local government bodies to facilitate single entry point arrangements for all government dealings. As such, it will increase levels of service to the business community and reduce compliance costs for business in a whole-of-government environment.

The introduction of the ABN is integral to a number of ATO specific ANTS measures including GST registration and withholding trigger mechanism.

This measure delivers on the Government’s election commitment in Not A New Tax – A New Tax System.

Pay As You Go and New Withholding Arrangements

Expense ($m)

Explanation

Funding will be provided to the Australian Taxation Office to meet the administrative costs associated with the introduction of the Pay As You Go and new withholding arrangements.

As part of A New Tax System (ANTS) the Government will rationalise the current withholding tax arrangements into a single Pay As You Go (PAYG) scheme. This will replace five existing payments and reporting systems (PAYE, PPS, RPS and provisional tax and company instalments) with a single new comprehensive system, avoiding confusion, potential overlaps and gaps. The reforms will also involve changes to remittance dates.

PAYG will apply a common set of rules to all instalment and withholding events under the taxation law. Similarly, existing income reporting arrangements will be streamlined through the introduction of a simple transaction reporting system. The measure also seeks to ease the administrative costs for small business in complying with tax obligations by introducing one return (or single statement) and one payment, each quarter, for large numbers of taxpayers.

This measure delivers on the Government’s election commitment in Not A New Tax – A New Tax System.

Further Information

The new PAYG arrangements are designed to achieve several aims:

• more closely align income tax payments with current trading conditions or income flows for all entities;

• provide a single payment system for business (and investor) income tax;

• create a flexible system so that taxpayer obligations will be transparent and easily managed, paying income tax and collecting other taxes will become simpler and compliance costs will be reduced;

• replace PAYE and PPS arrangements with a single withholding system giving businesses certainty about which payments are subject to withholding.

Fringe benefits tax reform

Expense ($m)

Explanation

Funding will be provided to the Australian Taxation Office to meet the administrative costs associated with the introduction of fringe benefits tax (FBT) reforms.

The four elements of the Government’s announced FBT reforms designed to make the tax system fairer for all Australians are:

• improving income tests for surcharges and government benefits by requiring employers, from the 1999-2000 FBT year of income, to identify on group certificates the grossed-up taxable value of an employee’s fringe benefits where the taxable value of the benefits exceeds $1,000;

• stopping overuse of the concessional FBT treatment of public benevolent institutions and certain other not-for-profit organisations. This will be done by limiting, for each employee, the value of fringe benefits eligible for concessional treatment to $17,000 of grossed-up taxable value per employee of such organisations. Any amount above this limit will be subject to the normal FBT treatment;

• extending FBT to the benefits in excess of $1,000 a year provided by companies to their shareholders or by trustees to trust beneficiaries, where the benefits are not taxed currently; and

• extending the FBT exemption for remote area housing provided by mining industry employers to their employees. This provides the mining industry with the same treatment that applies currently to primary producers.

The first of these elements took effect from 1 April 1999. The last three elements will take effect from the 2000-01 FBT year.

This measure delivers on the Government’s election commitment in Not A New Tax – A New Tax System.

Business taxation reform

Expense ($m)

Explanation

Funding will be provided to the Australian Taxation Office to meet the administrative costs of business taxation reform measures.

The Government has initiated a review of the current arrangements for the taxation of business entities by the Review of Business Taxation (RBT), led by John Ralph. The committee is due to provide final recommendations to the Government by 30 June 1999.

The review is being conducted consistent with the strategy for business tax reform set out in A New Tax System including the development of a new framework for the taxation of business entities.

The resources identified in this measure are interim estimates until the Government makes its decisions following receipt of the final recommendations of the Review in June 1999.

This measure delivers on the Government’s election commitment in Not A New Tax – A New Tax System.

Tax reform and Australian Taxation Office efficiencies

Expense ($m)

Explanation

The introduction of the Government’s tax reform package will result in administrative savings in the running costs of the Australian Taxation Office (ATO). This will be achieved through:

• phasing out the existing Wholesale Sales Tax system; and

• the rationalisation of five existing reporting and withholding systems into a single Pay As You Go system.

In addition, the ATO has recently undertaken several benchmarking and contestability studies in relation to its existing operations. Efficiencies are expected in areas such as auditing, provision of technical advice and data capture and management.

Additional savings expected from the recently announced outsourcing of the ATO Information Technology infrastructure are also included in this measure.

Tax Reform price exploitation

Expense ($m)

Explanation

The Government will provide additional resources until 2001-02 to the Australian Competition and Consumer Commission (ACCC) to monitor retail prices during the transition to A New Tax System.

The ACCC will:

• be given additional transitional powers to monitor retail prices. The ACCC will be required to monitor and report to the Treasurer on instances where consumers have not benefited from reductions in the tax rate, or have been exposed to greater than necessary price rises;

• provide information to the community at large through national television and radio advertising and publication; and

• take enforcement action where appropriate under the new prohibition on price exploitation and related parts of the Trade Practices Act 1974.

• The transitional price oversight role for the ACCC will begin 12 months prior to the implementation of A New Tax System and will continue for a further two years after the date of introduction of A New Tax System.

This measure delivers on the Government’s election commitment in Not A New Tax – A New Tax System.

Additional funding for taxation reform

Expense ($m)

Explanation

The Government will provide additional funding to the Treasury for the development and implementation of business tax reform, the goods and services tax and other elements of the Government’s tax reform package, including developing a response to the Ralph inquiry into business taxation.

This measure delivers on the Government’s election commitment in Not A New Tax – A New Tax System.

Enhancement of the Corporations and Securities Panel

Expense ($m)

Explanation

The Government will allocate additional resources to the Corporations and Securities Panel to fund its enhanced role and to provide a full-time independent secretariat to service the Panel.

The Corporations and Securities Panel provides a mechanism for peer review of takeover activity, with the aim of being more efficient and less formal than a court. Under proposals currently before the Parliament, the Panel’s role is to be greatly expanded, so that it will take the place of the courts as the principal forum for the resolution of takeover disputes under the Corporations Law,during the bid period. Reduced litigation will allow takeovers to be based on commercial rather than legal considerations.

The operation of the Panel will be effectively cost neutral within the context of the national corporations scheme. The ongoing costs of the Panel are to be recovered in the same manner as the costs of the regulator (the Australian Securities and Investments Commission), that is through the imposition on parties bringing matters before the Panel of fees and charges based on expenditure in the previous financial year. The fees and charges will be set as part of a review of companies’ fees to be completed in December 1999.

Savings to offset National Competition Council measure "Additional legal funding for matters relating to Part IIIA of the Trade Practices Act 1974"

Expense ($m)

Explanation

This measure will provide for the offsetting savings to enable the National Competition Council to meet the costs of additional legal obligations associated with Part IIIA of the Trades Practices Act 1974.

See also related expense measure under the Treasury portfolio titled Additional legal funding for matters relating to Part IIIA of the Trade Practices Act 1974.

Savings Bonus for Older Australians

Expense ($m)

Explanation

Funding will be provided to the Australian Taxation Office to meet the administrative costs associated with the provision of a savings bonus as part of A New Tax System.

The Government has decided to pay a one-off bonus to older Australians to compensate them for the impact of the GST on their savings.

The bonus is to be paid on or after 1 July 2000. A claim for a bonus must be made by 30 June 2001. Three different agencies – the Australian Taxation Office (ATO), the Department of Family and Community Services and the Department of Veterans’ Affairs - will decide on eligibility to a bonus for their respective client groups. ATO clients are those members of the community who have to lodge tax returns for the year ending 30 June 2000. Features of the lump sum payment are as follows:

• a tax free bonus up to $1,000 for those Australian residents aged 60 years or more on 1 July 2000, who have any savings and investment income, and whose total income in 1998-99 or 1999-00 is less than $30,000;

• an additional untaxed bonus of up to $2,000 for self funded retirees of age pension age; and

• these bonuses are eligible to be paid after 30 June 2000.

This measure delivers on the Government’s election commitment in Not A New Tax – A New Tax System.

Binding Oral Advice by the Australian Taxation Office

Expense ($m)

Explanation

The Government has decided that oral advice provided by the Australian Taxation Office (ATO) to taxpayers with simple tax affairs should be binding on the ATO. Funding will be provided to the ATO to meet the additional administrative costs of this measure.

This measure delivers on the Government’s election commitment in Not A New Tax – A New Tax System.

This measure will involve:

• drafting legislation to ensure taxpayers with simple tax affairs can rely on oral advice received from the ATO;

• the introduction of business support tools for staff providing binding oral advice, including the ability to record details of the advice given; and

• formulation and implementation of a communication and education strategy to ensure taxpayers and ATO staff are aware of their obligations. This will include specific publications, brochures and other marketing-related products.

Telecommunications - Australian Competition and Consumer Commission - additional functions and powers

Expense ($m)

Explanation

The Government will provide additional resources (for 1999-2000 only) for the Australian Competition and Consumer Commission (ACCC) to administer the new powers and functions proposed in the Telecommunications Legislation Amendment Bill 1998.

This measure will establish a more comprehensive information transfer, monitoring and reporting regime and will allow the ACCC to facilitate commercial infrastructure access negotiations. The additional powers and functions will enable the ACCC to achieve the Government’s goal of increasing competition in the telecommunications industry and is a response to amendments proposed by the industry (including through submissions to the Senate Inquiry on the Telstra Privatisation).

Further Information

The costs incurred in each financial year by the ACCC relating to telecommunications activities are recovered from the telecommunications industry through an annual carrier licence fee.

A review of the operation and effectiveness of the telecommunications competitive conduct scheme will be initiated before 1 July 2000. The ACCC’s telecommunications resource requirements will be evaluated following the report of the review, and funding for 2001-02 will depend on the extent of continuing ACCC functions and powers.

Expense ($m)

Explanation

This proposal will enable the National Competition Council (NCC) to meet the costs of additional legal obligations associated with Part IIIA of the Trade Practices Act 1974.

Part IIIA provides a regime for granting businesses access to significant infrastructure facilities or ‘services’ that would be uneconomical to duplicate. Under Part IIIA, the NCC may recommend that a particular service be ‘declared’. If the Minister accepts an NCC recommendation and ‘declares a service’, access to the ‘service’ is negotiated privately, or is subject to arbitration. These decisions are appellable to the Australian Competition Tribunal. The Tribunal may require the NCC to provide it information, reports, or other assistance as requested.

See also the related expense measure under the Treasury portfolio titled Savings to offset National Competition Council measure "Additional legal funding for matters relating to Part IIIA of the Trade Practices Act 1974"

Australia as a Centre for Global Financial Services

Expense ($m)

Explanation

Australia has the ability to develop further as a centre for global financial services (CGFS) and to gain a greater share of world financial services business.

While the Government’s key role in promoting Australia as a CGFS will remain to ensure that the overall economic and regulatory policy framework continues to be of international best practice, there is a need for more effective and coordinated promotion of Australia as a CGFS.

This measure provides $3.5 million in each of 1999-2000 and 2000-01 for initiatives that will promote Australia as a CGFS.

Corporate Law Economic Reform Programme

Expense ($m)

Explanation

This measure will assist the Australian Securities and Investments Commission (ASIC) to develop and implement proposals under the second phase of the Government’s Corporate Law Economic Reform Program (CLERP). This phase (CLERP 7) will focus on reducing the paper compliance burden of Australian companies and enabling ASIC to make greater use of communications technology. It will also look at a fundamental overhaul and review of the large range of paper-based documents that the law still requires companies to lodge.

The key reforms to be introduced under CLERP 7 include:

• the establishment of a Business Advisory Board to provide strategic advice on the direction and initiatives of the ASIC Information Division;

• the introduction of a ‘no change, no lodge’ policy which will provide that, from 1999-2000, companies and registered schemes will not need to lodge an annual return when there has been no change in the information held by ASIC;

• a review of fees set under the Corporations Law with the objective of reducing fees paid by small business and reducing the complexity of fee arrangements; and

• initiatives to assist ASIC in making optimal use of modern business practices and new communications technology.

This measure delivers on the Government’s election commitment in Business Law Reform – Less Red Tape, More Business, More Jobs, Corporate Law Economic Reform Programme (CLERP).

Questions? Comments? Problems? Past Last Updated: Tuesday 11th May, 7:30 pm AEST