Home > MYEFO > Part 4: Fiscal Strategy and Outlook > Appendix A: Policy Decisions Taken Since the 2008‑09 Budget > Revenue Measures > Treasury

Treasury

Capital gains tax — amend the application date of the earlier measure relating to employee share schemes

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	..	..	..	..	..

The Government has amended the application date of the 2008‑09 Budget measure removing double taxation that arises in relation to certain employee share schemes that use an employee share trust. This measure applied to capital gains tax (CGT) events occurring after 7.30 pm (AEST) on 13 May 2008.

The existing application time and date will be retained but, in relation to earlier CGT events, taxpayers will be provided with a choice to apply the Budget amendment for assessments for the 1998‑99 and later income years.

This change will ensure that the measure to remove double taxation applies appropriately to earlier transactions.

Capital gains tax — demutualisation of friendly societies

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	-	*	*	*	*

The Government will provide relief from capital gains tax (CGT) when friendly societies, including joint health and life insurers, demutualise to for-profit entities, with effect from 1 July 2008.

The Government will disregard any capital gains or losses that arise to the friendly society's policyholders when they receive shares in the demutualised entity. In addition, the Government will provide a cost base for these shares that reflects the market value of the health insurance business and the embedded value of any other business of the friendly society.

To ensure neutrality between policyholders who receive shares under the demutualisation and policyholders who receive cash, the Government will provide an equivalent cost base to any rights that a policyholder exchanges for this payment.

To provide flexibility in how the friendly society may choose to demutualise, the Government will also provide CGT relief for a number of transactions that are related to its demutualisation.

Capital gains tax — increase access to the small business concessions

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	*	*	*	*	*

The Government will treat an individual's spouse or child (under 18 years of age) as an affiliate of the individual for the purposes of determining whether the individual is eligible for the small business capital gains tax (CGT) concessions. The change applies where one entity owns a CGT asset and that asset is used, or held ready for use, in the course of carrying on a business by another entity. This change modifies the measure announced in the 2008‑09 Budget so that it operates more effectively, with effect from 1 July 2007.

The Government will make a number of other minor changes to refine and clarify aspects of the existing small business CGT concessions to remove anomalies and ensure that the concessions operate as intended.

Capital gains tax — removal of trust cloning exception

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	-	*	*	*	*

The Government will remove the capital gains tax (CGT) trust cloning exception to CGT events E1 and E2, with effect after 31 October 2008.

The trust cloning exception provides that when a trust is created over an asset (CGT event E1) or an asset is transferred from one trust to another (CGT event E2), no CGT taxing point arises, on the condition that the beneficiaries and terms of both the trusts are the same. This allows for a change in the effective economic ownership of the asset, without triggering a CGT taxing point. Removing the trust cloning exception will clarify and simplify the CGT law and ensure that CGT is payable where the effective economic ownership of a trust asset changes.

Capital gains tax — variations to the demutualisation of health insurer amendments

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	-	-	-2.0	-1.0	-1.0

The Government has improved and clarified the tax relief that is available when a health insurer demutualises to a for-profit entity, with effect from 1 July 2007.

This measure disregards from capital gains tax (CGT) all capital gains and losses that arise to policyholders under their insurer's demutualisation, including those that arise when a policyholder receives a cash payment. All policyholders who receive shares in the demutualised private health insurer will receive a market value cost base for those shares.

In addition, this measure extends the CGT relief to the executor and beneficiary of a deceased policyholder's estate. The measure also extends the exemption to the share capital tainting rules that applies to demutualisations so that it covers health insurer demutualisations.

Other amendments refine and clarify aspects of the relief and provide flexibility in how the health insurer may choose to demutualise.

Guarantee of deposits of authorised deposit-taking institutions

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Department of the Treasury	-	*	*	*	*

The Government has introduced a guarantee of deposits in authorised deposit-taking institutions in Australia. This measure will ensure that depositors in authorised deposit-taking institutions have absolute confidence that they will have timely access to their money, having regard to the current global financial market turmoil.

Until midnight on 27 November 2008, all deposits held in eligible institutions will be guaranteed without charge. From 28 November 2008, a threshold of $1.0 million will be applied per customer. Deposits below this threshold will continue to be guaranteed without charge. Deposits above this threshold and any deposits held in foreign bank branches will only be guaranteed if the institution has applied for the guarantee and agreed to pay the relevant fee.

The guarantee fee for deposits above the $1.0 million threshold will initially be set at 70 basis points per annum for AA-rated institutions, 100 basis points for A-rated institutions, and 150 basis points for BBB-rated and unrated institutions. This schedule may be revised in light of market developments and advice from financial regulators.

The amount of revenue collected from the guarantee fee cannot be quantified at this time. Revenue collections will depend on the level of uptake by institutions.

This measure creates a remote and unquantifiable contingent liability. For further details see Appendix C: Statement of risks.

Further information can be found in the press release of 12 October 2008 issued by the Prime Minister and the press release of 24 October 2008 issued by the Treasurer.

Guarantee of wholesale funding of authorised deposit-taking institutions

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Department of the Treasury	-	*	*	*	*

The Government has introduced a guarantee of eligible wholesale funding of authorised deposit-taking institutions in Australia. This initiative is designed to maintain institutions' access to new funding during the international financial market turbulence and support continued lending to Australian corporations, businesses and households.

Until midnight on 27 November 2008, all eligible wholesale funding will be guaranteed without charge. From 28 November 2008, wholesale funding will only be guaranteed if the institution has applied for the guarantee and agreed to pay the relevant fee.

The guarantee fee will initially be set at 70 basis points per annum for AA-rated institutions, 100 basis points for A‑rated institutions, and 150 basis points for BBB-rated and unrated institutions. This schedule may be revised in light of market developments and advice from financial regulators.

The amount of revenue collected from the guarantee fee cannot be quantified at this time. Revenue collections will depend on the duration of the guarantee facility and the level of uptake by institutions.

This measure creates a remote and unquantifiable contingent liability. For further details see Appendix C: Statement of risks.

Further information can be found in the press release of 12 October 2008 issued by the Prime Minister and the press release of 24 October 2008 issued by the Treasurer.

Interest withholding tax — extending eligibility for exemption to state government bonds

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	-	-7.0	-17.0	-19.0	-21.0

The Government will extend eligibility for exemption from interest withholding tax to bonds issued in Australia by State and Territory central borrowing authorities. This measure will apply to interest paid on or after the date of Royal Assent of the enabling legislation. This measure is estimated to have a cost to revenue of $64 million over the forward estimates period.

This initiative will improve depth and liquidity in state government bond markets, contributing to financial market stability.

Further information can be found in the press release of 20 May 2008 issued by the Treasurer.

Luxury car tax — fuel efficient car limit

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	-	-8.5	-9.2	-10.1	-11.0

The Government has introduced a 'fuel efficient car limit' that provides a higher luxury car tax threshold for cars with a fuel consumption of 7 litres per 100 kilometres or less, with effect from 3 October 2008. This measure is estimated to have a cost to revenue of $38.8 million over the forward estimates period.

The fuel efficient car limit is initially set at a threshold of $75,000 for 2008‑09 and indexed annually in the same manner as the general luxury car tax threshold (currently $57,180). Fuel consumption is determined as the combined rating under vehicle standards in force under Section 7 of the Motor Vehicle Standards Act 1989.

Luxury car tax — other amendments

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	-	*	*	*	*

The Government agreed to a number of amendments to the 2008‑09 Budget measure, Increasing the Luxury Car Tax. These amendments were:

an exemption from the luxury car tax increase for contracts to make the taxable supply or taxable importation of a luxury car that were entered into before 7.30 pm on 13 May 2008; and
on and after 1 July 2012, the luxury car tax threshold will be indexed by the Consumer Price Index unless Parliament agrees to another approach. The threshold is currently indexed by the motor vehicle purchase component of the Consumer Price Index.

The future operation and indexation of the luxury car tax will be considered by the Australia's Future Tax System review.

Luxury car tax — refunds for primary producers and eligible tourist operators

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	-	*	*	*	*

The Government agreed to an amendment to the 2008‑09 Budget measure Increasing the Luxury Car Tax, so that from 1 July 2008, a refund of the increase in the luxury car tax rate is available when an eligible four-wheel or all‑wheel drive car is acquired by a primary producer or eligible tourist operator. The refund is limited to $3,000 per annum for one vehicle for primary producers and $3,000 per vehicle for tourist operators.

Means testing of government support — expanded definitions of income to include reportable fringe benefits

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	-	-	-	-3.5	-3.5

The Government has varied the 2008‑09 Budget measure Means testing of government support — expanded definitions of income to include reportable fringe benefits so that the non-grossed value of fringe benefits is included in relevant income tests with effect from 1 July 2009. This variation has an ongoing cost to revenue which is estimated to be $7.0 million over the forward estimates period.

The variation will affect the income tests used to determine eligibility for the senior Australians tax offset, pensioner tax offset and dependency tax offsets.

Personal income tax — increasing the Medicare levy surcharge thresholds

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	-	-	90.0	110.0	100.0
Related expense ($m)
Department of Health and Ageing	-	140.8	50.5	26.5	1.4

The Government has increased the Medicare levy surcharge (MLS) threshold to $70,000 for singles and $140,000 for members of a family, with effect from 1 July 2008. In future years, the singles threshold will be indexed by Average Weekly Ordinary Time Earnings (AWOTE) and will increase in $1,000 increments (rounding down). The threshold for families will be double the threshold for singles. Under transitional arrangements taxpayers who were exempted from the MLS under the thresholds as announced at the 2008‑09 Budget will avoid the MLS for the period 1 July 2008 through to 31 December 2008 if they obtain appropriate private health cover before 1 January 2009.

This measure is estimated to increase revenue by $300 million and increase expenditure on the private health insurance rebate by $219.2 million over the forward estimates period.

Philanthropy — changes to prescribed private funds

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	-	-6.7	-73.2	-25.1	-26.1

Since the 2008‑09 Budget, 148 funds have been approved for prescription as prescribed private funds (PPFs), and three funds have been declared no longer to be PPFs. These changes are estimated to have a cost to revenue of $131.1 million over the forward estimates period.

Philanthropy — updating the list of deductible gift recipients

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	-	-	-1.5	-1.6	-1.7

Taxpayers may claim an income tax deduction for certain gifts of money or property to deductible gift recipients (DGRs). Since the 2008‑09 Budget there have been:

Thirty admissions to, and six removals from, the Register of Environmental Organisations;
Thirty-four admissions to, and seven removals from, the Register of Cultural Organisations;
Five admissions to the Register of Harm Prevention Charities; and
Eight admissions to the Overseas Aid Gift Deduction Scheme.

These changes are estimated to have a cost to revenue of $4.8 million over the forward estimates period.

The Register of Environmental Organisations can be found on the Department of Environment, Water, Heritage and the Arts website at www.environment.gov.au. The Register of Cultural Organisations can be found on the Department of Environment, Water, Heritage and the Arts website at www.arts.gov.au. The Register of Harm Prevention Charities can be found on the Department of Families, Housing, Community Services and Indigenous Affairs website at www.fahcsia.gov.au. The list of developing country relief funds on the Overseas Aid Gift Deduction Scheme can be found on the AusAID website at www.ausaid.gov.au.

Superannuation — variations to the temporary residents' superannuation measure

Revenue ($m)
	2007‑08	2008‑09	2009‑10	2010‑11	2011‑12
Australian Taxation Office	-	-64.0	-67.0	-76.0	-46.0

The Government has varied the temporary residents' superannuation measure originally announced by the previous government in the 2007‑08 Mid-Year Economic and Fiscal Outlook. The key differences between the previous measure and the current measure are that the unclaimed superannuation of temporary residents will be paid to the Commonwealth after they depart Australia (and not while they are still in the country), and there will be no time limit for them to claim back their money. This measure is estimated to have a cost to revenue of $253.0 million over the forward estimates period.

The superannuation of a temporary resident (who is not a New Zealand citizen, retirement visa holder or applying for permanent residency) will be deemed to be 'unclaimed' after they have left Australia, ceased to hold a temporary visa, and at least six months has passed and they have not taken their superannuation. Temporary residents can claim back their unclaimed superannuation at any time, subject to the existing departing Australia superannuation payment (DASP) tax. The DASP tax rates will be increased by 5 per cent.

Key features of the measure will commence from the date of proclamation of the enabling legislation.

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