Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2013-2014
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
LABOR 2013-14 BUDGET SAVINGS (MEASURES No. 1) BILL 2014
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon J. B. Hockey MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Repeal of the 2015-16 income tax cuts ......................... 5
Index ..................................................................................... 11
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
Carbon Tax Repeal Bills The package of bills that provide for the
repeal of the carbon tax:
· Clean Energy Legislation (Carbon Tax
Repeal) Bill 2013;
· True-up Shortfall Levy (General) (Carbon
Tax Repeal) Bill 2013;
· True-up Shortfall Levy (Excise) (Carbon
Tax Repeal) Bill 2013;
· Customs Tariff Amendment (Carbon Tax
Repeal) Bill 2013;
· Excise Tariff Amendment (Carbon Tax
Repeal) Bill 2013;
· Ozone Protection and Synthetic
Greenhouse Gas (Import Levy)
Amendment (Carbon Tax Repeal)
Bill 2013;
· Ozone Protection and Synthetic
Greenhouse Gas (Manufacture Levy)
Amendment (Carbon Tax Repeal)
Bill 2013.
LITO low-income tax offset
1
General outline and financial impact
Repeal of the 2015-16 personal income tax cuts
This Bill amends the Clean Energy (Income Tax Rates Amendments)
Act 2011 to repeal the personal income tax cuts that were legislated to
commence on 1 July 2015. It also amends the Clean Energy (Tax Laws
Amendments) Act 2011 to repeal associated amendments to the
low-income tax offset that were legislated to commence on 1 July 2015.
Date of effect: These amendments commence on, and apply from, the day
after this Bill receives Royal Assent.
Proposal announced: The former Government as part of compensation
linked to the Carbon Tax package introduced two rounds of personal
income tax cuts, which were included in the 2011-12 Mid-Year Economic
and Fiscal Outlook (MYEFO) on pages 159 and 160.
The two rounds of personal income tax cuts were introduced through
the Clean Energy (Income Tax Rates Amendments) Act 2011 and the
Clean Energy (Tax Laws Amendments) Act 2011 which received
Royal Assent on 4 December 2011.
The first round of personal income tax cuts commenced on 1 July 2012,
with the second round legislated to commence on 1 July 2015.
On 14 May 2013, the former Government announced, as part of
the 2013-14 Budget, that the personal income tax cuts scheduled
to commence on 1 July 2015 as part of the former Governments
Clean Energy Future package would be deferred as they were intended
to compensate for an increase in the carbon price, which was not expected
to occur until 2018-19 due to a revision to the former Governments
carbon price forecast.
The increase in tax revenue from this deferral was incorporated into the
budget estimates ($1.5 billion over the forward estimates at the time), but
the legislated personal income tax cuts were never repealed nor amended
by the former Government in the months following the 2013-14 Budget.
This was still policy of the former Government at the 2013 Federal
Election as funding for the second round of personal income tax cuts was
not provided for in the 2013 Economic Statement or in the 2013 Federal
Election costings.
3
Labor 2013-14 Budget Savings (Measures No. 1) Bill 2014
Financial impact: The repeal of the personal income tax cuts (including
the related changes to the low income tax offset) that were legislated to
commence on 1 July 2015 results in a revenue increase of around
$2.2 billion over the current forward estimates period.
At Budget 2013-14, the start date for these income tax cuts was deferred
to the income year in which the carbon price was estimated to exceed
$25.40 (which at Budget 2013-14 was estimated to occur in 2018-19).
The deferral of these income tax cuts provided a gain to revenue of
$1.5 billion over the then forward estimates period.
2013-14 2014-15 2015-16 2016-17 2017-18
$0m $0m $820m $670m $675m
Human rights implications: This Bill does not raise any human rights
issue. See Statement of Compatibility with Human Rights -- Chapter 1,
paragraphs 1.23 to 1.27.
Compliance cost impact: These amendments have no ongoing
compliance cost impacts. The amendments will also avoid transitional
compliance costs being incurred by taxpayers associated with
implementing changes to income tax rates and associated pay-as-you-go
withholding rates.
4
Chapter 1
Repeal of the 2015-16 income tax cuts
Outline of chapter
1.1 This Bill amends the Clean Energy (Income Tax Rates
Amendments) Act 2011 to repeal the personal income tax cuts that were
legislated to commence on 1 July 2015. It also amends the Clean Energy
(Tax Laws Amendments) Act 2011 to repeal associated amendments to the
low-income tax offset (LITO) that were legislated to commence on
1 July 2015.
Context of amendments
1.2 Under the former Governments Clean Energy Future plan, the
second round of personal income tax cuts that were legislated to
commence on 1 July 2015 and were intended to provide assistance for an
expected higher floating carbon price in the 2015-16 income year.
1.3 However, in the 2013-14 Budget, the former Government
announced it would defer these personal income tax cuts on the basis that
"[t]hese tax cuts were intended to provide assistance for a projected
increase in the carbon price to $29.00 in 2015-16, from the fixed price of
$25.40 in 2014-15. As the carbon price in 2015-16 is now projected to be
lower than $25.40 (at around $12.10), these tax cuts will be deferred until
the estimated carbon price in the Budget reaches $25.40. The Budgets
revised carbon price methodology projects carbon prices above $25.40
in 2018-19."1
1.4 Accordingly, revenue arising from this measure was
incorporated into the Budget estimates, but the legislative personal income
tax cuts were never repealed or amended by the former Government
before the 2013 Federal Election.
1
Budget Paper No. 2, 2013-14 Budget, p 24.
5
Labor 2013-14 Budget Savings (Measures No. 1) Bill 2014
1.5 The Government, when in Opposition, committed to keeping
the first round of personal income tax cuts and associated pension
benefit increases as announced by the former Government. The now
Prime Minister in response to the 2013-14 Budget said ,,We reserve the
right to implement all of Labors cuts, if needed.'
1.6 The former Government took this policy to the
2013 Federal Election.
1.7 The Government committed to keeping the first round of
personal income tax cuts to compensate for the introduction of the carbon
tax, and these have already been delivered. The abolition of the carbon tax
will result in Australian households saving $550 a year.
1.8 This amendment was previously introduced into Parliament on
13 November 2013 as the Clean Energy (Income Tax Rates and Other
Amendments) Bill 2013 as part of the package of Carbon Tax Repeal Bills.
1.9 These amendments do not affect the personal income tax cuts
that commenced from 1 July 2012.
Summary of new law
1.10 This Bill repeals Part 2 of Schedule 1 to the Clean Energy
(Income Tax Rates Amendments) Act 2011 to repeal the personal income
tax cuts that were legislated to commence on 1 July 2015.
1.11 The tax cuts were designed to incorporate part of the benefit
currently provided through the LITO into the statutory rates and
thresholds.
1.12 This Bill also repeals Part 2 of Schedule 1 to the Clean Energy
(Tax Laws Amendments) Act 2011 to prevent the commencement of
related amendments to correspondingly lower the income threshold,
amount and the withdrawal rate of the LITO that were also legislated to
commence on 1 July 2015.
6
Repeal of the 2015-16 personal income tax cuts
Comparison of key features of new law and current law
New law Current law
No personal income tax cuts Personal income tax cuts commence
commence on 1 July 2015, which on 1 July 2015, which entails:
entails: · the tax free threshold increasing
· the tax free threshold remaining at to $19,400;
$18,200; · the second personal marginal tax
· the second personal marginal tax rate increasing to 33 per cent;
rate remaining at 32.5 per cent; · the maximum value of the LITO
· the maximum value of the LITO falling to $300;
remaining at $445; · the withdrawal rate of the LITO
· the withdrawal rate of the LITO falling to 1 per cent; and
remaining at 1.5 per cent; and · the threshold below which a
· the threshold below which a person may receive LITO
person may receive LITO increasing to a taxable income
remaining at a taxable income of $67,000.
of $66,667.
Detailed explanation of new law
1.13 Schedule 1 to this Bill repeals Part 2 of Schedule 1 to the
Clean Energy (Income Tax Rates Amendments) Act 2011. [Schedule 1,
item 2]
1.14 Part 2 of Schedule 1 to the Clean Energy (Income Tax Rates
Amendments) Act 2011 contained amendments to be made to
subsection 3(1) and Clause 1 of Part I of Schedule 7 to the Income Tax
Rates Act 1986 that were to apply to the 2015-16 income year and later
income years. Those amendments were to increase the statutory tax-free
income threshold for individuals to $19,400, and to increase the second
lowest personal marginal tax rate from 32.5 per cent to 33 per cent.
1.15 The amendments contained in this Bill mean that rather than the
changes described above applying from the 2015-16 income year, the
statutory tax-free threshold for individuals remains at $18,200, and the
second personal marginal tax rate remains at 32.5 per cent.
1.16 Schedule 1 to this Bill also repeals item 3 in the table in
subsection 2(1) of the Clean Energy (Income Tax Rates Amendments)
Act 2011, which provided for Part 2 of Schedule 1 to commence on
1 July 2015. [Schedule 1, item 1]
7
Labor 2013-14 Budget Savings (Measures No. 1) Bill 2014
1.17 Schedule 2 to this Bill repeals Part 2 of Schedule 1 to the
Clean Energy (Tax Laws Amendments) Act 2011. [Schedule 2, item 2]
1.18 Part 2 of Schedule 1 to the Clean Energy (Tax Laws
Amendments) Act 2011 contained amendments to section 159N of the
Income Tax Assessment Act 1936 that were to apply from the
2015-16 income year. Those amendments were to decrease the maximum
amount of the LITO to $300, increase the income threshold to be eligible
for the LITO in subsection 159N(1) to $67,000, and decrease the
withdrawal rate of the LITO in subsection 159N(2) to 1 per cent.
1.19 The amendments contained in this Bill mean that rather than the
changes described above applying from the 2015-16 income year, the
maximum amount of the LITO remains at $445, the threshold in
subsection 159N(1) remains at $66,667, and the withdrawal rate of the
LITO in subsection 159N(2) remains at 1.5 per cent.
1.20 Schedule 2 to this Bill also repeals item 3 in the table in
subsection 2(1) of the Clean Energy (Tax Laws Amendments) Act 2011,
which provided for the amendments to Part 2 of Schedule 1 to commence
on 1 July 2015. [Schedule 2, item 1]
Consequential amendments
1.21 There are no consequential amendments made as a result of this
measure.
Application and transitional provisions
1.22 These amendments commence on, and apply from, the day after
this Bill receives Royal Assent. [Clause 2]
8
Repeal of the 2015-16 personal income tax cuts
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Labor 2013-14 Budget Savings (Measures No. 1) Bill 2014
1.23 This Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
1.24 This Bill amends the Clean Energy (Income Tax Rates
Amendments) Act 2011 to repeal the personal income tax cuts that were
legislated to commence on 1 July 2015. It also amends the Clean Energy
(Tax Laws Amendments) Act 2011 to repeal associated amendments to the
low-income tax offset that were legislated to commence on 1 July 2015.
Human rights implications
1.25 This Bill does not engage any of the applicable rights or
freedoms.
1.26 The only consequence of the proposed Bill will be to forestall a
number of changes that would otherwise come into effect from
1 July 2015. As it maintains existing arrangements, it does not raise any
new human rights issues.
Conclusion
1.27 This Bill is compatible with human rights as it does not raise any
human rights issues.
9
Index
Clauses
Bill reference Paragraph number
Clause 2 1.22
Schedule 1: Clean Energy (Income Tax Rates Amendments)
Act 2011
Bill reference Paragraph number
Item 1 1.16
Item 2 1.13
Schedule 2: Clean Energy (Tax Laws Amendments) Act 2011
Bill reference Paragraph number
Item 1 1.20
Item 2 1.17
11