Tax Amendment Bill Nos 7 and 8 await Assent

Tax Laws Amendment (2011 Measures No 7) Bill 2011 and Tax Laws Amendment (2011 Measures No Eight.) Bill 2011 have been passed by Parliament and await Royal Assent.

No 7 Bill

The No 7 Bill all stages without amendment. The Bill contains the following amendments:

• extends the CGT main residence exemption to Special Disability Trusts;
• extends the end date of the temporary loss relief for merging super funds by three months (ie from 30 June 2011 until 30 September 2011);
• retrospective amendments to ensure the continuing validity of director penalty notices following the NSW Court of Appeal decision in Soong v DCT [2011] NSWCA 26;
• provides a regulatory framework to improve the integrity of public ancillary funds;
• film tax offset changes eg re the producer tax offset and the location and post, digital and visual effects offsets;
• gives the Commissioner a limited discretion to extend the time for a taxpayer to notify the Commissioner of making the transitional election to apply TOFA Stages 3 and 4 provisions to its existing financial arrangements;
• amends the PAYG instalments provisions to ensure the concept of “instalment income” interacts appropriately with the concepts of “gain” and “loss” in the TOFA Stages 3 and 4 provisions;
• amends the tax law and the Banking Act 1959 to make changes to the farm management deposits (FMD) scheme;
• reduces the lowest marginal tax rate that applies to non-resident workers employed under the Government’s Pacific Seasonal Worker Pilot Scheme from 29% to 15%.

No 8 Bill amended

On 21 November 2011, the House of Reps passed the Tax Laws Amendment (2011 Measures No Bill 2011 with two amendments. In response to a recommendation from the House of Representatives Standing Committee on Economics, the Government deleted Sch 3 to the Bill – the two amendments relate to this deletion. Schedule 3 contained amendments that would extend the director penalty regime to make directors personally liable for their company’s unpaid superannuation guarantee amounts, and in some instances, would make directors and their associates liable to PAYG withholding non-compliance tax where the company has failed to pay amounts withheld to the Commissioner. The tax liability would arise where the company had failed to pay to the Commissioner amounts withheld under PAYG withholding arrangements and the director, or his or her associates, is entitled to a credit for amounts withheld from payments made by the company to them. The Pay As You Go Withholding Non-compliance Tax Bill 2011 would have imposed the tax, which would reverse the economic benefit of a credit to which directors and their associates were entitled. That Bill will remain pending in the House of Reps until the Government determines how to proceed with the issues addressed by Sch 3.

In its report of 3 November 2011, the Committee recommended that Sch 3 be deleted so that more consultation could be devoted towards identifying additional defences that allow innocent directors to avoid exposure to the director penalty regime. The Assistant Treasurer said he had asked Treasury to undertake further consultation to explore further defences. He said the Government intends to bring these amendments back into the Parliament in the next available sittings in 2012.

The Senate subsequently passed the No 8 Bill without further amendment and it awaits Royal Assent.

The Bill as passed contains amendments to: (i) provide the Commissioner with discretion to disregard certain events that would otherwise trigger the assessment of certain income for a primary production trust, in the year of the event; (ii) amend the Petroleum Resource Rent Tax Assessment Act 1987 to provide certainty regarding how the “taxing point” is determined for the purposes of the PRRT; (iii) make minor consequential amendments to the taxation arrangements for gaseous fuels.