Minister for Revenue and Assistant Treasurer
18 July 2004 - 26 January 2006
Wednesday September 14, 2005
NEW MEASURES TO IMPROVE TAX AND SUPERANNUATION
The Government today introduced legislation to implement a range of changes and improvements to Australia's taxation and superannuation system. This Bill will:
Deny deductions for expenditure incurred through illegal activity:
The Government moved to deny deductions for expenditure incurred through illegal
activity following Full Federal Court decision in Commissioner of Taxation
v La Rosa. The court held that the taxpayer, a convicted drug dealer, was
entitled to a deduction for a loss incurred in earning his income as a drug
Deductions will now be denied for expenditure that is incurred where the taxpayer has been convicted of an offence punishable by imprisonment for at least 12 months. Deductions will be denied for all expenditure where the activities are wholly illegal such as drug dealing or people smuggling.
"Where there are cases where a taxpayer is conducting a lawful business but is convicted of an illegal activity while carrying on that business, only the expenditure that is incurred in relation to the illegal activity will be denied. Expenditure that is incurred in undertaking the underlying lawful activity and that would have been incurred regardless of the illegal activity will continue to be deductible," Minister for Revenue and Assistant Treasurer Mal Brough said today.
Reform the loss recoupment rules for companies:
This will make the loss recoupment rules easier for large companies to apply and to resolve longstanding issues with those rules that have been highlighted by the introduction of the consolidation regime. The measure will:
- Introduce a new modified continuity of ownership (COT) test
- Remove the same business test (SBT) for companies whose income is more than $100 million in the year of recoupment.
"The current tests for accessing company tax losses for past years have
presented some practical difficulties in meeting the criteria. The new provisions
will make it easier to meet the criteria in order to access those losses,"
Mr Brough said.
Stakeholders consulted on this measure raised concerns about applying the continuity of ownership test to companies that have issued more than one class of share because, for example, preference shares or dividend access shares have been issued. The Government will continue to consult with stakeholders to find a workable solution to this issue.
Provide tax relief for conduit foreign income:
The changes will provide tax relief for foreign income received by a foreign resident through an Australian corporate tax entity (conduit foreign income.) These rules will allow Australian companies that receive foreign income on which no Australian tax is payable to pay dividends to foreign shareholders that are also free of Australian withholding tax.
"This will make Australia a more attractive base for multinationals looking to establish regional headquarters. It also benefits Australian-based multinationals by enhancing their ability to compete for foreign capital," Mr Brough said.
Include film copyrights in effective life depreciation:
Copyright in films that do not qualify for concessional treatment in the Income
Tax Assessment Act 1936 will now be subject to effective life depreciation
under the uniform capital allowances regime. This will replace the current statutory
Under effective life depreciation, taxpayers have a choice of using the Commissioner of Taxation's 'safe harbour' effective life determination or self assess the effective life of copyright in a film.
The measure will apply to expenditure on copyright in a film acquired on or after 1 July 2004. The measure was announced in the 2005-06 Budget.
Allow the offsetting of a late payment of contributions against an employer's superannuation charge:
The disproportionate penalty on employers who make late superannuation contributions
to superannuation funds in an attempt to honour their superannuation guarantee
obligations to employees, is to be reduced.
Currently, employers who make a late contribution to a superannuation fund may end up paying this amount again as late contributions cannot be used to offset the employer's liability to the superannuation guarantee charge, payable to Australian Taxation Office. Under the new arrangements, employer contributions made for an employee to a super fund within one month of the superannuation guarantee due date can be used to offset the portion of any superannuation guarantee charge for the quarter that relates to that employee. To ensure there continues to be a strong incentive for employers to make superannuation guarantee payments by the due date, late payments will not be tax deductible.
Employees will still receive their full superannuation shortfall plus interest to compensate them for the late payment.
Apply superannuation guarantee to back payments of wages:
This measure clarifies that mandatory employer contributions under the superannuation
guarantee arrangements are payable on wages or salary paid in
a quarter following the termination of an employment relationship.
This confirms that employees do not lose their superannuation guarantee entitlements as a result of being underpaid during their employment.
Provide relief for employee share scheme participants in the event of a corporate restructure:
The employee share scheme amendments further support the development of employee share schemes and the alignment of employer and employee interests by removing certain taxing points that would otherwise arise in the event of a corporate restructure or 100 per cent takeover.
Media contact: Carlie Hogan - (02) 6277 7360