Thursday, 13 October 2011
Tax Laws Amendment (2011 Measures No. 8) Bill 2011; Second Reading
That this bill be now read a second time.
This bill amends various taxation laws to implement a range of improvements to Australia’s taxation laws.
Schedule 1 amends the income tax law to provide the Commissioner of Taxation 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.
Currently, our income tax law allows primary producers to defer or spread profits made on certain forced disposals or death of livestock arising from natural disasters.
However, the concession immediately ends upon the happening of a disentitling event, for example, when a beneficiary leaves Australia permanently. This can produce some inappropriate outcomes. For this reason the government is broadly restoring the discretion which existed prior to the Tax Law Improvement Project in 1997.
This schedule also removes the death of a beneficiary as a disentitling event.
The amendments apply retrospectively from the 2005-06 income year and ensure a favourable position for affected taxpayers. Schedule 2 relates to the Petroleum Resource Rent Tax (PRRT). Since its introduction by the Hawke government in 1986, the PRRT has played an important role in ensuring that a share of the economic rent generated from offshore petroleum projects is retained by the community. From 1 July 2012, as part of the government’s resource tax reforms, the PRRT will be extended to cover all Australian oil and gas projects, including for the first time those located onshore, as well as the North West Shelf project.
In this context, it is vital that current and prospective PRRT taxpayers can be certain as to how the PRRT applies to their specific projects.
Schedule 2 provides this certainty by amending the Petroleum Resource Rent Tax Assessment Act 1987 to reinforce the long-established interpretation, recently affirmed by the Federal Court, of how the ‘taxing point’ is determined for the purposes of the PRRT.
The taxing point is central to the determination of PRRT liabilities, in that it is the point at which assessable revenue for a petroleum project is determined and up to which project expenditures are deductible.
Specifically, this bill clarifies the definition of a ‘marketable petroleum commodity’ in the PRRT law. Under the PRRT law, the taxing point occurs where marketable petroleum commodities produced by a petroleum operation become ‘excluded’—normally by being sold or by being moved from the place of production.
The new definition explicitly requires that the intended final use of a substance be taken into account in determining where in the production chain a marketable petroleum commodity is produced. This requirement has always existed, albeit implicitly, and is clear given the structure and operation of the PRRT law as a whole. The PRRT has operated on this basis for over 20 years.
By making this existing requirement explicit, the amendments will put the matter beyond doubt, removing any lingering uncertainty around a central element of the PRRT.
This measure was first announced in the 2011-12 budget. Consistent with that announcement, the amendments are effective from 1 July 1990.
Because the measure serves only to clarify and affirm the current application of the PRRT, it does not impose any additional tax burden. Accordingly, these amendments have no revenue impact.
Schedule 3 amends the tax law to better protect workers’ entitlements to superannuation, strengthen the obligations of company directors and enhance deterrence of fraudulent phoenix activity.
These amendments will provide disincentives for directors to allow their companies to fail to meet their existing obligations, particularly obligations to employees. They do not introduce new obligations on the company but, rather, penalise company directors who are failing to ensure that their companies meet their obligations.
These outcomes are achieved by extending the director penalty regime to superannuation guarantee. This will make directors personally liable for their company’s failure to meet its obligations to pay employee superannuation.
Secondly, this will allow the commissioner to commence recovery against company directors under the director penalty regime without issuing a director penalty notice. This power is limited to situations where the company’s unpaid pay-as-you-go (or PAYG) withholding or superannuation liability remains unpaid and unreported, three months after becoming due.
Thirdly, it is making company directors and, in some limited cases, their associates liable to a tax which, in effect, reverses the economic benefit of a PAYG withholding credit. This tax only applies if directors or their associates are entitled to a credit for amounts that have been withheld from payments made to them by the company and the company has failed to meet its obligation to pay PAYG withholding amounts to the commissioner. Further criteria must be satisfied before associates are liable.
Together, this package of amendments will improve the likelihood that employees will receive the superannuation they are entitled to. It will reduce the ability of directors to avoid paying director penalties for their company’s superannuation guarantee and PAYG withholding debts. Further, it will increase the disincentives for directors to allow their company to fail to meet its existing obligations.
The Legislative and Governance Forum for Corporations has been consulted and has approved the amendments to the Corporations Act contained in this schedule.
Broadly, these amendments commence on royal assent.
Schedule 4 contains minor consequential amendments to the taxation arrangements that bring the gaseous fuels—liquefied petroleum gas (LPG), liquefied natural gas (LNG) and compressed natural gas (CNG)—into the fuel tax regime. The changes ensure that legislation applies as intended and does not impose excessive compliance costs on the gaseous fuels industry.
The amendments in this schedule confirm that excise duty does not apply when CNG fuel is manufactured in home refuelling units that do not have commercial scale capacity.
The amendments also confirm that entitlements to fuel tax credits are available to unlicensed distributors of LPG for non-transport applications; and that the content of notices to accompany the supply of LPG for non-transport use, which will be developed in consultation with the gaseous fuels industry, will be set out entirely in regulations.
The measures contained in this schedule apply from 1 December 2011.
I would also like to take this opportunity to announce that the government will separately legislate to address difficulties gaseous fuel marketers would face in complying with the existing payment arrangements for excise and excise equivalent of customs duties.
Under these new legislative arrangements the government will allow up to six business days after the end of the weekly duty accounting period before duty payments must be made by entities with gaseous fuel tax obligations.
The changes will apply to duty obligations for LPG, LNG and CNG. They will not impact on payment of duty for other types of fuel.
The revised arrangements are in response to the concerns of marketers who, in many cases, are unable to identify whether deliveries of gaseous fuels are for transport use or for non-transport use until deliveries are made and invoices are processed. This may be some days after the fuel has left the excise or customs licensed premises.
In devising these arrangements the government was mindful of the position of gaseous fuel manufacturers and distributors who are already in the excise and excise equivalent customs duty system and whose accounting systems facilitate payment under existing arrangements.
The revised arrangements provide flexibility for existing parties in the fuel tax system to maintain their existing payment arrangements. The government's decision to amend legislation to implement revised payment arrangements for gaseous fuels reflects our commitment to respond to industry concerns and develop workable and practical solutions.
I can also announce that I am advised by the Commissioner of Taxation that he will administer the periodic settlement permissions under the existing excise law to allow duty to be paid for gaseous fuels up to six business days after the end of the weekly duty accounting period from 1 December 2011.
These arrangements will continue once legislation is enacted to give effect to the government’s decision on the six-business-day payment arrangement for gaseous fuels.
Full details of the measures in this bill are contained in the explanatory memorandum.