Part 2: Report on performance (continued)

Date

Program 1.1: Revenue Group

Overview

Revenue Group aims to contribute to effective taxation and retirement income arrangements that are crucial to the Government’s objectives for the economy and the wellbeing of Australians. Contributing to better tax policy and better tax law are key elements of the Treasury’s role as a central policy agency.

Revenue Group has primary responsibility for providing high-quality advice to Treasury portfolio ministers on tax and retirement income policies and legislation. The Treasury designs policy options and legislative proposals to make the Australian tax system more efficient, fair and transparent, and minimise compliance and administration costs. Advice is formulated through an integrated process, which includes consultation with business and community bodies, and close cooperation with the ATO and relevant Commonwealth departments.

During 2011-12, Revenue Group provided policy advice to assist the Government reform the tax and retirement income systems. It developed legislation giving effect to measures announced in the 2011-12 and 2012-13 Budgets and 2011-12 Mid-Year Economic and Fiscal Outlook to ensure the Budget’s sustainability. Revenue Group also developed revenue projections as an input to the medium-term analysis undertaken in the 2012-13 Budget.

The Treasury represents Australia as the Chair of the Global Forum on Transparency and Exchange of Information on Tax Matters. It also provides secretariat services to the Board of Taxation. The Board of Taxation publishes its own annual report at www.taxboard.gov.au.

Group deliverables

Revenue Group’s key deliverables are to provide advice on:

  • implementation of the Government’s taxation and retirement income reform agenda;
  • the impacts of tax system and retirement income proposals, measures and expenditures, including on government finances, economic growth, and their distributional impact and overall efficiency and effectiveness;
  • a modernised tax treaty network and revised international tax rules, which enhance Australia’s international attractiveness for investment but address risks from harmful tax jurisdictions while furthering Australia’s interests in the Pacific and Asia; and
  • Australia’s participation in international forums, including the OECD, G20 and the Global Forum in relation to international standards of tax information and transparency.

Group outcomes

Revenue Group’s key outcomes were:

  • advising the Government on further tax reform initiatives to follow on from the Stronger, Fairer, Simpler package of May 2010, including the Tax Forum that was held on 4-5 October 2011;
  • regularly revising tax revenue estimates and analysis and incorporating these into the overall fiscal outlook and strategy in the MYEFO and the 2012-13 Budget;
  • providing quantitative advice underpinning taxation proposals included in the 2011-12 MYEFO and 2012-13 Budget, including:
    • changes to the fringe benefits tax on living-away-from-home allowances and benefits,
    • consolidation of the dependency offsets,
    • phasing out of the mature age worker tax offset,
    • changes to the net medical expenses tax offset,
    • better targeting of the employment termination payment tax offset,
    • superannuation reforms,
    • changes to company taxation including introducing a system of loss carry-back,
    • changes to the duty-free allowances for tobacco, and
    • increasing the withholding tax on managed investment trusts;
  • providing demographic and labour force projections for the forward estimates and the medium-term estimates;
  • providing quantitative advice, including analysis of the distributional considerations and revenue impacts of the Government’s Budget and MYEFO measures;
  • coordinating the 2011 Tax Expenditures Statement publication and providing quantitative advice on estimates of tax expenditures;
  • advising on and developing legislation for business tax reforms including:
    • allowing companies to carry-back losses,
    • improving the efficiency of the research and development tax concessions,
    • revitalising the Australian shipping industry,
    • reforming taxation relief for small business, and
    • consulting on a revised policy framework of taxation of trust income;
  • advising and developing legislation on measures to ensure the integrity of the business tax system, including extending the director penalty regime to superannuation guarantee amounts, and establishing a contractor reporting regime for the building and construction industry;
  • providing advice and developing legislation on a number of improvements to the capital gains tax and taxation of financial arrangements regimes;
  • providing secretariat support to the Business Tax Working Group;
  • advising on and implementing legislation for personal tax policy reform, including:
    • increasing the tax free threshold as part of the Clean Energy Future package,
    • phasing out the dependent spouse tax offset,
    • consolidating the other dependency offsets into a single offset,
    • phasing out the mature age worker tax offset,
    • means testing the net medical expenses tax offset,
    • further exemptions from the temporary flood and cyclone reconstruction levy,
    • better targeting the employment termination payment tax offset, and
    • abolishing the education tax refund and replacing it with the Schoolkids bonus;
  • advising on and implementing legislation for superannuation and retirement income policies, including:
    • the Stronger Super reforms to improve the operation and integrity of the self-managed super funds (SMSF) sector,
    • the SuperStream proposals to enhance the efficiency of the superannuation system,
    • allowing fund members to electronically request the consolidation of their superannuation accounts through the Australian Taxation Office,
    • reducing the tax concessions received by very high income earners on their superannuation contributions, and
    • better ways to target and deliver certain superannuation concessions;
  • providing secretariat support to the Superannuation Roundtable;
  • advising on, and implementing legislation for, philanthropy tax policy, including:
    • progressing the Government’s not-for-profit reform agenda,
    • establishing an Australian Charities and Not-for-profits Commission,
    • better targeting of not-for-profit tax concessions,
    • introduction of a statutory definition of charity,
    • continuing negotiations with the states and territories on national not-for-profit reform,
    • restating the ‘in Australia’ special conditions applying to tax concession entities,
    • improving the integrity of public ancillary funds, and
    • specifically listing organisations in the tax law as deductible gift recipients;
  • advising on and implementing legislation for fringe benefits tax and non-cash benefits reform;
  • advising on and implementing legislation establishing the Minerals Resource Rent Tax (MRRT) and extending the Petroleum Resource Rent Tax (PRRT), as well as advising the Government on a range of other resource taxation policy issues;
  • advising on and implementing legislation on a range of indirect tax measures, including imposing an effective carbon price on business use of transport fuels and aviation fuel use, and bringing gaseous fuels under the carbon pricing mechanism;
  • providing support to the Low Value Parcel Processing Taskforce, including the provision of a member of staff on secondment to the taskforce’s secretariat;
  • monitoring the operation and administration of the GST through the a
    ctivities of the GST Policy and Administration Sub-group, which includes representation from each State and Territory Treasury;
  • contributing to international forums, including the OECD Working Party No. 9 on Consumption Taxes, and to international agreements, including the World Health Organisation’s Framework Convention on Tobacco Control;
  • advising on, developing and implementing legislation for Australia’s international tax arrangements. This reflects efforts to maintain the integrity of the tax base while providing a competitive and modern international tax system, including recommendations from the Board of Taxation’s Review of the Foreign Source Income Anti-Tax-Deferral Regimes, and the Johnson Report;
  • progressing tax treaty negotiations with key investment partners and concluding tax information exchange agreements with several other jurisdictions;
  • contributing to global efforts to address tax transparency, including through representing Australia as the Chair of the Global Forum on Transparency and Exchange of Information on Tax Matters;
  • advising on reports on tax administration matters by external scrutineers such as the Inspector-General of Taxation, Board of Taxation and Joint Committee of Public Accounts and Audit;
  • advising other agencies on legislation in relation to confidentiality of taxpayer information;
  • providing secretariat support to the Board of Taxation, including to:
    • its reviews of the tax arrangements applying to collective investment vehicles,
    • the review of an investment manager regime as it relates to foreign managed funds,
    • the review of tax arrangements applying to permanent establishments, and
    • post-implementation reviews into certain aspects of the consolidation regime, the Tax Design Review Panel recommendations and into Division 7A of Part III of the Income Tax Assessment Act 1936;
  • providing secretariat support to the Tax Issues Entry System Working Group.

Analysis of performance

Further tax reform

The Treasury has been working to foster a more system-wide approach to policy development that recognises the close links between different parts of the tax system. A series of policy workshops, seminars and cross-group collaborations have been used to deepen the understanding of these issues.

The Tax Forum

The Treasury coordinated the Tax Forum that was held at Parliament House on 4 and 5 October 2011. The forum brought together around 180 representatives from business, community, academia, unions and governments to discuss ways to progress tax reform.

Tax revenue estimates and analysis

The Treasury, in collaboration with the ATO, provided the Government with timely monitoring, analysis and estimation of tax revenues as revenues continued to recover from the effects of the global financial crisis. Revisions to expected tax revenue in 2011-12 and over the forward estimates were made at each of the economic and fiscal outlook releases through 2011-12 (MYEFO and the 2012-13 Budget). The Treasury provided revenue estimates into the medium term as an input into the medium-term analysis undertaken in the 2012-13 Budget.

A review of the quality of Treasury’s forecasts of the macroeconomy and revenue was announced by the Secretary on 31 May 2012. This review is being undertaken by a team from within Treasury, overseen by an external reference group, with a summary of the review’s findings to be published.

Business tax reform

Business Tax Working Group

The Treasury provided secretariat support to the Business Tax Working Group (BTWG) from its establishment in October 2011. The BTWG provided its interim report on the tax treatment of losses in December 2011 and a final report on the tax treatment of losses in March 2012 to the Treasurer. The Working Group also began its consideration of longer‑term business tax reform options.

Improving access to corporate losses

The Treasury provided policy advice to allow companies to carry-back losses following the recommendations of the BTWG. From 2012-13, companies will be able to carry-back tax losses of up to $1 million to obtain a refund of tax previously paid. From 2013-14 companies will be able to carry-back losses for the previous two years. This reform provides a tax benefit of up to $300,000 per year, and will assist companies to finance investments, training and restructuring to improve competitiveness.

Improving the efficiency of Research and Development (R&D)

The Treasury provided policy advice and developed legislation to replace the longstanding R&D Tax Concession with the R&D Tax Incentive. The new R&D Tax Incentive better targets research and development activity with a higher base rate of support. Unlike the Tax Concession, there is no cap on the amount that can be claimed. The R&D Tax Incentive commenced on 1 July 2011, allowing eligible companies with an aggregated annual turnover of less than $20 million to receive a 45 per cent refundable tax offset for expenditure on eligible R&D activities. All other eligible companies are entitled to a 40 per cent non-refundable tax offset for such expenditure.

Shipping reforms

The Treasury provided policy advice and developed legislation to implement the Government’s 2010 election commitment to revitalise the Australian shipping industry. The taxation measures, which were developed in close consultation with the Department of Infrastructure and Transport and industry stakeholders, comprise an income tax exemption for ship operators, provision for accelerated depreciation of certain vessels, roll-over relief from income tax on the sale of a vessel, a refundable tax offset for employers, and an exemption from royalty withholding tax for payments made for the lease of shipping vessels. These measures came into effect on 1 July 2012, and form part of the Government’s Stronger Shipping for a Stronger Economy reform package.

Small business tax package

The Treasury continued to provide policy advice, develop legislation and undertake public consultation on draft legislation, for reforms for small business that were included in the Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Act 2011. These reforms operate from the 2012-13 income year and include increasing the small business instant asset write-off threshold to $6,500 and simplifying the depreciation rules for small business. In addition, Treasury developed legislation on the 2010-11 Budget announcements, which provided small businesses with an accelerated initial deduction for motor vehicles.

Reform of taxation of trust income

The Treasury provided policy advice and consulted with the community on reforms to modernise the taxation of trust income. These reforms are scheduled to take effect on 1 July 2014 and will include a new tax system for managed investment trusts (MITs), where the objective is to increase certainty, reduce complexity and lower compliance costs for MITs and their investors.

Ensuring the integrity of the business tax system

Director penalty regime

The Treasury provided policy advice and developed legislation to extend the current director penalty regime to superannuation guarantee amounts, and to strengthen its application to Pay As You Go Withholding obligations. This measure was enacted as part of the Tax Laws Amendment (2012 Measures No. 2) Act 2012 and the Pay As You Go Withholding Non-compliance Tax Act 2012. The measure gave effect to the Government’s election commitment to counter phoenix activity and to protect workers’ entitlements.

Reporting taxable payments in the building and construction industry

The Treasury continued to provide policy advice, consult with the community and develop regulations on a regime that req
uires businesses in the building and construction industry to report annually to the Australian Taxation Office the details of payments they make to contractors providing building and construction services. The regime commenced on  1 July 2012.

Improving the operation of capital gains tax

The Treasury provided advice, consulted on and developed legislation on a number of measures to improve the operation of the capital gains tax (CGT) regime, including:

  • removing income tax impediments to superannuation funds seeking to merge in response to the Stronger Super reforms;
  • ensuring that default members of superannuation funds are not adversely affected if their superannuation benefits and relevant assets are transferred under the MySuper reforms;
  • extending the CGT main residence exemption to special disability trusts (SDTs) and providing a CGT exemption for assets transferred into an SDT for no consideration; and
  • removing CGT impediments to taxpayers participating in an Australian government agency program that provides replacement assets to taxpayers affected by a natural disaster.
Improvements to the taxation of financial arrangements

The Treasury provided advice, consulted and developed legislation to refine the taxation of financial arrangements provisions and to provide certainty and clarity on the operation of the law.

Treasury also provided advice on:

  • the treatment of certain Tier 2 capital instruments under the Basel III capital reforms to ensure that these instruments will not be precluded from being treated as debt for income tax purposes;
  • the consistent treatment of bad debts between related parties irrespective of whether they are members of a tax consolidated group; and
  • the definition of limited recourse debt, to include arrangements where the creditor’s right to recover the debt is effectively limited to the financed asset or security provided.

Personal tax and fringe benefits tax policy reform

Clean energy future tax reforms

The Treasury advised on the personal taxation elements of a package to assist Australian households with the move to a Clean Energy Future and introduced legislation to implement this package. This package involved tax cuts delivered through simplification reforms to the personal income tax system, which include more than tripling the statutory tax free threshold and reducing the system’s reliance on complicated tax offsets to deliver tax relief. These reforms commenced on 1 July 2012.

Phasing out the dependent spouse tax offset

The Treasury advised on and implemented legislation on the 2011-12 Budget and 2011-12 MYEFO measures to phase out the dependent spouse tax offset. The offset is no longer available for spouses born after 1 July 1952 unless the spouse is invalid or has caring responsibilities. These changes were implemented by the Tax Laws Amendment (2011 Measures No. 5) Act 2011 and Tax Laws Amendment (2012 Measures No. 3) Act 2012.

Rebalancing support for private health insurance

The Treasury continued to advise the Government on its measure, announced in the 2009-10 Budget and implemented in 2011-12, to means test the private health insurance rebate. These changes were introduced in Fairer Private Health Insurance Incentives Act 2012.

Phasing out the mature age worker tax offset

The Treasury advised on the 2012-13 Budget measure to phase out the mature age worker tax offset. From 1 July 2012, the mature age worker tax offset will only be available to taxpayers born before 1 July 1957. Legislation is being developed to give effect to this measure.

Consolidating the dependency tax offsets into one

The Treasury advised on the 2012-13 Budget measure to consolidate eight dependency offsets into one, which is only available to taxpayers who maintain a dependant who is genuinely unable to work due to carer obligation or disability. The offsets to be consolidated are the invalid spouse, carer spouse, housekeeper, housekeeper (with child), child‑housekeeper, child‑housekeeper (with child), invalid relative and parent/parent‑in‑law tax offsets. Legislation is being developed to give effect to this measure.

Better targeting the employment termination payment tax offset

The Treasury advised on the 2012-13 Budget measure to better target the employment termination payment tax offset. From 1 July 2012, only that part of an affected employment termination payment (ETP) that takes a person’s total annual taxable income (including the ETP) to no more than $180,000 will receive the ETP tax offset. This reform was implemented by the Tax Laws Amendment (2012 Measures No. 3) Act 2012.

Means testing the net medical expenses tax offset

The Treasury advised on the 2012-13 Budget measure to means test access to the net medical expenses tax offset. For people with adjusted taxable income above the Medicare levy surcharge thresholds ($84,000 for singles and $168,000 for couples or families in 2012-13), the threshold above which a taxpayer may claim the offset will be increased to $5,000 (indexed annually thereafter) and the rate of reimbursement will be reduced to 10 per cent for eligible out-of-pocket expenses incurred. People with income below the surcharge thresholds will be unaffected. Legislation implementing this measure is being developed.

Reform of the income tax treatment of non-cash benefits and the extension of the fringe benefits tax exemption for fly-in-fly-out arrangements to Australians working overseas

The Treasury provided advice and developed legislation to amend the Fringe Benefits Tax Assessment Act 1986 to provide an exemption from fringe benefits tax for transport, from an employee’s usual place of residence to their usual place of employment, where the employee is an Australian resident employed in a remote area overseas, under what is commonly known as a fly-in fly-out arrangement, for fringe benefits provided after 1 July 2009.

This measure was announced in the Assistant Treasurer and Minister for Financial Services and Superannuation’s Media Release No. 011 of 18 November 2010.

Not-for-profit reforms

The Treasury advised the Government on implementing its not-for-profit reform agenda announced in the 2011-12 Budget. The reforms include:

  • establishment of the Australian Charities and Not-for-profits Commission from 1 October 2012 — the Commission will initially be responsible for determining the legal status of groups seeking charitable and public benevolent institution status. The Commission will also implement a ‘report-once use-often’ reporting framework for charities, provide education and support for the sector on technical matters, and establish a public information portal;
  • introducing a statutory definition of ‘charity’ — the definition will apply across all Commonwealth agencies from 1 July 2013 and is based on the 2001 Report of the Inquiry into the Definition of Charities and Related Organisations, taking account of the findings of recent judicial decisions;
  • better targeting the not-for-profit tax concession — to reform the use of tax concessions by unrelated businesses run by not-for-profit entities;
  • continuing negotiations with the States and Territories on national regulation and a new national regulator for the sector, as the greatest reduction in red tape can only be achieved with national coordination; and
  • restating and standardising the special conditions for tax concession entities.

Superannuation and retirement income policy reform

2011-12 MYEFO measures

The Treasury provided advice for the Government’s 2011-12 MYEFO measures, and developed legislation for and implemented some of the measures. These measures included:

  • abolishing the maximum super
    annuation guarantee age limit;
  • a one-year pause in the indexation of the concessional contributions cap;
  • clarifying the operation of certain trust deed clauses so that these clauses cannot be used to avoid excess contributions tax;
  • changes to the superannuation co-contribution to reduce the matching rate, the maximum co-contribution amount and upper income threshold; and
  • extension of the drawdown relief for account-based pensions provided in 2011-12 to 2012-13, through a 25 per cent reduction in the minimum payment amounts.
2012-13 Budget superannuation measures

The Treasury provided policy advice for the Government’s 2012-13 Budget measures, and developed legislation for and implemented some of the measures. These measures included:

  • developing a facility for the online registration of SMSF auditors and to cover the costs, increasing the SMSF levy from $180 to $200 for 2011-12 and then decreasing to $191 from 2012-13;
  • ensuring the process of everyday superannuation transactions are easier, cheaper and faster through the SuperStream package of measures, including by implementing new data and e-commerce standards for superannuation transactions, allowing the use of tax file numbers as the primary locator of member accounts and facilitating account consolidation and electronic portability; and
  • deferring the higher concessional contributions cap for individuals aged 50 and over with superannuation balances below $500,000.

Treasury consulted the superannuation industry and other relevant stakeholders on further design and implementation issues on the 2012-13 Budget measures to reduce the tax concession on superannuation contributions of very high income earners.

Stronger, Fairer, Simpler superannuation reforms

The Treasury consulted the Superannuation Roundtable on implementation issues for the Government’s announcement to provide higher concessional contributions caps for those aged 50 or over with superannuation balances of less than $500,000.

The Treasury developed legislation to give effect to the superannuation reforms to increase the superannuation guarantee rate, abolish the maximum age limit on superannuation guarantee and introduce a new superannuation contribution for low income earners. This legislation was part of the Mineral Resource Rent Tax package and was enacted on 29 March 2012.

Trans-Tasman retirement savings portability

The Treasury continues to work with New Zealand officials to finalise legislation to allow Australians and New Zealanders to take their retirement savings with them when they move across the Tasman.

Once enacted, the scheme will permit transfers between certain Australian superannuation funds and New Zealand KiwiSaver schemes. Participation in the scheme will be voluntary for eligible funds, as well as for individuals wishing to transfer their retirement savings.

The approach will maintain the integrity of the Australian and New Zealand retirement savings systems.

Super System Review

The Treasury assisted the Government in undertaking consultations with stakeholders on the implementation of the Super System review reforms and provided advice to the Government on implementation details.

The Treasury developed legislation for reporting of superannuation contributions on payslips, quarterly notification by superannuation funds about whether contributions have been received and the facilitation of the consolidation of unnecessary superannuation accounts.

Other superannuation measures

The Treasury provided policy advice and developed legislation on other superannuation issues, including:

  • streamlining the process for superannuation funds claiming deductions for the cost of total and permanent disability insurance;
  • allowing the proceeds of crime to be recovered from superannuation; and
  • refunding certain excess concessional contributions.

International tax arrangements

Review of transfer pricing laws

On 1 November 2011, the Government announced that it would introduce amendments to the income tax law to better align Australia’s transfer pricing rules with international best practice in order to improve the integrity and efficiency of the tax system.

The first phase of these reforms involved clarification of the application of the treaty transfer pricing rules. The Treasury developed legislation to give effect to this reform with amendments to clarify the operation of the law included in the Tax Laws Amendment (Cross-border Transfer Pricing) Bill (No. 1) 2012, which was passed by the Parliament on 20 August 2012. In developing the rules, the Treasury consulted extensively both on a public basis, and with tax practitioners, peak body representatives and industry representatives.

Investment Manager Reforms

Following a review and report of the Australian Financial Centre Forum (Australia as a Financial Centre; Building on Our Strengths 2009), the Australian Government announced support for the development of an investment manager regime (IMR). The IMR is intended to provide clear and comprehensive statutory rules for taxing non-resident investment into Australian and foreign assets.

Treasury has consulted extensively with industry on the implementation of this measure and has developed legislation to clarify the tax treatment of income of foreign managed funds for previous income years, and the foreign conduit income of such funds.

Treasury will continue to consult with industry and provide further advice to government on the development of the final stage of the IMR.

Tax treaty negotiations

Australia has a tax treaty network of 44 bilateral tax treaties (42 in force). Tax treaties promote closer economic cooperation by eliminating barriers to trade and investment caused by overlapping tax jurisdictions. Tax treaties offer protection for Australian businesses investing offshore by reducing or eliminating double taxation of income flows between treaty partner countries. They also create a framework through which tax administrations can combat international fiscal evasion. During 2011-12, the Treasury continued to progress the Government’s tax treaty negotiation program through negotiations and discussions with a number of countries. In particular, Treasury hosted a round of negotiations with Switzerland in November 2011. A protocol amending the Australia-India treaty was signed in December 2011.

The Treasury provided advice on various international agreements the Government is negotiating, including free trade agreements, film co-production agreements, and proposed agreements with potential tax privileges and immunities. The Treasury also contributed to international tax treaty policy development and capacity-building through its work with the OECD’s Committee on Fiscal Affairs. The Treasury also analysed, and provided advice on, mitigating the impacts of the United States’ Foreign Account Tax Compliance Act (FATCA) on the Australian economy.

Tax information exchange agreements and international transparency

Tax information exchange agreements

Australia continued to make significant progress in securing tax information exchange agreements with low tax jurisdictions, including signing tax information exchange agreements with Andorra, Bahrain, Costa Rica, Liberia and Macao. Tax information exchange agreements provide a legal basis for bilateral exchange of tax information, for both civil and criminal tax purposes, and are an important measure to combat offshore tax evasion.

The Treasury has led Australia’s contribution to international efforts to address tax transparency and the use of secrecy for tax evasion purposes, and is involved in G20 and OECD efforts to improve global exchange of information for tax purposes. In August 2009, the Global Forum on Transparency and Exchange of Information was reinvigorated with a renew
ed mandate to conduct peer reviews of its members’ commitment to international standards on tax transparency commitments. A Treasury official, Mr Mike Rawstron, is Chair of the Global Forum, which has overseen substantial progress in the removal of secrecy and provisions preventing the exchange of information on tax matters between jurisdictions.

Other international tax agreements

Australia signed the Multilateral Convention on Mutual Administrative Assistance in November 2011. The convention has been signed by nearly 40 jurisdictions and provides for assistance between national revenue authorities in three areas: the exchange of taxpayer information, the recovery of outstanding tax debts and the service of documents. The convention will complement Australia’s tax treaty and tax information exchange agreement networks and further enhance Australia’s ability to protect its revenue base. Action to enable Australia to ratify the convention is now underway.

International representation

The Treasury represented Australia on the OECD’s Committee on Fiscal Affairs and its associated working parties dealing with international tax matters, particularly on developing comprehensive tax treaty policy and the harmful tax practices initiative. In addition, the Treasury represented Australia at the annual meetings of the United Nations Committee of Experts on International Cooperation in Tax Matters and the Global Forum for Transparency and Exchange of Information for Tax purposes. The Treasury also provided an instructor to an OECD course on tax treaty issues. Treasury staff presented at an Asian Development Bank seminar in Indonesia, and represented Australia at the First Annual International Meeting on Transfer Pricing as part of the OECD’s Global Forum on Tax Treaties and Transfer Pricing.

Indirect tax policy reform

Clean Energy Plan

The Treasury developed legislation imposing an effective carbon price on aviation fuels through excise and customs tariffs from 1 July 2012. The legislation also reduced the business fuel tax credit entitlement of non-exempted industries for their use of liquid and gaseous transport fuels, imposing an effective carbon price on business through the fuel tax system from 1 July 2012. The Clean Energy (Fuel Tax Legislation Amendment) Act 2011, Clean Energy (Excise Tariff Legislation Amendment) Act 2011 and Clean Energy (Customs Tariff Amendment) Act 2011 received Royal Assent on 4 December 2011.

Applying the carbon price to gaseous fuels

The Treasury provided policy advice and developed legislation to bring gaseous fuels under the carbon pricing mechanism. The Clean Energy Legislation Amendment Act 2012, Clean Energy (Customs Tariff Amendment) Act 2012 and Clean Energy (Excise Tariff Legislation Amendment) Act 2012 received Royal Assent on 28 June 2012.

The Treasury also developed regulations to impose an effective carbon price on non-transport use of certain gaseous fuels for the period 1 July 2012 to 30 June 2013, before the fuels are brought directly into the carbon pricing mechanism.

Australia’s response to the illicit tobacco protocol

The Treasury contributed to Australia’s position on protocols and guidelines attached to the World Health Organisation’s Framework Convention on Tobacco Control.

Review of the Legal Framework for the Administration of the Goods and Services Tax

The Indirect Tax Laws Amendment (Assessment) Act 2012 implemented a number of recommendations of the Board of Taxation’s Review of the Legal Framework for the Administration of the Goods and Services Tax.

Review of the GST financial supplies provisions

Legislative amendments were made, with effect from 1 July 2012, implementing the recommendations of the Treasury review of the GST Financial Supplies provisions.

Productivity Commission Inquiry into the Retail Industry

Revenue Group provided advice to the Government on the Productivity Commission’s recommendations relating to the appropriateness of current indirect tax arrangements in its report on the Economic Structure and Performance of the Australian Retail Industry.

GST treatment of government taxes, fees and charges

Regulations were made under Division 81 of the A New Tax System (Goods and Services Tax) Act 1999, with effect from 1 July 2012, exempting certain government taxes, fees and charges from GST in accordance with the principles contained in the Intergovernmental Agreement on Federal Financial Relations.

Responding to court cases

Amendments to the GST law were made in response to a number of court cases including: Commissioner of Taxation v Multiflex [2011] FCAFC 142, Commissioner of Taxation v Gloxinia Investments (Trustee) [2010] FCAFC 46, TT-Line Company Pty Ltd v Commissioner of Taxation [2009] FCAFC 178 and Commissioner of Taxation v Secretary to the Department of Transport (Victoria) [2010] FCAFC 84. The GST issues considered in these cases included refunds, new residential premises, appropriations and GST-free health supplies.

Other reforms

Minerals Resource Rent Tax (MRRT) and Petroleum Resource Rent Tax (PRRT) extension

The Treasury developed legislation to implement the revised resource taxation arrangements announced by the Government on 2 July 2010. These included establishing the MRRT, which will apply to profits from coal and iron ore, and extending the PRRT to apply to all petroleum projects across Australia, including the North West Shelf and those located onshore. The Minerals Resource Rent Tax Act 2012, the Petroleum Resource Rent Tax Assessment Amendment Act 2012, and related legislation received Royal Assent on 29 March 2012.

Tax agent services regulatory reform

Treasury, in consultation with relevant industry and government stakeholders, continued to work through the co-regulatory model and implementation issues associated with bringing financial advisers providing tax advice under the scope of the tax agent services regime. On 30 April 2012, the Assistant Treasurer announced a deferral until 30 June 2013 from application of the tax agent services regime for financial advisers providing tax advice.

Tax Expenditures Statement

The Treasury coordinated the 2011 Tax Expenditures Statement publication and provided quantitative advice in respect of the estimates of tax expenditures (that is, the value of concessional taxation treatment) associated with taxation policy.

Tax policy consultation

The Treasury implemented a program of high-level stakeholder consultation meetings to engage the taxpayer community in a wider conversation about strategic tax policy issues. Two consultation meetings were held in 2011-12 with representatives from the tax industry, and business and community groups.

The Treasury updated the Government’s Forward Work Program on a monthly basis and made it available publicly. The document is published to inform taxpayers and their advisers about the Government’s current and forthcoming consultation process on tax measures. It outlines discussion papers, and exposure drafts of legislation and regulation that are currently open for consultation as well as those currently in preparation.

In addition, the Treasury engaged with members of the Tax Design Advisory Panel, which comprises lawyers, accountants, academics and economists. This panel provides advice on:

  • consideration of tax and superannuation issues; and
  • the design and implementation of relevant changes to the tax system.

The operation of the panel has been extended until 30 June 2014.

Miscellaneous amendments and technical corrections

Measures making miscellaneous amendments and technical corrections to the taxation laws were included in the Tax Laws Amendment (2011 Measures N
o. 9) Act 2012 and the Tax Laws Amendment (2012 Measures No. 1) Act 2012, which received Royal Assent on 21 March 2012 and 27 June 2012 respectively.

Issues raised through the Tax Issues Entry System are addressed in miscellaneous amendment packages. The Tax Issues Entry System website (www.ties.gov.au) is jointly operated by the ATO and the Treasury and allows tax professionals and the general public to raise issues on the care and maintenance of the tax system.

Secretariat support to the Tax Issues Entry System Working Group

The Treasury provided support to the Tax Issues Entry System Working Group which met four times during 2011-12.

Secretariat support to the Board of Taxation

The Treasury provided secretariat support to the Board of Taxation, including to its reviews of the tax arrangements applying to collective investment vehicles, the review of an investment manager regime as it relates to foreign managed funds, the review of tax arrangements applying to permanent establishments and post-implementation reviews into certain aspects of the consolidation regime, into the Tax Design Review Panel recommendations and into Division 7A of Part III of the Income Tax Assessment Act 1936.

Secretariat support to the Superannuation Roundtable

The Treasury provided secretariat support to the Superannuation Roundtable, which met twice during 2011-12.

Management of legislation program

Advice to the Government on tax policy and legislation was timely, influential and of high quality, enabling the Government to make informed decisions and to develop a range of business, indirect, international, resource and personal income tax measures.

A total of 45 tax bills containing 73 measures were introduced into Parliament in 2011-12.