Soon after the Government was elected we were advised that 96 tax and superannuation announcements, with one dating back as far as March 2001, had not been legislated.
Four of these have been dealt with as part of the carbon and mining tax repeal packages.
Today we are dealing with the final backlog of 92 measures of announced but unlegislated tax and superannuation measures.
This backlog has created significant operational uncertainty for businesses and consumers.
The Government is determined to resolve all policies relating to these matters by 1 December 2013 for inclusion in the Mid-Year Economic and Fiscal Outlook (MYEFO).
The Government intends that the bulk of legislation that is to be progressed should be passed by the Parliament by 1 July 2014.
Of the 92 unlegislated and unresolved tax and superannuation changes, the Government will proceed with 18 initiatives. A further three initiatives will be significantly amended.
The Government will not proceed with seven initiatives.
Assistant Treasurer Arthur Sinodinos, with assistance from the Board of Taxation will undertake consultation with tax experts, including a number drawn from the Board's advisory panel over the next two weeks with a disposition not to proceed with the remaining 64 measures.
It will be an expedited and thorough review with industry, focusing on whether there are any unintended consequences from not proceeding with the measures or whether there are compelling reasons why the measure should proceed. We are advised that the fiscal impact of the vast bulk of the remaining 64 initiatives is expected to be minimal.
This package of taxation measures will provide certainty to business and significantly reduce red tape and associated costs.
Importantly it will provide consumers, particularly those with significant education costs, with certainty.
This package will prevent an estimated 10 Bills and hundreds of pages of legislation from proceeding.
In addition, there will be legislated protection for any taxpayer who has self-assessed with announced changes that the Government will not proceed with.
Moreover taxpayers that have complied with previous announcements that will no longer proceed, and have paid additional taxation, will be entitled to a refund. We are advised by the Treasury that the financial impact of this initiative is expected to be minimal.
This is part of our ongoing process to restore simplicity and fairness to the Australian tax system.
The integrity of our tax system will further be enhanced by a range of other reforms to be announced in coming months.
Among the seven measures the Government will not proceed with are:
•Self-Education Expenses Cap (Announced as part of the 2013-14 Budget, and delayed for one year in the 2013 Economic Statement)
The Government will not proceed with Labor's announcement to put a $2,000 cap on the amount people can deduct as self-education expenses, including training and educational courses, textbooks and other accreditation expenses.
Not proceeding with this measure means that these expenses will continue to be deductible according to the normal rules.
The highest number of self-education claims over $2000 (ie 80%) come from people earning less than $80,000 per annum.
We have been advised that there is no credible evidence of substantial abuse of this deduction. If credible evidence of systematic abuse emerges, then the Government will revisit this issue. Moreover the economic cost of this initiative is substantial. This was recognised by the previous Government which delayed the implementation of their proposal
•Labor's $1.8 billion Fringe Benefits Tax hit on the car industry. (Labor announced the measure on 16 July 2013 and documented it in the 2013 Economic Statement)
During the 2013 election the Coalition pledged not to continue with Labor's $1.8 billion Fringe Benefits Tax change that would make it harder for people to have a company or salary sacrificed vehicle. The Coalition Government today confirms it will not proceed with this measure.
•Tax on Superannuation Pensions – tax on earnings on super assets supporting retirement income streams (Announced in April 2013 and documented in the 2013-14 Budget)
The Coalition Government will not proceed with Labor's announcement which would have taxed people's superannuation pension earnings above $100,000 in the draw-down phase.
The complexity and compliance costs associated with this initiative are extreme and essentially undeliverable.
This is a demonstration of the Government's commitment to provide certainty for superannuation fund members by making no adverse unexpected changes to superannuation during our first term.
The Government acknowledges that not proceeding with these and other measures will negatively impact on the underlying cash balance by $2.4 billion over the current forward estimates period.
The Government will also amend three measures, with a Budget cost of $700 million over the forward estimates, including:
•Thin Capitalisation Changes – relating to tax structures that seek to shift profits through debt loading. (Announced as part of the 2013-14 Budget)
The Coalition will not proceed with Labor's proposal to deny deductions made under section 25-90 of the Income Tax Assessment Act 1997 because the revenue is essentially unrealisable and it would impose unreasonable compliance costs on Australian businesses. Australian companies have been able to claim deductions for interest and other debt-related expenses for their overseas investment, thanks to a Coalition measure in 2001, and will be able to continue to do so now that the Coalition will not proceed with this measure. We will instead introduce a targeted anti-avoidance provision after detailed consultation with stakeholders. Details of this consultation will be announced before the end of the year.
•Offshore Banking Unit (Announced as part of the 2013-14 Budget)
The Government will not proceed with the part of this measure that excludes all related party transactions but have a targeted integrity measure to provide certainty for the industry. It will help Australian banks compete on a level playing field overseas, through access to a competitive tax rate, and attract activity to their Australian operations.
The Government will continue to work closely with stakeholders to develop targeted rules to address the integrity issues with the current rules. Consultation with industry will begin soon.
The Government will proceed with 18 un-enacted measures, maintaining close to $11 billion in revenue over the forward estimates, including:
•Tobacco Tax Changes (Announced as part of the 2013-14 Budget and the 2013 Economic Statement)
One measure indexes the tobacco excise and customs duty to Average Weekly Ordinary Time Earnings (AWOTE) instead of the Consumer Price Index (CPI). Indexing to AWOTE means that it will increase at a faster rate. The indexation occurs twice a year.
The second measure implements 4 additional increases to tobacco excise and customs duty on 1 December 2013, 1 September 2014, 1 September 2015, and 1 September 2016
•Net Medical Expenses Tax Offset (NMETO) phase out (Announced as part of the 2013-14 Budget)
The NMETO provides an offset for people when their medical expenses are high. The phasing out will allow current claimants to remain eligible for the offset until 2014-15.
The Government provides support for people with high medical expenses through Medicare safety nets. The NMETO provides no assistance to those with high medical expenses but no tax liability.
•Managed Investment Trusts
The new tax regime for Managed Investment Trusts along with the third tranche of the Investment Manager Regime reaffirms our commitment to growing Australia's financial services industry by making them more attractive in foreign markets. It will establish MITs in their own right with a transparent framework, aimed at driving demand.
•Farm finance – Support for farmers
The Government will support regional Australia by increasing the non-primary production income eligibility threshold for Farm Management Deposits from $65,000 to $100,000.
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