Chapter 1Committee report
1.1On 19 September 2024, the Senate referred the provisions of the Treasury Laws Amendment (2024 Tax and Other Measures No. 1) Bill 2024 (the bill) to the Senate Economics Legislation Committee (the committee) for inquiry and report by 24 October 2024.
1.2The bill would amend the Taxation Administration Act 1953 and the Income Tax Assessment Act 1936 to implement a range of measures, all intended to ensure that Australia’s tax system is 'simpler and fairer'. These measures include changes to the foreign resident capital gains withholding tax regime, and various changes intended to make the tax system simpler for small businesses.
Overview of the bill
1.3The bill contains four schedules:
Schedule 1 makes amendments to the foreign resident capital gains withholding tax regime. The changes in the bill would help ensure that foreign investors selling a real property asset (such as a residential property) are subject to the same overall tax obligations as Australians, and better align a foreign resident’s capital gains tax liabilities with their likely real capital gain. In doing so, Schedule 1 would implement the Increasing the integrity of the foreign resident capital gains withholding regime measure announced as part of the Mid-Year Economic and Fiscal Outlook 2023–24.
Schedules 2, 3 and 4 implement various changes intended to make Australia’s tax system simpler for small businesses, enabling those businesses to more easily manage their tax affairs. In doing so, each of these schedules partially gives effect to the Driving Collaboration with Small Business to Reduce the Time Spent Complying with Tax Obligations measure that was announced in the 2023–24 Budget.
1.4A summary of the provisions in the bill is provided below. More detail on the provisions, including the context of the measures they implement, is provided in the Explanatory Memorandum.
Schedule 1—Foreign resident capital gains withholding payments
1.5Schedule 1 seeks to ensure better compliance by foreign residents with the Australian tax regime and to assist with the collection of tax liabilities owed by foreign residents.
1.6Like Australian residents, foreign residents must pay capital gains tax (CGT) when selling Australian real property assets. The foreign resident capital gains withholding payments regime has been in place in 2016 and requires a 12.5percent upfront payment on any CGT liability for asset sales exceeding $750000. However, data from the Australian Taxation Office (ATO) indicates that foreign residents who have sold real property interests are less likely to lodge an Australian tax return unless they are eligible for a refund.
1.7Schedule 1 would address this by amending the Tax Administration Act 1953 to modify the foreign resident capital gains withholding payments regime to:
increase the withholding rate from 12.5 per cent to 15 per cent; and
remove the current $750 000 threshold before which withholding applies.
1.8The bill specifies that the amendments apply to acquisitions made on or after either 1 January 2025 or the commencement of Schedule 1 of the bill, which ever event occurs later. The Explanatory Memorandum (EM) clarifies that the amendments will not apply to transfers that occur under a contract entered into before this time.
Schedule 2—Allowing employers to make single touch payroll declarations for extended periods
1.9Schedule 2 of the bill seeks to reduce the administrative burden for employers under the single-touch payroll (STP) scheme.
1.10Under the current scheme, employers are required to report on employee payments to the Commissioner of Taxation (the Commissioner). When using a tax agent to lodge this information, employers are required to make a declaration of accuracy and authority for each lodgement.
1.11Schedule 2 would amend the Tax Administration Act 1953 to allow an employer to make a standing declaration to their tax agent. The declaration would cover multiple lodgements for a period of up to 12 months, or until:
the declaration is withdrawn by the employer; or
a material change occurs in the relationship between the employer and the agent or in the affairs of the employer’s business since the declaration was made.
Schedule 3—Self amendments by small and medium businesses
1.12Schedule 3 would amend the Income Tax Assessment Act 1936 to extend the amount of time that small and medium businesses have to self-amend their tax assessments from two years, as is currently allowed, to four years.
1.13Currently, the period during which the Commissioner may amend a tax assessment for a small to medium business is two years, after which time businesses must lodge an objection if they wish to amend their tax return. The EM states that the ‘relatively short [two-year] statutory limitation period was intended to provide taxpayers swift certainty regarding their income tax liabilities’. However, the two-year limit has led to an increase in taxpayers seeking extensions of time to lodge objections, resulting in a greater administrative burden for the Commissioner.
1.14In his second reading speech, the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP noted that this process is also burdensome upon the taxpayer:
Currently, if a business realises they've made a mistake in their tax return after that two-year window, they are forced into a formal objections process that can be time-consuming, complex and, often, costly for them.
1.15The extended period to self-amendment tax assessments is expected to reduce the administrative and financial burden for both the taxpayers in question and the Commissioner.
Schedule 4—Reducing the use of cheques for tax refunds
1.16Schedule 4 seeks to reduce the use of cheques by the Commissioner when issuing tax refunds by encouraging the use of electronic banking, thereby making the refund process 'faster, safer, and cheaper'.
1.17For income tax, refunds must be issued within 30 days even where an entity has not provided valid bank account details. In these instances, refunds are issued using cheques, which can delay the refund process. The use of cheques also imposes an administrative cost on the ATO, at an estimated $6 per cheque.
1.18Schedule 4 would amend the IncomeTax Administration Act 1953 to provide the Commissioner the power to retain certain tax refunds or credits for up to 90 days. This would allow time to obtain a taxpayer's current financial institution account details. The retention period would last until either the entity provides the required bank details, or the 90-day period expires. During this period, the Commissioner must notify the entity and request the necessary account details.
Financial impact
1.19The provisions of the bill are projected to have financial impacts as outlined below in Table 1.2.
Table 1.2Financial impact
| |
Schedule 1 | This measure is estimated to increase receipts by $150 million and increase payments by $5.9 million over the next 5 years from 2022–23. |
Schedule 2 | Nil financial impact. |
Schedule 3 | Nil financial impact. |
Schedule 4 | Nil financial impact. |
Source: Explanatory Memorandum, pp. 1–4.
Consultation
1.20The Treasury undertook consultation processes on exposure draft legislation for:
Schedule 1, undertaken between 23 July 2024 and 5 August 2024; and
Schedule 3, undertaken between 26 July 2024 and 9 August 2024.
1.21At the time of writing, three submissions were publicly available from both consultation processes.
1.22In relation to Schedule 4, the Treasury undertook a consultation process to 'seek comments on the Government’s intention to wind down the cheques system in Australia'. The consultation took place between 8 December 2024 and 9 February 2024. At the time of writing, no submissions had been published as part of that process.
Consideration by other committees
1.23The Standing Committee for the Scrutiny of Bills made no comment on the bill.
1.24The Parliamentary Joint Committee on Human Rights also made no comment on the bill.
1.25The Statement of Compatibility with Human Rights contained in the Explanatory Memorandum provides that the bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, and thus does not raise any human rights concerns.
Conduct of the inquiry
1.26The committee agreed to open submissions on 20 September 2024 and set 4October 2024 as the closing date. The committee wrote to a range of organisations and individuals, drawing their attention to the inquiry and inviting written submissions.
1.27The committee did not receive any submissions, and no public hearings were held.
Committee view
1.28The committee notes it received no submissions to the inquiry, and as such, no substantive issues relating to the provisions of the bill have been raised.
1.29The committee further notes the consultative processes undertaken by the Treasury prior to the introduction to the bill.
1.30The committee welcomes measures in Schedule 1 of the bill which would support fairer outcomes in the Australian tax system, by ensuring that foreign investors selling real property assets are subject to the same tax obligations as Australians.
1.31The committee further supports measures contained in Schedule 2 and 3 of the bill which seek to simplify and streamline tax administration processes for small businesses, including by allowing for standing tax declarations and increasing the time that businesses can self-amend tax returns.
1.32Finally, the committee considers that the measure in Schedule 4 of the bill will help ensure that Australians are receiving their tax refunds in a timely and reliable manner by minimizing the use of cheques.
1.33The committee recommends that the bill be passed.
Senator Jess Walsh
Chair