Chapter 1Introduction
1.1On 28 November 2024, the Senate referred the provisions of the Treasury Laws Amendment (Tax Incentives and Integrity Bill) 2024 (the bill) to the Senate Economics Legislation Committee (the committee) for inquiry and report by 30January2025.
Purpose of the bill
1.2As indicated in the Hon Stephen Jones MP’s, Assistant Treasurer and Minister for Financial Services, second reading speech, the bill aims to ensure fairness and integrity in Australia’s tax system, while fostering a cleaner and more sustainable future.
1.3A summary of the bill’s three schedules is provided below; however, more detail on the provisions can be found in the bill’s explanatory memorandum.
Schedule 1—Luxury car tax amendments
1.4Schedule 1 to the bill amends section 25-1 of the A New Tax System (Luxury Car Tax) Act 1999 (LCTA) by:
updating the definition of a fuel-efficient car by reducing the maximum fuel consumption for a car to be considered fuel-efficient for the luxury car tax (LCT) to 3.5 litres per 100 kilometres from the current 7 litres per 100kilometres; and
amending the index number used to index the LCT threshold from All Groups Consumer Price Index (CPI) to the motor vehicle purchase sub‑group of the CPI.
1.5The measure to 'modernise the LCT' was initially announced by the Australian Government (the government) as part of the 2023–24 Mid‑Year Economic and Fiscal Outlook (MYEFO), and seeks to incentivise the take‑up of fuel-efficient and electric vehicles and ensure the concessional treatment of fuel‑efficient cars is consistent with the government’s National Electric Vehicle Strategy.
1.6The Department of the Treasury (the Treasury) undertook a consultation process on the draft legislation between 20 September 2024 and 16October2024.
Schedule 2—Denying deductions for interest charges
1.7Schedule 2 to the bill amends sections 25-5 and 26-5 of the Income Tax Assessment Act 1997 (ITAA) to deny income tax deductions for amounts of general interest charge (GIC) and shortfall interest charge (SIC) incurred by taxpayers.
1.8GIC and SIC are incurred where tax debts have not been paid on time, or a tax liability has been incorrectly self-assessed and resulted in a shortfall of tax paid, respectively. Both are currently tax-deductible for all entities.
1.9The amendments seek to reinforce the requirements imposed on all taxpayers to correctly self-assess their income tax liability, pay their tax on time, and assist in lowering the amount of collectable debt owed to the Australian Taxation Office (ATO).
1.10The measure to deny deductions for GIC and SIC incurred on, or after, 1July2025 were initially announced by the government as part of the 2023–24 MYEFO. Consultation on the draft legislation was undertaken by the Treasury between 24 September 2024 and 16 October 2024.
Schedule 3—Extending ATO notification period for retaining funds
1.11Schedule 3 to the bill amends the Taxation Administration Act 1953 (TAA) to extend from 14 to 30 days the period within which the Commissioner for Taxation must notify a taxpayer of their decision to retain a refund amount arising from a business activity statement (BAS), or another notification under the BAS provisions, for verification of information. The amendments apply to amounts due to be refunded on, or after, the commencement of schedule 3 to the bill.
1.12The extension of this mandatory notification period aims to strengthen the ATO’s ability to combat fraud during periods of increased risk of fraudulent activity. Specifically, it would provide the ATO with additional assessment time to determine whether it is necessary to retain a refund to verify the information contained in a taxpayer’s statement.
1.13The government announced the measure on 14 May 2024 as part of the 2024–25 Budget.
Financial impact
1.14Schedule 1 to the bill is estimated to increase receipts by $155 million over five years from 2022–23 ($60 million in 2025–26 and $95 million in 2026–27).
1.15Schedule 2 to the bill is estimated to increase receipts by $500 million over five years from 2022–23 ($500 million in 2026–27).
1.16Schedule 3 to the bill is estimated to have a small but unquantifiable impact.
Commencement of the bill
1.17There is some variation of the commencement dates for each schedule to the bill:
Schedules 1 and 2 to the bill commence on the first 1January, 1April, 1July, or 1October to occur after the day the bill receives royal assent.
Schedule 3 to the bill commences on the first 1July to occur after the day the bill receives royal assent.
Scrutiny of the bill
Legislative scrutiny
1.18At the time of writing, there had been no legislative scrutiny of the bill by the Senate Standing Committee for the Scrutiny of Bills.
Human rights compatibility
1.19The explanatory memorandum’s Statement of Compatibility with Human Rights states that no schedule to the bill raises any human rights issues and that they are all 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.
1.20At the time of writing, the Parliamentary Joint Committee on Human Rights had not considered the bill.
Conduct of the inquiry
1.21The committee advertised the inquiry on its website and wrote to interested individuals and organisations seeking written submissions by 9 January 2025.
1.22The committee received eight submissions which are listed at Appendix 1.
Acknowledgements
1.23The committee thanks all individuals and organisations who assisted with the inquiry, especially those who made written submissions.