1998
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
A NEW TAX SYSTEM (PERSONAL INCOME TAX CUTS) BILL 1998
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Treasurer, the Hon Peter Costello, MP)
Table of contents
General outline and financial impact ................................................................................. 1
Chapter
1.
Reducing personal income tax rates .............................................................................................. 3
2.
Increasing family tax assistance ................................................................................................... 11
General outline and financial impact
Reducing Personal Income Tax Rates
Amends the Income Tax Rates Act 1986 to provide for significant personal
income tax cuts.
Date of effect: The new rates come into effect on 1 July 2000 and will
apply to assessments for the 2000-2001 year of income and later years of
income.
Proposal announced: The Government announced the proposed tax cuts
in Tax Reform: not a new tax, a new tax system: The Howard
Government’s Plan for a New Tax System on 13 August 1998.
Financial impact: The measure will cost $13.1 billion in 2000-2001,
$13.5 billion in 2001-2002 and $14.5 billion in 2002-2003.
Compliance cost impact: See Regulation Impact Statement.
Summary of Regulation Impact Statement
Impact: Low
Main Points:

The measure will impact on employers, professional advisers,
computer programmers, the Australian Taxation Office (ATO),
contractors who process payroll, electronic payroll stockists and
electronic payroll producers.

Compliance costs for employers will increase, because the new
tax rates will require PAYE remitters to recalculate the amount
of tax they need to remit to the ATO.

To ensure that remitters are able to determine the correct
amounts of tax, the ATO will need to devote additional
resources to providing information support to the affected
groups in the form of an educational campaign. This may consist
of advertising, educational pamphlets, mailouts and information
in remitter books. These costs are expected to be absorbed
within the ATO’s annual budget.
Policy objective: To provide stronger incentives for people to work and
save.
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A New Tax System (Personal Income Tax Cuts) Bill 1998
Increasing Family Tax Assistance
Amends the Income Tax Rates Act 1986 by increasing the Family Tax
Assistance tax-free thresholds.
Date of effect: The increased thresholds will apply to assessments for the
2000-2001 year of income and later years of income.
Proposal announced: The Government announced the proposal in Tax
Reform: not a new tax, a new tax system: The Howard Government’s Plan
for a New Tax System on 13 August 1998.
Financial impact: This measure is an integral part of the larger family
package. The precise revenue cost will depend on the way in which
primary carers choose to obtain the benefit. The total budgetary cost of
the family package is $2.3 billion in 2000-2001, $2.4 billion in 2001-2002
and $2.6 billion in 2002-2003.
Compliance cost impact: See Regulation Impact Statement.
Summary of Regulation Impact Statement
Impact: Low
Main Points:

The measure will impact mainly on eligible employee taxpayers
who wish to claim the increased Family Tax Assistance through
reduced tax instalment deductions (TIDs), because they will
have to lodge a revised employment declaration (ED) with their
employers. Employers will also be affected by the new measure
because employees will be lodging new EDs.

For the 2000-2001 year of income there will be a one-off
compliance cost associated with implementing the proposal.
Compliance costs will be incurred relative to the extent that
employees complete new EDs following the introduction of the
new scheme.

The measure modifies an existing regime and will have only a
minimal effect on the ATO’s recurrent costs. There will be some
minor transitional costs to the ATO. Computer systems will need
to be amended to encompass the change, as will educational
booklets such as TaxPack.
Policy objective: To increase the amount of assistance provided to
families by increasing the level of Family Tax Assistance provided
through the tax system.
2
Chapter 1
Reducing personal income tax rates
Overview
1.1
Schedule 1 to the Bill will amend the Income Tax Rates Act
1986 (the ITRA) to provide for a significant reduction in personal income
tax rates. Schedule 2 provides for consequential amendments to other
Acts affected by the changes in personal tax rates.
Summary of the amendments
Purpose of the amendments
1.2
The amendments will give effect to the Government’s
announcement in its tax reform policy document, Tax Reform: not a new
tax, a new tax system: The Howard Government’s Plan for a New Tax
System, released on 13 August 1998, to cut personal income tax rates for
about 95% of all taxpayers.
Date of effect
1.3
Clause 2 of the Bill provides that this Act commences, or is
taken to have commenced, after all of the GST-related Acts have received
the Royal Assent. This reflects the integration of the measures that will
give effect to the Government’s plan for a new tax system.
1.4
The amendments in Schedule 1 will generally apply to
assessments for the 2000-2001 year of income and later years of income.
[Schedule 3, subitem 1(1)]
Background to the legislation
Personal Tax Cuts
1.5
The Government, in its tax reform policy document, stated its
intention to provide for personal income tax cuts. The Government’s tax
reform plan includes changes to the marginal tax rates and an increase in
the tax-free threshold.
3
A New Tax System (Personal Income Tax Cuts) Bill 1998
Explanation of the amendments
Resident taxpayers
1.6
Item 14 of Schedule 1 replaces the table in clause 1 of Part I of
Schedule 7 of the ITRA, which sets out the rates of tax on the taxable
income of a resident taxpayer. The new rates will apply to assessments for
the 2000-2001 year of income and later years of income. [Schedule 3,
subitem 1(1)]
1.7
The following table sets out the current rates of tax for resident
taxpayers and the proposed rates of tax that will apply from 1 July 2000:
Current scale
Taxable Income $
Tax rate (%)
0-5,400
0
5,401-20,700
20
20,701-38,000
34
38,001-50,000
43
50,001 +
47
1.8
4
New scale
Taxable Income $ Tax Rate (%)
0-6,000
0
6,001-20,000
17
20,001-50,000
30
50,001-75,000
40
75,001 +
47
The key features of the new tax scale are:

an 11% increase in the tax-free threshold to $6,000. This will
help all taxpayers, but is of relatively greater benefit to low
income taxpayers;

a reduction in the lowest marginal tax rate from 20% to 17%.
This also helps all taxpayers, but is of particular benefit to low
income taxpayers;

large tax cuts for middle income earners with income between
$30,000 and $50,000 a year through the replacement of the 34%
and 43% rates with a 30% rate. This will mean around 81% of
taxpayers will have a top tax rate of 30% or less, compared to
around 30% of taxpayers currently; and

a $25,000 increase (to $75,000) in the level of income at which
the top marginal rate of 47% takes effect. This will ensure that
average earners do not drift into paying the top marginal tax rate,
which would otherwise have occurred early in the next century.
Reducing person income tax rates
Non-resident taxpayers
1.9
As a result of the proposed reductions in personal income tax for
residents, it will be necessary to make consequential amendments to the
rates of tax payable by non-residents.
1.10
Item 15 of Schedule 1 replaces the table in clause 1 of Part II of
Schedule 7 of the ITRA, which sets out the rates of tax on the taxable
income of a non-resident taxpayer. The new rates will apply to
assessments for the 2000-2001 year of income and later years of income.
[Schedule 3, subitem 1(1)]
1.11
The following table sets out the current rates of tax on the taxable
income of a non-resident taxpayer and the proposed rates of tax that will
apply from 1 July 2000:
Current scale
Taxable Income $
Tax rate (%)
0-20,700
29
20,701-38,000
34
38,001-50,000
43
50,001 +
47
New scale
Taxable Income $
Tax Rate (%)
0-20,000
29
20,001-50,000
30
50,001-75,000
40
75,001 +
47
Landcare and Water Facility Tax Offset
1.12
Division 388 of the Income Tax Assessment Act 1997 provides
for a landcare and water facility tax offset. The offset is available to
taxpayers whose taxable income for the income year would have been
$20,700 or less. The offset is calculated on the basis of 34% of
expenditure incurred. The threshold and offset rate are based on the
current income tax rates scale.
1.13
To be consistent with the proposed tax rates and threshold that
will apply from 1 July 2000, Schedule 2 makes consequential
amendments to paragraph 388-55(2)(a) (substituting $20,000 for $20,700)
and paragraphs 388-60(1)(a) and (b) (substituting 30% for 34%).
[Schedule 2, items 2 and 3]
Consequential Amendments of other Acts
1.14
Items 16 and 17 of Schedule 1 make consequential
amendments to Schedules 8 and 10 of the ITRA by omitting “$5,400”
(wherever occurring) and substituting “$6,000”, and omitting “$20,700”
(wherever occurring) and substituting “$20,000”.
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A New Tax System (Personal Income Tax Cuts) Bill 1998
Regulation Impact Statement
Policy Objective
Specification of policy objective
1.15
The policy objective is to provide stronger incentives for people
to work and save.
Background
1.16
The Government announced in its tax reform policy document,
Tax Reform: not a new tax, a new tax system: The Howard Government’s
Plan for a New Tax System, its intention to cut personal income tax rates
and increase the tax-free threshold.
Identification of implementation options
1.17
The only feasible implementation option is to alter the current
personal income tax rates and brackets/thresholds in the Income Tax Rates
Act 1986 to reflect the desired changes. The new rates will provide that
individual taxpayers pay less personal tax.
1.18
The new tax rates will require 710,000 PAYE remitters to
familiarise themselves with the new scales and calculate the amount of tax
they need to remit to the Australian Taxation Office (ATO).
1.19
The new rates are to operate from 1 July 2000. To ensure that
remitters are able to determine the correct amounts of tax, an educational
campaign will be conducted by the ATO. This may consist of advertising,
educational pamphlets, mailouts and information in remitter books.
1.20
Remitters who do not comply with the payment arrangements
using the new rates will be penalised under the existing penalty regime.
Assessment of impacts (costs and benefits) of the implementation
option
Impact group identification
1.21
6
The proposal will affect the following groups:

Employers

Professional advisers, eg. tax advisers, computer programmers

Australian Taxation Office
Reducing person income tax rates

Contractors who process payroll (Payroll businesses)

Electronic payroll stockists

Electronic payroll producers.
Assessment of costs
Compliance costs
Initial compliance costs
1.22
Generally, all impact groups will need to familiarise themselves
with the change in rates. This may require those in the various impact
groups taking 5 or 10 minutes to read information provided to them by the
ATO.
1.23
Employers, payers, payroll businesses and professional advisers
will need to update their technology and/or methodology for calculating
tax payable. Approximately 76% of employers use a manual payroll
system, with the remainder using computerised or external systems. Small
employers and payers are more likely to use paper-based records and,
hence, may face higher implementation costs. However, recalculating tax
payable manually is unlikely to require additional staff or to require
employers to obtain professional advice from tax agents.
1.24
Many computerised systems are designed to accommodate
changes in tax rates with minimal instruction. Most would require around
15 minutes of a computer programmer’s time to incorporate this measure.
1.25
Electronic payroll stockists and producers will also need to alter
the tax rates in their programs, and should face similar compliance costs to
employers with computerised systems. The number of payroll producers
is not known precisely; the ATO estimates that it is unlikely to exceed
18,000.
1.26
The combined total cost of compliance to employers, payroll
businesses and professional advisers of this proposal is estimated to be
$4 million (assuming labour costs of $23.90 per hour for a computer
programmer and $16.30 for other payroll staff).
1.27
Under the PAYE system, employers with a total PAYE
remittance of less than $25,000 per annum may remit PAYE deductions
quarterly. Other employers remit PAYE payments at least monthly. Those
employers who are currently paying monthly and remit between $25,000
and $29,300 in PAYE deductions would become eligible to remit
quarterly when the proposed personal income tax cuts are implemented.
The ATO estimates that this change will affect 13,500 PAYE remitters,
7
A New Tax System (Personal Income Tax Cuts) Bill 1998
and reduce compliance costs by approximately $1 million per annum.
This equates to 8 less remittances per annum at a saving of between $7
and $8 per remittance.
Recurrent compliance costs
1.28
Existing PAYE remittance arrangements benefit employers by
allowing them to delay the payment of PAYE deductions to the ATO. The
proposed changes to personal income tax rates reduce the amount of tax
deducted by employers for remittance to the ATO. Some employers will
benefit from the measure because, when the personal income tax rates are
reduced, they will be able to remit quarterly, rather than monthly.
However, other employers will be disadvantaged as the reduced
deductions amount to a reduced cash flow. Assuming an interest rate of
7% in 2000-2001, the proposed changes are estimated to reduce the cash
flow benefit of the remittance arrangements to employers by $38 million
per annum (or10%). The proposed extension of the remittance dates for
monthly and quarterly PAYE remitters from the 7th day of the month to
the 21st, announced in the Government’s tax reform policy document, will
partly offset this cost.
Administrative costs
Initial cost – internal
1.29
The ATO will need to devote additional resources in providing
information support to the impact groups. One off expenses include:

advertising the new rates;

changing the TaxPack, other booklets, pamphlets and
educational material;

updating Taxation Rulings; and

educating staff.
Internal computer systems will also need to be updated to ensure correct
calculations of tax payable on individual assessments.
1.30
These costs will be absorbed within the ATO’s annual budget.
Overall resource costs are estimated to be:
Salary/ASL
Administration
Total Costs
8
1999-2000
$25,000
$145,000
$170,000
2000-2001
$100,000
2001-2002
$100,000
$100,000
$100,000
Reducing person income tax rates
Recurrent costs – Internal
1.31
All costs will be initial costs.
Government revenue
1.32
The Government estimates the cost to the revenue of the
proposal to be $13.1 billion in 2000-2001; $13.5 billion in 2001-2002; and
$14.5 billion in 2002-2003.
Economic Costs
1.33
There are not considered to be any economic costs involved.
Consultation
1.34
The Government announced the proposed measure in its tax
reform policy document prior to the election period.
Conclusion
1.35
Implementation of this measure will increase the net pay of
individual taxpayers by providing significant cuts in personal income tax
rates. It is intended to provide incentives for people to undertake extra
work or seek advancement, undertake additional education or training, and
increase personal savings.
1.36
The option put forward will require employers, payers and
payroll businesses to familiarise themselves with the change in rates. This
will involve updating computer programs and/or the methodology used to
calculate tax payable. The decreased tax rates will enable more small
businesses to remit on a quarterly basis, reducing compliance costs.
1.37
The ATO and Treasury will monitor this measure, as part of the
whole taxation system, on a continuing basis. In addition, the ATO has
consultative arrangements in place to obtain feedback from professional
and small business associations, and other taxpayer bodies.
9
Chapter 2
Increasing family tax assistance
Overview
2.1
Schedule 1 to the Bill will amend the Income Tax Rates Act
1986 (the ITRA) by further increasing the tax-free threshold for certain
taxpayers with dependent children under the Family Tax Assistance (FTA)
initiative.
Summary of the amendments
Purpose of the amendments
2.2
The amendments will give effect to the Government’s
announcement in its tax reform policy document, Tax Reform: not a new
tax, a new tax system: The Howard Government’s Plan for a New Tax
System, to provide extra assistance to Australian families.
Date of effect
2.3
Clause 2 of the Bill provides that this Act commences, or is
taken to have commenced, after all of the GST-related Acts have received
the Royal Assent. This reflects the integration of the measures that will
give effect to the Government’s plan for a new tax system.
2.4
The amendments in Schedule 1 giving effect to the proposed
increases in FTA will apply to assessments for the 2000-2001 year of
income and later years of income. [Schedule 3, subitem 1(1)]
Background to the legislation
Increasing family tax assistance
2.5
The Government, in its tax reform policy document, released on
13 August 1998, stated its intention to introduce substantial reforms to the
various forms of assistance provided to families through the income tax
and social security systems.
11
A New Tax System (Personal Income Tax Cuts) Bill 1998
2.6
The Government’s tax reform plan includes providing extra
assistance to families by extending the Family Tax Initiative (FTI),
introduced by the Government in January 1997. The tax reform policy
document also foreshadowed changes to the current delivery of assistance
to families under a simplified set of family assistance programs to be
delivered by the new Family Assistance Office.
2.7
The FTI is currently available in the form of the Family Tax
Payment (FTP) and the FTA. The FTP is administered by the Department
of Family and Community Services (formerly the Department of Social
Security) and the FTA is administered by the Australian Taxation Office.
2.8
FTA takes the form of increases in the tax-free threshold for
certain taxpayers with dependent children with consequent reductions in
their tax liability. The proposed amendments deal with increases to the
FTA tax-free thresholds. Eligibility for and delivery of the FTA will be
subject to the future changes to and simplification of family assistance
programs.
Explanation of the amendments
2.9
The FTA currently incorporates two forms of assistance. Part A
generally provides for an increase in the standard tax-free threshold of
$1,000 for each dependent child. This benefit applies where the family
income is less than $70,000 (increasing by $3,000 for each dependent
child after the first).
2.10
Part B directs additional assistance to single income families
(including sole parents) with at least one dependent child under the age of
5 years. Part B generally provides for an additional increase in the
tax-free threshold for one parent of $2,500. This benefit is subject to an
income ceiling of $65,000 (which is increased by $3,000 for each
additional dependent child, regardless of whether they are under the age of
5 years). A further requirement is that, if the taxpayer had a spouse on the
last day of the income year, the spouse’s taxable income for that year must
be less than ‘spouse income ceiling’ ($4,573 in 1997-1998).
2.11
Where a child is a dependant of a person for only part of a year
of income, FTA benefits are pro rated according to the proportion of the
number of days that the child was a dependant during the year.
2.12
The proposed amendments will increase the FTA tax-free
thresholds as follows:
12
Increasing family tax assistance

FTA Part A - the current increase in the tax-free threshold
provided for in subsections 20C(2) and 20S(3) of the ITRA will
be increased from $1,000 to $2,000 [Schedule 1, items 5 and
12]; and

FTA Part B - the current increase in the tax-free threshold
provided for in subsections 20D(2) and 20T(3) will be increased
from $2,500 to $5,000. [Schedule 1, items 10 and 13]
2.13
The effect of the proposed amendments is that from 1 July 2000
all single income families (including sole parents) with a child under 5
years will have an effective tax-free threshold of $13,000. This is made
up of the new $6,000 tax-free threshold plus $2,000 (FTA Part A) for one
dependent child and the further $5,000 (FTA Part B) provided to single
income families with young children.
2.14
The proposed amendments, which double the existing tax-free
threshold increases, together with proposed amendments to the income tax
rates outlined in Chapter 1, mean that families will receive:

an increase in assistance of $140 a year (a 70% increase) for
each dependent child; and

an extra $350 a year (a 70% increase) for single income families
with a child aged under 5 years.
2.15
The table below shows the increase in assistance for different
types of families from 1 July 2000 and the total increase in assistance that
will have been provided since January 1997 when the Government
introduced the FTI.
Increase in assistance ($/yr)
Family Type
From July 2000
Including increase
in January 1997
1 child under 5 years
490
1,190
1 child, aged 5 years or more
140
340
2 children, one under 5 years
630
1,530
2 children, aged 5 years or more
280
680
3 children, one under 5 years
770
1,870
3 children, aged 5 years or more
420
1,020
1 child
140
340
2 children
280
680
3 children
420
1,020
Single-income family
Dual-income family
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A New Tax System (Personal Income Tax Cuts) Bill 1998
2.16
Item 11 of Schedule 1 replaces the existing table of tax rates
for FTA in subsection 20E(2) of the ITRA, to reflect the lower income tax
rates that will be introduced from 1 July 2000. The tax rate for taxable
income that exceeds $20,000 but does not exceed the adjusted tax-free
threshold (defined in subsection 20E(3) of the ITRA) will be reduced
from 14% to 13%. This will ensure that taxpayers only have to pay tax on
the amount of their taxable income that exceeds $20,000 but does not
exceed the adjusted tax-free threshold on the basis of the difference
between the lowest marginal tax rate (17%) and the next marginal tax rate
(30%). This is consistent with the way FTA currently operates.
2.17
Items 2 and 7 of Schedule 1 amend subsections 20C(1) and
20D(1) respectively to make it clear that the increase in the tax-free
threshold for the 1996-97 year of income is based on the schedule of tax
rates that was in force immediately before the commencement of the new
schedule of tax rates that will come into effect from 1 July 2000.
2.18
Items 1, 4, 6 and 9 of Schedule 1 replace the word “taxpayers’”
in paragraphs 20C(1)(b) and (2)(b) and paragraphs 20D(1)(b) and (2)(b)
with the word “taxpayer’s”. These are simply technical corrections.
2.19
Items 3 & 8 make consequential amendments to paragraphs
20C(2)(a) and 20D(2)(a) by omitting “1997-98” and substituting
“2000-01”.
2.20
Items 16 and 17 of Schedule 1 make consequential
amendments to various provisions of the ITRA by omitting “$5,400”
(wherever occurring), and substituting “$6,000” and omitting “$20,700”
(wherever occurring) and substituting “$20,000”.
2.21
Item 1 of Schedule 2 makes consequential amendments to
subsection 23AF(17E) (definition of tax free threshold increase),
subsection 23AG(5B) (definition of tax free threshold increase),
paragraph 221YDA(1)(g) and subparagraph 221YDA(2)(a)(iv) of the
Income Tax Assessment Act 1936. The amendments to paragraph
221YDA(1)(g) and subparagraph 221YDA(2)(a)(iv) apply for the
purposes of working out amounts of provisional tax payable for the
2000-2001 year of income and later years of income. [Schedule 3,
subitem 1(2)]
Regulation Impact Statement – Increasing Family Tax
Assistance
Policy objective
2.22
The policy objective, as stated by the Government in its tax
reform policy document, Tax Reform: not a new tax, a new tax system:
14
Increasing family tax assistance
The Howard Government’s Plan for a New Tax System, is to increase the
amount of assistance provided to families by increasing the level of FTA
provided through the tax system.
Identification of implementation options
2.23
Only one implementation option is considered feasible, based
on the current delivery of the FTA. The Government has foreshadowed,
in its tax reform policy document, that eligibility for and delivery of the
FTA will be subject to reform and simplification of assistance currently
provided to families.
2.24
The FTA is currently delivered on assessment at the end of the
financial year. Employee taxpayers can also claim FTA during the year,
through a reduction in their tax instalment deductions (TIDs), by lodging
an employment declaration (ED) with their employer.
Assessment of impacts (costs and benefits) of the implementation
option
Impact group identification
2.25
The groups impacted by the proposal are as follows:
a)
individual taxpayers with children
Eligible employee taxpayers who wish to claim the increased
FTA through reduced TIDs will have to lodge a revised ED with
their employers.
Under the existing scheme, at 1 July 1998, approximately 15%
of eligible employees have elected to receive their FTA benefits
by way of reduced TIDs. However, the number of employees
who will elect to have reduced TIDs under the new scheme
cannot be reliably estimated because it will depend upon the
method by which individual primary carers choose to claim the
benefit.
b)
employers
Employers will be affected by the new measure because
employees will be lodging new EDs to claim their entitlement to
the increased FTA through reduced TIDs. Employers will need
to work out the new rate of tax instalments to deduct from their
employee’s salary or wages and remit that amount to the ATO.
As with current requirements, employers will have to send in an
employee’s new ED to the ATO within 28 days of receiving it
and keep a copy of it themselves for 5 years.
15
A New Tax System (Personal Income Tax Cuts) Bill 1998
c)
the ATO
The measure modifies existing arrangements, but will have only
a minimal impact on the ATO. Changes will need to be made
to both taxpayer and staff educational materials and to computer
systems.
Assessment of costs
Compliance costs
2.26
For the 2000-2001 year of income there will be a one-off
compliance cost associated with implementing the proposal. There will be
no recurrent compliance costs, as the changes will be subsumed within the
normal ED process at no additional cost. Compliance costs will be
incurred relative to the extent that eligible employees complete new EDs
following the introduction of the new scheme. The initial compliance cost
will consist of:
a)
costs of general understanding
There will be initial costs associated with learning the new
measure for both individuals and employers. However, as the
change is not complex, individuals and employers should not
require professional advice or assistance. Initial assistance will
be provided by the ATO through educational booklets.
Affected individuals may also contact the ATO’s enquiries line
if they are unsure of the new arrangements.
It is assumed that FTA eligible taxpayers would take
approximately five minutes to read educational material and
understand the changes. It is also assumed that all group
employers (750,000) would have a clerk spend approximately
10 minutes to read and interpret the changes, at an average
after-tax cost to an employer of $11/hr.
b)
costs of current FTA employees completing a revised
ED
It is assumed that all compliance costs are borne by the
employer, as employees will complete their forms at work. To
the extent that eligible employees will complete new EDs to
change their TID arrangements under the new scheme, it is
estimated that this will take an average of 25 minutes at an
after-tax salary of $11/hr. For each of these taxpayers, a
company clerk (at an average of $11/hr after-tax cost to the
employer) will spend 15 minutes processing, filing and
forwarding the new forms.
16
Increasing family tax assistance
c)
costs for remaining FTA eligible employees and new
employees
Those employees who currently receive FTA upon assessment
(75% of the total) will take about five minutes to understand the
proposal. They will not bear any compliance costs in addition
to these, as the method of calculation will be the same as it is
currently. Upon preparing their tax returns, these taxpayers will
simply determine their entitlement under the new rates rather
than the old.
New employees after 1 July 2000 will also not bear any
additional compliance costs if they claim the FTA through
reduced TIDs. This is because a new employee is currently
required to complete an ED form upon commencing
employment and, thus no further work will be required.
Administrative costs
2.27
The measure modifies an existing regime and will have only a
minimal effect on the ATO’s recurrent costs. There will be some minor
transitional costs to the ATO. Computer systems will need to be amended
to encompass the change, as will educational booklets such as TaxPack.
2.28
The modification of computer systems and educational booklets
such as TaxPack will not impose significant administration costs on the
ATO. These costs will be absorbed within the ATO’s annual budget.
Government revenue
2.29
This measure is an integral part of the larger family package.
The precise revenue cost will depend on the way in which primary carers
choose to obtain the benefit. The total budgetary cost of the family
package is $2.3 billion in 2000-2001, $2.4 billion in 2001-2002 and
$2.6 billion in 2002-2003.
Assessment of benefits
2.30
Taxpayers who wish to obtain FTA through the tax system will
be able to choose whether they receive the benefit at the end of the year on
assessment or throughout the year as a reduction in their TIDs.
Conclusion
2.31
Implementation of this measure will increase the assistance
provided to families from the Government. Eligibility for and delivery of
FTA will be subject to the reform and simplification of family assistance
programs foreshadowed by the Government in its tax reform policy
document. The Government is currently consulting with community
organisations on the details of the new structure.
17
A New Tax System (Personal Income Tax Cuts) Bill 1998
2.32
The ATO and Treasury will monitor this measure, as part of the
whole taxation system, on a continuing basis. In addition, the ATO has
consultative arrangements in place to obtain feedback from professional
and business associations and other taxpayer bodies.
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19