Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2019-2020-2021-2022
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TREASURY LAWS AMENDMENT (COST OF LIVING SUPPORT AND OTHER
MEASURES) BILL 2022
EXCISE TARIFF AMENDMENT (COST OF LIVING SUPPORT) BILL 2022
CUSTOMS TARIFF AMENDMENT (COST OF LIVING SUPPORT) BILL 2022
EXPLANATORY MEMORANDUM
(Circulated by authority of the Treasurer, the Hon. Josh Frydenberg MP)
Table of Contents
Glossary................................................................................................. iii
General outline and financial impact ...................................................... 1
Medicare Levy and Medicare Levy Surcharge Income
Thresholds ................................................................. 13
Deductibility of COVID-19 tests ................................. 21
Deductible gift recipients--new specific recipients .... 27
Employee Share Schemes ........................................ 31
Varying the GDP uplift factor for tax instalments ....... 73
Low and middle income tax offset.............................. 77
Safety net thresholds ................................................. 81
2022 cost of living payment ....................................... 85
Fuel duty amendments in the Customs Tariff
Amendment (Cost of Living Support) Bill 2022 and
Excise Tariff Amendment (Cost of Living Support)
Bill 2022 ..................................................................... 97
Statement of Compatibility with Human Rights ........ 107
Glossary
This Explanatory Memorandum uses the following abbreviations and acronyms.
Abbreviation Definition
ABS Australian Bureau of Statistics
ASIC Australian Securities and Investments
Commission
CEO Chief Executive Officer
Commissioner Commissioner of Taxation
COVID-19 Coronavirus known as COVID-19
CPI Consumer Price Index
Customs Bill Customs Tariff Amendment (Cost of Living
Support) Bill 2022
Customs Tariff Act Customs Tariff Act 1995
Excise Bill Excise Tariff Amendment (Cost of Living
Support) Bill 2022
Excise Tariff Act Excise Tariff Act 1921
FBT Fringe benefits tax
FBTAA 1986 Fringe Benefits Tax Assessment Act 1986
GDP gross domestic product
GST goods and services tax
ICCPR International Covenant on Civil and Political
Rights
ICESCR International Covenant on Economic, Social and
Cultural Rights
ITAA 1997 Income Tax Assessment Act 1997
Glossary
Abbreviation Definition
main Bill Treasury Laws Amendment (Cost of Living
Support and Other Measures) Bill 2022
MYEFO Mid-year Economic and Fiscal Outlook
PAYG pay as you go
PBS Pharmaceutical Benefits Scheme
SAPTO Seniors and pensioners tax offset
Social Security Act Social Security Act 1991
TAA 1953 Taxation Administration Act 1953
Threshold amount Medicare levy and Medicare levy surcharge
low-income threshold amount
Veterans' Entitlements Act Veterans' Entitlements Act 1986
Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Customs Tariff Amendment (Cost of Living Support) Bill 2022
General outline and financial impact
Schedule 1 - Medicare Levy and Medicare Levy
Surcharge Income Thresholds
Outline
Schedule 1 to the main Bill amends the Medicare Levy Act 1986 and the A New Tax
System (Medicare Levy Surcharge -- Fringe Benefits) Act 1999 to increase:
• the Medicare levy low-income thresholds for individuals and families
(along with the dependent child/student component of the family
threshold) in line with movements in the CPI;
• the Medicare levy low-income thresholds for individuals and families
eligible for SAPTO (along with the dependent child/student
component of the family threshold), in line with movements in the
CPI; and
• the Medicare levy surcharge low-income threshold in line with
movements in the CPI.
Date of effect
This measure applies to the 2021-22 income year and later income years.
Proposal announced
Schedule 1 to the main Bill fully implements the Personal income tax - increasing the
Medicare levy low-income thresholds measure from the 2022-23 Budget.
Financial impact
This measure is estimated to decrease receipts by $90 million over the forward
estimates period.
All figures in this table represent amounts in $m.
2021-22 2022-23 2023-24 2024-25 2025-26
- -20 -20 -30 -20
- nil
1
General outline and financial impact
Human rights implications
Schedule 1 to the main Bill does not raise any human rights issues. See Statement of
Compatibility with Human Rights -- Chapter 10.
Compliance cost impact
This measure will not have any ongoing compliance cost impact or additional impact
on regulatory burden.
Schedule 2 - Deductibility of COVID-19 tests
Outline
Schedule 2 to the main Bill amends the ITAA 1997 by allowing an income tax
deduction for taxpayers who incur relevant COVID-19 testing expenses in gaining or
producing their assessable income. The deduction applies to relevant expenses incurred
on or after 1 July 2021.
Date of effect
The amendments to the ITAA 1997 apply to losses and outgoings on or after
1 July 2021.
Proposal announced
Schedule 2 to the main Bill fully implements the tax deductibility of COVID-19 test
expenses measure announced on 7 February 2022.
Financial impact
The measure is estimated to have a significant but unquantifiable cost to receipts over
the forward estimates period.
2021-22 2022-23 2023-24 2024-25 2025-26
* * * * *
*unquantifiable
Human rights implications
Schedule 2 to the main Bill does not raise any human rights issues. See Statement of
Compatibility with Human Rights -- Chapter 10.
2
Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Customs Tariff Amendment (Cost of Living Support) Bill 2022
Compliance cost impact
This measure will have a negligible compliance cost.
Schedule 3 - Deductible gift recipients--new
specific recipients
Outline
Schedule 3 to the main Bill amends the ITAA 1997 to allow the following entities to be
deductible gift recipients under the income tax law:
• Royal Humane Society of New South Wales Incorporated;
• Perth Korean War Memorial Committee Incorporated;
• Greek Orthodox Archdiocese of Australia Consolidated Trust
Cathedral of the Annunciation of our Lady Restoration Fund;
• The Australian Future Leaders Foundation Limited;
• Lord Mayor's Charitable Foundation; and
• The Ramsay Centre for Western Civilisation Limited.
Date of effect
The amendments apply to gifts made on and after 1 July 2020 to the Royal Humane
Society of New South Wales Incorporated.
The amendments apply to gifts made on and after 1 July 2021 and before 1 July 2024
to:
• Perth Korean War Memorial Committee Incorporated; and
• Greek Orthodox Archdiocese of Australia Consolidated Trust
Cathedral of the Annunciation of our Lady Restoration Fund.
The amendments apply to gifts made on and after 1 July 2021 to:
• The Australian Future Leaders Foundation Limited;
• Lord Mayor's Charitable Foundation; and
• The Ramsay Centre for Western Civilisation Limited.
3
General outline and financial impact
Proposal announced
Schedule 3 to the main Bill partially implements the measure Philanthropy -- updates
to the list of specifically listed deductible gift recipients from the 2020-21 Budget.
This Schedule partially implements the measure Philanthropy -- updates to the list of
specifically listed deductible gift recipients from the 2021-22 MYEFO.
Financial impact
Specifically listing the Perth Korean War Memorial Committee Incorporated, Greek
Orthodox Archdiocese of Australia Consolidated Trust Cathedral of the Annunciation
of our Lady Restoration Fund, The Australian Future Leaders Foundation Limited,
Lord Mayor's Charitable Foundation and The Ramsay Centre for Western Civilisation
Limited was part of the 2021-22 MYEFO measure Philanthropy - updates to the list of
specifically listed deductible gift recipients. This measure, which included specific
listings for two other organisations, was estimated to decrease receipts by $1.7 million
over the forward estimates period.
Specifically listing the Royal Humane Society of New South Wales Incorporated was
part of the 2020-21 Budget measure Philanthropy - updates to the list of specifically
listed deductible gift recipients. This measure, which included specific listings for
several organisations, was estimated at the 2020-21 Budget to decrease receipts by
$4.1 million over the period from 2020-21 to 2023-24.
Human rights implications
Schedule 3 to the main Bill does not raise any human rights issues. See Statement of
Compatibility with Human Rights -- Chapter 10.
Compliance cost impact
This measure is expected to have a low impact on compliance costs.
Schedule 4 - Employee Share Schemes
Outline
Schedule 4 to the main Bill makes it easier for businesses to create employee share
schemes. This Schedule provides regulatory relief to employee share schemes which
meet particular requirements.
4
Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Customs Tariff Amendment (Cost of Living Support) Bill 2022
Date of effect
The amendments in Schedule 4 to the main Bill commence 6 months after Royal
Assent.
Proposal announced
Schedule 4 to the main Bill implements:
• the Small Business Package - finance and cash flow measure from the
2018-19 MYEFO;
• the Employee Share Schemes -- removing cessation of employment
as a taxing point and reducing red tape measure from the
2021-22 Budget; and
• the Employee Share Schemes - further reducing red tape measure from
the 2022-23 Budget.
Financial impact
Schedule 4 to the main Bill will have an unquantifiable impact on receipts over the
forward estimates period.
2021-22 2022-23 2023-24 2024-25 2025-26
- * * * *
- nil
* unquantifiable
Human rights implications
Schedule 4 to the main Bill raises human rights issues. See Statement of Compatibility
with Human Rights -- Chapter 10.
Compliance cost impact
It is expected that this measure will reduce compliance costs for businesses creating
employee share schemes.
5
General outline and financial impact
Schedule 5 - Varying the GDP uplift factor for
tax instalments
Outline
Schedule 5 to the main Bill amends the TAA 1953 to reduce the GDP adjustment
factor for the 2022-23 income year to 2 per cent. The GDP adjustment factor is applied
by the Commissioner to work out the amount of PAYG and GST instalments payable
by a taxpayer in certain circumstances.
Date of effect
This measure will apply for the purposes of working out the amount of PAYG and
GST instalments for instalment quarters that fall due for the 2022-23 income year.
Proposal announced
Schedule 5 to the main Bill fully implements the Lowering tax instalments in 2022-23
measure announced on 23 March 2022.
Financial impact
This measure is estimated to have the following impact on the underlying cash balance
over the forward estimates period.
All figures in this table represent amounts in $m.
2021-22 2022-23 2023-24 2024-25 2025-26
- -1,800 1,800 - -
- nil
Human rights implications
Schedule 5 to the main Bill does not raise any human rights issues. See Statement of
Compatibility with Human Rights -- Chapter 10.
Compliance cost impact
This measure does not have any compliance cost impact.
6
Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Customs Tariff Amendment (Cost of Living Support) Bill 2022
Schedule 6 - Low and middle income tax offset
Outline
Schedule 6 to the main Bill amends the ITAA 1997 to increase the low and middle
income tax offset for the 2021-22 income year by $420 to ease cost of living pressures
for Australians.
Date of effect
The amendments to the low and middle income tax offset in Schedule 6 to the
main Bill apply to the 2021-22 income year.
Proposal announced
Schedule 6 to the Bill fully implements Cost of living tax offset measure from the
2022-23 Budget.
Financial impact
This measure is estimated to decrease receipts by $4.1 billion over the forward
estimates period.
All figures in this table represent amounts in $m.
2021-22 2022-23 2023-24 2024-25 2025-26
0 -3,900 -200 .. 0
.. is used to indicate that the financial impact is not zero but is rounded to zero.
Human rights implications
Schedule 6 to the main Bill does not raise any human rights issues. See Statement of
Compatibility with Human Rights -- Chapter 10.
Compliance cost impact
This measure is expected to only have a minor regulatory impact.
7
General outline and financial impact
Schedule 7 - Safety Net Thresholds
This Schedule was prepared by the Department of Health.
Outline
There are two PBS safety net thresholds - concessional and general. The general
patient safety net threshold is currently $1,542.10, which equates to approximately
36 general patient co-payments. The concessional safety set threshold is currently
$326.40 which is the equivalent to 48 concessional patient co-payments.
The purpose of Schedule 7 to the main Bill is to amend the National Health Act 1953
to lower the PBS safety net thresholds for the concessional safety net to 36 scripts
(from 48) and general to $1457.10 (from $1542.10) on 1 July 2022.
Date of effect
This change will come into effect on 1 July 2022 and will apply to any concessional
and general patient safety net thresholds on that date.
Proposal announced
Schedule 7 to the main Bill fully implements a measure from the 2022-23 Budget.
Financial impact
The change to the safety net thresholds, as outlined in Schedule 7 to the main Bill, is
estimated to deliver increased net expenditure of $525.3 million over four years to
2025-26 (underlying cash).
Human rights implications
Schedule 7 to the main Bill raises human rights issues. See Statement of Compatibility
with Human Rights -- Chapter 10.
Compliance cost impact
This measure does not have any compliance cost impact.
8
Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Customs Tariff Amendment (Cost of Living Support) Bill 2022
Schedule 8 - 2022 cost of living payment
This Schedule was prepared by the Department of Social Services and the Department
of Veterans' Affairs.
Outline
Schedule 8 to the main Bill provides for the payment of 2022 cost of living payment of
$250 to around 6 million Social Security and Veterans' income support and
compensation recipients, Farm Household Allowance recipients, and holders of a
Pensioner Concession Card, Commonwealth Seniors Health Card or Veteran Gold
Card.
To be qualified for the 2022 cost of living payment, a person must be residing in
Australia and be receiving one of the qualifying payments or hold or have claimed and
qualified for one of the qualifying concession cards on 29 March 2022.
Date of effect
Schedule 8 to the main Bill commences the day after the main Bill receives Royal
Assent.
Proposal announced
Schedule 8 to the main Bill fully implements a measure from the 2022-23 Budget.
Financial impact
This measure is estimated to have a financial impact of $1,517.2 million in 2021-22
income year.
Human rights implications
Schedule 8 to the main Bill raises human rights issues. See Statement of Compatibility
with Human Rights -- Chapter 10.
Compliance cost impact
This measure does not have any compliance cost impact.
9
General outline and financial impact
Schedule 9 - Fuel duty consequential
amendments
Customs Tariff Amendment (Cost of Living
Support) Bill 2022
Excise Tariff Amendment (Cost of Living
Support) Bill 2022
Outline
The Excise Bill and Customs Bill amend the Excise Tariff Act and the
Customs Tariff Act respectively to temporarily reduce the excise duty rates and
excise-equivalent customs duty rates for fuels, including petrol and diesel and similar
petroleum-based products, including oils and grease.
These changes assist in temporarily easing cost of living and business pressures by
providing a temporary reduction in fuel excise and customs duties.
Date of effect
The amendments commence on 30 March 2022.
Proposal announced
The Excise Bill and the Customs Bill and Schedule 9 to the main Bill fully implement
the 50 per cent reduction for six months in fuel excise and excise-equivalent customs
duty measure from the 2022-23 Budget.
Financial impact
The measure is estimated to have the following impact to underlying cash over the
forward estimates period.
All figures in this table represent amounts in $m.
2021-22 2022-23 2023-24 2024-25 2025-26
-1,870 -1,105 0 0 0
Human rights implications
The Excise Bill and the Customs Bill and Schedule 9 to the main Bill do not raise any
human rights issues. See Statement of Compatibility with Human Rights --
Chapter 10.
10
Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Customs Tariff Amendment (Cost of Living Support) Bill 2022
Compliance cost impact
This measure is expected to have a low impact on compliance costs.
11
Medicare Levy and
Medicare Levy Surcharge Income
Thresholds
Table of Contents:
Outline of chapter ................................................................................ 13
Context of amendments ....................................................................... 14
Medicare levy low-income thresholds............................................ 14
Medicare levy surcharge low-income threshold ............................ 14
Summary of new law............................................................................ 14
Comparison of key features of new law and current law ...................... 15
Detailed explanation of new law .......................................................... 16
Phase-in limits ............................................................................... 17
Medicare levy surcharge low-income threshold ............................ 18
Commencement, application, and transitional provisions .................... 19
Outline of chapter
1.1 Schedule 1 to the main Bill amends the Medicare Levy Act 1986 and the A New
Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 to increase:
• the Medicare levy low-income thresholds for individuals and families
(along with the dependent child/student component of the family
threshold) in line with movements in the CPI;
• the Medicare levy low-income thresholds for individuals and families
eligible for SAPTO (along with the dependent child/student
component of the family threshold), in line with movements in the
CPI; and
• the Medicare levy surcharge low-income threshold in line with
movements in the CPI.
13
Medicare Levy and Medicare Levy Surcharge Income Thresholds
Context of amendments
Medicare levy low-income thresholds
1.2 The Medicare Levy Act 1986 provides that no Medicare levy is payable by
low-income individuals and families where their taxable income or combined
family taxable income does not exceed the stated threshold amounts.
1.3 The Medicare levy phases in at a rate of 10 cents in the dollar where the
taxable income or combined family taxable income exceeds the threshold
amounts (section 7 of the Medicare Levy Act 1986).
Medicare levy surcharge low-income threshold
1.4 A Medicare levy surcharge of between one and one and a half per cent applies
on taxable income in certain cases where taxpayers do not have appropriate
private patient hospital cover (sections 8B and 8G of the Medicare Levy
Act 1986). The Medicare levy surcharge also applies to reportable fringe
benefits in certain cases where taxpayers do not have appropriate private
hospital cover (sections 12 to 16 of the A New Tax System (Medicare Levy
Surcharge -- Fringe Benefits) Act 1999).
1.5 A family member who otherwise would be liable for the Medicare levy
surcharge is not required to pay the surcharge where the total of that person's
income for surcharge purposes does not exceed the individual low-income
threshold amount. Unlike the Medicare levy, there is no phase-in of the
Medicare levy surcharge above the threshold amount.
Summary of new law
1.6 Schedule 1 to the main Bill amends:
• subsections 3(1) and 8(5) to 8(7) of the Medicare Levy Act 1986 to
increase the threshold amounts and phase-in limits for individuals,
families and individual taxpayers and families eligible for the SAPTO;
• paragraphs 8D(3)(c) and 8G(2)(c) and subparagraphs 8D(4)(a)(ii) and
8G(3)(a)(ii) of the Medicare Levy Act 1986 to raise the threshold
below which a family member is not required to pay the Medicare levy
surcharge on taxable income; and
• paragraphs 15(1)(c) and 16(2)(c) of the A New Tax System (Medicare
Levy Surcharge -- Fringe Benefits) Act 1999 to raise the threshold
14
Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Customs Tariff Amendment (Cost of Living Support) Bill 2022
below which a family member is not required to pay the Medicare levy
surcharge on reportable fringe benefits.
Comparison of key features of new law and
current law
Table 1.1 Comparison of new law and current law
New law Current law
Medicare levy low-income thresholds
The individual income threshold for the The individual income threshold for the
2021-22 income year is $23,365. 2020-21 income year is $23,226.
The family income threshold for the The family income threshold for the
2021-22 income year is $39,402. 2020-21 income year is $39,167.
The income threshold for individual The income threshold for individual
taxpayers eligible for the SAPTO for the taxpayers eligible for the SAPTO for the
2021-22 income year is $36,925. 2020-21 income year is $36,705.
The income threshold for families eligible The income threshold for families eligible
for the SAPTO for the 2021-22 income for the SAPTO for the 2020-21 income year
year is $51,401. is $51,094.
The child-student component of the income The child-student component of the income
threshold for families (whether eligible for threshold for families (whether eligible for
SAPTO or not) for the 2021-22 income SAPTO or not) for the 2020-21 income year
year is $3,619. is $3,597.
Phase-in limit
The individual phase-in limit for the The individual phase-in limit for the
2021-22 income year is $29,206. 2020-21 income year is $29,032.
The phase-in limit for individual taxpayers The phase-in limit for individual taxpayers
eligible for the SAPTO for the 2021-22 eligible for the SAPTO for the
income year is $46,156. 2020-21 income year is $45,881.
The phase-in limit for families for the The phase-in limit for families for the
2021-22 income year is $49,252. 2020-21 income year is $48,958.
The phase-in limit for families eligible for The phase-in limit for families eligible for
the SAPTO for the 2021-22 income year is the SAPTO for the 2020-21 income year is
$64,251. $63,867.
15
Medicare Levy and Medicare Levy Surcharge Income Thresholds
New law Current law
The child-student component of the phase- The child-student component of the phase-in
in limit for families (whether eligible for limit for families (whether eligible for
SAPTO or not) for the 2021-22 income SAPTO or not) for the 2020-21 income year
year is $4,523. is $4,496.
Detailed explanation of new law
1.7 Schedule 1 to the main Bill increases the low-income threshold for individuals
and families (including the dependent child-student component of the family
threshold) in line with annual movements in the CPI.
1.8 Section 7 of the Medicare Levy Act 1986 states that no levy is payable where a
taxpayer has a taxable income at or below the applicable threshold amount as
specified in subsection 3(1) of the Medicare Levy Act 1986.
1.9 The individual threshold amount (specified in paragraph (c) of the definition of
the 'threshold amount' in subsection 3(1) of the Medicare Levy Act 1986)
increases from $23,226 to $23,365.
[Schedule 1, item 5, paragraph (c) of the definition of 'threshold amount' in
subsection 3(1) of the Medicare Levy Act 1986]
1.10 The level of the 'family income threshold' referred to in subsections 8(5)
to 8(7) of the Medicare Levy Act 1986 increases from $39,167 to $39,402. For
each dependent child or student, the family income threshold increases by a
further $3,619, instead of the previous amount of $3,597.
[Schedule 1, items 6, 7 and 8, the definition of 'family income threshold' in
subsection 8(5), and subsections 8(6) and (7) of the Medicare Levy Act 1986]
1.11 Schedule 1 to the main Bill also increases the threshold amount for individual
taxpayers eligible for the SAPTO for the 2021-22 income year.
1.12 The threshold amount for individual taxpayers eligible for the SAPTO
(specified in paragraph (a) of the definition of the 'threshold amount' in
subsection 3(1) of the Medicare Levy Act 1986) increases from $36,705
to $36,925.
[Schedule 1, item 4, paragraph (a) of the definition of 'threshold amount' in
subsection 3(1) of the Medicare Levy Act 1986]
1.13 The threshold amount for families eligible for SAPTO increases from $51,094
to $51,401. For each dependent child or student, the income threshold
increases by a further $3,619, instead of the previous figure of $3,597.
[Schedule 1, item 9, subsection 8(7) of the Medicare Levy Act 1986]
16
Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Customs Tariff Amendment (Cost of Living Support) Bill 2022
Phase-in limits
1.14 Section 7 of the Medicare Levy Act 1986 also provides that the Medicare levy
applies at a reduced rate to taxpayers with taxable incomes above the threshold
amount but not more than the 'phase-in limit' specified in subsection 3(1). The
rate of Medicare levy payable in these circumstances is limited to 10 per cent
of the excess over the threshold amount that is relevant to the particular person.
1.15 The phase-in limit for individuals (specified in paragraph (c) of the definition
of 'phase-in limit' in subsection 3(1) of the Medicare Levy Act 1986) increases
from $29,032 to $29,206.
[Schedule 1, item 3, paragraph (c) of the definition of 'phase-in limit' in
subsection 3(1) of the Medicare Levy Act 1986]
1.16 The phase-in limit for individual taxpayers eligible for SAPTO (specified in
paragraph (a) of the definition of 'phase-in limit' in subsection 3(1) of the
Medicare Levy Act 1986) increases from $45,881 to $46,156.
[Schedule 1, item 2, paragraph (a) of the definition of 'phase-in limit' in
subsection 3(1) of the Medicare Levy Act 1986]
1.17 There is no phase-in limit for families in the Medicare Levy Act 1986, as the
limit changes with the number of dependants. Instead, subsection 8(2) of the
Medicare Levy Act 1986 contains a formula that limits the levy payable by
persons with families to 10 per cent of the amount of family income that
exceeds their family income threshold.
1.18 The increased threshold amounts and phase-in ranges for the 2021-22 income
year are as shown in Table 1.2.
Table 1.2 2021-22 Medicare levy low-income threshold amounts and
phasing-in ranges
Category of No levy Reduced levy in Ordinary rate of
taxpayer payable in 2021-22 (if levy payable in
2021-22 if taxable income 2021-22 where
taxable income or family taxable income
or family income is or family
income does within range income is equal
not exceed (inclusive) to or exceeds
(figure for (figure for
2020-21) 2020-21)
Individual taxpayer $23,365 ($23,226) $23,366-$29,206 $29,207 ($29,033)
17
Medicare Levy and Medicare Levy Surcharge Income Thresholds
Category of No levy Reduced levy in Ordinary rate of
taxpayer payable in 2021-22 (if levy payable in
2021-22 if taxable income 2021-22 where
taxable income or family taxable income
or family income is or family
income does within range income is equal
not exceed (inclusive) to or exceeds
(figure for (figure for
2020-21) 2020-21)
Individual taxpayers $36,925 ($36,705) $36,926-$46,156 $46,157 ($45,882)
eligible for the
SAPTO
Families eligible for $51,401 ($51,094) $51,402-$64,251 $64,252 ($63,868)
the SAPTO
Families with the (family income) (family income) (family income)
following number of
children and/or
students
0 $39,402 ($39,167) $39,403-$49,252 $49,253 ($48,959)
1 $43,021 ($42,764) $43,022-$53,775 $53,776 ($53,455)
2 $46,640 ($46,361) $46,641-$58,298 $58,299 ($57,951)
3 $50,259 ($49,958) $50,260-$62,821 $62,822 ($62,447)
4 $53,878 ($53,555) $53,879-$67,344 $67,345 ($66,943)
5 $57,497 ($57,152) $57,498-$71,867 $71,868 ($71,439)
Medicare levy surcharge low-income threshold
1.19 References to the individual low-income threshold amount of $23,226 in the
Medicare levy surcharge provisions (in sections 8D and 8G of the Medicare
Levy Act 1986) in respect of the surcharge payable on taxable income for a
person who is married (or both married and a beneficiary of a trust) are also
increased to $23,365.
[Schedule 1, items 10 to 13, paragraphs 8D(3)(c) and 8G(2)(c) and
subparagraphs 8D(4)(a)(ii) and 8G(3)(a)(ii) of the Medicare Levy Act 1986]
1.20 References to the individual low-income threshold amount of $23,226 in the
Medicare levy surcharge provisions (in sections 15 and 16 of the A New Tax
System (Medicare Levy Surcharge -- Fringe Benefits) Act 1999) in respect of
the surcharge on reportable fringe benefits are also increased to $23,365.
[Schedule 1, item 1, paragraphs 15(1)(c) and 16(2)(c) of the A New Tax
System (Medicare Levy Surcharge -- Fringe Benefits) Act 1999]
18
Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Customs Tariff Amendment (Cost of Living Support) Bill 2022
Commencement, application, and transitional
provisions
1.21 Schedule 1 to the main Bill commences on the day after it receives Royal
Assent. [Clause 2]
1.22 The amendments apply retrospectively from the start of the 2021-22 income
year. However, they are beneficial to all affected taxpayers as they
retrospectively reduce or remove liability for Medicare levy and the Medicare
levy surcharge that would otherwise apply to affected taxpayers.
1.23 Schedule 1 to the main Bill applies to assessments for the 2021-22 income year
and later income years.
[Schedule 1, item 14]
19
Deductibility of
COVID-19 tests
Table of Contents:
Outline of chapter ................................................................................ 21
Context of amendments ....................................................................... 21
Summary of new law............................................................................ 22
Detailed explanation of new law .......................................................... 22
Deductibility of COVID-19 tests ..................................................... 22
Substantiation rules and applicable exceptions for COVID-19 test
expenses ....................................................................................... 24
Fringe benefits tax consequences for employers who provide
COVID-19 tests to employees ....................................................... 24
Consequential amendments ................................................................ 25
Commencement, application, and transitional provisions .................... 25
Outline of chapter
2.1 Schedule 2 to the main Bill amends the ITAA 1997 by allowing an income tax
deduction for taxpayers who incur relevant COVID-19 testing expenses in
gaining or producing their assessable income. The deduction applies to those
expenses incurred on or after 1 July 2021.
2.2 Legislative references in this chapter are made to ITAA 1997 unless otherwise
specified.
Context of amendments
2.3 The Government is taking action to remove uncertainty on the tax treatment of
COVID-19 testing expenses, ensuring that our response to the evolving
COVID-19 pandemic remains flexible and practical. This action recognises
21
Deductibility of COVID-19 tests
that COVID-19 tests are one of a range of important tools for mitigating
transmission risks and absences from the workplace.
Summary of new law
2.4 From 1 July 2021, the amendments provide individual taxpayers with a
specific deduction for their loss or outgoing incurred in gaining or producing
assessable income. The loss or outgoing must be incurred in respect of a
COVID-19 test with the purpose of determining whether the taxpayer should
attend their place of work. To qualify, the test must be one that is:
• a polymerase chain reaction test for testing COVID-19; or
• a test that is included in the Australian Register of Therapeutic Goods
for testing COVID-19 (such as an approved rapid antigen test).
2.5 To claim the deduction under the amendments, taxpayers must meet the
general substantiation requirements.
2.6 Employers that provide relevant COVID-19 testing to employees in the course
of their work will not incur FBT liability.
Detailed explanation of new law
Deductibility of COVID-19 tests
2.7 From 1 July 2021, taxpayers may deduct expenses for COVID-19 tests under
certain conditions. This deduction applies to the extent that the expense is
incurred in gaining or producing their assessable income. To claim a deduction
for this expense, the taxpayer must generally satisfy the following criteria:
• the taxpayer is an individual;
• the expense is incurred for qualifying COVID-19 tests (explained
below); and
• the purpose of testing the taxpayer for COVID-19 is to determine
whether they can attend or remain at their place of work.
[Schedule 2, item 2, subsection 25-125(1)]
2.8 To claim the deduction, there must be a sufficient connection between testing
the taxpayer for COVID-19 and that taxpayer's assessable income. The
amendments ensure that the expenses for relevant COVID-19 tests are
deductible when undertaken for the purpose of determining whether a taxpayer
should attend or remain at their place of work. The amendments cover
circumstances where a taxpayer's positive COVID-19 status means that they
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cannot attend their place of work at all, or will instead work from home if they
are able to.
[Schedule 2, item 2, paragraph 25-125(1)(c)]
2.9 If, for example, a rapid antigen test is used due to a requirement for leisure
activities and travel, or for the prospect of future employment, the expense is
not deductible. In those circumstances, there is a lack of sufficient nexus
between the expense and the taxpayer's assessable income.
2.10 Where the relevant expense is partially incurred in gaining or producing
assessable income, the amount of the deduction is reasonably apportioned
(e.g. where a two-pack rapid antigen test is purchased and one is used for
purposes such as leisure travel, and one is used for work purposes, the amount
of the expense is halved for the purposes of the deduction).
2.11 The ancillary costs of acquiring the tests, including the costs of travelling and
parking to purchase a testing kit cannot be claimed as a deduction. However, it
is not the policy intention to exclude other incidental costs during the purchase
of the test, such as vendor credit card surcharge fees at the time of purchase,
and postage and handling for online purchases.
2.12 The expense must be incurred in respect of a qualifying test that tests the
taxpayer for COVID-19. To qualify, the test must be one that is either:
• a polymerase chain reaction test (commonly known as a PCR test) for
the detection of COVID-19; or
• a test that is:
- covered by the meaning of a therapeutic good and included in
the Australian Register of Therapeutic Goods (maintained
under section 9A of the Therapeutic Goods Act 1989); and
- has the intended purpose of detecting COVID-19 and is
included in the Australian Register of Therapeutic Goods for
that purpose.
[Schedule 2, item 2, paragraph 25-125(1)(b) and
subsection 25-125(3)]
2.13 In general terms, from 1 July 2021, taxpayers who purchase and undertake
COVID-19 tests to determine whether they can attend their place of work can
deduct expenses for those tests to the extent that they are incurred in gaining or
producing their assessable income. These include expenses for COVID-19 tests
that are polymerase chain reaction tests undertaken through a private clinic
where the taxpayer incurs the expense, or other tests included in the Australian
Register of Therapeutic Goods, including those commonly known as rapid
antigen tests.
2.14 Under the amendments, the taxpayer may not deduct an amount of the expense
to the extent that it is capital, or capital in nature. A deduction is available for
23
Deductibility of COVID-19 tests
individuals who are required to purchase and use qualifying COVID-19 tests to
determine whether they attend their place of work. In these cases, especially
due to the consumable nature or the expected repeated use of tests, it is not
expected that the relevant expenses would be capital in nature.
[Schedule 2, item 2, subsection 25-125(2)]
Substantiation rules and applicable exceptions for
COVID-19 test expenses
2.15 Division 900 provides rules regarding necessary substantiation of expenses that
may be deducted in an income year. Under section 900-5, substantiation
requirements of the Division apply generally to individuals.
2.16 Specifically, subsection 900-35(1) provides that work expenses (as defined
under section 900-30) of $300 or less in an income year do not need to be
substantiated if those expenses were incurred by the taxpayer in producing
their salary and wages. However, if an amount over $300 is claimed in an
income year, all amounts of the deduction need to be substantiated.
2.17 The amendments ensure that eligible expenses for COVID-19 testing are
subject to the exception to the substantiation rules for work expenses where
appropriate.
[Schedule 2, item 3, subsection 900-30(7)]
2.18 This means that for employees who require COVID-19 testing to determine
whether they will attend their place of work, they do not need to substantiate
those expenses if their total work expenses deduction is $300 or less.
2.19 In circumstances where the exception from substantiation under the rules for
work expenses does not apply, the existing rules for substantiation continue to
apply.
Fringe benefits tax consequences for employers who
provide COVID-19 tests to employees
2.20 As the amendments provide a specific deduction for individuals that incur
relevant expenses for COVID-19 tests on or after 1 July 2021, there may be
implications with respect to FBT.
2.21 In general, where an employer provides the benefit of COVID-19 tests to
employees to determine whether they can attend their place of work, and this
benefit was provided on or after 1 July 2021, the employer may reduce their
FBT liability by applying the 'otherwise deductible' rule.
2.22 Under the FBT regime, the value of fringe benefits (benefits other than salary
and wages) provided by employers to employees is generally taxable under the
FBTAA 1986. COVID-19 tests provided by employers to employees (whether
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directly or through a third party under an arrangement, or as a reimbursement
of the cost to employees) are considered benefits under the FBT regime.
2.23 An employer can, however, reduce the taxable value of the fringe benefit
provided to an employee where the 'otherwise deductible' rule applies, for
example, in sections 24 (employee expense payment fringe benefits),
44 (property fringe benefits) or 52 (residual fringe benefits) of the
FBTAA 1986.
2.24 The 'otherwise deductible' rule allows the employer to reduce the taxable
value of the fringe benefit (and therefore the FBT liability) by the amount of
the income tax deduction the employee would otherwise have been entitled to
claim at the time the benefit was provided had the employee incurred the
relevant costs.
2.25 The existing FBT record keeping requirements apply. Where the 'otherwise
deductible' rule is applied, the employer would need to ensure they have the
relevant documentation and employee declarations to substantiate the extent to
which the benefit provided would have been 'otherwise deductible' to the
employee.
Consequential amendments
2.26 The list of provisions about deductions in section 12-5 is updated to include the
specific deduction under the amendments. This provision acts as a guide to the
legislation.
[Schedule 2, item 1, table under section 12-5]
Commencement, application, and transitional
provisions
2.27 The amendments commence on the first day of the first quarter following
Royal Assent of the main Bill.
[Clause 2]
2.28 The amendments apply to relevant expenses incurred on or after 1 July 2021.
[Schedule 2, item 4]
2.29 Although the amendments apply retrospectively, the amendments provide an
income tax deduction in the relevant circumstances and do not disadvantage
affected taxpayers.
25
Deductible gift
recipients--new specific recipients
Table of Contents:
Outline of chapter ................................................................................ 27
Context of amendments ....................................................................... 27
Summary of new law............................................................................ 28
Detailed explanation of new law .......................................................... 29
Consequential amendments ................................................................ 30
Commencement, application, and transitional provisions .................... 30
Commencement ............................................................................ 30
Application..................................................................................... 30
Outline of chapter
3.1 Schedule 3 to the main Bill amends the ITAA 1997 to allow the following
entities to be deductible gift recipients under the income tax law:
• Royal Humane Society of New South Wales Incorporated;
• Perth Korean War Memorial Committee Incorporated;
• Greek Orthodox Archdiocese of Australia Consolidated Trust
Cathedral of the Annunciation of our Lady Restoration Fund;
• The Australian Future Leaders Foundation Limited;
• Lord Mayor's Charitable Foundation; and
• The Ramsay Centre for Western Civilisation Limited.
Context of amendments
3.2 The income tax law allows income tax deductions for taxpayers who make
gifts of $2 or more to a deductible gift recipient. Deductible gift recipients are
entities that fall within one of the general categories set out in Division 30 of
27
Deductible gift recipients--new specific recipients
the ITAA 1997 or are specifically listed by name in that Division. Legislative
references in this Chapter are to the ITAA 1997 unless otherwise specified.
3.3 Deductible gift recipient status helps eligible organisations attract public
financial support for their activities.
3.4 Royal Humane Society of New South Wales Incorporated
(ABN 68 581 296 689) is a charity committed to publicly recognising acts of
bravery by bestowing awards on those who risk their own lives in saving or
attempting to save the lives of others.
3.5 Perth Korean War Memorial Committee Incorporated (ABN 90 608 024 391)
is a charity created to establish a war memorial in Perth to honour the service
and sacrifices of the Australians who served in the Korean War between 1950
and 1953.
3.6 Greek Orthodox Archdiocese of Australia Consolidated Trust Cathedral of the
Annunciation of our Lady Restoration Fund (ABN 32 574 064 265) is operated
by a registered charity and was created to restore the Cathedral of the
Annunciation of our Lady which was damaged by fire in September 2021.
3.7 The Australian Future Leaders Foundation Limited (ABN 28 649 403 654) is a
charity committed to advancing education, with a focus on building the skills,
experience and capability of Australia's future leaders.
3.8 Lord Mayor's Charitable Foundation (ABN 48 042 414 556) is a charity that is
committed to responding to social, economic, cultural, educational,
environmental and other charitable needs of the community for the public
benefit.
3.9 The Ramsay Centre for Western Civilisation Limited (ABN 22 617 686 905) is
a charity that promotes studies and discussion associated with the
establishment and development of western civilisation, including through
establishing and administering scholarship funds and educational courses in
collaboration and partnership with universities and other educational providers.
Summary of new law
3.10 Schedule 3 to the main Bill amends the ITAA 1997 to allow the following
entities to be deductible gift recipients under the income tax law:
• Royal Humane Society of New South Wales Incorporated;
• Perth Korean War Memorial Committee Incorporated;
• Greek Orthodox Archdiocese of Australia Consolidated Trust
Cathedral of the Annunciation of our Lady Restoration Fund;
• The Australian Future Leaders Foundation Limited;
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• Lord Mayor's Charitable Foundation; and
• The Ramsay Centre for Western Civilisation Limited.
Detailed explanation of new law
3.11 Taxpayers may claim an income tax deduction for gifts made to Royal Humane
Society of New South Wales Incorporated (ABN 68 581 296 689) provided the
gift complies with the existing requirements of the income tax law. This
amendment ensures that Royal Humane Society of New South Wales
Incorporated receives appropriate support through the Commonwealth tax
system.
[Schedule 3, item 3, table item 13.2.33 in the table in section 30-105]
3.12 Taxpayers may claim an income tax deduction for gifts made to Perth Korean
War Memorial Committee Incorporated (ABN 90 608 024 391) provided the
gift complies with the existing requirements of the income tax law. This
amendment ensures that Perth Korean War Memorial Committee Incorporated
receives appropriate support through the Commonwealth tax system.
[Schedule 3, item 2, table item 5.2.37 in the table in section 30-50(2)]
3.13 Taxpayers may claim an income tax deduction for gifts made to Greek
Orthodox Archdiocese of Australia Consolidated Trust Cathedral of the
Annunciation of our Lady Restoration Fund (ABN 32 574 064 265) provided
the gift complies with the existing requirements of the income tax law. This
amendment ensures that Greek Orthodox Archdiocese of Australia
Consolidated Trust Cathedral of the Annunciation of our Lady Restoration
Fund receives appropriate support through the Commonwealth tax system.
[Schedule 3, item 3, table item 13.2.31 in the table in section 30-105]
3.14 Taxpayers may claim an income tax deduction for gifts made to The Australian
Future Leaders Foundation Limited (ABN 28 649 403 654) provided the gift
complies with the existing requirements of the income tax law. This
amendment ensures that The Australian Future Leaders Foundation Limited
receives appropriate support through the Commonwealth tax system.
[Schedule 3, item 1, table item 2.2.54 in the table in section 30-25(2)]
3.15 Taxpayers may claim an income tax deduction for gifts made to Lord Mayor's
Charitable Foundation (ABN 48 042 414 556) provided the gift complies with
the existing requirements of the income tax law. This amendment ensures that
Lord Mayor's Charitable Foundation receives appropriate support through the
Commonwealth tax system.
[Schedule 3, item 3, table item 13.2.32 in the table in section 30-105]
3.16 Taxpayers may claim an income tax deduction for gifts made to The Ramsay
Centre for Western Civilisation Limited (ABN 22 617 686 905) provided the
29
Deductible gift recipients--new specific recipients
gift complies with the existing requirements of the income tax law. This
amendment ensures that The Ramsay Centre for Western Civilisation Limited
receives appropriate support through the Commonwealth tax system.
[Schedule 3, item 1, table item 2.2.55 in the table in section 30-25(2)]
Consequential amendments
3.17 Schedule 3 also amends the index for Division 30 of the ITAA 1997 to reflect
the new listings.
[Schedule 3, items 4 to 9, table items 21AA, 52BA, 68A, 84A, 94AAA and
103AA in the table in section 30-315]
Commencement, application, and transitional
provisions
Commencement
3.18 The amendments commence on the first day of the quarter following Royal
Assent.
[Clause 2]
Application
3.19 The listing of Royal Humane Society of New South Wales Incorporated
applies to gifts made on and after 1 July 2020.
3.20 The following listings apply to gifts made on and after 1 July 2021 and before
1 July 2024:
• Perth Korean War Memorial Committee Incorporated; and
• Greek Orthodox Archdiocese of Australia Consolidated Trust
Cathedral of the Annunciation of our Lady Restoration Fund.
3.21 The following listings apply to gifts made on and after 1 July 2021:
• The Australian Future Leaders Foundation Limited;
• Lord Mayor's Charitable Foundation; and
• The Ramsay Centre for Western Civilisation Limited.
30
Employee Share
Schemes
Table of Contents:
Outline of chapter ................................................................................ 32
Context of amendments ....................................................................... 32
Summary of new law............................................................................ 33
Detailed explanation of new law .......................................................... 35
Regulatory relief for employee share schemes ............................. 35
Requirements for an employee share scheme .............................. 37
Participants in an employee share scheme ................................... 39
Interests in an employee share scheme ........................................ 41
Trustees managing an employee share scheme ........................... 42
Employee share scheme contribution plans .................................. 44
Employee share scheme loans ..................................................... 46
The issue cap ................................................................................ 47
The monetary cap ......................................................................... 48
Disclosure under an employee share scheme .............................. 52
Penalties for breaching the regime ................................................ 57
Offers with pre-existing disclosure exemptions ............................. 65
ASIC Powers ................................................................................. 66
Modification by Regulations .......................................................... 69
Subsequent sale provisions .......................................................... 70
Other amendments........................................................................ 70
Commencement, application, and transitional provisions .................... 72
31
Employee Share Schemes
Outline of chapter
4.1 Schedule 4 to the main Bill introduces amendments make it easier for
businesses to create employee share schemes.
4.2 References in this Chapter of this Explanatory Memorandum to 'the Act' are to
the Corporations Act 2001.
Context of amendments
4.3 An employee share scheme is an arrangement put in place by a business to
reward people who contribute to the business, namely directors, employees and
service providers (referred to as 'participants'), with shares or other interests in
the business in exchange for their labour.
4.4 Employee share schemes are often used by start-ups and cash poor businesses
to attract employees when the business would be unable to compete with the
salary and wages offered by larger and more established businesses.
4.5 Participants are generally offered the ability to join an employee share scheme
for a business when they start their employment with the business or reach a
new level of seniority within the business.
4.6 Employee share schemes come in many different forms. Employee share
schemes can:
• be offered in addition to salary and wages;
• be offered to all or only certain groups of people participating in the
business (such as senior managers and directors);
• be in shares or other interests in the business (such as options or units
in a trust);
• involve trust arrangements where a trustee holds the shares on behalf
of the participants; and
• require the participants to make payments or take out loans to
participate in the scheme.
4.7 Offers under employee share schemes can take many different forms. Offers
can:
• be created by separate offer rounds where a business offers interests to
participants, with a deadline for those participants to accept the offer;
or
• be permanently open to allow people who participate in the business to
join the scheme at any time.
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4.8 The Act contains a variety of rules for businesses which issue financial
products and securities. These rules include a requirement to obtain an
Australian financial services licence and restrictions on hawking and
advertising and disclosure requirements.
4.9 Financial products and securities offered as a part of certain employee share
schemes are excluded from some of these requirements under the Act.
4.10 Further exclusions are currently made in ASIC class orders CO 14/1000 and
CO 14/1001. Class Order 14/1000 applies to listed bodies corporate and listed
registered schemes and Class Order 14/1001 applies to unlisted bodies
corporate.
4.11 The Government is committed to reducing red tape for business, supporting job
creation and competitive remuneration, and incentivising employers and
employees to work together to contribute to a strong and sustained post
COVID-19 economic recovery.
4.12 Going forward, businesses offering employee share schemes, where
participants do not have to pay or borrow to participate in an employee share
scheme, will not have to consider or comply with any requirements under the
Act in respect of the employee share scheme.
4.13 These reforms build on the:
• Government's previous announcement on 13 November 2018 that it
would streamline the exclusions under the Act and ASIC class orders
to make it easier for businesses to offer employee share schemes;
• consultation paper released on 3 April 2019 outlining possible
approaches;
• changes announced as part of the 2021-22 Budget; and
• changes announced as part of the 2022-23 Budget.
Summary of new law
4.14 If an employee share scheme receives relief under Schedule 4 to the main Bill,
the standard regulatory requirements for businesses offering shares and
financial products to retail clients under the Act will not apply. This will mean:
• a scheme can be operated without an Australian financial services
licence;
• general financial advice can be provided in relation to the scheme
without an Australian financial services licence;
33
Employee Share Schemes
• the restrictions on advertising and hawking securities and financial
products in the Act do not apply to the scheme; and
• the existing disclosure requirements under the Act do not apply to
offers under the scheme.
4.15 In simple terms, an employee share scheme can receive relief under Schedule 4
to the main Bill if:
• the interests issued, sold or transferred to participants under the scheme
fall within certain eligible categories of interests (for example - shares
or options);
• the participants in the scheme are directors, employees, or service
providers; or
• if the scheme requires payment to participate:
- certain disclosure documents are provided with the offer;
- if the scheme has an associated contribution plan, loan or trust,
the contribution plan, loan or trust meet certain requirements;
- the total numbers of products issued under the scheme over the
previous three years does not exceed the specified percentage
of the body's issued capital (5 per cent for listed bodies or
20 per cent for unlisted body corporates, unless otherwise
specified by regulations or the body corporate's constitution);
and
- for an unlisted body corporate, all participants are generally
limited to outlay a monetary cap of $30,000 per year (which
can be accrued for unexercised options over a 5-year period,
up to a maximum of $150,000), plus 70 per cent of dividends
and 70 per cent of cash bonuses.
4.16 Generally, for an employee share scheme to receive relief under Schedule 4 to
the main Bill the interests offered, issued, sold or transferred under the scheme
to participants must be:
• for listed body corporates, the interest must be able to be traded on a
financial market, and be one of the below types of interests;
- a fully paid share;
- a beneficial interest in a fully paid share;
- a stapled security; or
- a unit in, an incentive right in relation to, or an option to
acquire one of the above interests;
• for unlisted bodies corporate:
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- a fully paid share; or
- a unit in, an incentive right in relation to, or an option to
acquire a fully paid share;
• for registered schemes:
- an interest in the registered scheme that is tradable on a
financial market; or
- a unit in, an incentive right in relation to, or an option to
acquire an interest in, the registered scheme that is tradable on
a financial market.
4.17 Employee share schemes which require participants to pay for an interest to
participate will need to provide disclosure in relation to offers under the
scheme. The disclosure requirements are streamlined versions of the general
requirements under the Act.
4.18 The disclosure documents required to be provided are:
• for a listed body corporate or registered scheme - certain warnings;
• for an unlisted body corporate:
- certain warnings;
- certain financial information about the body corporate;
- a valuation of the interests; and
- a statement that the company is solvent.
Detailed explanation of new law
Regulatory relief for employee share schemes
4.19 If an employee share scheme does not require payment to participate:
• the scheme can be operated without an Australian financial services
licence;
• general financial advice can be provided in relation to the scheme
without an Australian financial services licence;
• the restrictions on advertising and hawking securities and financial
products in the Act do not apply to the scheme;
• the design and distribution obligations do not apply to the issue, sale or
transfer of interests under the scheme; and
35
Employee Share Schemes
• no disclosure requirements apply to offers under the scheme.
[Schedule 4, item 33, sections 1100N, 1100P and 1100ZC of the Act]
4.20 If an employee share scheme requires payment to participate and the scheme
meets the requirements in Schedule 4 to the main Bill:
• the scheme can be operated without an Australian financial services
licence;
• general financial advice can be provided in relation to the scheme
without an Australian financial services licence;
• the restrictions on advertising and hawking securities and financial
products in the Act do not apply to the scheme;
• the design and distribution obligations do not apply to the issue, sale or
transfer of interests under the scheme; and
• a streamlined set of disclosure requirements apply to the scheme.
[Schedule 4, item 33, sections 1100N, 1100Q, and 1100ZC of the Act]
4.21 This relief also applies in relation to any contribution plan or loan which is
related to the employee share scheme.
[Schedule 4, items 9 and 33, section 9 definition of 'managed investment
scheme' and section 1100Y of the Act]
4.22 The relief applies to any person associated with the employee share scheme
such as:
• the body which issues, sells or transfers the interests under the scheme;
• an associated body corporate;
• a trustee which is engaged to manage the employee share scheme; or
• a third-party custodian who holds the interests.
[Schedule 4, item 33, section 1100ZC of the Act]
4.23 Various elements of the regulatory regime can be modified by regulations (see
the section of this Chapter on modification by regulations).
4.24 This will allow businesses to run their own employee share schemes, without
having the same regulatory obligations as financial services providers. This is
appropriate because these regulatory obligations are designed for arm's length
transactions to consumers, unlike an employee share scheme, where there is a
pre-existing employment relationship between the business and participant.
4.25 An employer that is a national system employer is still required to comply with
the requirements of the Fair Work Act 2009 in relation to their employees. This
includes paying wages in line with any applicable modern award or enterprise
agreement, or the National Minimum Wage Order for award and agreement
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free employees. Any employee share scheme offer must be in addition to these
wages, which must be paid in full and in money.
Requirements for an employee share scheme
4.26 An offer under an employee share scheme which does not require payment to
participate will be entitled to relief if:
• the interests offered, issued, sold or transferred to participants under
the scheme fall within certain categories of eligible interests (generally
shares and interests in shares);
• the participants are directors, employees, or service providers;
• any trustee used to manage the scheme meets certain requirements; and
• the offer is expressed to be made under Division 1A of Part 7.12 of
the Act.
[Schedule 4, item 33, sections 1100N, 1100P and 1100ZC of the Act]
4.27 An offer under an employee share scheme which requires payment to
participate will be entitled to relief if:
• the interests offered, issued, sold or transferred to participants under
the scheme fall within certain categories of eligible interests (generally
shares and interests in shares);
• the participants are directors, employees, or service providers;
• any trustee used to manage the scheme meets certain requirements;
• the offer is expressed to be made under Part 7.12 Division 1A of
the Act;
• if the scheme has an associated contribution plan or loan, the
contribution plan or loan meets certain requirements;
• the offer requires certain disclosure documents be provided;
• the total numbers of products issued under the scheme over the
previous three years does not exceed the specified percentage of the
body's issued capital (5 per cent for a listed body or 20 per cent for an
unlisted body corporate, unless otherwise specified by regulations or
the body's constitution); and
• for an unlisted body corporate no participant outlays more than
$30,000 worth of interest under the scheme in a 12-month period, and
in the case of options, cumulative over 5 years to a maximum total of
$150,000.
37
Employee Share Schemes
[Schedule 4, item 33, sections 1100N, 1100Q and 1100ZC of the Act]
Diagram 4.1 Requirements for an offer under an employee share scheme
The below diagram sets out the requirements in order to qualify for regulatory relief for
employee share scheme offers that do and do not require payment to participate.
Eligible interests to eligible
participants
1100L and 1100M
Expressed to be under Part
Offers that do not require
7.12 Division 1A
payment to participate
1100N
Trust arrangements
1100S
Eligible interests to eligible
participants
1100L and 1100M
Expressed to be under Part
7.12 Division 1A
1100N
Trust arrangements
1100S
Issue cap
1100V
Offers that require payment
to participate
Contribution plans
1100T
Loans
1100U
Disclosure requirements
1100X and 1100Y
Monetary cap
1100ZA
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4.28 An offer under an employee share scheme, which would not require disclosure
under the Act due to pre-existing exemptions from the disclosure rules (such as
offers to sophisticated investors or small-scale offerings) will receive relief if:
• the interests offered, issued, sold or transferred to participants under
the scheme fall within certain categories of eligible interests (generally
shares and interests in shares);
• if the scheme is utilising the small-scale offering exemption - the
scheme complies with the employee share scheme rules concerning
loans, trusts or contribution plans; and
• the participants in the scheme are directors, employees or service
providers.
[Schedule 4, item 33, section 1100R of the Act]
Participants in an employee share scheme
4.29 For an individual to participate in an employee share scheme they must be a
director, employee or service provider of the body corporate or an associated
body corporate that is issuing interests in an employee share scheme. These
people are referred to in Schedule 4 to the main Bill as ESS participants.
[Schedule 4, item 8, item 33, section 9, the definition of 'ESS participant'
and section 1100L of the Act]
4.30 A primary participant is an employee, director, or person who provides
services to:
• the body corporate issuing the interests under the employee share
scheme or an associated body corporate; or
• in the case of an employee share scheme by a listed registered scheme
- the responsible entity of the listed registered scheme or an associated
body corporate.
[Schedule 4, item 8, item 33, section 9, the definition of 'ESS participant'
and paragraph 1100M(1)(a) of the Act]
4.31 An employee includes a casual, part-time or full-time employee. Directors
include executive and non-executive directors as well as salaried and
non-salaried directors.
4.32 A person can also participate in the employee share scheme if they are about to
become one of the above eligible categories (for example, a person who has
received an offer to become an employee of the body issuing interests under
the employee share scheme).
[Schedule 4, item 33, subparagraph 1100L(1)(a)(iii) of the Act]
39
Employee Share Schemes
4.33 Certain people who are related to the primary participant can also participate in
an employee share scheme. These are referred to in Schedule 4 to the main Bill
as related persons. They are:
• a spouse, parent, child or sibling of the primary participant;
• a body corporate which is controlled by the primary participant or their
spouse, parent, child or sibling; or
• a body corporate that is the trustee of the primary participant's
self-managed superannuation fund.
[Schedule 4, item 33, paragraph 1100L(1)(b) of the Act]
Diagram 4.2 Primary participants and related participants
The below diagram represents the two kinds of participants in an employee share scheme -
primary participants and related participants. Primary participants are an employee, director, or
other service provider to a business. Related participants are certain family members of the
primary participant and bodies corporate controlled by certain family members of a primary
participant. Related participants can also participate in an employee share scheme through their
relationship with the primary participant.
Primary participant:
Director, employee, or service provider:
Issuing body
under the
employee share
scheme
Corporation
controlled by Trustee of a
primary self-managed
Parent, spouse, sibling, participant or super fund
child family
Related persons:
Immediate family members and
corporations controlled by
immediate family members
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Interests in an employee share scheme
4.34 For an employee share scheme to receive relief under Schedule 4 to the
main Bill, the interests offered to participants must fall within certain eligible
categories of interests, referred to in Schedule 4 to the main Bill as ESS
interests.
4.35 The ESS interests for a listed body corporate are:
• a fully paid share which is tradable on an eligible financial market;
• a beneficial interest in a fully paid share where the interest is in a class
of interests which is tradable on an eligible financial market;
• a fully paid share which can be converted into a beneficial interest (or
vice versa) without charge or for a nominal fee, where either the
beneficial interest or share is tradable on an eligible financial market;
• a unit in, an incentive right, or an option to acquire, any of the above
interests; or
• a fully paid stapled security which is tradable on an eligible financial
market consisting of any of the above interests, or an interest in a listed
registered scheme.
[Schedule 4, item 33, subsection 1100M(1) of the Act]
4.36 The ESS interests for an unlisted body corporate are:
• a fully paid share; or
• a unit in, an incentive right, or an option to acquire, a fully paid share.
[Schedule 4, item 33, subsection 1100M(2) of the Act]
4.37 The ESS interests for a listed registered scheme are:
• an interest in a listed registered scheme which is tradable on an eligible
financial market; or
• a unit in, an incentive right, or an option to acquire, an interest in a
listed registered scheme.
[Schedule 4, item 33, subsection 1100M(3) of the Act]
4.38 An incentive right is a conditional right to be issued a security or financial
product or a right to be paid a cash amount where the right is contingent on:
• the price or value of the security or financial product;
• the change in the price or value of the security or financial product;
41
Employee Share Schemes
• the amount of dividends or distributions paid in respect of the security
or financial product; or
• the change in the amount of dividends or distributions paid in respect
of the security or financial product.
[Schedule 4, item 33, subsection 1100M(4) of the Act]
4.39 A body corporate or registered scheme is a listed body corporate or registered
scheme if it is listed on a financial market operated by an Australian market
licensee or a foreign financial market determined by ASIC by legislative
instrument.
[Schedule 4, item 33, section 1100K of the Act]
Trustees managing an employee share scheme
4.40 A business can engage a trustee to manage the interests issued under an
employee share scheme on their behalf, and still obtain relief under Schedule 4
to the main Bill, if the trust deed meets certain requirements.
4.41 An employee share scheme with a trustee is only able to receive an interest in
an employee share scheme if the trust deed states:
• the activities of the trustee are limited to managing only the employee
share schemes of the body corporate - by either transferring interests
under the schemes to participants or issuing units in the interests to
participants;
• the trustee keeps written records on the administration of the trust;
• the trustee does not take any administration fees out of trust funds,
other than reasonable disbursements;
• the trustee only charges fees or amounts to the body corporate or entity
responsible for the employee share scheme (i.e. not the participants);
and
• if the trustee is an associated body corporate of the body corporate
issuing the interests or the responsible entity of the listed registered
scheme - that the trustee only exercise voting rights in accordance with
the instructions of the participants or consistently with their fiduciary
duties.
[Schedule 4, item 33, section 1100S of the Act]
4.42 The requirements are generally designed to minimise financial risk for
participants in the employee share scheme by ensuring the trustee acts in the
best interests of the participants and to minimise the possibility of conflicts of
interest.
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4.43 If an offer that is made by a trustee who manages an employee share scheme
requires a participant to make a payment to participate, the offer document
must include:
• the trust deed; or
• a summary of the trust deed and a statement that the full deed will be
made available upon the participant's request.
[Schedule 4, item 33, paragraph 1100W(2)(h) of the Act]
4.44 If a participant has only been provided a summary of the terms of the trust
deed for an offer under an employee share scheme and the participant then
requests the full terms, those full terms must be provided within 10 days.
[Schedule 4, item 33, paragraph 1100Y(1)(d) of the Act]
4.45 Offers of eligible interests to participants under an employee share scheme
which would not ordinarily require disclosure, such as offers to senior
managers, are not required to comply with the trust requirements. However,
offers utilising the small-scale offering exemption must comply with the trust
requirements.
[Schedule 4, item 33, section 1100R of the Act]
4.46 This requirement applies regardless of whether the offer is made by a listed
body corporate, listed registered scheme or unlisted body corporate.
4.47 For an offer by an employee share scheme trustee to be eligible for relief, the
offer must include a term that requires the trustee comply with the trust deed.
[Schedule 4, item 33, paragraph 1100Y(1)(e) of the Act]
4.48 An employee share scheme which accepts payment and does not comply with
its trust deed will have its regulatory relief revoked.
[Schedule 4, item 33, section 1100ZG of the Act]
Diagram 4.3 Trustees under employee share schemes
The below diagram demonstrates the relationship between the body corporate issuing interests
under the employee share scheme, a trustee holding those interests and the participants in the
scheme. A body corporate generally issues interests in an employee share scheme directly to a
trustee, who holds the interests on behalf of participants. The trustee can subsequently issue the
interests to the participants, as new participants join the businesses. The trustee can also issue
units over interests it holds to participants, and still hold legal title to the interests in the scheme.
43
Employee Share Schemes
Issuing body
under the Trustee for the
employee share scheme
scheme
Participants in the scheme
(individuals and body
corporates)
Employee share scheme contribution plans
4.49 Employee share schemes can have contribution plans associated with the
scheme to allow participants to purchase the interests and still receive
regulatory relief under Schedule 4 to the main Bill.
4.50 An employee share scheme contribution plan enables employees to pay for an
interest over time. The employee only receives the interest after fully paying
off the interest under the plan. A contribution plan contrasts with a loan
arrangement, where the employee receives full ownership of the interest
upfront and repays the loan over time.
4.51 Contribution plans generally require the participants to make repayments or
allow for deductions to be made from their salary or wages.
4.52 An employee share scheme can be eligible for relief under Schedule 4 to the
main Bill even if it has an associated contribution plan. However, the
contribution plan must meet certain requirements (referred to in Schedule 4 to
the main Bill as an ESS contribution plan).
4.53 For an employee share scheme with an associated contribution plan to be
eligible for relief, the contribution plan must:
• have contributions held on trust in an account with an Australian
authorised deposit-taking institution which is solely kept for that
purpose;
• allow the participant to discontinue from the deductions or payments at
any time;
• if the participant decides to discontinue - within 45 days any
deductions from salary or wages must cease and all deductions or
payments, not yet exchanged for interests, must be repaid to the
participant; and
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• before participating in the plan, the participant must agree in writing to
the terms of the plan.
[Schedule 4, items 8 and 33, section 9 definition of 'ESS contribution plan'
and section 1100T of the Act]
4.54 If an offer is made with a related ESS contribution plan, each participant
receiving the offer must be provided with:
• the terms of the contribution plan; or
• a summary of the terms and a statement that the full terms will be
made available upon the participant's request.
[Schedule 4, item 33, paragraph 1100W(2)(g) of the Act]
4.55 If a participant has only been provided a summary of the terms of the
contribution plan for an offer under an employee share scheme and the
participant then requests the full terms, those full terms must be provided
within 10 days.
[Schedule 4, item 33, paragraph 1100Y(1)(c) of the Act]
4.56 The obligation for payment for a contribution plan provided in association with
an employee share scheme must fall on the individual who receives the
interests under the scheme, whether they be the primary participant or a related
participant.
[Schedule 4, item 33, section 1100T of the Act]
4.57 Offers of eligible interests to participants under an employee share scheme
which would not ordinarily require disclosure, such as offers to senior
managers, are not required to comply with the contribution plan requirements.
However, offers utilising the small-scale offering exemption must comply with
the contribution plan requirements.
[Schedule 4, item 33, section 1100R of the Act]
4.58 This requirement applies regardless of whether the offer is made by a listed
body corporate, listed registered scheme or unlisted body corporate.
4.59 The existence of a settlement period between paying for an interest and
receiving that interest does not automatically create a contribution plan and
trigger the additional regulatory obligations associated with contribution plans.
4.60 An employee share scheme which ceases to comply with the requirements for
contribution plans and has accepted payment will have its regulatory relief
under Schedule 4 to the main Bill revoked.
[Schedule 4, item 33, section 1100ZG of the Act]
45
Employee Share Schemes
Employee share scheme loans
4.61 An employee share scheme with an associated loan can be eligible for relief if
the loan meets certain requirements.
4.62 A loan in relation to an employee share scheme allows the participant to take
full ownership of their interest immediately, as opposed to a contribution plan,
where a participant acquires their interests over time. The participant can then
pay for their interests over time, while receiving full ownership of their
ESS interest upfront along with any of the rights associated with that interest
(for instance, voting rights attached to shares).
4.63 For an employee share scheme with an associated loan to be eligible for relief:
• the loan must have no interest or fees payable;
• in the event of non-payment of the loan, the rights against the
participant are limited to forfeiture of the interests acquired using the
loan; and
• if the loan is by an unlisted company, the loan cannot be provided to an
existing shareholder.
[Schedule 4, item 33, section 1100U of the Act]
4.64 These conditions are designed to avoid employees suffering losses due to
interest payments or loss of security for the loans other than the interest itself.
The requirement that a loan is not provided to an existing shareholder for
unlisted companies is designed to prevent a tax liability under Division 7A of
the Income Tax Assessment Act 1936.
4.65 If an offer is made with a related loan each participant receiving the offer must
be provided with:
• the terms of the loan; or
• a summary of the terms and a statement that the full terms will be
made available upon the participant's request.
[Schedule 4, item 33, paragraph 1100W(2)(g) of the Act]
4.66 If a participant has only been provided a summary of the terms of the loan for
an offer under an employee share scheme and the participant then requests the
full terms, those full terms must be provided within 10 days.
[Schedule 4, item 33, paragraph 1100Y(1)(c) of the Act]
4.67 The obligation for repayment for a loan provided in association with an
employee share scheme must fall on the individual who receives the interests
under the scheme, whether they be the primary participant or a related
participant.
[Schedule 4, item 33, paragraph 1100U(1)(b) of the Act]
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4.68 These requirements apply regardless of whether the offer is made by a listed
body corporate, listed registered scheme or unlisted body corporate.
4.69 Offers of eligible interests to participants under an employee share scheme
which would not ordinarily require disclosure, such as offers to senior
managers, are not required to comply with the loan requirements. However,
offers utilising the small-scale offering exemption must comply with the loan
requirements.
[Schedule 4, item 33, section 1100R of the Act]
4.70 An employee share scheme which ceases to comply with the requirements for
loans and has accepted payment will have its regulatory relief revoked.
[Schedule 4, item 33, section 1100ZG of the Act]
4.71 Other conditions can be included in the terms of the loan (such as requirements
that dividends received by participants on account of holding interests
purchased using the loan, be used to pay down the loan).
The issue cap
4.72 An offer from an employee share scheme which requires payment to
participate can only be eligible for relief if it complies with the issue cap.
[Schedule 4, item 33, section 1100V of the Act]
4.73 Employee share schemes are only intended to allow businesses to attract and
keep employees. They are not intended to allow a body corporate to raise
funds. If a body corporate wishes to raise funds it must use other means (for
example, issuing shares under a prospectus).
4.74 The issue cap limits the proportion of its share capital a body corporate can
issue under an employee share scheme to ensure the offer is genuinely for
attracting and retaining employees.
4.75 The issue cap also limits the proportion of shares that may be subsequently
issued under interests made as part of an offer under an employee share
schemes (for example, an offer of options under an employee share scheme
which can be exercised and result in shares being issued 12 months later).
4.76 An offer by an employee share scheme complies with the issue cap if the sum
of the two below numbers do not exceed the specified percentage of interests
actually issued by the body:
• the number of interests that may be issued, directly or indirectly, as a
result of the offer; and
• the number of interests that have been issued, or could be issued as a
result of previous offers, in connection with an employee share scheme
made during the previous three years.
47
Employee Share Schemes
[Schedule 4, item 33, subsection 1100V(2) of the Act]
4.77 The specified percentage is, if the constitution of the body corporate or
registered scheme specifies a percentage, that percentage. If not, the cap is the
greater of 5 per cent for a listed body corporate or 20 per cent for an unlisted
body corporate, or the percentage (if any) prescribed by regulations.
[Schedule 4, item 33, subsection 1100V(2) of the Act]
4.78 The issue cap does not apply to interests issued under an employee share
scheme where payment is not required to participate.
[Schedule 4, item 33, sections 1100N and 1100P of the Act]
4.79 When an employee share scheme offers interests to participants which are
stapled securities, the issue cap applies in relation to both of the securities
which are stapled.
[Schedule 4, item 33, subsection 1100V(3) of the Act]
4.80 Offers of eligible interests to participants under an employee share scheme
which would not ordinarily require disclosure are not required to comply with
the issue cap, such as offers to senior managers or small-scale offerings.
[Schedule 4, item 33, section 1100R of the Act]
4.81 An employee share scheme which ceases to comply with the issue cap and has
accepted payment will have its regulatory relief revoked.
[Schedule 4, item 33, subparagraph 1100ZG(1)(c)(ii) of the Act]
The monetary cap
4.82 For offers in an unlisted company under an employee share scheme which
require payment to receive relief under Schedule 4 to the main Bill, the offer
must comply with the monetary cap.
4.83 Put simply, the monetary cap only allows a participant to outlay up to $30,000
on offers over a 12-month period, plus an additional 70 per cent of any
dividends and 70 per cent of cash bonuses received in that year.
[Schedule 4, item 33, section 1100ZA of the Act]
4.84 The first 12-month period applies from the day when the participant accepts
the offer under an employee share scheme.
[Schedule 4, item 33, paragraph 1100ZA(1)(a) of the Act]
4.85 An employee share scheme which ceases to comply with the monetary cap and
has accepted payment will have its regulatory relief revoked.
[Schedule 4, item 33, subparagraph 1100ZG(1)(c)(iii) of the Act]
Application of the cap
4.86 The monetary cap applies to the total amount of expenditure by a participant
under offers from an employee share scheme. The monetary cap does not just
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apply to an individual offer. If multiple offers are made to a participant, which
if accepted would breach the monetary cap, the terms of offers would need to
be drafted so payments can only be made up to the monetary cap.
[Schedule 4, item 33, subsection 1100ZA(1) of the Act]
4.87 The cap is used up as the participant expends money or takes out loans on
offers. This includes current offers, for example purchasing shares upfront, as
well as exercising rights to purchase shares under earlier offers of options. This
includes payments made directly or payments made using a contribution plan.
[Schedule 4, item 33, paragraph 1100ZA(4)(a) of the Act]
4.88 Money paid from a contribution plan only counts towards the monetary cap
when exiting a contribution plan to be exchanged for the interests under the
offer from the employee share scheme. Money paid into a contribution plan
which has not yet been exchanged for interests does not use up the monetary
cap.
[Schedule 4, item 33, paragraph 1100ZA(4)(a) and subsection 1100ZB(2) of
the Act]
4.89 The monetary cap is per person directly entitled. Should offers be made to a
primary participant and a related participant of that primary participant, then
the cap applies in relation to payments made by both the primary participant
and the related participant.
[Schedule 4, item 33, subsection 1100ZA(3) of the Act]
Dividends and cash bonuses
4.90 The monetary cap for each participant in each year will increase by 70 per cent
of the value of any distributions that participant received from interests under
the employee share scheme and 70 per cent of any cash bonuses they receive
from their employment in that company in that year.
[Schedule 4, item 33, paragraphs 1100ZA(5)(b) and (c) of the Act]
4.91 This will allow more senior individuals receiving more remuneration in the
company from dividends or bonuses to have a higher cap for a particular year.
4.92 Cash bonuses and dividends are also additional payments. This means there is
less financial risk for participants in relation to these payments, as the loss of
these payments should not significantly affect an individual's take home pay.
Accrual of the cap for option plans
4.93 A participant's monetary cap can be accrued in circumstances of an option
plan, in respect of unexercised options over a 5-year period.
[Schedule 4, item 33, subsection 1100ZA(5) of the Act]
49
Employee Share Schemes
4.94 The amount accrued is the value of interests the participant has the right to
purchase in that year under their option plan, which they have chosen to not
purchase.
4.95 This will still be subject to the cap of $30,000 per year and have a maximum
cap of $150,000 accrued over a 5-year period. The dividends and cash bonuses
component of the cap cannot accrue.
4.96 The first 12-month period applies from the day when the participant accepts an
options plan under an employee share scheme.
[Schedule 4, item 33, paragraph 1100ZA(1)(a) of the Act]
4.97 After the 5-year period, any unspent amounts can continue to be accrued (or
'roll over') to increase the monetary cap, however, any unspent monies under
the cap from year one would no longer contribute to the cap in the 6th year.
[Schedule 4, item 33, subsection 1100ZA(5) of the Act]
Exemption from the cap - liquidity events
4.98 The monetary cap does not apply when there is a liquidity event, such as a
business being purchased or listed on a financial market.
[Schedule 4, item 33, section 1100ZB of the Act]
4.99 The exemption will allow participants to take part in a liquidity event through
their employee share scheme by expending larger amounts of money than
would generally be allowed under the monetary cap. Greater expenditure is
appropriate in these circumstances because there is limited financial risk as the
participant will have accurate information as to the market value of their
interests (i.e. the listing price or the purchase price in a private sale) and there
is a genuine opportunity to sell their interests to realise gains.
4.100 The exemption works in conjunction with the monetary cap. The monetary cap
is applied up until a liquidity event occurs, which will result in the cap being
lifted so that participants can purchase an unlimited amount of interests.
4.101 To take advantage of the exemption in the monetary cap, payments by
participants can be made no longer than 7 days before an anticipated liquidity
event. These amounts paid in anticipation of a liquidity event must be held on
trust and be returned as soon as practicable if the liquidity event does not
occur.
[Schedule 4, item 33, subsections 1100ZB(4) to (5) of the Act]
4.102 A failure to keep the money on trust until it is returned to the participant or
until the liquidity event occurs is a strict liability offence with a penalty of
60 penalty units.
[Schedule 4, items 33 and 37, subsection 1100ZF(1) and Schedule 3 of
the Act]
4.103 Failure to return the money as soon as practicable is a strict liability offence
with a penalty of 20 penalty units.
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[Schedule 4, items 33 and 37, subsection 1100ZF(2) and Schedule 3 of
the Act]
4.104 For the purposes of Schedule 4 to the main Bill, a liquidity event means the
point at which either:
• an unlisted company is listed on an official list of a financial market; or
[Schedule 4, item 33, paragraph 1100ZB(7)(a) of the Act]
• there is an executed sale agreement to acquire interests, covering the
participant's interests or underlying shares, open to acceptance by the
participant or related person.
[Schedule 4, item 33, paragraph 1100ZB(7)(b) of the Act]
4.105 In summary, the monetary cap for a particular participant in a particular year
will be the sum of:
• $30,000; and
• if there are unexercised options from previous 5 years, an amount
equal to the price that would have been paid for those unexercised
options; and
• 70 per cent of the dividends from interests in the businesses the
participant has received in that year; and
• 70 per cent of the cash bonuses the participant has received in that
year.
[Schedule 4, item 33, subsection 1100ZA(5) of the Act]
Diagram 4.4 Monetary cap
The below diagram shows how the monetary cap applies over 6 years, for both standard offers
as well as options. In the case of options, it demonstrates how the cap is accrued over the
6 years.
51
Employee Share Schemes
4.106 Offers of eligible interests to participants under an employee share scheme
which would not ordinarily require disclosure are not required to comply with
the monetary cap, such as offers to senior managers or small-scale offerings.
[Schedule 4, item 33, section 1100R of the Act]
Disclosure under an employee share scheme
4.107 To ensure participants can make an informed choice as to whether to accept an
offer under an employee share scheme, Schedule 4 to the main Bill requires
that employers provide participants certain information in the form of
disclosure documents in relation to the interests they receive.
4.108 These disclosure documents are less onerous than the general existing
disclosure requirements for shares and financial products issued to the general
market (for example, prospectuses and product disclosure statements under
Chapter 6D and Part 7.9 of the Act).
4.109 Disclosure can be required at two different points in time in relation to an
offer:
• upfront, before the interest is issued or sold in exchange for payment;
and
• at a later point after an interest has been sold, before an option or
incentive right can be exercised.
Diagram 4.5 Disclosure timing
The below diagram shows the timing requirements of disclosure documents. Disclosure
requirements are indicated by a tick (✓) at the necessary points in time, either upfront when
issuing the offer or at the point of exercising the offer.
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4.110 Different disclosure documents are required for different types of employee
share schemes, in particular for listed and unlisted schemes. Different
disclosure documents are also required depending on the interest under the
scheme (for example, shares as opposed to options and incentive rights).
Disclosure for offers without payment
4.111 Offers that do not require payment to participate, do not require disclosure to
be eligible for regulatory relief.
[Schedule 4, item 33, sections 1100N and 1100P of the Act]
4.112 This only applies to offers where there is no payment required upfront, nor at
any future stage, for the issue or transfer of interests under the employee share
scheme (such as under an option plan).
Disclosure for interests with payment upfront (not options)
4.113 Offers that require upfront payment must provide disclosure in accordance
with Schedule 4 to the main Bill.
[Schedule 4, item 33, paragraphs 1100Q(1)(f) to (g) of the Act]
4.114 For an offer that requires payment upfront, 14 days before making an offer, the
participant must be provided with:
53
Employee Share Schemes
• a set of warnings (referred to in Schedule 4 to the main Bill as an ESS
offer document);
• in addition, for an unlisted body corporate:
- certain financial information about the body making the offer;
- a valuation of the interests being offered;
- a statement that the body making the offer is solvent; and
• if the offer is made with a related loan, disclosure documents in
relation to the loan;
• if the offer is made with a related contribution plan, disclosure
documents in relation to the contribution plan; and
• if the interests are to be held by a trustee for the participants, disclosure
documents in relation to the trustee.
[Schedule 4, item 33, paragraphs 1100Q(1)(f), (g) and (2)(a) and sections
1100W to 1100X of the Act]
4.115 The disclosure requirements for a listed body corporate or listed registered
scheme are less onerous than those for an unlisted body corporate as the value
of an ESS interest which is listed is easy to ascertain when compared to an
unlisted body corporate.
4.116 A participant cannot acquire an interest until 14 days after receiving the above
documents. This mandates a waiting period ensuring a participant has time to
consider their decision or seek additional legal or financial advice.
[Schedule 4, item 33, paragraph 1100Y(1)(a) of the Act]
4.117 The documents must be updated as soon as practicable to reflect any material
or substantive changes that occur.
[Schedule 4, item 33, paragraph 1100Z(1)(b) of the Act]
4.118 If the offer document included only a summary of the terms of the offer, loan,
contribution plan or trust deed then the body corporate or responsible entity
must provide the participant with a copy of the full version if the participant
requests it, within 10 business days.
[Schedule 4, item 33, paragraphs 1100Y(1)(b) to (d) of the Act]
ESS offer document
4.119 For a listed body corporate or listed registered scheme, the offer document
must:
• include the terms of the offer, and any relevant loan, contribution plan
or trust deed or a summary of those terms with a statement that a copy
of the full terms will be provided to the participant on request;
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• provide general information about the risks of acquiring and holding
the interests being offered;
• state that advice given in relation to the offer does not take into
account the participants objectives, financial situation and needs;
• suggest that the participant obtain personal advice in relation to the
offer;
• state the application period during which the participant may accept the
offer;
• include the acquisition price of the interest or how a participant could
from time to time ascertain the market price of their interest, or if the
interest is a unit, option or incentive right, the acquisition price of the
underlying product in Australian dollars; and
• draw the participant's attention to relevant disclosure documents
produced in the previous 12 months.
[Schedule 4, item 33, subsection 1100W(1) of the Act]
Additional documents for an unlisted employee share scheme
4.120 For an unlisted body corporate, the ESS offer document must:
• include the terms of the offer, and any relevant loan, contribution plan
or trust deed or a summary of those terms with a statement that a copy
of the full terms will be provided to the participant on request;
• provide general information about the risks of acquiring and holding
the interests being offered;
• state that advice given in relation to the offer does not take into
account the participants objectives, financial situation and needs;
• suggest that the participant obtain personal advice in relation to the
offer;
• state the application period during which the participant may accept the
offer;
• draw the participant's attention to relevant disclosure documents
produced in the previous 12 months;
• state that the interest may not have any value and that the value of the
interest will depend on future events that may not occur; and
• if the interests being offered are non-ordinary shares - contain a
statement about the rights that attach to the shares and how this differs
to the rights that attach to ordinary shares.
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Employee Share Schemes
[Schedule 4, item 33, subsections 1100W(1) to (3) of the Act]
4.121 The financial information about an unlisted body corporate, which must be
provided with an ESS offer to each participant is:
• if the body corporate must lodge a report for a financial year with
ASIC under section 319 of the Act--a copy of the most recent report
lodged with ASIC; or
• if the body corporate is a registered foreign body corporate--a copy of
the most recent balance sheet lodged with ASIC under section 601CK;
or
• a balance sheet and profit and loss statement prepared in compliance
with the Australian or international accounting standards.
[Schedule 4, item 33, subsection 1100X(2) of the Act]
The financial information must be accompanied by a statement as to whether
the financial information has been audited.
[Schedule 4, item 33, subparagraph 1100Y(4)(a)(i) of the Act]
4.122 A valuation can include:
• a valuation that has been prepared consistently with an applicable
method approved by the Commissioner of Taxation under section 960
412 of the ITAA 1997;
[Schedule 4, item 33, paragraph 1100X(3)(a) of the Act]
• a disclosure document for any other securities in the same class as the
interest that are on offer at the same time and that have been lodged
with ASIC;
[Schedule 4, item 33, paragraph 1100X(3)(b) of the Act]
• a disclosure document for any financial products in the same class as
the interest that are on offer at the same time; or
[Schedule 4, item 33, paragraph 1100X(3)(c) of the Act]
• a copy of an executed or draft agreement for acquiring an ESS interest
in that class on arms lengths terms by a third party; or
[Schedule 4, item 33, paragraphs 1100X(3)(d) to (e) of the Act]
• another document prescribed in the regulations.
[Schedule 4, item 33, paragraph 1100X(3)(f) of the Act]
4.123 A draft sale agreement can only be used if a sale agreement that is not
materially different from the draft sale agreement is subsequently executed,
otherwise the relief under Schedule 4 to the main Bill will be revoked if the
employee share scheme has also accepted payment under the Act.
[Schedule 4, item 33, subsection 1100Y(3), paragraph 1100Y(4)(c) and
subparagraph 1100ZG(1)(c)(vi) of the Act]
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4.124 The policy intent is for a body corporate, where possible, to be able to use the
same valuations that they make, to assist participants with determining their
income tax liabilities, to conduct the valuation.
Disclosure for option plans and incentive rights
4.125 Option plans and incentive rights in a body corporate that is not included on an
official list of a financial market require two points of disclosure in order to
receive relief under Schedule 4 to the main Bill.
[Schedule 4, item 33, section 1100W and subsection 1100Y(4) of the Act]
4.126 Option plans and incentive rights require disclosure upfront, regardless of
whether acceptance of the offer requires payment or not. However, where there
is no payment, the offer document is the only form of disclosure required at the
point of offer. Options with both an upfront price and exercise price will
require streamlined disclosure at both points.
[Schedule 4, item 33, paragraphs 1100Q(1)(f), 1100Q(2)(a) and 1100Y(4)(a)
of the Act]
4.127 Additionally, before each exercise period during which an option or incentive
right can be exercised or an amount can be paid allowing the incentive right to
vest, a valuation, financial statements and solvency statements must be
provided at least 14 days prior.
[Schedule 4, item 33, paragraph 1100Y(4)(b) of the Act]
4.128 A draft sale agreement can only be used if a sale agreement that is not
materially different from the draft sale agreement is subsequently executed,
otherwise the relief under Schedule 4 to the main Bill will be revoked if the
employee share scheme has also accepted payment under the Act.
[Schedule 4, item 33, subsection 1100Y(3), paragraph 1100Y(4)(c) and
subparagraph 1100ZG(1)(c)(vi) of the Act]
Penalties for breaching the regime
4.129 There are three possible types of penalties for breaching the rules in relation to
employee share schemes in Schedule 4 to the main Bill:
• breaching of a contractual term;
• revocation of regulatory relief; and
• criminal offences.
4.130 To obtain regulatory relief, an offer by an employee share scheme must contain
certain mandatory contractual terms which require the offeror to comply with
the regime. If the offeror then breaches these terms, they will have breached
their contract and the participant can seek a variety of contractual remedies,
57
Employee Share Schemes
including damages.
[Schedule 4, item 33, paragraphs 1100P(c) and 1100Q(1)(g) and sections
1100Y and 1100Z of the Act]
4.131 To obtain regulatory relief, an offer by an employee share scheme must also be
on terms that comply with the monetary cap and any applicable, loan, trust and
contribution plan requirements. If the offeror breaches these terms, they will
have breached their contract and the participant seek a variety of contractual
remedies, including damages.
[Schedule 4, item 33, sections 1100P, 1100Q, 1100S, 1100T, 1100U and
1100ZA of the Act]
4.132 If an employee share scheme breaches certain key obligations of the regulatory
regime, such as the issue cap or obligations around trusts, loans and
contribution plans and has accepted payment, the employee share scheme may
have its regulatory relief revoked (see below).
[Schedule 4, item 33, section 1100ZG of the Act]
4.133 If a disclosure document contains misleading and deceptive statements or
omissions, or is out of date, relief is not revoked but the offeror may commit an
offence (see below).
[Schedule 4, item 33, sections 1100ZH and 1100ZI of the Act]
4.134 It is also an offence to deal with participants' money inappropriately in certain
circumstances, and for particular people to fail to notify the business of
misleading or deceptive statements or omissions in disclosure documents.
[Schedule 4, item 33, sections 1100ZE, 1100ZF and 1100ZJ of the Act]
Breaching of contractual terms
4.135 For an offer of interests under an employee share scheme to receive relief
under Schedule 4 to the main Bill, the compliance with certain regulatory
requirements must be included as contractual terms in the offer.
4.136 These requirements that must be included in the terms of offer are:
• compliance with the monetary cap; and
[Schedule 4, item 33, section 1100ZA of the Act]
• compliance with the various disclosure obligations.
[Schedule 4, item 33, paragraph 1100Q(1)(g) and sections 1100Y and
1100Z of the Act]
4.137 Additionally, if the scheme involves a trust, loan or contribution plan, certain
requirements must be met by the terms of the loan, trust or contribution plan.
[Schedule 4, item 33, sections 1100S, 1100T and 1100V of the Act]
4.138 If these terms are not included, the scheme will not receive regulatory relief
under Schedule 4 to the main Bill. This means the scheme will be in breach of
various prohibitions in the Act such as selling securities or financial products
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without disclosure (see sections 707 and 1012B).
[Schedule 4, item 33, sections 1100P and 1100Q of the Act]
4.139 If these terms are included, but the offeror subsequently breaches the terms, the
offeror will have breached their contract and the participant can recover a
variety of contractual remedies, including damages.
[Schedule 4, item 33, section 1100Y of the Act]
Contractual terms relating to disclosure
4.140 For an offer by an employee share scheme to receive regulatory relief, terms
must be included which require:
• the offer document and any supporting documents to not include any
misleading or deceptive statements or omissions; and
[Schedule 4, item 33, paragraph 1100Z(1)(a) of the Act]
• certain people listed in the legislation (directors of the body, people
named in the offer etc) to inform the employee share scheme, if they
become aware of any misleading, deceptive, out of date, omitted or
otherwise materially incorrect elements in the offer document or
supporting documents.
[Schedule 4, item 33, paragraph 1100Z(1)(b) of the Act]
4.141 The contractual terms must allow a participant who suffers loss or damage
from an out of date or deceptive or misleading statement or omissions, or a
failure to provide required supporting documents, to recover damages from:
• the body corporate or responsible entity making the offer;
• each director of the body corporate or responsible entity making the
offer;
• a person named in any disclosure document with their consent as a
proposed director of the body corporate or responsible entity of a listed
registered scheme;
• in the case of misleading or deceptive statements or omissions, a
person named in the disclosure documents with their consent who
made the misleading or deceptive statement or omission or statement
on which the misleading or deceptive statement or omission is based;
and
• in the case of a failure to notify, the persons mentioned in the above
three dot points who fail to notify the body corporate or responsible
entity.
[Schedule 4, item 33, subsection 1100Z(2) of the Act]
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Employee Share Schemes
4.142 The contractual term can be limited so that the above individuals are not liable
for a participant's loss or damage where:
• the persons made all necessary enquiries that were reasonable in the
circumstances and after doing so, believed on reasonable grounds that
the statements were not misleading or deceptive; or
• the person did not know that the statement was misleading or
deceptive; or
• the person was unaware of a new circumstance that has arisen during
the application period; or
• if the person is a person named in a disclosure document - the person
publicly withdraws their consent to be named in the disclosure
document; or
• if the person is a body corporate or a responsible entity of a listed
registered scheme - the person relied on information from someone
other than a director, employee or agent; or
• if the person is an individual - the person relied on information from
someone other than an employee or agent of the individual.
[Schedule 4, item 33, subsection 1100Z(3) of the Act]
Revoking of regulatory relief
4.143 For an offer of interests under an employee share scheme to receive relief
under Schedule 4 to the main Bill, compliance with certain regulatory
requirements must be included as essential terms in the offer. If the scheme
involves a trust, loan or contribution plan, these must also have terms which
meet particular requirements.
4.144 If these terms are not included, the scheme will not receive regulatory relief
under Schedule 4 to the main Bill and will be in breach of various prohibitions
in the Act such as selling securities or financial products without disclosure
(see above).
[Schedule 4, item 33, sections 1100P and 1100Q of the Act]
4.145 If an offeror breaches certain key regulatory terms of the regime, and accepts
payment under the employee share scheme, the schemes regulatory relief will
be revoked and taken to never have applied. This will mean the scheme will
have breached various prohibitions in the Act such as selling securities or
financial products without disclosure (see above).
[Schedule 4, item 33, sections 1100P and 1100Q of the Act]
4.146 The requirements that result in revoking regulatory relief if breached are after
an employee share scheme accepts payment are:
• the requirements for loans, trusts and contribution plans;
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• compliance with the monetary cap;
• compliance with the issue cap; and
• providing disclosure documents at the required time.
[Schedule 4, item 33, section 1100ZG of the Act]
4.147 The limitation period for civil suits and ASIC taking enforcement action begins
when the regulatory relief is revoked, as opposed to when the interests are
originally issued.
[Schedule 4, item 33, subsections 1100ZG(4) to (5) of the Act]
Criminal offences
Misleading and deceptive statements offences
4.148 A person must not offer interests under an employee share scheme if the offer
document or supporting information:
• contains a misleading or deceptive statement;
• omits information in a way that causes the document to be misleading
or deceptive; or
• does not reflect a new circumstance that has arisen during the offer
period.
[Schedule 4, item 33, subsections 1100ZH(1) to (2) of the Act]
4.149 Likewise, a person must not provide disclosure documents to a participant
during the exercise period for an option or incentive right under an employee
share scheme if the document:
• contains a misleading or deceptive statement;
• omits information in a way that causes the document to be misleading
or deceptive; or
• does not reflect a new circumstance that has arisen during the offer
period.
[Schedule 4, item 33, subsections 1100ZI(1) to (2) of the Act]
4.150 A person commits an offence if the misleading or deceptive statement or
omission is materially adverse from the point of view of a participant in an
employee share scheme. The penalty for a person who commits the offence is a
maximum penalty of 5 years imprisonment.
[Schedule 4, items 33 and 37, subsections 1100ZH(4) and 1100ZI(4) and
Schedule 3 of the Act]
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Employee Share Schemes
4.151 A person also commits an offence if they fail to inform the business operating
an employee share scheme if they become aware of a misleading or deceptive
statement or omission in a disclosure document, if the person:
• is a director of the relevant body corporate (or a proposed director); or
• the person is named in the disclosure document and has provided
information mentioned in the disclosure document.
[Schedule 4, item 33, subsection 1100ZJ(2) and Schedule 3 of
the Act]
4.152 Failure to do so is an offence of strict liability. The penalty for this offence is a
maximum penalty of 50 penalty units.
[Schedule 4, items 33 and 37, section 1100ZJ and Schedule 3 of the Act]
4.153 A statement about a future matter will be considered misleading where the
person making the statement does not have reasonable grounds to make that
statement.
[Schedule 4, item 33, subsections 1100ZH(3) and 1100ZI(3)]
Defences to misleading and deceptive statement offences
4.154 The below defences are available for persons who would otherwise be
responsible for misleading and deceptive statements or omissions in employee
share scheme disclosure documents:
• the person made all reasonable inquiries;
• the person did not know the statement was misleading or deceptive or
did not know a new circumstance had arisen;
• the person placed reasonable reliance on another person;
• the person publicly withdrew their consent for their statement to be
used in the disclosure document;
• the relevant documents were updated as soon as reasonably
practicable.
[Schedule 4, item 33, subsections 1100ZH(4) to (11), 1100ZI(4) to (11) and
1100ZJ(5) of the Act]
4.155 Further detail in relation to each of these defences is provided below.
4.156 For these defences the defendant bears an evidential burden to point to
evidence that suggests a reasonable possibility that the matter exists or does not
exist. Once the defendant discharges this evidential burden, the prosecution
must disprove these matters beyond reasonable doubt.
4.157 The evidential burden on the defendant is therefore fully consistent with the
principle in the Guide to Framing Commonwealth Offences, Infringement
Notices and Enforcement Powers which establishes the general rule that a
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defendant should only bear an evidential burden of proof for an
offence-specific defence.
4.158 A person who made all reasonable inquiries in the circumstances and believed
on reasonable grounds that the statement or omission was not misleading or
deceptive will not be responsible for the statement. The person bears the
evidential burden of establishing that they made all reasonable inquiries and
had a reasonable belief that the statement was not misleading or deceptive.
This is appropriate as the person is best placed to raise evidence that they made
all reasonable inquiries and had the requisite reasonable belief.
[Schedule 4, item 33, subsections 1100ZH(5) and 1100ZI(5) of the Act]
4.159 A person who did not know a misleading or deceptive statement or omission
was misleading or deceptive will not be responsible for the statement.
Similarly, where a new matter arises which would have been required to be
disclosed, or which makes a document contain a misleading or deceptive
statement or omission, a person will not be responsible for the statement,
omission or unmentioned new matter where the person did not know about the
new circumstance. The person bears the evidential burden of establishing that
they did not know that the statement or omission was misleading or deceptive
or that the new circumstance had arisen. This is appropriate as the person is
best placed to raise evidence of their own knowledge.
[Schedule 4, item 33, subsections 1100ZH(6) to (8) and 1100ZI(6) to (8) of
the Act]
4.160 A person who placed reasonable reliance on information given by another
person, other than if that information was given by an employee, agent or (in
the case of a company) a director will not be responsible for a misleading or
deceptive statement or omission. The evidentiary burden for this defence rests
on the person making the claim as they are best placed to demonstrate that they
did in fact place reasonable reliance on information from an independent
person.
[Schedule 4, item 33, subsections 1100ZH(9) to (10) and 1100ZI(9) to (10) of
the Act]
4.161 A person will not be liable for a misleading or deceptive statement or omission
which arises due to a new circumstance, or an undisclosed new matter, where
they prove that the relevant document was updated as soon as reasonably
practicable after the new circumstance arose and the updated information was
provided to the participants. The evidentiary burden for this defence rests on
the person making the claim as they are best placed to demonstrate that the
document was updated as soon as reasonably practicable.
[Schedule 4, item 33, subsections 1100ZH(11) and 1100ZH(11) of the Act]
4.162 A person named in a disclosure document as a director or as providing
information for the disclosure document will not be responsible for failing to
inform the employee share scheme of the misleading statement if they publicly
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Employee Share Schemes
withdrew their consent to being named in the document. A person making use
of this defence has the evidentiary burden of demonstrating that they did in fact
withdraw their consent publicly as they would be best placed to be able to raise
the relevant evidence of their public withdrawal.
[Schedule 4, item 33, subsection 1100ZJ(5) of the Act]
Offences for holding participants' money
Offence for holding participants' money before interests are transferred
4.163 A person who offers interests under an employee share scheme to participants
in the scheme must:
• hold all application money on trust for the participants until the
interests are issued or the money is returned to the participants; and
• if the money is required to be returned to the participants, return the
money as soon as possible.
[Schedule 4, item 33, section 1100ZE of the Act]
4.164 Failure to keep the money on trust is a strict liability offence with a penalty of
60 penalty units.
[Schedule 4, items 33 and 37, subsection 1100ZE(1) and Schedule 3 of
the Act]
4.165 Failure to return the money as soon as possible is a strict liability offence with
a penalty of 20 penalty units.
[Schedule 4, items 33 and 37, subsection 1100ZE(2) and Schedule 3 of
the Act]
Offence for holding participants' money in advance of a liquidity event
4.166 An employee share scheme must hold any amounts paid in anticipation of a
liquidity event on trust and be returned as soon as practicable if the liquidity
event does not occur.
[Schedule 4, item 33, subsections 1100ZB(5) and (6) of the Act]
4.167 A failure to keep the money on trust until it is returned to the participant or
until the liquidity event occurs is a strict liability offence with a penalty of
60 penalty units.
[Schedule 4, items 33 and 37, subsection 1100ZF(1) and Schedule 3 of
the Act]
4.168 Failure to return the money as soon as possible is a strict liability offence with
a penalty of 20 penalty units.
[Schedule 4, items 33 and 37, subsection 1100ZF(2) and Schedule 3 of
the Act]
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Offers with pre-existing disclosure exemptions
4.169 The Act contains pre-existing disclosure exemptions for certain types of offers
(see sections 708 and 1012D). These exemptions generally relate to offers of
interests to sophisticated individuals who are able to make informed decisions
about the offers (for example the sophisticated investors exemption in
subsection 708(8) of the Act).
4.170 An offer made by an employee share scheme can take advantage of these
pre-existing exemptions in the Act. This will mean where an offer made by an
employee share scheme would normally be required to comply with the
streamlined disclosure requirements outlined above, an offer by an employee
share scheme taking advantage of these pre-existing disclosure exemptions
under Schedule 4 to the main Bill would be able to be made without any
disclosure and still receive regulatory relief.
4.171 An offer under an employee share scheme, which would not require disclosure
under the Act due to pre-existing exemptions will receive relief under
Schedule 4 to the main Bill if:
• the interests under the scheme are ESS interests;
• the participants in the scheme are directors, employees or service
providers; and
• if the scheme is utilising the small-scale offering exemption and
involves a loan, trust or contribution plan - the scheme complies with
the rules concerning loans, trusts or contribution plans.
[Schedule 4, item 33, section 1100R of the Act]
4.172 Offers by employee share schemes using the pre-existing disclosure
exemptions are not required to comply with the trust, loan and contribution
requirements (except for small scale offers under subsection 708(1) of the Act).
This is because such offers generally go to sophisticated individuals who are
able to make informed decisions about the offers and who would already be
able to receive interests without disclosure in a non-employee share scheme
context.
[Schedule 4, item 33, subsection 1100R(1) of the Act]
4.173 Offers made under subsection 708(1), the small-scale offering exemption, will
be required to comply with the trust, loan and contribution plan requirements.
This is because such offers can be provided to any individual, regardless of
their level of financial literacy.
[Schedule 4, item 33, subsection 1100R(2) of the Act]
4.174 Schedule 4 also puts beyond doubt that offers by employee share schemes
cannot take advantage of the no-consideration exemption in 708(15) of the Act,
65
Employee Share Schemes
as offers under employee share schemes are provided by businesses in
exchange for consideration, namely the labour of the employees.
[Schedule 4, item 33, paragraph 1100R(1)(a) and the note under paragraph
1100R(1)(b) of the Act]
ASIC Powers
ASIC exemption and modification powers
4.175 Schedule 4 to the main Bill gives ASIC a variety of regulatory tools to
monitor, enforce and modify the requirements for employee share schemes.
4.176 Schedule 4 to the main Bill allows ASIC to exempt or modify Chapters 2L,
5, 5C, 6D and 7 of the Act with regard to employee share schemes. These
chapters are the parts of the Act that are amended by Schedule 4 to the main
Bill which contain the requirements for businesses which issue and sell
financial products and securities.
[Schedule 4, item 33, section 1100ZK of the Act]
4.177 Schedule 4 to the main Bill allows ASIC to modify the above chapters of the
Act with regard to all employee share schemes, a class of employee share
schemes or an individual employee share scheme.
[Schedule 4, item 33, subsections 1100ZK(2) to (3) of the Act]
4.178 An exemption or modification by ASIC can be subject to conditions. An
employee share scheme which is relying on an exemption, must comply with
any conditions of that exemption. Only ASIC may apply to the Court to ensure
an employee share scheme complies with a condition of an exemption.
[Schedule 4, item 33, subsections 1100ZK(4) to (6) of the Act]
4.179 An exemption that relates to all or a specified class of employee share schemes
must be made by legislative instrument. An exemption that relates to a
specified employee share scheme must be made in a notifiable instrument.
[Schedule 4, item 33, subsections 1100ZK(7) to (8) of the Act]
4.180 ASIC must provide a copy of an exemption that relates to a specified employee
share scheme to the relevant body corporate or responsible entity as soon as is
reasonably practical after the exemption or declaration is made.
[Schedule 4, item 33, subsection 1100ZK(9) of the Act]
4.181 These exemption and modification powers are necessary to ensure flexibility in
the regulatory regime. Employee share schemes are complex legal
arrangements that are used in a wide variety of industries which interact with a
similarly wide variety of regulatory frameworks including rules in relation to
selling of securities and financial products, financial advice, hawking and
advertising of securities and financial products and disclosure obligations as
well as taxation and employment law. Industry practice is also often evolving
as new interests enter the market, which require changes in the regulatory
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framework. Therefore, it is likely there are unforeseen circumstances and
situations which would not be appropriate to address in the primary law. The
exemption and modification powers provide ASIC the ability to address these
situations and ensure the regime operates in line with the policy intent.
4.182 Exemptions made in legislative instruments will be subject to Parliamentary
disallowance.
ASIC stop orders
4.183 ASIC may issue a stop order to prevent an offer being made under an
employee share scheme.
4.184 ASIC may issue a stop order in relation to an offer under an employee share
scheme if:
• the offer is not worded and presented in a clear, concise and effective
manner;
• a disclosure document which is provided with the offer, does not
contain the required material;
• the offer does not contain the essential terms;
• the offer contains a misleading or deceptive statement; or
• a person has contravened, or is likely to contravene an essential term of
the offer.
[Schedule 4, item 33, subsections 1100ZL(1) to (2) of the Act]
4.185 Before making the order, ASIC must hold a hearing and give a reasonable
opportunity to any interested people to make oral or written submissions about
whether such an order should be made.
[Schedule 4, item 33, subsection 1100ZL(3) of the Act]
4.186 However, if ASIC considers that a delay in making the order caused by holding
a hearing would be prejudicial to public interest, ASIC may make an interim
order without holding a hearing for 21 days.
[Schedule 4, item 33, subsections 1100ZL(4) to (5) of the Act]
4.187 Such an order by ASIC must be made in writing and be served to the person
who is ordered not to offer or issue interests under an employee share scheme.
[Schedule 4, item 33, subsection 1100ZL(6) of the Act]
ASIC power to request documents
4.188 ASIC may require a person to provide the offer document and any other
documents ASIC thinks necessary in order to form an opinion about whether
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Employee Share Schemes
Schedule 4 to the main Bill has been complied with.
[Schedule 4, item 33, subsection 1100ZM(1)]
4.189 The person must provide the information within such reasonable period and in
the manner specified by ASIC. Failure to do so is a strict liability offence
subject to 60 penalty units.
[Schedule 4, items 33 and 37, subsections 1100ZM(2) to (3) and Schedule 3
of the Act]
Lodging documents with ASIC and public inspection
4.190 Schedule 4 to the main Bill does not require employee share scheme disclosure
documents be lodged with ASIC. However, in certain circumstances disclosure
documents under employee share schemes may be required to be lodged with
ASIC under other provisions of the Act.
4.191 The current law provides that, if an employee share scheme disclosure
document is lodged with ASIC, members of the public are entitled to inspect
the lodged documents unless (see section 1274 of the Act):
• the employee share scheme relates only to employees;
• the disclosure document relates to ordinary shares;
• the body corporate was incorporated less than 10 years ago;
• all body corporates in the employee share scheme's corporate group
are unlisted; and
• the issuing body corporate has an aggregated turnover of less than
$50 million.
4.192 This may make businesses more reluctant to offer employee share schemes as
they may be required to make potentially sensitive internal financial
information public.
4.193 Schedule 4 to the main Bill removes the requirements contained in the first
three dot points above so that employee share scheme disclosure documents
are not required to be made public if:
• all bodies corporate in the employee share schemes corporate group are
unlisted; and
• the issuing body corporate has an aggregated turnover of less than
$50 million.
[Schedule 4, items 34 and 35, section 1274 of the Act]
4.194 This will encourage businesses to offer employee share schemes as fewer
employee share schemes will be required to make their internal financial
information made public.
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Modification by Regulations
4.195 Schedule 4 to the main Bill creates regulation-making powers which can
modify the operation of the regime.
4.196 Schedule 4 to the main Bill contains regulation-making powers which can:
• add additional kinds of ESS participants;
[Schedule 4, item 33, subparagraphs 1100L(1)(a)(iv) and (1)(b)(iv) of
the Act]
• add new types of ESS interests;
[Schedule 4, item 33, subparagraph 1100M(1)(i),
paragraphs 1100M(2)(d) and 1100M(3)(d) of the Act]
• add requirements for offers which do not require payment to
participate to obtain the regulatory relief under Schedule 4 to the
main Bill;
[Schedule 4, item 33, paragraph 1100P(1)(d) of the Act]
• add requirements for offers which require payment to participate to
obtain the regulatory relief under Schedule 4 to the main Bill;
[Schedule 4, item 33, paragraphs 1100Q(1)(h) and (2)(c) of the Act]
• modify the issue cap by lifting the percentage from 5 per cent (for
listed bodies corporate or schemes) or 20 per cent (for unlisted bodies
corporate);
[Schedule 4, item 33, subparagraph 1100V(2)(b)(iii) of the Act]
• modify the monetary cap, by either lifting the basic cap amount from
$30,000, providing alternatives to the monetary cap or adding
additional types liquidity events which are exempt from the
monetary cap;
[Schedule 4, item 33, paragraph 1100ZA(4)(b) and
subsections 1100ZA(6), 1100ZA(8) and 1100ZB(8) of the Act]
• modify the disclosure requirements, including exempting certain types
of offer from requiring disclosure; and
[Schedule 4, item 33, subsections 1100W(4) and 1100Y(5),
paragraphs 1100T(f) and 1100W(2)(j) and
subparagraph 1100Y(4)(a)(iv) of the Act]
• add requirements for trust, contribution plans and loans for employee
share schemes.
[Schedule 4, item 33, paragraphs 1100S(3)(e), 1100T(f) and
1100U(1)(c) of the Act]
4.197 These regulation-making powers are necessary to ensure flexibility in the
regulatory regime.
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Employee Share Schemes
4.198 Employee share schemes are complex legal arrangements that are used in a
wide variety of industries which interact with a similarly wide variety of
regulatory frameworks including rules in relation to selling of securities and
financial products, financial advice, hawking and advertising of securities and
financial products and disclosure obligations as well as taxation and
employment law. Industry practice is also often evolving as new interests enter
the market, which require changes in the regulatory framework.
4.199 It is therefore likely that there are unforeseen circumstances and situations
which it would not be appropriate to address in the primary law. Regulation
making powers in addition to ASIC exemption and modification powers are
necessary to ensure decisive action can be taken in circumstances where it
would be inappropriate for ASIC to intervene, and to ensure the scheme is
responsive to government policy.
4.200 Regulations made under Schedule 4 to the main Bill will be disallowable and
subject to parliamentary scrutiny.
Subsequent sale provisions
4.201 Generally, disclosure is not required for private sales of interests by a person
under the Act after an interest has been issued. However, in some
circumstances the on-sale of interests does require disclosure under the Act
(see sections 707 and 1012C of the Act).
4.202 Participants in an employee share scheme can sell interests without disclosure
if the participant reasonably believes they received that interest under an
employee share scheme, and they reasonably believe they are only selling their
interest to another participant in the same employee share scheme.
[Schedule 4, item 33, section 1100ZD of the Act]
Other amendments
4.203 The existing definitions of 'employee share scheme', 'eligible employee share
scheme' and 'employee share scheme buy-back' are repealed and replaced by
the new definitions inserted by Schedule 4 to the main Bill.
[Schedule 4, items 2, 4, 5 and 33, section 9, definitions of an 'eligible
employee share scheme', 'employee share scheme' and 'employee share
scheme buy-back' and section 1100L of the Act]
4.204 Consequential amendments are made to the definition and uses of 'contribution
plan' throughout the Act and a new definition of 'employee share buy-back' is
added.
[Schedule 4, items 1, 3, 6, 10, 11, 13 and 18, section 9, definitions of
'contribution plan', 'employee share buy-back' and 'selective buy-back' and
sections 709 and 257B of the Act]
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4.205 The existing definition of 'ESS Interest' is repealed and replaced by a new
definition inserted by Schedule 4 to the main Bill.
[Schedule 4, item 7, section 9, definition of 'ESS Interest' of the Act]
4.206 Amendments are made to section 708 to direct readers to the rules for
employee share schemes.
[Schedule 4, items 16 and 17, section 708 of the Act]
4.207 An ESS contribution plan is excluded from the definition of a managed
investment scheme in section 9 of the Act.
[Schedule 4, item 9, section 9, definition of 'managed investment scheme' of
the Act]
4.208 Amendments are made to sections 703B and 725A to indicate that Part 6D.3A
of the Act does not apply to employee share schemes.
[Schedule 4, items 14, 15, 19 and 20, sections 703B and 725A of the Act]
4.209 The content relating to employee share schemes in section 911A of the Act is
removed as it has been made redundant by Schedule 4 to the main Bill.
[Schedule 4, items 21 to 23, section 911A of the Act]
4.210 The content relating to employee share schemes in relation to hawking
securities and financial products, and the design and distribution obligations
regime in sections 736, 992A and 994B of the Act is removed as it has been
made redundant by Schedule 4 to the main Bill.
[Schedule 4, items 24 to 26, sections 992A and 994B of the Act]
4.211 Amendments are made to section 1010A and 1010BA of the Act to indicate
that Divisions 5A, 5B, 5C and 6 do not apply to employee share schemes, as
well as amendments to 1012E to direct readers to the new regime.
[Schedule 4, items 27 to 32 and sections 1010A, 1010BA and 1012E]
4.212 Schedule 4 to the main Bill contains a simplified outline of the rules for
employee share schemes.
[Schedule 4, item 33, section 1100E of the Act]
4.213 Schedule 4 to the main Bill covers interests that are received in this
jurisdiction, regardless of where any resulting issue, sale or transfer occurs.
[Schedule 4, item 33, section 1100F of the Act]
4.214 Schedule 4 to the main Bill covers offers of ESS interests, invitations for
applications for the issue, sale or transfer of ESS interests and invitations to
purchase ESS interests.
[Schedule 4, item 33, section 1100G of the Act]
4.215 The person who offers interests under Schedule 4 to the main Bill is the person
who has capacity or agrees to issue the interests if the offer is accepted.
[Schedule 4, item 33, section 1100H of the Act]
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Employee Share Schemes
4.216 Offers made under an employee share scheme under Schedule 4 to the main
Bill can also simultaneously rely on other pre-existing disclosure exemptions
in the Act.
[Schedule 4, item 33, section 1100J of the Act]
4.217 Schedule 4 to the main Bill does not apply to unlisted registered schemes.
[Schedule 4, item 33, section 1100L of the Act]
4.218 Offers made under employee share schemes are not counted for the purpose of
determining if the small-scale offerings exemption for disclosure applies under
subsection 708(1), unless the employee share scheme is also utilising the
small-scale offering exemption.
[Schedule 4, item 33, subsection 1100ZC(4) of the Act]
4.219 Any offers made in connection to an employee share scheme are subject to the
pre-existing offences for misleading and deceptive conduct present in the Act.
These include:
• section 1041E False and misleading statements (strict and normal
offences) in relation to disseminating information that will induce
persons to apply for financial products;
• section 1041F Inducing a person to deal in financial products; and
• section 1041 Misleading and deceptive conduct (civil liability).
4.220 Schedule 4 to the main Bill also makes amendments to allow a proprietary
company to offer options in respect of its shares to existing shareholders of the
company or employees of the company or a subsidiary of the company, even
where this activity would require disclosure under Chapter 6D.
[Schedule 4, item 11, subsection 113(3)(a) of the Act]
Commencement, application, and transitional
provisions
4.221 Schedule 4 to the main Bill will commence 6 months after Royal Assent.
[Schedule 4, Commencement table]
4.222 Shares from entities listed on financial markets listed in the ASIC Corporations
(Definition of Approved Foreign Market) Instrument 2017/669 will be treated
as shares from entities listed in Australia for the purposes of Schedule 4 to the
main Bill until ASIC issues an instrument under Schedule 4 to the main Bill
prescribing a different set of foreign markets. That instrument prescribes
foreign markets that are covered by the rules in CO 14/1000.
[Schedule 4, item 36, section 1696 of the Act]
72
Varying the GDP uplift
factor for tax instalments
Table of Contents:
Outline of chapter ................................................................................ 73
Context of amendments ....................................................................... 73
Comparison of key features of new law and current law ...................... 74
Detailed explanation of new law .......................................................... 75
Commencement, application, and transitional provisions .................... 75
Outline of chapter
5.1 Schedule 5 to the main Bill amends the TAA 1953 to reduce the GDP
adjustment factor for the 2022-23 income year to 2 per cent. The GDP
adjustment factor is applied by the Commissioner to work out the amount of
PAYG and GST instalments payable by a taxpayer in certain circumstances.
Context of amendments
5.2 Most small businesses and some individuals are required to pay instalments
toward their expected annual income tax under the PAYG instalment system.
The difference between instalment payments and the taxpayer's final tax
liability is reconciled in a wash-up payment or refund at the time an income tax
assessment is made (generally at the end of the income year).
5.3 Small business entities that are liable to pay GST may also elect to pay by
instalments. The amount of the GST instalments payable by a small business
entity is worked out by the Commissioner taking into account the GDP
adjustment factor.
5.4 There are a number of methods to determine tax instalments based on previous
tax outcomes. These include:
• the Instalment Rate method - under this method the amount of the
instalment is worked out based on income as a proxy for profit within
instalment periods; and
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Varying the GDP uplift factor for tax instalments
• the Quarterly Instalment Amount method - under this method the
amount of the instalment is worked out based on previous tax
outcomes that are uplifted based on the nominal increase in GDP over
the previous two calendar years.
5.5 Taxpayers can vary their instalments if they consider their income is expected
to be lower or higher than the amount determined by the Commissioner.
5.6 The Commissioner has advised that, without this amendment, the GDP
adjustment factor that will apply to work out instalments for the
2022-23 income year under the Quarterly Instalment Amount method will be
10 per cent.
5.7 The GDP adjustment factor can be unrepresentative of expected profit growth
in income years where economic and business conditions change quickly and
the expected income of taxpayers changes accordingly. This can cause
taxpayers to be required to pay instalments that are too high compared with
their actual income, with the overpaid tax being credited to them after the end
of the income year when their final tax liability is assessed.
5.8 Therefore, having regard to the economic and business conditions caused by
the Coronavirus, the GDP adjustment factor that applies to work out the
amount of instalments payable is reduced to 2 per cent for the 2022-23 income
year.
Comparison of key features of new law and
current law
Table 5.1 Comparison of new law and current law
New law Current law
The GDP adjustment factor used by the The GDP adjustment factor used by the
Commissioner to work out PAYG Commissioner to work out PAYG
instalments under the Quarterly Instalment instalments under the Quarterly Instalment
Amount method for the 2022-23 income Amount method for the 2022-23 income year
year will be 2 per cent. will be 10 per cent.
The Commissioner will apply the reduced The Commissioner will apply the GDP
GDP adjustment factor to work out the adjustment factor to work out the amount of
amount of GST instalments payable by GST instalments payable by small business
small business entities in the entities in the 2022-23 income year.
2022-23 income year.
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Detailed explanation of new law
5.9 Schedule 5 to the main Bill amends section 45-405 in Schedule 1 to the
TAA 1953 to reduce the GDP adjustment factor for the 2022-23 income year
to 2 per cent.
5.10 Taxpayers who make PAYG and GST instalments on the basis of the Quarterly
Instalment Amount method are required to pay a percentage of their GDP
adjusted notional tax each quarter as worked out under either section 45-400 or
section 45-402 in Schedule 1 to the TAA 1953.
5.11 GDP adjusted notional tax is calculated by the Commissioner under
section 45-405 in Schedule 1 to the TAA 1953. Broadly, a taxpayer's GDP
adjusted notional tax is calculated by increasing the taxpayer's adjusted taxable
income from their most recent income tax return by the GDP adjustment factor
to give the adjusted taxable income for the purposes of calculating their
notional tax for the current income year.
5.12 The GDP adjustment factor is generally calculated using the formula in
subsection 45-405(3) in Schedule 1 to the TAA 1953. However, for the
2022-23 income year, the GDP adjustment factor is set at 2 per cent.
[Schedule 5, item 1, subsection 45-405(9) in Schedule 1 to the TAA 1953]
5.13 The Commissioner will apply the reduced GDP adjustment factor to work out
the amount of GST instalments payable by small business entities in the
2022-23 income year.
5.14 Taxpayers may still vary their quarterly instalments if they consider their
income is expected to be lower or higher than the amount determined by the
Commissioner using the 2 per cent GDP adjustment factor.
5.15 The reduction of the GDP adjustment factor does not alter the relevant
taxpayer's overall tax liability. Instead, the reduction minimises adverse
impacts on cashflow for the 2022-23 income year as instalments fall due.
Commencement, application, and transitional
provisions
5.16 The amendments commence on the first day of the first quarter following
Royal Assent of the main Bill.
[Clause 2]
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Varying the GDP uplift factor for tax instalments
5.17 These amendments will apply for the purposes of working out the amount of
PAYG and GST instalments for instalment quarters of the 2022-23 income
year.
[Schedule 5, item 2]
5.18 This will ensure that the measure will apply for the purposes of working out
the amount of a taxpayer's instalments in relation to the 2022-23 income year
(including the PAYG instalments payable by a taxpayer that has a substituted
accounting period). For relevant taxpayers with substituted accounting periods
that are early balancers for the 2022-23 income year, the reduction of the GDP
adjustment factor to 2 per cent does not cause a disadvantage as there is a
reduction in the applicable instalments.
5.19 To avoid inoperative provisions remaining in the tax laws, the provisions that
give effect to this measure will be automatically repealed on 1 July 2027.
[Schedule 5, item 3]
76
Low and middle income
tax offset
Table of Contents:
Outline of chapter ................................................................................ 77
Context of amendments ....................................................................... 77
Summary of new law............................................................................ 78
Comparison of key features of new law and current law ...................... 78
Detailed explanation of new law .......................................................... 79
Commencement, application, and transitional provisions .................... 80
Commencement ............................................................................ 80
Application..................................................................................... 80
Outline of chapter
6.1 Schedule 6 to the main Bill amends the ITAA 1997 to increase the low and
middle income tax offset for the 2021-22 income year by $420 to ease cost of
living pressures for Australians.
Context of amendments
6.2 In the 2022-23 Budget, the Government announced that it would increase the
low and middle income tax offset for the 2021-22 income year to help ease
cost of living pressures for Australians.
6.3 A person is liable to pay income tax in Australia with reference to their taxable
income for the income year. The amount of income tax payable is calculated
by applying the applicable income tax rate to your taxable income and then
reducing it by your tax offsets for the income year.
6.4 Income tax law also provides for a number of tax offsets, which are reductions
in the income tax that would otherwise be payable by taxpayers that satisfy the
specified requirements. Many of these offsets are contained in Division 61 of
the ITAA 1997.
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Low and middle income tax offset
6.5 Subdivision 61-D of the ITAA 1997 provides for one such tax offset - the low
and middle income tax offset - for lower income individuals (and certain
trustees taxed in the place of these individuals) in the 2018-19, 2019-20,
2020-21 and 2021-22 income years.
6.6 Schedule 6 to the main Bill gives effect to the Government's announcement in
the 2022-23 Budget by amending Subdivision 61-D of the ITAA 1997 to
increase the low and middle income tax offset for eligible individuals (and
trustees) by $420 for the 2021-22 income year.
Summary of new law
6.7 Schedule 6 to the main Bill amends the ITAA 1997 to increase the low and
middle income tax offset by $420 for the 2021-22 income year.
6.8 The increase in the low and middle income tax offset will apply to:
• individuals
- who are Australian residents at any time during the
2021-22 income year; and
- whose taxable income for the 2021-22 income year is less than
$126,000; or
• trustees
- who are liable to be assessed under section 98 of the
Income Tax Assessment Act 1936 in respect of a share of the
net income of a trust;
- the beneficiary who is presently entitled to that share is an
individual who is an Australian resident at any time during the
income year; and
- that share is less than $126,000.
Comparison of key features of new law and
current law
Table 6.1 Comparison of new law and current law
New law Current law
Schedule 6 to the main Bill increases the The tax offset amount for persons who are
low and middle income tax offset amount eligible to receive the low and middle
income tax offset is as follows:
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New law Current law
for the 2021-22 income year by $420 for • Taxable income does not exceed
eligible individuals (and trustees). $37,000;
- $255;
• Taxable income exceeds $37,000 but is
not more than $48,000;
- $255, plus an amount equal to
7.5 per cent of the excess;
• Taxable income exceeds $48,000 but is
not more than 90,000;
- $1,080;
• Taxable income exceeds $90,000 but is
not more than $126,000;
- $1,080, less an amount equal to
three per cent of the excess.
Detailed explanation of new law
6.9 The low and middle income tax offset amount is increased by $420 for the
2021-22 income year.
[Schedule 6, item 3, subsection 60-107(1A) of the ITAA 1997]
6.10 This increase applies to eligible persons who have a taxable income that is less
than $126,000 for the 2021-22 income year (i.e. persons who are entitled to a
low and middle income tax offset amount of greater than $0 for the 2021-22
income year).
[Schedule 6, item 3, paragraph 60-107(1A)(b) of the ITAA 1997]
6.11 The increase of $420 applies to persons in each of the four income thresholds
to which the existing low and middle income tax offset applies. As a result:
• persons with taxable incomes below $37,000 would be entitled to a
total tax offset amount of $675;
• persons with taxable incomes exceeding $37,000 but not more than
$48,000 would be entitled to a total tax offset amount of $675, plus
7.5 cents for every dollar above $37,000;
• persons with taxable incomes exceeding $48,000 but not more than
$90,000 are entitled to a tax offset amount of $1,500; and
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Low and middle income tax offset
• persons with taxable income exceeding $90,000 but less than $126,000
are entitled to a tax offset amount of $1,500 less 3 cents for every
dollar above $90,000.
6.12 In accordance with the existing law, the low and middle income tax offset does
not apply to persons who have a taxable income for the 2021-22 income year
that exceeds $126,000.
6.13 The low and middle income tax offset can only reduce the amount of tax
payable on an individual's taxable income to a minimum of $0. Any offset
amount that remains once an individual's tax payable is zero is not refunded.
As a result, some individuals will not have sufficient tax liability to use the
entire amount of the additional offset.
6.14 All of the other features of the existing low and middle income tax offset,
including the taper-in and taper-out rates and the integrity rules applying to
persons below the age of 18 years, remain unchanged.
[Schedule 6, item 4, subsections 60-107(2) and (4) of the ITAA 1997]
6.15 Sections 60-105 and 60-107 of the ITAA 1997, which provide for the low and
middle income tax offset, will be repealed on 1 July 2022 by the Treasury
Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery)
Act 2020. Schedule 6 to the main Bill amends the notes under subsections
60-105(3) and 60-107(1) of the ITAA 1997 to update these references.
[Schedule 6, items 1 and 2, subsections 60-105(3) and 60-107(1) of the
ITAA 1997]
Commencement, application, and transitional
provisions
Commencement
6.16 The amendments to the low and middle income tax offset in Schedule 6 to the
main Bill commence on the day after the main Bill receives Royal Assent.
Application
6.17 The amendments to the low and middle income tax offset only apply to the
2021-22 income year.
[Schedule 6, Item 3, subsection 61-107(1A) of the ITAA 1997]
80
Safety net thresholds
Table of Contents:
Outline of chapter ................................................................................ 81
Context of amendments ....................................................................... 81
Comparison of key features of new law and current law ...................... 82
Detailed explanation of new law .......................................................... 82
Outline of chapter
7.1 There are two PBS Safety Net thresholds - concessional and general. The
general patient safety net threshold is currently $1,542.10, which equates to
approximately 36 general patient co-payments. The concessional safety set
threshold is currently $326.40 which is the equivalent to 48 concessional
patient co-payments.
7.2 The purpose of Schedule 7 of the main Bill is to amend the National Health
Act 1953 to reduce the safety net thresholds for concessional to 36 scripts
(from 48) and general to $1457.10 (from $1542.10) on 1 July 2022.
7.3 References in this Chapter of the Explanatory Memorandum to 'Concessional'
refer to Concessional beneficiary patient.
7.4 References in this Chapter of the Explanatory Memorandum to 'General' refer
to General beneficial patient.
Context of amendments
7.5 The Australian Government is committed to ensuring that all Australians are
able to access high quality health care. The PBS provides significant direct
assistance to make medicines affordable.
7.6 Medicines dispensed through the PBS are subject to a patient contribution, for
general (non-concessional) patients, this is known as a general patient charge.
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Safety net thresholds
The general patient charge is the amount the patient pays towards the cost of
their PBS subsidised medicine. The Government pays the remaining cost.
7.7 Currently concessional patients pay $6.80 for a script. Once a concessional
patient reaches the safety net threshold any scripts for the remainder of the year
are cost free to the patient.
7.8 The concessional safety net is based on a multiple of the concessional
beneficiary charge which is indexed annually on 1 January each year.
7.9 General patients currently pay up to $42.50 per script and once the safety net
threshold is met a general patient pays $6.80 per script for the remainder of the
calendar year.
7.10 The general patient safety net is indexed annually.
7.11 Without a reduction to the safety net thresholds, over time it may become more
difficult for patients to afford the out-of-pocket costs if they require a lot of
medicines.
7.12 Schedule 7 to the main Bill will reduce the concessional safety net by
12 concessional patient co-payments to 36 and the general patient safety net by
$85 (equivalent to 2 general patient co-payments) to $1457.10.
Comparison of key features of new law and current
law
Table 7.1 Comparison of new law and current law
New law Current law
On 1 July 2022 the new concessional Current concessional beneficiary safety net
beneficiary safety net will be reduced to is 48 scripts.
36 concessional patient co-payments.
On 1 May 2022 the general patient safety Current general patient safety net threshold
net threshold will reduce by $85.00 to is $1542.10.
$1457.10.
Detailed explanation of new law
7.13 Schedule 7 of the main Bill commences on 1 July 2022 which means the
amendments will apply in relation to the supply of a pharmaceutical benefit on
or after 1 July 2022.
7.14 Section 99F of the National Health Act 1953 defines the concessional
beneficiary safety net as "the amount worked out by multiplying the
concessional beneficiary charge by 48", and the general patient safety net as
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"the amount of $1486.80". However indexation has increased the general
patient Safety Net threshold, to the current $1,542.10, as at 1 January 2022.
7.15 Item 1 of schedule 7 amends the definition of concessional beneficiary safety
net at section 99F of the National Health Act 1953 by lowering the number of
concessional patient co-payments to 36.
7.16 Item 2 of schedule 7 amends the definition of general patient safety net at
section 99F of the National Health Act 1953 by lowering the dollar value to
$1457.10.
7.17 After 1 July 2022, the indexation arrangements defined in section 99G of the
National Health Act 1953 will resume, with no change to their current
operation. That is, on 1 January 2023, normal indexation of the general patient
safety net amount (Year to September Quarter) will resume. The concessional
beneficiary safety net will continue to be determined as a multiple of
concessional patient co-payments, which are indexed, resulting in the overall
increase of the concessional beneficiary safety net threshold.
7.18 This change is reducing the baseline. Indexation is based on the CPI and will
not be affected by the reset of the baseline.
7.19 The reduction to the concessional beneficiary safety net and the general patient
safety net will have an impact on the number of scripts a patient has filled
before reaching the safety net threshold.
83
2022 cost of living
payment
Table of Contents:
Outline of Schedule ............................................................................. 85
Summary of new law............................................................................ 86
Comparison of key features of new law and current law ...................... 86
Detailed explanation of new law .......................................................... 86
Amendments to the Income Tax Assessment Act 1997 ................ 86
Amendments to the Social Security Act 1991 ............................... 86
Amendments to the Social Security (Administration) Act 1999 ..... 88
Amendments to the Veterans' Entitlement Act 1986 ..................... 89
Commencement, application, and transitional provisions .................... 95
Outline of Schedule
8.1 Schedule 8 to the main Bill provides for the payment of 2022 cost of living
payment of $250 to around 5.9 million Social Security and Veterans' income
support and compensation recipients, Farm Household Allowance recipients,
and holders of a Pensioner Concession Card, Commonwealth Seniors Health
Card or Veteran Gold Card. The cost of living payment is exempt from income
tax and not assessed as income for the purposes of the social security law or
Veterans' Entitlement Act.
8.2 To be qualified for the 2022 cost of living payment, a person must be residing
in Australia and be receiving one of the qualifying payments or hold or have
claimed and qualified for one of the qualifying concession cards on
29 March 2022.
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2022 cost of living payment
Summary of new law
8.3 This Schedule provides for the payment of new 2022 cost of living payment to
a range of income support payment recipients, compensation payment
recipients and concession card holders.
Comparison of key features of new law and
current law
Table 8.1 Comparison of new law and current law
New law Current law
A Payment of $250 is payable to certain Not applicable
income support recipients, compensation
payment recipients and concession card
holders
Detailed explanation of new law
Amendments to the Income Tax Assessment
Act 1997
8.4 Items 1 to 9 amend sections 11-15, 52-10, 52-40, 52-65, 52-75, 52-131 and
52-150 of the ITAA 1997 to ensure that 2022 cost of living payment under the
Social Security Act, Veterans' Entitlements Act and ABSTUDY scheme is tax
exempt.
Amendments to the Social Security Act 1991
8.5 Item 10 inserts paragraph 8(8)(yp) of the Social Security Act to ensure that a
payment of a 2022 cost of living payment under the Veterans' Entitlements Act
is not assessed as income for the purposes of the social security law.
8.6 Item 11 inserts paragraph 23(4AA)(af) into the Social Security Act before
paragraph 23(4AA)(b) of that Act. The new paragraph contains a reference to
new Part 2.6D of the Social Security Act.
8.7 The effect of this amendment is that a person qualifies for a 2022 cost of living
payment under section 314 of the Social Security Act if on 29 March 2022 they
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are taken to be receiving a social security benefit or pension under
subsection 23(4A) of the Social Security Act on that day.
8.8 Subsection 23(4A) of the Social Security Act treats a person as still 'receiving'
a social security pension or benefit (for the purposes of receiving certain
supplementary payments listed in subsection 23(4AA) of the Social Security
Act) if they ceased to be paid their pension or benefit because employment
income reduced the rate of their pension or benefit to nil.
8.9 Item 12 inserts Part 2.6D into the Social Security Act after Part 2.6C.
8.10 New section 314 in Division 1 of the new Part provides for qualification for a
2022 cost of living payment. A person is so qualified if new
subsection 316(2)(3) or (4) applies to the person on 29 March 2022, and the
person is residing in Australia on that day.
8.11 Subsection 314(2) provides that a person may only receive one payment
regardless of how many times the person qualifies under section 314.
8.12 Subsection 314(3) prevents a 2022 cost of living payment under section 314
being paid to a person if such payment has already been paid under the
ABSTUDY Scheme or under the Veterans' Entitlements Act.
8.13 New section 315 sets the amount of a person's 2022 cost of living payment at
$250.
8.14 New Division 2 of Part 2.6D includes new section 316. Section 316 applies for
the purposes of subsection 314(1). Subsection 316(2) lists the payments, the
receipt of which will give rise to qualification for the 2022 cost of living
payment. The listed payments are:-
• age pension;
• disability support pension;
• carer payment;
• parenting payment;
• youth allowance;
• austudy payment;
• jobseeker payment;
• special benefit;
• carer allowance; and
• double orphan pension.
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2022 cost of living payment
8.15 A note to subsection 316(2) alerts the reader that references to youth allowance
and jobseeker payment include references to farm household allowance: see
section 93 of the Farm Household Support Act 2014.
8.16 Subsection 316(3) provides for qualification for a 2022 cost of living payment
if the person has claimed a seniors health card on 29 March 2022, has not
withdrawn that claim, and is ultimately found to be qualified for the card on
that day, is also qualified for a payment.
8.17 Subsection 216(4) provides for qualification for a 2022 cost of living payment
if the person is qualified for a pensioner concession card on that day.
8.18 Item 13 inserts new table item 4M after table item 4L in subsection 1222(2),
relating to the manner of recovery of debts. This is consequential to item 28
which inserts new debt provisions in respect of 2022 cost of living payment.
The new table item alerts readers to the manner of recovery of any debts of the
payment raised.
8.19 Item 14 provides for debts in respect of 2022 cost of living payment. A debt of
the payment will only arise when its payment is paid as a result of the recipient
knowingly making a false or misleading statement or knowingly providing
false information. This may result in a change, revocation, setting aside or
superseding of the underlying determination giving rise to qualification for the
underlying payment. In this case, the whole amount of the payment is a debt.
Other provisions of Part 5 relating to raising debts more broadly do not apply
to the payment.
Amendments to the Social Security (Administration)
Act 1999
8.20 Item 15 inserts new section 12AH before section 12B, providing that a claim is
not required for a 2022 cost of living payment provided for by the main social
security Act.
8.21 Item 16 inserts reference to the 2022 cost of living payment into new
paragraph 47(1)(gk), which provides for the payment of lump sum benefits to
individuals, to require the amount be paid to the person.
8.22 Item 17 inserts new section 47AI after section 47AH to provide for the timing
of the payment to the person. Section 47AI provides for the payment to be
made in a single lump sum on the date on or after 29 March 2022 that the
Secretary considers to be the earliest date on which it is reasonably practicable
for the payment to be paid; and in such manner as the Secretary considers
appropriate. However, the payment must not be paid on or after 1 July 2023. It
would be expected that all persons qualified for the payment would have been
paid before this date.
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8.23 Item 18 amends provisions relating to the income management regime. The
2022 cost of living payment will be subject to income management if the
person receiving the payment is subject to income management. Item 32 inserts
a definition of the 2022 cost of living payment into section 123TC, by
reference to new part 2.6D of the Social Security Act, or such payment under
the ABSTUDY scheme.
8.24 Item 19 modifies the heading to Subdivision DB of Division 5 of Part 3B, to
include reference to cost of living payment.
8.25 Item 20 inserts new section 123XPE into Subdivision DB of Division 5 of
Part 3B. This provides for 100 percent of the payment to be withheld and
subject to income management where the person qualified for the payment is
otherwise subject to income management.
8.26 Item 21 amends the definition of restrictable payment in subsection 124PD(1)
of the Social Security (Administration) Act to insert reference to the 2022 cost
of living payment' under the Social Security Act and the ABSTUDY Scheme.
The insertion of these terms into the definition of restrictable payment, in
conjunction with existing subsection 124PJ(2) of the Social Security
(Administration) Act, will mean that 100 per cent of the payment will be
subject to the cashless welfare card if the recipient of the payment is a
participant in the cashless welfare card trial in Part 3D of the Social Security
(Administration) Act.
Amendments to the Veterans' Entitlement Act 1986
8.27 Item 22 amends subsection 5H(8) of the Veterans' Entitlement Act to specify
the 2022 cost of living payment under new Part IIIK (Division 1) in the list of
excluded amounts for the purposes of that Act. This amendment in effect
ensures that the 2022 cost of living payment does not count as income for
income testing purposes under that Act, but instead is an excluded amount.
Specifically, item 22 inserts a new paragraph (zzap) in subsection 5H(8) to
include the 2022 payment payable under new Part IIIK (Division 1) so that it is
not counted as income.
8.28 Item 23 inserts a new Part IIIK into the Veterans Entitlement Act. New Part
IIIK provides for the 2022 cost of living payment of $250. Division 1 sets out
who are eligible for the payment, the amount of payment, entitlement for the
payment and makes it clear that a claim is not required for the payment.
Division 2 provides details and list of persons receiving specified payments or
who hold the appropriate card as being eligible for the payment.
8.29 The amendments to the Veterans' Entitlements Act will allow the 2022 cost of
living payment to be paid to persons receiving the following payments or who
hold the appropriate card listed below:
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2022 cost of living payment
• service pension;
• income support supplement;
• disability compensation payment under the Veterans'
Entitlements Act;
• war widow(er)s pension under the Veterans' Entitlements Act;
• veteran payment;
• permanent impairment compensation under the Military Rehabilitation
and Compensation Act 2004;
• special rate disability pension under the Military Rehabilitation and
Compensation Act 2004;
• wholly Dependent Partner payments under the Military Rehabilitation
and Compensation Act 2004;
• those who converted their weekly Permanent Impairment
Compensation, or Wholly Dependent Partner Payments under the
Military Rehabilitation and Compensation Act 2004 prior to the date
their eligibility for 2022 cost of living payment is assessed and those
who have received Permanent Impairment compensation under the
Safety, Rehabilitation and Compensation (Defence-related Claims)
Act 1988;
• all Repatriation Health Card - For All Conditions (Veteran Gold Card)
holders;
• Education Allowance recipients aged 16 or over;
• all Commonwealth Seniors Health Card and Pensioner Concession
Card holders under the Veterans' Entitlements Act; and
• claimants under section 8 of the Australian Participants in British
Nuclear Tests and British Commonwealth Occupation Force
(Treatment) Act 2006 or section 9 of the Treatment Benefits (Special
Access) Act 2019 and are eligible persons within the meaning of those
Acts.
8.30 Division 1 sets out entitlement to, and the amount and details of, the 2022 cost
of living payment for persons who will be eligible for that payment under the
Veterans' Entitlement Act.
8.31 New section 67ZP provides for persons who will be eligible for the payment
and the amount of the payment. Subsection 67ZP(1) provides that a person is
eligible for a 2022 cost of living payment if new Division 2 of Part IIIK applies
to the person on 29 March 2022. Subsection 67ZP(1) provides that the amount
of the payment is $250.
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8.32 New section 67ZQ specifies that a person is only entitled to one payment and
prohibits multiple entitlement or payment of the 2022 cost of living payment.
Subsection 67ZQ(1) makes it clear that a person can only receive one payment
under Division 1, regardless of how many times the person becomes eligible
under section 67ZQ. New section 67ZP provides that if a 2022 cost of living
payment under the ABSTUDY Scheme or an identical payment under Division
1 of Part 2.6D of the Social Security Act is paid to the person, the 2022 cost of
living payment under Division 1 of Part IIIK of the Veterans Entitlement Act
cannot be paid to the person.
8.33 New section 67ZR makes it clear that a claim is not required for a person to be
paid a 2022 cost of living payment under Division 1 of Part IIIK.
8.34 Section 67ZS of the Veterans' Entitlements Act provides that, where a person
is eligible for a 2022 cost of living payment under Division 1, the Repatriation
Commission must, subject to subsection (2), pay the payment in a single lump
sum of $250 on the date occurring on or after 29 March 2022, that is
reasonably practical for the payment to be made and in the manner the
Repatriation Commission considers to be appropriate.
8.35 Subsection 67ZS(2) provides that the Commission must not pay the payment
on or after 1 July 2023. Thus the payment can only be made between
29 March 2022 and 30 June 2023.
8.36 Division 2 of Part IIIK specifies persons who are eligible to receive the
payment for the purposes of subsection 67ZP(1) of Division 1 of Part IIIK.
8.37 Section 67ZU provides for the eligibility of persons receiving specified
payments under the Veterans' Entitlement Act, that include service pension,
income support supplement, disability compensation payment, and war
widow's/widower's pension under Part II or IV of the Act, and veteran
payment.
8.38 Subsection 67ZU(1) provides that Division 1 (Eligibility) of new Part IIIK
applies to a person on a particular day, if service pension or income support
supplement is payable to the person on that day. Note, however, that the day on
which the eligibility for the 2022 cost of living payment is determined is on
29 March 2022 (refer to subsection 67ZP(1)).
8.39 Subsection 67ZU(2) provides for circumstances where a person may not be
receiving a service pension or income support supplement or such payments
are not payable to the person because of a change in employment income
during a specified period.
8.40 Subsection 67ZU(2) provides that those who have personal and/or partner
employment income that reduces their rate to nil during the 12 week period to
their service pension or income support supplement ceasing (the cessation
date) on or before the "test day", are still taken to be receiving a payment on
the "test day" and therefore qualifies and is eligible for the 2022 cost of living
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2022 cost of living payment
payment. The cessation day must occur no earlier than 12 weeks before the test
day.
8.41 Subsection 67ZU(3) provides that a person is eligible for the 2022 cost of
living payment on a day, if an amount of disability compensation payment at
the general rate of pension and extreme disablement adjustment, intermediate
rate, special rate of pension, temporary special rate or an increased rate or
pension due to a kind of incapacity set out in section 27 of the Veterans'
Entitlement Act, is payable to the veteran on the day (the amount payable
being greater than nil for that day) their eligibility is determined.
8.42 Subsection 67ZU(4) provides that a person is eligible for the 2022 cost of
living payment on a day, if the person who is a widow or widower of a
deceased veteran or a reinstated pensioner in relation to the veteran, if an
amount of pension is payable to the person under Part II or Part IV of the
Veterans' Entitlement Act under or by reference to subsection 30(1) of that
Act, on the day their eligibility is determined and the person's rate of pension
is greater than nil for that day.
8.43 Subsection 67ZU(5) provides that, a pension is deemed payable even if the rate
of pension is nil, or a pension would not be payable merely because the rate is
reduced, or pension is not payable because the pension has been fully offset
under Division 4, 5 or 5A of Part II or section 74 of the Veterans' Entitlement
Act.
8.44 Subsection 67ZU(6) provides that a person is eligible for the 2022 cost of
living payment on a day, if the veteran payment is payable to the person on that
day and the veteran payment is payable because of a claim made on or before
that day their eligibility for that payment is determined under the Veterans'
Entitlement Act.
8.45 Section 67ZV provides for the payment of the 2022 cost of living payment to
be paid to certain persons who on a particular day receive payments (Education
Allowance) under the Veterans' Children Education Scheme (the VCES). As
provided for in subsection 67ZP(2), the day the eligibility is determined is on
29 March 2022.
8.46 According to section 67ZV, the 2022 cost of living payment is payable to a
person on a day who on that day their eligibility is determined under Division 2
of Part IIIK is aged 16 or over and receiving a payment under the VCES.
Where a person aged 16 or over has made a claim under the VCES and that
claim is subsequently granted on a day, the person will be also considered
eligible for the 2022 cost of living payment on that day.
8.47 Section 67ZW of the Veterans' Entitlement Act provides for the payment of
the 2022 cost of living payment to certain people who are eligible because they
hold seniors health cards or gold cards or who are eligible for fringe benefits
(where a Pensioner Concession Card is issued) under that Act. As previously
discussed the eligibility for the payment is determined on 29 March 2022.
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8.48 Subsection 67ZW(1) provides that a person is eligible for the 2022 cost of
living payment on a day, if the person makes a claim for a seniors health card
under Division 2 of Part VIIC on or before that day, the person does not
withdraw that claim on or before that day and the person is able to meet all
requirements and become eligible for the seniors card on that day. In effect, if a
person has made a successful claim on or before the day their eligibility for the
payment is applicable, then that person is eligible to receive the payment.
However, if the person has withdrawn their claim on or before the day their
eligibility for the payment under Division of Part IIIK becomes applicable, or
have ceased to be eligible for the holding of a seniors health card on a
particular day, they will not be able to receive the payment. Note that
individuals who hold a seniors health card under the Social Security Act cannot
hold a seniors health card under the Veterans' Entitlement Act (refer to
section 118X).
8.49 Subsection 67ZW(2) provides that a person is eligible for the payment under
Division 1 of Part IIIK on a day, if the person is the holder of a seniors health
card on that day because of the application of subsection 118XA(3) and the
person is eligible for the card on that particular day. Section 118XA provides
for the modification of the provisions under Division 1 of Part VIIC relating to
the eligibility for a seniors health card.
8.50 A person who holds a Repatriation Health Card - For All Conditions, may be
eligible for the 2022 cost of living payment. The Repatriation Health Card -
For All Conditions is also known as the Veteran Gold Card and is issued to
people who are eligible to be provided with treatment for all injuries or
diseases under the Veterans' Entitlements Act, Military Rehabilitation and
Compensation Act 2004, the Australian Participants in British Nuclear Tests
and British Commonwealth Occupation Force (Treatment) Act 2006 or the
Treatment Benefits (Special Access) Act 2019.
8.51 Subsection 67ZW(3) provides that a person is eligible for the payment on a
day, if the person on that day, holds a card known as the Repatriation Health
Card- For all conditions that evidences the person's eligibility under the
Veterans' Entitlement Act or the Military Rehabilitation and Compensation
Act 2004 to be provided with treatment for all injuries or diseases, and the
person is eligible for that card on that particular day.
8.52 Subsection 67ZW(4) deals with the circumstances where a person either
receives treatment or has made a claim under the Australian Participants in
British Nuclear Tests and British Commonwealth Occupation Force
(Treatment) Act 2006 or the Treatment Benefits (Special Access) Act 2019 for
eligibility to be provided for treatment. In essence, if a person has made a
successful claim for the Repatriation Health Card - For All Conditions under
either of these Acts on or before the day their eligibility under Division 2 of
Part IIIK becomes applicable, then the person will be eligible to receive the
payment on the day that the person is determined to be eligible to hold the
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2022 cost of living payment
card. However, if the person has withdrawn their claim on or before the day
their eligibility is determined or ceased to be eligible for Repatriation Health
Card - For All Conditions, the person will not be eligible to receive the 2022
cost of living payment. The day eligibility for the 2022 cost of living payment
is determined is on 29 March 2022.
8.53 Subsection 67ZW(5) provides that the payment is payable to a person on a day
if the person is eligible for fringe benefits under subsection 53A(1A) of the
Veterans' Entitlements Act on that particular day. A person is not eligible for
the payment if they are eligible for fringe benefits under other subsections of
section 53A of the Veterans' Entitlements Act.
8.54 Section 67ZX of the Veterans' Entitlements Act sets out the criteria for persons
who are eligible for the 2022 cost of living payment because they are in receipt
of specified payments under the Military Rehabilitation and Compensation
Act 2004. These payments are compensation for permanent impairment,
special rate disability pension and compensation for wholly dependent
partners.
8.55 A person is eligible for the payment if one or both of the following conditions
is met on the day their eligibility for the payment is applicable:
• weekly compensation for permanent impairment is payable to the
person under Part 2 of Chapter 4 of the Military Rehabilitation and
Compensation Act 2004 on that day or weekly compensation for
permanent impairment would have been payable under Part 2 of
Chapter 4 for that day if it had not been offset under
paragraph 398(3)(b) of the Military Rehabilitation and Compensation
Act 2004 or subsection 13(4) of the Military Rehabilitation and
Compensation (Consequential and Transitional Provisions) Act 2004;
or
• on or prior to that day, the person had received lump sum
compensation for permanent impairment under Part 2 of Chapter 4 of
the Military Rehabilitation and Compensation Act 2004.
8.56 A person is eligible for the payment if Special Rate Disability Pension is
payable to the person under the Military Rehabilitation and Compensation
Act 2004 the day their eligibility for the payment is applicable. The payment is
also payable if the Special Rate Disability Pension would have been payable
for that day if it had not been offset under section 204 or paragraph 398(3)(b)
of the Military Rehabilitation and Compensation Act 2004.
8.57 A wholly dependent partner is eligible for the payment if one or both of the
following conditions are met on the day the person's eligibility for the payment
is applicable:
• weekly compensation as a wholly dependent partner is payable to the
person under Division 2 of Part 2 of Chapter 5 of the Military
Rehabilitation and Compensation Act 2004 on that day, or weekly
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compensation as a wholly dependent partner would have been payable
to the person under Division 2 of Part 2 of Chapter 5 for that day if it
had not been offset under paragraph 398(3)(b) of the Military
Rehabilitation and Compensation Act 2004; or
• on or before that day, the person had received lump sum compensation
as a wholly dependent partner under Division 2 of Part 2 of Chapter 5
of the Military Rehabilitation and Compensation Act 2004 and before
that date the person had not been precluded under subsection 388(6) of
the Military Rehabilitation and Compensation Act 2004 from being
eligible for any further compensation under the Military Rehabilitation
and Compensation Act 2004 following the recovery of damages for the
death of the person's partner from the Commonwealth.
8.58 Subsections (1), (2) and (3) of the Veterans' Entitlements Act all refer to the
circumstances where compensation payable under the Military Rehabilitation
and Compensation Act 2004 is to be regarded as being payable to the person
even though the payment rate is nil due to the operation of one of the offsetting
provisions in the Military Rehabilitation and Compensation Act 2004.
8.59 Section 67ZY of the Veterans' Entitlements Act provides for the payment to be
paid to certain persons who receive payments under the education scheme
under section 258 of the Military Rehabilitation and Compensation Act 2004.
The payment is payable if the person is, on the day their eligibility becomes
applicable, aged 16 or over, and receiving a payment (Education Allowance)
under that education scheme. A person is also eligible for the payment where
that person is aged 16 or over and has made a claim for that education scheme
on the day their eligibility is determined to be applicable and that claim is
subsequently granted.
8.60 A person receiving a payment of compensation under section 24 of the Safety,
Rehabilitation and Compensation (Defence-related Claims) Act 1988 is
eligible for the payment if the compensation was paid because of a claim the
person made on or before the day their eligibility for the payment becomes
applicable.
8.61 A person must reside in Australia on the day that their eligibility for the
payment is determined to be applicable, to be eligible for the payment.
Commencement, application, and transitional
provisions
The amendments commence on the day after Royal Assent.
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Fuel duty amendments
in the Customs Tariff Amendment (Cost
of Living Support) Bill 2022 and Excise
Tariff Amendment (Cost of Living
Support) Bill 2022
Table of Contents:
Outline of chapter ................................................................................ 97
Context of amendments ....................................................................... 97
Summary of new law............................................................................ 98
Fuel excise and customs duty rates .............................................. 98
Comparison of key features of new law and current law ...................... 98
Detailed explanation of new law .......................................................... 99
Fuel excise and customs duty rates .............................................. 99
Consequential amendments ........................................................ 104
Commencement, application, and transitional provisions .................. 105
Commencement .......................................................................... 105
Application provisions.................................................................. 105
Outline of chapter
9.1 The Excise Bill and Customs Bill amend the Excise Tariff Act and the
Customs Tariff Act respectively to temporarily reduce the excise duty rates and
excise-equivalent customs duty rates for fuels, including petrol and diesel and
similar petroleum-based products, including oils and grease.
Context of amendments
9.2 In the 2022-23 Budget, the Government announced that it would temporarily
reduce the excise and excise-equivalent customs duty rates for fuels, including
petrol and diesel and similar petroleum-based products, including oils and
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grease to help reduce cost of living pressures for households and assist
Australian businesses.
Summary of new law
Fuel excise and customs duty rates
9.3 The Excise Bill and the Customs Bill respectively amend the Excise Tariff Act
and the Customs Tariff Act to temporarily reduce the excise and
excise-equivalent customs duty rates applying to fuels, including petrol and
diesel and similar petroleum-based products, including oils and grease.
• From 30 March 2022, the excise and excise-equivalent customs duty
rates on fuels, including petrol and diesel and similar petroleum-based
products, including oils and grease manufactured or produced in
Australia or imported into Australia is reduced by 50 per cent for a
period of six months until 28 September 2022.
• From 29 September 2022, the excise and excise-equivalent customs
duty rates for these goods automatically return to the rates that would
otherwise have applied on this date (including indexation during the
reduction period) as if there had not been a temporary reduction in fuel
excise and excise-equivalent customs duty rates.
Comparison of key features of new law and
current law
Comparison of new law and current law
New law Current law
Excise duty
From 30 March 2022, the excise duty rates The Excise Tariff Act imposes excise duties
on fuels, including petrol and diesel and on the manufacture and production of fuels,
similar petroleum-based products, including including petrol and diesel and similar
oils and grease are reduced by 50 per cent petroleum-based products, including oils and
for a period of 6 months until grease in Australia.
28 September 2022 (inclusive). Fuel excise duties are subject to indexation in
From 29 September 2022, the fuel excise February and August each year (generally on
duty rates automatically return to the full the first of the month) at the CPI-indexed
rate.
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New law Current law
rates and apply as if there had not been a
temporary reduction in excise duty rates.
These changes do not affect current ongoing
indexation arrangements, although
indexation in August 2022 applies to the
reduced duty rate.
Excise-equivalent customs duty
The changes to the fuel excise-equivalent The Customs Tariff Act imposes
customs duty rates are consistent with the excise-equivalent customs duty rates on the
equivalent changes to the excise duty rates. importation of all fuels including petrol and
These changes do not affect current ongoing diesel and similar petroleum-based products,
indexation arrangements, although including oils and grease into Australia.
indexation in August 2022 applies to the Fuel excise-equivalent customs duty rates are
reduced duty rate. subject to indexation in February and August
each year (generally on the first of the
month) at the CPI-indexed rate.
Detailed explanation of new law
Fuel excise and customs duty rates
9.4 From 30 March 2022:
• the excise and excise-equivalent customs duty rates for fuels, including
petrol and diesel are reduced by 50 per cent from the rate applying
since 1 February 2022 (see paragraph 9.8 below for the reduced rates);
and
• the excise and excise-equivalent customs duty rates for similar oils and
grease are reduced to:
- $0.043 per litre for oils; and
- $0.043 per kilogram for grease.
9.5 On 1 August 2022 (or the applicable indexation day in August 2022), the
reduced rate for fuel duty rates is subject to indexation at the CPI indexed rate.
9.6 From 29 September 2022:
• the excise and excise-equivalent customs duty rates for fuels, including
petrol and diesel, return to the 1 February 2022 rate and are subject to
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indexation at the CPI indexed rate (using the August 2022 indexation
factor); and
• the excise and excise-equivalent customs duty rates for oils and grease
return to:
- $0.085 per litre for oils; and
- $0.085 per kilogram for grease.
Temporary reduction in excise and excise-equivalent customs
duty rates from 30 March 2022
9.7 From 30 March 2022, the fuel excise and excise-equivalent customs duty rates
are reduced by 50 per cent from the rates that have applied since
1 February 2022.
[Schedule 1, item 1, subsection 6K(1) of the Excise Tariff Act; and
Schedule 1, item 1, subsection 19AABA(1) of the Customs Tariff Act]
9.8 Accordingly, from 30 March 2022, the excise and excise-equivalent customs
duty rates applying to fuels, including petrol and diesel and similar products
are as follows:
• petrol and diesel - $0.221 per litre;
• liquefied petroleum gas - $0.072 per litre;
• liquefied natural gas and compressed natural gas - $0.152 per litre;
• denatured ethanol for use in internal combustion engines - $0.073 per
litre; and
• biodiesel - $0.044 per litre.
[Schedule 1, item 1, subsections 6K(1) and (2) of the Excise Tariff Act; and
Schedule 1, item 1, subsections 19AABA(1) and (2) of the
Customs Tariff Act]
9.9 The reduced fuel excise rates are included in the definition of CPI indexed fuel
rate in subsection 6K(8) of the Excise Bill. This specifies that the reduced fuel
excise rates are the ones covered in paragraphs (b) and (c) of the existing
definition of CPI indexed rate in subsection 6A(10) of the Excise Tariff Act.
9.10 The current fuel excise and excise-equivalent customs duty rates are available
from the Australian Taxation Office and Australian Border Force websites.
9.11 From 30 March 2022, the excise and excise-equivalent customs duty rates for
oils and grease are reduced to:
• $0.043 per litre for oil; and
• $0.043 per kilogram for grease.
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[Schedule 1, item 1, subsection 6L(1) of the Excise Tariff Act; and
Schedule 1, item 1, subsections 19AABB(1), (5) and (6) of the
Customs Tariff Act]
9.12 Reduced excise duty rates apply to fuels, including petrol and diesel and
similar petroleum-based products, including oils and grease that were
manufactured or produced in Australia:
• between the period beginning on 30 March 2022 and ending on
28 September 2022 (inclusive); and
• before 30 March 2022, if:
- on 30 March 2022, the goods were subject to the CEO's
control or were in the stock, custody or possession of, or
belonged to, a manufacturer or producer of goods; and
- no duty of excise had been paid on the goods before
30 March 2022.
[Schedule 1, item 1, subsections 6K(3) and (8) and subsection 6L(2) of the
Excise Tariff Act]
9.13 Reduced excise-equivalent customs duty rates apply to fuels, including petrol
and diesel and similar petroleum-based products, including oils and grease:
• imported into Australia between the period beginning on
30 March 2022 and ending on 28 September 2022 (inclusive); and
• imported into Australia before 30 March 2022, where the time for
working out the rate of the import duty on the goods had not occurred
before 30 March 2022.
[Schedule 1, item 1, subsections 19AABA(3) and (6) and
subsection 19AABB(2) of the Customs Tariff Act]
9.14 The requirements for when the duty rate for imported goods must be paid and
worked out are set out in section 132AA of the Customs Act 1901.
9.15 The reduced excise and excise-equivalent customs duty rates for fuels,
including petrol and diesel and similar petroleum-based products, including
oils and grease are rounded to three decimal places.
[Schedule 1, item 1, subsection 6K(2) of the Excise Tariff Act; and
Schedule 1, item 1, subsection 19AABA(2) of the Customs Tariff Act]
Exclusion for aviation fuels
9.16 There are no changes to the excise and excise-equivalent customs duty rates for
aviation fuels (i.e., fuels used in aircraft). This is because excise and
excise-equivalent customs duties on aviation fuels is wholly used to fund the
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Civil Aviation Safety Authority which is required under the Aviation Fuel
Revenues (Special Appropriation) Act 1988.
Indexation of reduced fuel excise and excise-equivalent
customs duty rates in August 2022
9.17 In accordance with existing sections 6A and 6AAA of the Excise Tariff Act
and sections 19 and 19AAA of the Customs Tariff Act, excise and
excise-equivalent customs duty rates for specified goods (including most fuels
and similar products) are subject to twice yearly CPI indexation occurring in
February and August each year (generally on the first of the month).
9.18 Excise and excise-equivalent customs duty rates on oil and grease are not
subject to indexation.
9.19 In February and August each year (generally on the first of the month), the new
excise and excise-equivalent customs duty rates are determined by the
application of an indexation factor, which is calculated in accordance with the
formula in subsection 6A(3) of the Excise Tariff Act and subsection 19(3) of
the Customs Tariff Act.
9.20 CPI figures are available from the ABS website. If the ABS does not publish
the CPI figure at least five days before the indexation day (i.e., before 1
February or 1 August), then the indexed rate does not take effect until the fifth
day after the day the CPI figures are published. This may mean that in some
limited situations, indexation may, for example, apply on 2 February or
2 August.
9.21 Under the existing law, on 1 August 2022 (or the later applicable indexation
day in August 2022), the excise and excise-equivalent customs duty rates for
fuels are subject to indexation at the CPI indexed rate.
9.22 CPI indexed fuel rate is defined as a sub-set of the definition of CPI indexed
rate in subsection 6A(10) of the Excise Tariff Act. An equivalent definition of
the CPI indexed rate is set out in subsection 19(10) of the Customs Tariff Act.
[Schedule 1, item 1, subsection 6K(8) of the Excise Tariff Act]
9.23 The amendments in the Excise Bill and Customs Bill provide that the reduced
fuel excise and excise-equivalent customs duty rates remain subject to
indexation at the CPI indexed rate on the August adjustment day (that is, the
indexation day).
9.24 The August adjustment day for the reduced rates for fuels, including petrol and
diesel, is either:
• 1 August 2022; or
• the replacement indexation day under section 6A of the Excise Tariff
Act (or section 19 of the Customs Tariff Act).
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[Schedule 1, item 1, subsection 6K(8) of the Excise Tariff Act; and
Schedule 1, item 1, subsection 19AABA(7) of the Customs Tariff Act]
9.25 The replacement indexation day has been linked to the replacement day of a
rate of duty under subsection 6A(5) of the Excise Tariff Act and
subsection 19(5) of the Customs Tariff Act. This is to ensure that despite any
amendment to indexation arrangements for fuel, there is a set indexation day
that remains unchanged to replace the 1 August 2022 date if it is required.
Annual increase in excise duty on biodiesel on 1 July 2022
9.26 Similar to how indexation continues to apply for applicable fuels, the annual
increase in the excise duty rate for biodiesel that applies on 1 July each year
until 2030 continues to apply on 1 July 2022 but at 50 per cent for the rate
reduction period.
Restoration of excise and excise-equivalent customs duty
rates from 29 September 2022
9.27 From 29 September 2022, the excise and excise-equivalent customs duty rates
for fuels, including petrol and diesel automatically return to the rates that
would have applied had the rates not been reduced.
[Schedule 1, item 1, subsections 6K(5) of the Excise Tariff Act; and
Schedule 1, item 1, subsections 19AABA(4) of the Customs Tariff Act]
9.28 This means that from 29 September 2022, the excise and excise-equivalent
customs duty rates for fuels, including petrol and diesel, return to the rates that
applied on 1 February 2022 and are subject to indexation at the CPI-indexed
rate (using the August 2022 indexation factor). These full rates continue to be
subject to indexation twice each year (in February and August) on an ongoing
basis.
9.29 Similarly, the full annual increase in the biodiesel excise rate is included in the
biodiesel rate when the rate returns to the full rate on 29 September 2022 and
annual increases continue until 2030 under section 6J of the Excise Tariff Act.
9.30 From 29 September 2022, the excise and excise-equivalent customs duty rates
for similar petroleum-based products, including oils and grease, which are not
subject to indexation, return to the rate that applied prior to the reduction which
is:
• $0.085 per litre for oil; and
• $0.085 per kilogram for grease.
[Schedule 1, item 1, subsection 6L(4) of the Excise Tariff Act; and
Schedule 1, item 1, subsection 19AABB(3) of the Customs Tariff Act]
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9.31 The restoration of the excise duty rates applies to fuels, including petrol and
diesel and similar petroleum-based products, including oils and grease
manufactured or produced in Australia:
• on or after 29 September 2022; or
• before 29 September 2022 if:
- on 29 September 2022, the goods were subject to the CEO's
control or were in the stock, custody or possession of, or belonged
to, a manufacturer or producer of goods; and
- no duty of excise had been paid on the goods before
29 September 2022.
[Schedule 1, item 1, subsections 6K(6) and 6L(5) of the Excise Tariff Act]
9.32 The restoration of the excise-equivalent customs duty rates applies to fuels,
including petrol and diesel and similar petroleum-based products, including
oils and grease:
• imported into Australia on or after 29 September 2022; and
• imported into Australia before 29 September 2022, where the time for
working out the rate of import duty on the goods had not occurred
before 29 September 2022.
[Schedule 1, item 1, subsections 19AABA(5) and 19AABB(4) of the
Customs Tariff Act]
Consequential amendments
9.33 The amendments include a consequential amendment to section 19AAC of the
Customs Tariff Act to reference the newly inserted provisions.
[Schedule 1, item 2, subsection 19AAC(1) of the Customs Tariff Act]
9.34 Schedule 9 to the Bill makes a consequential amendment to the
Product Stewardship (Oil) Regulations 2000.
9.35 During the rate reduction period from 30 March 2022 to 28 September 2022,
the levy on gazetted oils is $0.043 per litre. At any other time, the levy on these
products is $0.085 per litre.
[Schedule 9, item 3, subregulation 4(1A) of the Product Stewardship (Oil)
Regulations 2000]
9.36 The amendment ensures that the benefit available for gazetted oil (category 8)
under the Product Stewardship for Oil Program continues to be equal to the
rate of duty payable on petroleum-based lubricants and fluid oils and their
synthetic equivalents despite the reduction in the duty rate during the period
from 30 March 2022 to 28 September 2022. This ensures that the benefit
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available under the scheme for such gazetted oils continues to directly offset
the duty rate on these oils that is imposed as a product stewardship for oil levy.
[Schedule 9, items 1 to 3, subregulations 4(1) and (1A) of the
Product Stewardship (Oil) Regulations 2000]
Commencement, application, and transitional
provisions
Commencement
9.37 The amendments to the Excise Tariff Act and the Customs Tariff Act
commence on the day the amendments receive Royal Assent.
[Clause 2 of the Excise Bill; and clause 2 of the Customs Bill]
9.38 The amendments in Schedule 9 to the Bill commence immediately after the
commencement of the Excise Bill. However, the provisions in Schedule 9 to
the Bill do not commence at all if the Excise Bill does not commence. This
contingent commencement ensures that the amendments to the benefit rate
under the Product Stewardship (Oil) Regulations 2000 only apply if the excise
reduction occurs.
[Clause 2 of the Bill]
Application provisions
Application date - reduction of excise and customs duties
9.39 The amendments to reduce fuel excise and excise-equivalent customs duty
rates apply to goods that are:
• manufactured or produced in Australia on or after 30 March 2022 (the
rate reduction period); or
• manufactured or produced in Australia prior to 30 March 2022 that
were subject to the Commissioner's control or were held or belonged
to a manufacturer or producer of the goods and no duty of excise had
been paid on the goods before 30 March 2022; or
• imported into Australia on or after 30 March 2022; or
• imported before 30 March 2022 where the time for working out the
rate of import duty for the goods had not occurred prior to
30 March 2022.
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[Schedule 1, item 1, subsections 6K(3), 6K(8) and 6L(2) of the
Excise Tariff Act; and Schedule 1, item 1, subsections 19AABA(3),
19AABA(6) and 19AABB(2) of the Customs Tariff Act]
Application date - restoration of excise and customs duties
9.40 The amendments to restore the fuel excise and excise-equivalent customs duty
rates to the rates that would otherwise have applied if the amendments had not
been made, apply to goods that are:
• manufactured or produced in Australia on or after 29 September 2022;
• manufactured or produced in Australia prior to 29 September 2022 that
were subject to the Commissioner's control or were held or belonged
to a manufacturer or producer of the goods and no duty of excise had
been paid on the goods before 29 September 2022;
• imported into Australia on or after 29 September 2022; or
• imported before 29 September 2022 where the time for working out
the rate of import duty for the goods had not occurred prior to
29 September 2022.
[Schedule 1, item 1, subsections 6K(6) and 6L(5) of the Excise Tariff Act;
and Schedule 1, item 1, subsections 19AABA(5) and 19AABB(4) of the
Customs Tariff Act]
9.41 This application provision for the reduction and restoration of excise duty rates
in the Excise Tariff Act applies despite subsection 5(2) of the
Excise Tariff Act.
[Schedule 1, item 1, subsections 6K(4), 6K(7), 6L(3) and 6L(6) of the
Excise Tariff Act]
9.42 Depending on when the Excise and Customs Bills receive Royal Assent, the
amendments may apply retrospectively. However, the reduced duty rates that
apply from 30 March 2022 are wholly beneficial for affected manufacturers,
producers, importers and users of fuels, including petrol and diesel and similar
petroleum-based products, including oils and grease as the Bills result in the
temporary reduction in the rates of duty payable.
9.43 The reduction in the benefit payable for gazetted oils under the product
stewardship for oil scheme similarly applies from 30 March 2022. The
amendment ensures that the benefit payable continues to directly offset the
duty rate on these oils that is imposed as a product stewardship for oil levy and
does not give rise to a windfall gain.
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Statement of
Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Treasury Laws Amendment (Cost of Living Support and Other Measures)
Bill 2022
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Customs Tariff Amendment (Cost of Living Support) Bill 2022
Table of Contents:
Schedule 1 - Medicare Levy and Medicare Levy Surcharge Income
Thresholds ......................................................................................... 109
Overview ..................................................................................... 109
Human rights implications ........................................................... 109
Conclusion .................................................................................. 109
Schedule 2 - Deductibility of COVID-19 tests.................................... 110
Overview ..................................................................................... 110
Human rights implications ........................................................... 110
Conclusion .................................................................................. 110
Schedule 3 - Deductible gift recipients--new specific recipients ....... 111
Overview ..................................................................................... 111
Human rights implications ........................................................... 111
Conclusion .................................................................................. 111
Schedule 4 - Employee share scheme.............................................. 111
Overview ..................................................................................... 111
Human rights implications ........................................................... 113
Conclusion .................................................................................. 115
Schedule 5 - Varying the GDP uplift factor for tax instalments .......... 116
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Overview ..................................................................................... 116
Human rights implications ........................................................... 116
Conclusion .................................................................................. 116
Schedule 6 - Low and middle income tax offset ................................ 116
Overview ..................................................................................... 116
Human rights implications ........................................................... 116
Conclusion .................................................................................. 117
Schedule 7 - Safety net thresholds ................................................... 117
Overview ..................................................................................... 117
Human rights implications ........................................................... 117
Conclusion .................................................................................. 118
Schedule 8 - 2022 cost of living payment.......................................... 118
Overview ..................................................................................... 118
Human rights implications ........................................................... 119
Conclusion .................................................................................. 119
Schedule 9 - Fuel duty consequential amendments ......................... 120
Overview ..................................................................................... 120
Human rights implications ........................................................... 120
Conclusion .................................................................................. 120
Excise Tariff Amendment (Cost of Living Support) Bill 2022.............. 120
Overview ..................................................................................... 120
Human rights implications ........................................................... 121
Conclusion .................................................................................. 121
Customs Tariff Amendment (Cost of Living Support) Bill 2022 .......... 121
Overview ..................................................................................... 121
Human rights implications ........................................................... 121
Conclusion .................................................................................. 121
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Schedule 1 - Medicare Levy and Medicare Levy
Surcharge Income Thresholds
Overview
10.1 Schedule 1 to the main 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.
10.2 Schedule 1 to the main Bill amends the Medicare Levy Act 1986 and the A New
Tax System (Medicare Levy Surcharge -- Fringe Benefits) Act 1999 to
increase:
• the Medicare levy low-income thresholds for individuals and families
(along with the dependent child-student component of the family
threshold) in line with movements in the CPI;
• the Medicare levy low-income thresholds for individuals and families
eligible for the SAPTO (along with the dependent child-student
component of the family threshold), in line with movements in the
CPI; and
• the Medicare levy surcharge low-income threshold in line with
movements in the CPI.
10.3 This will ensure that low-income individuals, families, seniors and pensioners
who were exempt from the Medicare levy in the 2020-21 income year continue
to be exempt in the 2021-22 income year if their income has increased in line
with, or less than, movements in the CPI
Human rights implications
10.4 Schedule 1 to the main Bill does not engage any of the applicable rights or
freedoms.
Conclusion
10.5 Schedule 1 to the main Bill is compatible with human rights as it does not raise
any human rights issues.
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Schedule 2 - Deductibility of COVID-19 tests
Overview
10.6 Schedule 2 to the main 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.
10.7 Schedule 2 to the main Bill amends the ITAA 1997 by allowing an income tax
deduction for taxpayers who incur relevant COVID-19 testing expenses in
gaining or producing their assessable income. The deduction applies to those
expenses incurred on or after 1 July 2021.
10.8 From 1 July 2021, the amendments provide individual taxpayers with a
specific deduction for their loss or outgoing incurred in gaining or producing
assessable income. The loss or outgoing must be incurred in respect of a
COVID-19 test with the purpose of determining whether the taxpayer should
attend their place of work. To qualify, the test must be one that is:
• a polymerase chain reaction test for testing COVID-19; or
• a test that is included in the Australian Register of Therapeutic Goods
for testing COVID-19 (such as an approved rapid antigen test).
10.9 To claim the deduction under the amendments, taxpayers must meet the
general substantiation requirements.
Human rights implications
10.10 Schedule 2 to the main Bill does not engage any applicable rights or freedoms.
Conclusion
10.11 Schedule 2 to the main Bill is compatible with human rights as it does not raise
any human rights issues.
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Schedule 3 - Deductible gift recipients--new
specific recipients
Overview
10.12 Schedule 3 to the main Bill amends the ITAA 1997 to allow the following
entities to be deductible gift recipients under the income tax law:
• Royal Humane Society of New South Wales Incorporated;
• Perth Korean War Memorial Committee Incorporated;
• Greek Orthodox Archdiocese of Australia Consolidated Trust
Cathedral of the Annunciation of our Lady Restoration Fund;
• The Australian Future Leaders Foundation Limited;
• Lord Mayor's Charitable Foundation; and
• The Ramsay Centre for Western Civilisation Limited.
Human rights implications
10.13 Schedule 3 to the main Bill does not engage any of the applicable rights or
freedoms.
Conclusion
10.14 Schedule 3 to the main Bill is compatible with human rights as it does not raise
any human rights issues.
Schedule 4 - Employee share scheme
Overview
10.15 Schedule 4 to the main 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.
10.16 The Corporations Act 2001 contains a variety of rules for businesses which
sell financial products and securities. These rules include a requirement to
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obtain an Australian financial services licence and restrictions on hawking and
advertising and disclosure requirements.
10.17 Financial products and securities offered as a part of certain employee share
schemes are excluded from some of these requirements under the Corporations
Act 2001. Further exclusions are made in ASIC class orders CO 14/1000 and
CO 14/1001. Class Order 14/1000 applies to listed bodies corporate and Class
Order 14/1001 applies to unlisted bodies corporate.
10.18 An employee share scheme is an arrangement put in place by a business to
reward people who contribute to the business, namely directors, employees and
service providers (hereafter referred to as 'participants'), with shares or other
interests in the business in exchange for their labour.
10.19 Schedule 4 to the main Bill will provide regulatory relief to allow businesses to
create employee share schemes, which they would otherwise be unable to
operate due to the requirements under the National Health Act 1953. If an
employee share scheme receives relief under Schedule 4 to the main Bill, the
standard regulatory requirements for operating a business offering shares and
financial products to retail clients under the Corporations Act 2001 will not
apply.
10.20 In simple terms, an employee share scheme can receive relief under Schedule 4
to the main Bill if:
• the interests issued, sold or transferred to participants under the scheme
fall within certain eligible categories of interests (for example - shares
or options);
• the participants in the scheme are directors, employees or service
providers to the business; and
• if the scheme requires payment to participate:
- certain disclosure documents are provided with the offer;
- if the scheme has an associated contribution plan, loan or trust,
the contribution plan, loan or trust meet certain requirements;
- the total numbers of products issued under the scheme over the
previous three years does not exceed the specified percentage
of the body's issued capital; and
• for an unlisted body corporate, all participants are limited to outlay a
monetary cap of $30,000 per year (which can be accrued for
unexercised options over a 5-year period, up to a maximum of
$150,000), plus 70 per cent of dividends and 70 per cent of cash
bonuses.
10.21 If an employee share scheme does not meet the requirements for relief under
Schedule 4 to the main Bill the business operating the employee share scheme
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will be in breach of a wide variety of provisions under the Corporations
Act 2001, such as issuing shares without appropriate disclosure.
Human rights implications
Offence-specific defences
10.22 Schedule 4 to the main Bill engages the right to a fair trial in Article 14 of the
ICCPR. Article 14 of the ICCPR provides that everyone shall be entitled to a
fair and public hearing by a competent, independent and impartial tribunal
established by law.
10.23 Sections 1100ZH and 1100ZI provide that it is an offence to provide
misleading or deceptive information in an ESS offer document or document
provided during an exercise period, or to fail to disclose a new circumstance
that arises during the offer or exercise period. It is also an offence to fail to
notify a body corporate of a misleading or deceptive statement or new
circumstance under section 1100ZJ.
10.24 A number of defences to these offences are available, including not knowing
that a statement was misleading and deceptive, and placing reasonable reliance
on information provided by another person. A person who wishes to rely on
one of these exceptions bears the evidential proof of raising the defence.
10.25 Under subsection 13.3(3) of the Criminal Code Act 1995 a defendant who
wishes to rely on any exception, provided by the law creating an offence, bears
an evidential burden in relation to that matter; the exception need not
accompany the description of the offence.
10.26 The reversal of the evidential burden is acceptable in this instance as it is
peculiarly within the knowledge of the defendant themselves whether a
particular defence is relevant to their case. For instance, an individual relying
on the defence that they lacked knowledge that a statement was misleading
would easily be able to identify that they were unaware a statement was
misleading and then rely on that defence. It would be unreasonable and
unnecessary use of government resources to require the regulator to prove
beyond a reasonable doubt that each defence did not apply to every individual.
10.27 Accordingly, to the extent that Schedule 4 to the main Bill engages the rights
under Article 14 of the ICCPR, it is compatible with human rights as the
limitations are appropriate and proportionate.
Strict liability offences
10.28 Schedule 4 to the main Bill engages the right to a fair trial, as well as the
presumption of innocence in Article 14 of the ICCPR. Article 14 of the ICCPR
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provides that everyone shall be entitled to a fair and public hearing by a
competent, independent and impartial tribunal established by law.
10.29 Strict liability offences engage with this right as they involve the imposition of
criminal liability without a mental fault element. However, strict liability
offences are compatible with the presumption of innocence if they are
reasonable, necessary and proportionate and in pursuit of a legitimate
objective.
10.30 Sections 1100ZE and 1100ZF provide that it is a strict liability offence to:
• fail to hold money paid by a participant to obtain an interest under an
employee share scheme on trust for the participant until the interest is
sold or the money is returned to the participant;
• fail to hold money paid by a participant in anticipation of a liquidity
event on trust until the start of the liquidity period or the money is
returned to the participant; and
• fail to return the money to the participant as soon as practicable if the
money needs to be returned.
10.31 Strict liability offences are appropriate in these circumstances, as it is
appropriate for a person to be penalised if they permit an ESS participant's
money to be dealt with improperly regardless of their intention. This is because
of the power and information imbalance between businesses and ESS
participants, and the potential for employees to lose a significant amount of
money if they do not receive the promised ESS interest or the liquidity event
does not occur. The obligation to keep money on trust is a common obligation
required of businesses handling clients' money and is not particularly onerous
and provides low regulatory burden.
10.32 Section 1100ZJ provides that it is an offence of strict liability for a person to
fail to inform the business operating an employee share scheme if they become
aware of a misleading or deceptive statement or omission in a disclosure
document, if the person:
• is a director of the relevant body corporate (or a proposed director); or
• the person is named in the disclosure document and has provided
information mentioned in the disclosure document.
10.33 A strict liability offence is appropriate in this circumstance as the information
imbalance between the director or person making a statement in the disclosure
document and a participant means that it is appropriate for such a person to be
penalised if they permit incorrect information to be provided to participants
regardless of their intention. This is because participants in an employee share
scheme are reliant on the information contained in the disclosure documents
and may suffer a significant detriment if the information is misleading,
deceptive or incomplete.
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10.34 Section 1100ZM provides that it is an offence for a person who makes or
purports to make an offer of ESS interests to not provide information to ASIC
upon request.
10.35 A strict liability offence is appropriate in this circumstance as it is a minimal
administrative burden in order to access a regime which provides significant
regulatory relief, and so it is appropriate for a person to be penalised for failing
to comply with an ASIC document request regardless of their intention.
10.36 Having strict liability apply to these offences also reduces non-compliance by
ensuring that regulators can efficiently and expeditiously deal with low-level
offending. This in turn bolsters the integrity of the regulatory regime enforced
by ASIC and maintains public confidence in the regime.
10.37 The strict liability offences in Schedule 4 to the main Bill meet all the
conditions listed in the Attorney-General's Department's A Guide to Framing
Commonwealth Offences, Infringement Notices and Enforcement Powers.
10.38 The fines for the offences do not exceed 60 penalty units for persons other than
a body corporate or 300 penalty units for a body corporate.
10.39 The application of strict liability, as opposed to absolute liability, preserves the
defence of honest and reasonable mistake of fact to be proved by the accused
on the balance of probabilities. This defence maintains adequate checks and
balances for persons who may be accused of such offences.
10.40 Given the harm that could come to ESS participants from improper use of their
money, and the superior knowledge that businesses, directors, and other named
persons have, these obligations are a reasonable and proportionate means of
achieving the legitimate objective of protecting ESS participants' funds.
Conclusion
10.41 Schedule 4 to the main Bill is compatible with human rights because, to the
extent that it may limit human rights, those limitations are reasonable,
necessary and proportionate.
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Schedule 5 - Varying the GDP uplift factor for
tax instalments
Overview
10.42 Schedule 5 to the main 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.
10.43 Schedule 5 to the main Bill amends the TAA 1953 to reduce the GDP
adjustment factor for the 2022-23 income year to 2 per cent. The GDP
adjustment factor is applied by the Commissioner to work out the amount of
PAYG and GST instalments payable by a taxpayer in certain circumstances.
Human rights implications
10.44 Schedule 5 to the main Bill does not engage any of the applicable rights or
freedoms.
Conclusion
10.45 Schedule 5 to the main Bill is compatible with human rights as it does not raise
any human rights issues.
Schedule 6 - Low and middle income tax offset
Overview
10.46 Schedule 6 to the main 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.
10.47 Schedule 6 to the main Bill amends the ITAA 1997 to increase the low and
middle income tax offset for the 2021-22 income year by $420 to ease cost of
living pressures for Australians.
Human rights implications
10.48 Schedule 6 to the main Bill does not engage any of the applicable rights or
freedoms.
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Conclusion
10.49 Schedule 6 to the main Bill is compatible with human rights as it does not raise
any human rights issues.
Schedule 7 - Safety net thresholds
Overview
10.50 Schedule 7 to the main 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.
10.51 The purpose of Schedule 7 to the main Bill is to amend the National Health
Act 1953 to reduce the safety net thresholds for concessional beneficiary
patients to 36 scripts (from 48) and general patients to $1457.10 (from
$1542.10) on 1 July 2022.
10.52 After 1 May 2022, the indexation arrangements defined in s99G of the
National Health Act 1953 will resume, with no change to their current
operation. That is, the general patient safety net will be indexed by applying
the index number (at section 99F of the National Health Act 1953) from the
reference quarter (September) to the new general patient safety net ($1457.10)
on the indexation day (1 January 2023).
10.53 The concessional safety net threshold will continue to be determined as a
multiple of concessional payment co-payments (which are indexed, resulting in
the overall increase of the concessional safety net threshold).
Human rights implications
10.54 Schedule 7 to the main Bill engages Articles 9 and 12(1) of the ICESCR,
specifically the rights to health and social security.
10.55 Article 9 of the ICESCR recognises the right to social security. It requires that
a country must, within its maximum available resources, ensure access to a
social security scheme that provides a minimum essential level of benefits to
all individuals and families that will enable them to acquire at least essential
health care. Article 12(1) of ICESCR promotes the right of all individuals to
enjoy the highest standard of physical and mental health. The PBS assists with
advancement of these human rights by providing subsidised access to
medicines for Australians.
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10.56 Schedule 7 to the main Bill assists with the progressive realisation by all
appropriate means of the right of everyone to essential healthcare and the
enjoyment of the highest attainable standard of physical and mental health by
reducing the safety net thresholds for both concessional beneficiary and
general patients, improving the affordability of PBS items.
There may be a perception that those patients that met the safety net thresholds
prior to 1 July 2022 are disadvantaged as they had to pay a higher amount for
medicines that under the new bill post 1 July 2022 will be at a reduced price
(or free of charge for concessional beneficiary patients). These patients will
continue to be eligible for the safety net rate for their medicines after
1 July 2022 and will benefit from significantly reduced safety net thresholds in
future years.
Conclusion
10.57 Schedule 7 to the main Bill is compatible with human rights as it does not raise
any human rights issues. The amendments made by this Schedule will have a
beneficial impact on human rights by helping to ensure Australians can access
the best available medicines through more reliable supply and continued
subsidy of new treatments as they emerge.
Schedule 8 - 2022 cost of living payment
10.58 Schedule 8 to the main 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.
Overview
10.59 Schedule 8 to the main Bill provides for the payment of 2022 cost of living
payment of $250 to approximately 6 million Social Security and Veterans'
income support and compensation recipients, Farm Household Allowance
recipients, and holders of a Pensioner Concession Card, Commonwealth
Seniors Health Card or Commonwealth Gold Card.
10.60 To be qualified for the 2022 cost of living payment, a person must be residing
in Australia and be receiving one of the qualifying payments or hold or have
claimed and qualified for one of the qualifying concession cards on
29 March 2022.
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Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Customs Tariff Amendment (Cost of Living Support) Bill 2022
Human rights implications
10.61 This Schedule engages the following human rights:
• The right of everyone to social security in Article 9, and the right of
everyone to an adequate standard of living for an individual and their
family, including adequate food, clothing and housing, and the
continuous improvement of living conditions in Article 11 of the
ICESCR; and
• The rights of the child in Article 26 of the Convention on the Rights of
the Child.
The right of everyone to social security and an adequate
standard of living
10.62 The objective of creating a new cost of living payment promotes Article 9
and Article 11 by providing further payment to assist in achieving an adequate
standard of living. The pursuit of this objective also promotes human rights by
supporting the Convention on the Rights of Persons with Disabilities.
The rights of the child
10.63 This cost of living payment promotes Article 26 by enhancing the rights of the
child to social security, as the payment will be made to a group of recipients
with children, including recipients of Parenting Payment Single. The payment
is targeted at vulnerable groups who receive Government assistance and has a
flow on effect to the children of recipients by increasing the support for
families.
Conclusion
10.64 Schedule 8 to the main Bill is compatible with human rights because it
promotes the protection of human rights for some of the most vulnerable
groups in society.
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Statement of Compatibility with Human Rights
Schedule 9 - Fuel duty consequential
amendments
Overview
10.1 Schedule 9 to the main 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.
10.2 Schedule 9 to the main Bill makes a consequential amendment to the Product
Stewardship (Oil) Regulations 2000. The amendment ensures that the benefit
available for gazetted oil (category 8) under the Product Stewardship for Oil
program continues to be equal to the rate of duty payable on petroleum-based
lubricants and fluid oils and their synthetic equivalents despite the reduction in
the duty rate during the rate reduction period from 30 March 2022 to
28 September 2022.
Human rights implications
10.3 Schedule 9 to the main Bill does not engage any of the applicable rights or
freedoms.
Conclusion
10.4 Schedule 9 to the main Bill is compatible with human rights as it does not raise
any human rights issues.
Excise Tariff Amendment (Cost of Living
Support) Bill 2022
Overview
10.5 The Excise 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.
10.6 The Excise Bill amends the Excise Tariff Act to temporarily reduce the excise
duty rates for fuels, including petrol and diesel and similar petroleum-based
products, including oils and grease by 50 per cent.
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Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Customs Tariff Amendment (Cost of Living Support) Bill 2022
Human rights implications
10.7 The Excise Bill does not engage any of the applicable rights or freedoms.
Conclusion
10.8 The Excise Bill is compatible with human rights as this Bill does not raise any
human rights issues.
Customs Tariff Amendment (Cost of Living
Support) Bill 2022
Overview
10.9 The Customs 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.
10.10 The Customs Bill amends the Customs Tariff Act to temporarily reduce the
excise-equivalent customs duty rates for fuels, including petrol and diesel and
similar petroleum-based products, including oils and grease by 50 per cent.
Human rights implications
10.11 The Customs Bill does not engage any of the applicable rights or freedoms.
Conclusion
10.12 The Customs Bill is compatible with human rights as it does not raise any
human rights issues.
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