The Tax Institute welcomes the opportunity to make a submission to the Senate Standing Committee on Economics (Committee) in respect of its inquiry and report on the Treasury Laws Amendment (2023 Measures No. 1) Bill 2023 (Bill) and accompanying explanatory memorandum (EM).
In the development of this submission, we have closely consulted with our National Large Business and International Technical Committee and National Small and Medium Enterprises Technical Committee to prepare a considered response that represents the views of the broader membership of The Tax Institute.
The Bill contains several key changes that impact taxpayers and tax practitioners. These include:
- Schedule 3 – Government response to the review of the Tax Practitioners Board;
- Schedule 4 – Off-market share buy-backs;
- Schedule 5 – Franked distributions funded by capital raisings.
The Tax Institute, in conjunction with several other professional bodies and associations (together the Joint Bodies), is a co-signatory for a submission to the Committee with respect to Schedule 3 of the Bill. Our views on Schedule 3 are reflected in the Joint Bodies’ submission and are not reiterated in this submission.
Schedule 4 of the Bill contains a measure that is intended to align the capital raising activities of public companies. However, as currently drafted, the provisions result in different capital gains tax (CGT) treatment between off-market share buy-backs and selective share reductions.
The Tax Institute is of the view that Schedule 5 of the Bill requires further explanation and clarity regarding the scope and purpose of the proposed measure. We consider that the scope of Schedule 5 goes beyond the original policy intent contained in the Mid-Year Economic and Fiscal Outlook 2016-17 (MYEFO announcement). Our members have also raised concerns about the requirements in the proposed measure that will result in the arrangement becoming an unfrankable distribution. In particular:
- the established practice requirement is likely to unfairly target private groups and companies with irregular distribution patterns;
- the purpose test has a lower threshold than other anti-avoidance provisions, resulting in a larger number of arrangements being captured than originally intended; and
- the disproportionate effect of the measure making an entire distribution unfrankable, even if only a small percentage is sourced from a capital raising that is within scope.