Excluded Classes of Transactions and Entities for Third Party Reports on Shares and Units Determination 2016

EXCLUDED CLASSES OF TRANSACTIONS AND ENTITIES FOR THIRD PARTY INFORMATION REPORTS ON SHARES AND UNITS

DETERMINATION 2016

General Outline of Instrument

1. This instrument is made under subsection 396-70(4) of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953).
2. This instrument identifies classes of transactions that are not required to be reported under items 5, 6, 7 or 8 of the table in section 396-55 of Schedule 1 to the TAA 1953.
3. This instrument identifies entities that are not required to prepare and give reports under items 7 and 8 of the table in section 396-55 of Schedule 1 to the TAA 1953.
4. Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.
5. The instrument is a legislative instrument for the purposes of the Legislation Act 2003.

Date of effect

6.      The instrument commences on 1 July 2017.

What is this instrument about

7.      The purpose of this instrument is to exempt classes of transactions from being reported to the Commissioner, and to exempt certain entities from having to prepare and lodge reports, in relation to items 6, 7 or 8 in the table included in section 396-55 of Schedule 1 to the TAA 1953.

What is the effect of this instrument

8.      The list of excluded transactions and entities provides certainty and a potential reduction in compliance cost for entities that may be impacted by the third party reporting legislation. 

9.      Reporting entities that have excluded transactions can omit that information from their reporting obligations.

10.  Exempted entities are not required to prepare and lodge a report to the ATO.

11.  This instrument does not prevent the reporting of information where not reporting it would impose an increased administrative burden on the reporting entity.

12.  Compliance Cost Impact: Minor – There will be no or minimal impacts for both implementation and ongoing compliance costs. The legislative instrument is minor or machinery in nature. 

Background

13.  This instrument was developed to ensure that the third party reporting regime operates efficiently and the compliance burden on reporters is minimised.

14.  Section 396-70(4)  of Schedule 1 to the TAA 1953 allows the Commissioner, by legislative instrument, to exempt classes of entities from reporting and allows the Commissioner to exempt certain classes of transactions from being reported.

15.  Under items 6, 7 and 8 in the table at section 396-55 of Schedule 1 to the TAA 1953, entities are required to report to the Commissioner information about transfers of shares or units in a unit trust.

16.  The information that is required to be reported is in relation to the change to the type, name and number of the shares or units held by an entity.

17.  To reduce the administrative and compliance burden on reporters the Commissioner does not require information to be reported on shares listed on Australian financial markets that are not required to deliver data to the Australian Securities and Investment Commission (ASIC) under the market integrity rules. The bulk of the share transaction information required by the Commissioner will be captured through the existing ASIC market integrity system. The exemption to report is provided for those financial markets not captured under this system because it is considered unnecessarily burdensome to require transaction reporting from brokers and listed entities for shares listed on markets not monitored by the market integrity rules..

18.  To reduce the administrative and compliance burden on small unit trusts and trustees of other trusts the instrument exempts certain trustees from having to prepare and lodge reports to the ATO.

19.  In recognising that the benefit of very small entities providing third party data reports is frequently outweighed by the cost, the instrument provides exemptions for small unit trusts with less than 10 investors and less than $5 million in assets. This is consistent with the Annual Investment Income Report (AIIR) which provides an income based exemption for unit trusts that during the financial year did not:

• accept 10 or more investments and
• make payments of $1 or more to at least one investor or
• deduct withholding tax from investment income or
• provide farm management deposits.

20.  There is also an exemption for trustees, other than trustees of a unit trust, if they are not required to hold an Australian Financial Services Licence and hold total assets of less than $5 million in all trusts of which they are the trustee.

Consultation:

21.  In October/November 2015, the Australian Taxation Office (ATO) undertook consultation with key stakeholders on the content to be included in the Legislative Instrument. Formal public consultation on the draft Legislative Instrument commenced on the 15 December 2015 and concluded on 15 February 2016. The public and the reporting entities were invited to provide feedback. At the conclusion of the consultation window, the ATO received nine submissions from reporters raising a number of issues/concerns. After consideration of the issues raised out of consultation, the ATO has taken on board some of the issues raised and made some changes to the Legislative Instrument and data specifications. Not all issues raised could be adopted by the ATO as the issues raised were inconsistent with the policy intent or not administratively feasible.

Legislative references:

Taxation Administration Act 1953

Superannuation Laws Amendment (2015 Measures No. 5) Act 2015

Human Rights (Parliamentary Scrutiny) Act 2011

Legislation Act 2003

Statement of Compatibility 

This Statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

EXCLUDED CLASSES OF TRANSACTIONS AND ENTITIES FOR THIRD PARTY INFORMATION REPORTS ON SHARES AND UNITS

DETERMINATION 2016

This Legislative Instrument 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 of the Bill/Legislative Instrument

This Legislative instrument excludes classes of transactions and entities from third party reports on shares and units. Excluding entities and transactions will ensure certainty and reduced compliance costs for entities that may be impacted by the third party reporting legislation.

Human rights implications

The legislative Instrument does not engage any of the applicable rights or freedoms.  It excludes classes of transactions and entities for third party report on shares and units to ensure that the third party reporting regime operates efficiently and the compliance burden on reporters is minimised.  

Conclusion

This Legislative Instrument does not raise any human rights issues.