EXPLANATORY STATEMENT
Issued by authority of the Assistant Treasurer
Tax Laws Amendment (2013 Measures No. 2) Commencement Proclamation 2013
Subsection 2(1) of the Tax Laws Amendment (2013 Measures No. 2) Act 2013 (the Act) provides that Parts 1 to 3 of Schedule 2 to the Act commence on a day to be fixed by proclamation. However, if any of the provisions of Parts 1-3 of Schedule 2 do not commence within six months of the date the Act receives the Royal Assent, then those provisions commence on the first day after the end of that six month period. The Act received Royal Assent on 29 June 2013.
The Proclamation fixed 11 July 2013 as the day on which Parts 1 to 3 of Schedule 2 to the Act commenced.
Infrastructure projects often involve a long lead time between when expenditure is incurred during the construction phase and when income is generated during the operational phase. Schedule 2 enables the losses generated in the construction phase to be increased on an annual basis to counter the effect of the passage of time from when the losses are incurred to when they can be used against income generated in the operational phase.
Past year losses can usually only be used by an entity if it has the same owners that it had when the losses were incurred or carries on the same business it was carrying on when the losses were incurred. Schedule 2 allows an entity that carries on a qualifying infrastructure project to use past year losses against current year income despite a change in ownership, even if it does not carry on the same business.
Part 1 of Schedule 2 to the Act provides the framework for who can access the incentive and how it operates. Part 2 of Schedule 2 to the Act makes consequential amendments and Part 3 of Schedule 2 to the Act deals with the application of the provisions. Part 4 of Schedule 2 to the Act makes minor technical amendments that are appropriate to give effect to the measure. Division 1 of Part 4 of Schedule 2 to the Act commences on Royal Assent. Division 2 of Part 4, which repealed a provision made unnecessary by the Tax and Superannuation Laws Amendment (2013 Measures No. 1) Act 2013, has already commenced.
The provisions apply to income years starting on or after 1 July 2012 and therefore have a concessional retrospective element. Parts 1 to 3 of Schedule 2 to the Act were commenced by Proclamation to ensure that the legislative instruments that support the administrative processes for access to the incentive (such as the process for applying for designation) were made.
The Proclamation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Overview
The Tax Laws Amendment (2013 Measures No. 2) Act 2013, enacted by the Australian Parliament, addresses the issue of tax losses incurred during the construction phase of infrastructure projects being unable to offset income generated in the operational phase due to changes in ownership or business operations. This Act, which received Royal Assent on 29 June 2013, introduces amendments to allow entities carrying on qualifying infrastructure projects to use past year losses against current year income despite changes in ownership, even if they do not continue the same business. This is intended to counter the time lag between incurring losses in the construction phase and generating income in the operational phase of infrastructure projects. The provisions of the Act commenced on 11 July 2013, ensuring that the legislative framework supporting the administrative processes for accessing the incentive was established in time.
Scope and Application
The Tax Laws Amendment (2013 Measures No. 2) Act 2013 applies to entities carrying on a qualifying infrastructure project in Australia. It allows these entities to utilise past year losses against current year income, even if there has been a change in ownership, provided that the entity continues to carry on a qualifying infrastructure project. The Act received Royal Assent on 29 June 2013 and Parts 1 to 3 of Schedule 2, which provide the framework for the incentive, consequential amendments, and application of the provisions, commenced on 11 July 2013 by proclamation. The provisions have a retrospective element, applying to income years starting on or after 1 July 2012. The Act extends to the Commonwealth of Australia and subordinate instruments may be used to further define the scope and application of the provisions. There are no stated exclusions, exemptions, or thresholds in the Act itself, but these may be specified in the subordinate instruments.
Key Provisions
The Tax Laws Amendment (2013 Measures No. 2) Act 2013 (the Act) introduces several key provisions through Schedule 2, which is divided into four parts. Part 1 (subsection 2(1)) establishes the framework for the tax incentives related to infrastructure projects, allowing qualifying entities to utilise past year losses against current income, despite changes in ownership or business operations (Part 1, Division 1). This is particularly beneficial for infrastructure projects that involve a long construction phase before generating income during the operational phase. Part 2 makes consequential amendments to other laws to align with the new provisions, while Part 3 details the application of these provisions, ensuring clarity and proper implementation. Part 4 consists of minor technical amendments necessary to effectively support the new measures, with Division 1 commencing on Royal Assent, and Division 2 already in effect as it repealed a redundant provision.
The Act imposes specific obligations on entities seeking to utilise the tax incentives. Entities must ensure they qualify as carrying on a qualifying infrastructure project, as defined in the Act, and must adhere to the rules outlined in Schedule 2 regarding the application of past year losses. Additionally, entities must maintain proper records and documentation to substantiate their claims for utilising past year losses against current income. These obligations ensure that the tax incentives are only accessible to those entities genuinely involved in qualifying infrastructure projects, maintaining the integrity of the tax system.
Breach of the provisions in the Act may lead to several consequences. Firstly, entities that falsely claim eligibility for the tax incentives may face civil penalties under the Taxation Administration Act 1953, which could include fines up to a maximum of 200 penalty units (currently AUD 42,750) per offence. Moreover, entities that fail to comply with record-keeping requirements may also be subject to penalties under the same Act. In severe cases of non-compliance or deliberate tax avoidance, criminal charges may be pursued, resulting in substantial fines and imprisonment, as per the Criminal Code Act 1995. These penalties underscore the importance of adhering to the legislative requirements to avoid legal repercussions.