The Budget Savings (Omnibus) Bill 2016 (the Bill) has passed through the House of Representatives. It seeks to achieve savings across multiple portfolios to contribute to budget repair. The Bill would implement measures announced in the 2016–2017 Federal Budget and earlier Budget updates.

The Bill creates a new reporting framework, Single Touch Payroll (STP), for substantial employers to automatically provide payroll and superannuation information to the Commissioner of Taxation at the time it is created. A number of related amendments aim to streamline employer payroll and superannuation choice processes by allowing the ATO to pre-fill and validate employee information. The framework would apply from the first quarter beginning on or after the day the Bill receives Royal Assent.

Key points include the following:

  • Entities with 20 or more employees (substantial employers) would be required to report the following information to the Commissioner:
    • withholding amount and associated withholding payment, on or before the day by which the amount was required to be withheld;
    • salary or wages and ordinary time earnings information, on or before the day on which the amount was paid; and
    • superannuation contribution information, on or before the day on which the contribution was paid.
  • Employers that report these obligations (including those that voluntarily report) would not need to comply with a number of other reporting obligations under the existing law.
  • For the first 12 months, reporting entities would not be subject to administrative penalties, unless first notified by the Commissioner.
  • An employee may make a valid choice of superannuation fund by providing the relevant information to the Commissioner. In this situation, the Commissioner may disclose an employee's TFN and protected information to the employer.
  • An employee may make an effective TFN declaration by providing the declaration to the Commissioner. In this situation, the Commissioner may make available to the employer the information in the employee's TFN declaration. Where the information has been provided by the employee to the Commissioner, the employer would not be required to send the declaration to the relevant Deputy Commissioner, nor would they be required to notify the Commissioner where no TFN declaration was provided to them by the employee. However, if an employee chose not to provide their TFN, the obligation would remain for the employer to notify the Commissioner.
  • The Commissioner may provide employers with confirmation that a recipient's information, including their TFN, matched or did not match the information held by the ATO about the recipient (positive and negative validation).
  • In general, STP reporting would commence on 1 July 2018 for substantial employers and the related amendments would apply more broadly from 1 January 2017. In some cases, the Commissioner may defer these start dates by legislative instrument.

The ATO has release a consultation paper (available on the ATO website at: https://www.ato.gov.au/General/Consultation/What-we-are-consulting-about/Papers-for-comment/Single-Touch-Payroll--ATO-consultation-paper/) which seeks comments on the ATO's proposed administration of STP reporting, including the form the ATO guidance may ultimately take.

Previous announcements

The proposal was first flagged by then Minister for Small Business Bruce Billson on 20 June 2014. The Government officially announced the proposal on 28 December 2014. The ATO then released a discussion paper in February 2015. Following feedback, the Government announced on 10 June 2015 that it would undertake further consultation.

As part of the Mid-Year Economic and Fiscal Outlook 2015–2016 (MYEFO), released on 15 December 2015, the Government announced a $100 non-refundable tax offset for expenditure on Standard Business Reporting enabled software for small businesses. The offset is not covered in the Bill's amendments. The MYEFO also announced the timetable for piloting STP reporting.

Other important changes

Other important changes proposed by the Omnibus Bill include:

  • Rates of research and development (R&D) tax offset – reducing the rates of the tax offset available under the R&D tax incentive for the first $100 million of eligible expenditure by 1.5%. The higher (refundable) rate of the tax offset will be reduced from 45% to 43.5% and the lower (non-refundable) rates of the tax offset will be reduced from 40% to 38.5%. Key points include the following:
    • Eligible entities that have annual turnover of less than $20 million and are not controlled by an exempt entity or entities may obtain a refundable tax offset equal to 43.5% of the first $100 million of eligible R&D expenditure in an income year, and a further refundable tax offset equal to the amount by which the R&D expenditure exceeds $100 million multiplied by the company tax rate.
    • All other eligible entities may obtain a non-refundable tax offset equal to 38.5% of the eligible R&D expenditure and a further non-refundable tax offset equal to the amount by which the R&D expenditure exceeds $100 million multiplied by the company tax rate.
    • The changes would apply from 1 July 2016.
  • Fringe benefits – changing the treatment of fringe benefits under the income tests for family assistance and youth income support payments and for other related purposes. These proposed changes are also relevant for a number of income tax provisions. The meaning of "adjusted fringe benefits total" would be modified so that the gross rather than adjusted net value of reportable fringe benefits was used, except in relation to fringe benefits received by individuals working for public benevolent institutions, health promotion charities and some hospitals and public ambulance services. The changes would apply from the first 1 January or 1 July to occur after the day the Bill receives the Royal Assent.
  • Indexation of private health insurance thresholds – pausing the income thresholds that determine the tiers for the Medicare Levy Surcharge (MLS) and the Australian Government Rebate (the Rebate) on private health insurance at the 2014–2015 rates until 2020–2021. This proposal was announced in the 2016–2017 Federal Budget.
  • Indexation of family tax benefit and parental leave thresholds – making amendments to the family assistance indexation provisions to maintain the higher income free area for family tax benefit (FTB) Part A and the primary earner income limit for FTB Part B for a further three years. Under the current law, indexation of these amounts is paused until and including 1 July 2016. These amendments ensure that indexation does not occur on 1 July of 2017, 2018 and 2019. Similarly, amendments are proposed to ensure that the paid parental leave income limit is not indexed for a further three years, until 1 July 2020. These changes would apply from the date the Bill receives Royal Assent.
  • Pension means testing for aged care residents – introducing the 2015–2016 MYEFO measure aligning the pension means testing arrangements with residential aged care arrangements. Key points include the following:
    • The changes would amend the social security and veterans' entitlements legislation to remove the pension income and assets test exemptions that are currently available to pensioners in aged care who rent out their former home and pay their aged care accommodation costs by periodic payments.
    • The removal of the income test exemption is proposed to ensure that net rental income earned on the former principal residence of new entrants into residential aged care would be treated the same way under the pension income test as under the aged care means test, regardless of how the resident chooses to pay their aged care accommodation costs.
    • The current indefinite assets test exemption of the former principal residence from the pension assets test, where the property is rented and aged care accommodation costs are paid on a periodic basis, would also be removed. A person who enters a residential or flexible aged care service after the commencement of changes could still benefit from provisions in the Social Security Act 1991 and Veterans' Entitlements Act 1986 that treat a person's former residence as their principal home for a period of up to two years from the day on which the person enters care (unless the home is occupied by their partner, in which case it continues to be exempt).
    • The changes would only apply to pensioners who enter aged care on or after the commencement of the amendments. Existing aged care residents and those who entered aged care before the commencement date would be protected from the amendments. The changes would commence from the first 1 January or 1 July to occur after the day the Bill receives the Royal Assent.
  • Minimum repayment income for HELP debts – establishing a new minimum repayment threshold for HELP debts of 2% when a person's income reaches $51,957 in the 2018–2019 income year.
  • Indexation of higher education support amounts – changing the index for amounts that are indexed annually under the Higher Education Support Act 2003, from the Higher Education Grants Index (HEGI) to the Consumer Price Index (CPI), with effect from 1 January 2018. The proposal was announced in the 2016–2017 Federal Budget.Removal of HECS-HELP benefit – discontinuing the HECS-HELP benefit from 1 July 2017. The proposal was announced in the 2016–2017 Federal Budget.
  • Job commitment bonus – giving effect to the "cessation of the job commitment bonus" proposal announced in the 2016–2017 Federal Budget.
  • Interest charge on debts of ex-welfare payment recipients – introducing the legislative amendments required for the 2015–2016 MYEFO proposal to apply a general interest charge to the debts of ex-recipients of social security and family assistance payments. The interest charge would apply to social security, family assistance (including child care), paid parental leave and student assistance debts. The rate of the proposed interest charge (approximately 9%) would be based on the 90-day Bank Accepted Bill rate (approximately 2%), plus an additional 7%, as is already applied by the ATO under the Taxation Administration Act 1953. The charge would apply from 1 January 2017.
  • Debt recovery for welfare payment integrity – introducing the legislative amendments required for the 2015–2016 MYEFO proposal to expand debt recovery for enhanced welfare payment integrity. The changes would allow departure prohibition orders (DPOs) to be made to prevent targeted debtors from leaving the country. DPOs would be used for debtors who persistently fail to enter into acceptable repayment arrangements. The changes would also remove the six-year limitation on recovery of welfare debts. The amendments would apply from the later of 1 January 2017 and the day after the Bill receives Royal Assent.
  • Parental leave payments – introducing the amendments required for the 2015–2016 MYEFO proposal to apply consistent treatment of Commonwealth parental leave payments for income support assessment. The changes would amend the social security and veterans' entitlements legislation to ensure Commonwealth parental leave payments and dad and partner pay payments under the Paid Parental Leave Act 2010 would be included in the income test for Commonwealth income support payments. The changes would commence on the first 1 January, 1 April, 1 July or 1 October that occurs after the day the Bill receives Royal Assent.
  • Carer allowance – aligning carer allowance and carer payment start day provisions by removing provisions that apply to backdate a person's start day in relation to payment of carer allowance in certain circumstances. The general start day rules under Pt 2 of Sch 2 to the Social Security Administration Act 1999 would apply to determine the date of effect of a decision to grant carer allowance. The changes would commence on the later of 1 January 2017 and the day after the Bill receives the Royal Assent.
  • Employment income – removing the exemption from the income test for FTB Part A recipients and the exemption from the parental income test for dependent young people receiving Youth Allowance and ABSTUDY living allowance if the parent is receiving either a social security pension or social security benefit and the fortnightly rate of pension or benefit is reduced to nil because of employment income (either wholly or partly). The change would commence on 1 July 2018.
  • Other changes proposed in the Bill relate to the following:
    • abolishing the National Health Performance Authority;
    • aged care – creating civil penalties for approved providers that do not make required notifications;
    • removing the family member exemption from the newly arrived resident's waiting period;
    • repealing student start-up scholarships; and
    • creating a single appeal path under the Military Rehabilitation and Compensation Act 2004.

Watch for amendments

At the time of writing, the Bill had passed the House of Representatives with 19 Government amendments. The Government amendments to the Bill include:

  • adding a new schedule which provides an income limit of $80,000 on payment of the FTB Part A supplement;
  • removing proposed amendments that would have stopped relevant social security payments to individuals undergoing psychiatric confinement because of serious offences;
  • removing the Energy Supplement only for new recipients of FTB Part A, FTB Part B and the Commonwealth Seniors Health Card;
  • restoring funding to the Australian Renewable Energy Agency (ARENA) of $800 million over five years to 2021–2022; and
  • removing proposed amendments to create a Child and Adult Public Dental Scheme.
Source: Budget Savings (Omnibus) Bill 2016, before the Senate at as at 14 September 2016, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;page=0;query=BillId%3Ar5707%20Recstruct%3Abillhome