1 Summary of analysis: objectives and impacts IMPACTS criteria Description (paragraph Recommendation Fiscal Economic impact Compliance impacts Administration impacts Risks 30 refers) impact Gives preference to sole trader business structure Inconsistencies Although there is a potential for Ongoing uncertainty about over company business between law and wasted expenses to arise in application of tax law to (a) and (b) are structure. policy remain. determining whether carried bankrupts, including Option 1: Status not met. Gives preference to fund Uncertainty about the Does not address the problem. Nil forward tax losses exist, there is compliance obligations and quo/ (c), (d) and (e) business from personal application of the law Not recommended. no change in compliance costs the tax treatment of assets are met. savings and debt not subject to bankrupts may give as this is the effect of the status vested in the Official to remission income rules. rise to wasted quo. Assignee. Inconsistent with policy for expenses. carrying forward tax losses. A potential minor decrease Option 2: Cancel No change in compliance costs in administration costs, as carried forward Has neutral effect. would be expected as the the value of carried forward Addresses the problem. tax losses if all (a) to (e) are all Consistent with policy for Nil outcome is largely consistent tax losses on discharge No risks identified. Consistent with policy objectives. debts cancelled met. carrying forward tax losses. with current outcomes in from bankruptcy would no Recommended method. under insolvency practice. longer be a disputable law/ matter. Gives preference to sole Inconsistencies trader business structure Option 3: Cancel between law and over company business A net (small) increase in carried-forward There is a risk of increased policy remain. structure. compliance costs would be tax losses to the administration costs Risk of dispute (a) to (e) are not preference to fund expected, The scale of this net Does not address the problem. extent business Nil. relating to determining the between met. business from personal increase is not able to be Not recommended. debts cancelled value of carried-forward administrators and savings and debt not subject determined due to data under insolvency tax losses. taxpayer on whether to remission income rules. limitations. law. carried-forward tax Inconsistent with policy for losses exist. carrying forward tax losses.
1 Summary of analysis: objectives and impacts Description criteria (paragraph 30 refers) IMPACTS Recommendation Economic impact Fiscal impact Compliance impacts Administration impacts Risks Option 1: Status quo/ (a) and (b) are not met. (c), (d) and (e) are met. Gives preference to sole trader business structure over company business structure. Gives preference to fund business from personal savings and debt not subject to remission income rules. Inconsistent with policy for carrying forward tax losses. Nil Although there is a potential for wasted expenses to arise in determining whether carried forward tax losses exist, there is no change in compliance costs as this is the effect of the status quo. Ongoing uncertainty about application of tax law to bankrupts, including compliance obligations and the tax treatment of assets vested in the Official Assignee. Inconsistencies between law and policy remain. Uncertainty about the application of the law to bankrupts may give rise to wasted expenses. Does not address the problem. Not recommended. Option 2: Cancel carried forward tax losses if all debts cancelled under insolvency law/ (a) to (e) are all met. Has neutral effect. Consistent with policy for carrying forward tax losses. Nil No change in compliance costs would be expected as the outcome is largely consistent with current outcomes in practice. A potential minor decrease in administration costs, as the value of carried forward tax losses on discharge from bankruptcy would no longer be a disputable matter. No risks identified. Addresses the problem. Consistent with policy objectives. Recommended method. Option 3: Cancel carried-forward tax losses to the extent business debts cancelled under insolvency law. (a) to (e) are not met. Gives preference to sole trader business structure over company business structure. preference to fund business from personal savings and debt not subject to remission income rules. Inconsistent with policy for carrying forward tax losses. Nil. A net (small) increase in compliance costs would be expected, The scale of this net increase is not able to be determined due to data limitations. There is a risk of increased administration costs relating to determining the value of carried-forward tax losses. Inconsistencies between law and policy remain. Risk of dispute between administrators and taxpayer on whether carried-forward tax losses exist. Does not address the problem. Not recommended.
2016-ris-archcrm-bill-10.docx