There are a number of items scattered through the budget that will have an impact on the market and investors and some of us in business.
We already know of the alcopops tax, the changes to the Medicare levy, the moves to boost taxation compliance and the higher tax on luxury cars above $57,000.
But there’re others, starting with the largest new tax change: the move to scrap a tax exemption on light crude oil extracted from natural gas.
This has no doubt been sparked by the surge in world oil prices to well over $US120 a barrel in recent days.
That will boost government revenue by $2.5 billion over the next four years.
The tax will apply from midnight last night.
Condensate, which is used to make gasoline and diesel, will be taxed at the same rate as crude oil.
Companies such as Woodside Petroleum and BHP Billiton are among six companies that produce the raw material on the North West Shelf and which will be impacted to varying degrees.
As well condensate gathered from onshore fields will also be affected.
The Government said in its announcement last night that under the new arrangements, "all condensate production from petroleum fields located in the North West Shelf Project area and onshore Australia will be subject to the Crude Oil Excise. This excise is levied as a percentage of the value of crude oil produced from a petroleum field.
"Condensate will be subject to the same excise rates as crude oil from petroleum fields discovered after 18 September 1975. Under these arrangements, the top Crude Oil Excise rate (which applies once annual production reaches just over 5 million barrels in a year) is 30 per cent.
"The first 4,767.3 megalitres (or 30 million barrels) of crude oil produced from a field is exempt from Crude Oil Excise. Past production of condensate from a petroleum field will contribute towards meeting this threshold before the Crude Oil Excise becomes payable.
"As part of this measure, the Australian Government will provide the Western Australian (WA) Government with ongoing compensation for the loss of shared Offshore Petroleum Royalty revenue resulting from imposing the Crude Oil Excise on condensate. This arises because Crude Oil Excise payments are a deductible expense for calculating the Offshore Petroleum Royalty.
"An initial payment of $80 million will be paid to the WA in 2007-08, with payment in subsequent years adjusted to equal the impact of removing the condensate exemption on royalty payments to Western Australia. This is estimated to cost $406.6 million over the forward estimates period."
And a move that will benefit Australian property trusts will see the Federal Government cutting the amount of
tax overseas investors
pay on dividends from managed funds to 7.5 percent to encourage investments in real estate trusts.
The move will enhance the attractiveness of Australian property trusts, such as Westfield, to foreign investors. It could also improve the prospects of the troubled Centro finding buyers overseas for its Australian shopping malls. The new measure won’t apply to investors living in countries not a party to a tax information exchange arrangements. That means investors many tax havens will miss out.
The tax, currently 30 percent, will be cut to 22.5 percent in the year starting July 1; 15 percent the following year; and 7.5 percent the year after that, according to last night’s budget papers.
Treasurer Wayne Swan said in his first budget “these arrangements will make Australia’s withholding tax rate one of the most competitive in the world. The arrangements will ensure Australian property trusts are well placed to attract foreign investment.”
"This will provide a major boost to Australia’s goal of becoming a financial hub in the Asia-Pacific region and goes beyond the commitment made during the election.
Mr Swan said that "Australia is internationally recognised as one of the major markets for managed funds. The Australian funds management industry manages more than $1.4 trillion in assets. The industry is expected to continue its strong growth, with assets under management estimated to exceed $2.5 trillion by 2015. The Australian property trust sector is a key part of the industry.
"In spite of Australia’s strong regulatory regime and reputation for funds management, less than three per cent of industry fees are derived from exports – that is, from foreign residents investing in Australian managed funds.
"Industry has advised this is in part due to the existing non-final withholding tax rate, predominantly applying to rental income and capital gains from taxable Australian property, which is higher, on average, than the withholding rates imposed by other countries.
"In order to enhance the industry’s export ability, the Government will introduce a new withholding tax regime, with effect from the first income year after the date of Royal Assent of the enabling legislation.
"The new withholding tax regime will apply to fund payments that are distributions of Australian source net income (other than dividends, interest and royalties) of Australian MITs to foreign residents.
"It will cover distributions made directly from MITs to foreign residents as well as distributions made through other intermediaries (including custodians). Distributions of dividends, interest and royalties will continue to be covered by the existing final withholding tax arrangements.
"However, to support the integrity of the arrangements and in keeping with the Government’s commitment to minimise international tax evasion and avoidance, the nature of the new withholding tax regime will vary depending on whether the foreign investor is resident in a jurisdicti
