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INCOME TAX ASSESSMENT AMENDMENT REGULATIONS 2000 (NO. 2) 2000 NO. 128
EXPLANATORY STATEMENTSTATUTORY RULES 2000 No. 128
Issued by authority of the Assistant Treasurer
Income Tax Assessment Act 1997
Income Tax Assessment Amendment Regulations 2000 (No. 2)
Section 909-1 of the Income Tax Assessment Act 1997 (the Act) provides that the Governor-General may make regulations for giving effect to the Act.
The regulations amend the Income Tax Assessment Regulations 1997 (the Regulations) to establish procedures for the valuation of property donated to certain funds, authorities and institutions and to set the fees that the Commissioner will charge for the valuations.
Under section 30-15 of the Act, a tax deduction is available for gifts of property made to certain funds, authorities and institutions where the property is valued by the Commissioner at more than $5,000, regardless of when or how the property was acquired by the donor. The amount deductible is the value of the property as determined by a valuation. Section 30-212 of the Act provides that the property valuation must be made by the Commissioner and that the Commissioner may charge an amount worked out in accordance with the Regulations.
The Regulations require a request for a valuation to be made in writing on a form approved by the Commissioner and lodged with the General Manager, Australian Valuation Office. The application requires, amongst other things, the applicant's name and address, a description of the property to be valued and the appropriate application fee.
Where the item to be valued is not real property, the Regulations provide that a certificate of authenticity must also be attached to the application. If a certificate is not provided or the Commissioner is not satisfied with the one that is provided, then the Commissioner may charge the applicant for the cost of obtaining a certificate.
The Regulations lists the circumstances in which the Commissioner must treat an application as having no effect:
* the request for valuation has not been made in accordance with the regulations;
* the application fee has not been paid in full; and
* advance payments have not been paid in the required time.
In these situations, the Commissioner must advise the applicant in writing that the application has no effect.
The Regulations provide that if the Commissioner determines that a certificate of authenticity or an advance payment is required, no further work on the valuation is required until the requested information is received. Likewise, if the applicant has sought an estimate of the likely fee for the valuation, no further work is required on the valuation until the Commissioner has given the estimate to the applicant.
The Regulations also provide that the valuation certificate is only issued once all fees have been paid in full. However, if the total fees paid by the applicant exceed the amount due to the Commissioner, then the Commissioner must repay the difference to the applicant as soon as practicable.
In addition, the Regulations determine that once a valuation is completed and all fees paid, the certificate must be issued to the applicant showing the following information:
* the date of the valuation;
* either a legal description of any real property or a full description of other property;
* the period for which the valuation is valid;
* a statement of the valuation; and
* any other relevant information.
Details of the amending Regulations are attached.
A Regulation Impact Statement is also attached.
The Regulations commence on gazettal.
ATTACHMENT A
Details of the Regulations are as follows:
Regulation 1: Identifies the Regulations as the Income Tax Assessment
Amendment Regulations 2000 (No. 2).
Regulation 2: Provides for the Regulations to commence on gazettal.
Regulation 3: Amends the Income Tax Assessment Regulations 1997. The amendments are contained in Schedule 1 of the Regulations.
Schedule 1
Item 1:
Regulation 30-212.01 provides that the procedures for valuation of property and the fees to be charged by the Commissioner under section 30-212 of the ITAA 1997 are set out in regulations 30-212.02 to 30-212.11.
Regulation 30-212.02 provides for the request for a valuation to be made in writing on a form approved by the Commissioner and may require, amongst other things, the applicant's name and address and a legal description of the property to be valued.
Regulation 30-212.03 states that the request for the valuation is to be given to the General Manager, Australian Valuation Office and must include the prescribed application fee.
Regulation 30-212.04 provides that the prescribed application fee is $150 up to 30 June 2000 and $162 (GST inclusive) from 1 July 2000.
Under Regulation 30-212.05, an applicant must provide a certificate of authenticity for a valuation of property other than real property. If a certificate is not provided or the Commissioner is not satisfied with the one that is provided, then the Commissioner may charge the applicant for the cost of obtaining a certificate.
Regulation 30-212.06 provides that an applicant may ask the Commissioner for an estimate of the likely fees for the valuation. While the Commissioner is not bound by this estimate, an estimate of the fees must be provided to the applicant, along with the basis of the estimate.
Regulation 30-212.07 provides that if the Commissioner requires an advance payment, the Commissioner must request the payment within 14 days from receiving the application. An explanation of the calculation of the advance payment required must also be given. The applicant must pay the advance payment required within 14 days of being asked for it.
Regulation 30-212.08 prescribes the situations when the Commissioner is not required to consider certain applications. If the Commissioner determines that a certificate of authenticity or an advance payment is required, no further work on the valuation is required until the requested information is received. Likewise, if the applicant has sought an estimate of the fee for the valuation, no further work is required on the valuation until the Commissioner has given the estimate to the applicant.
Regulation 30-212.09 lists the circumstances in which the Commissioner must treat an application as having no effect:
* the request for valuation has not been made in accordance with the regulations;
* the application fee has not been paid in full; and
* advance payments have not been paid in the required time.
In these situations, the Commissioner must advise the applicant in writing that the application has no effect.
Regulation 30-212. 10 provides a standard fee of $150 per hour, and $2.50 per minute for part hours, to be charged for the time spent by the Commissioner in determining the value of the property. The fee will be $162 per hour, and $2.70 per minute for part hours, (GST inclusive) from 1 July 2000. Any fees paid by the applicant are not refundable if the applicant withdraws the request for the valuation.
Regulation 3 0-212. 11 prescribes that any fees paid at the time of lodgment of the application or any advance payment made during the course of the valuation are to be credited against the fees due. These fees are a debt due to the Commonwealth. However, if the total fees paid by the applicant exceed the amount due to the Commissioner, then the Commissioner must repay the difference to the applicant as soon as practicable.
Regulation 30-212.12 states that once a valuation is completed and all fees are paid, the Commissioner must issue a valuation certificate to the applicant. The details that shall be included in the Certificate are:
* either a legal description of any real property or a full description of other property;
* the date of the valuation,
* the period for which the valuation is valid;
a statement of the valuation; and
any other relevant information.
ATTACHMENT B
Regulation impact statement
Policy objective
On 26 March 1999, the Prime Minister, the Treasurer and the Minister for Family and Community Services announced income tax measures to encourage greater corporate and personal philanthropy in Australia. One of the measures allows an income tax deduction for gifts of property made to certain funds, authorities and institutions where the property is valued by the Commissioner of Taxation at more than $5,000, regardless of when or how the property was acquired. Amendments are made to the Income Tax Assessment Act 1997 (ITAA 1997) by Taxation Laws Amendment Act (No. 2) 2000 to implement the proposals.
The policy objective of the proposed regulations is to facilitate the making of independent property valuations by the Commissioner under new section 30-212 of the ITAA 1997 and to recover the costs of the valuation process.
This will be achieved by setting out the administrative requirements for valuations and by charging taxpayers a fee for valuations at the rate specified in the Income Tax Assessment Regulations 1997. The fees charged by the Commissioner for the valuations are tax deductible to the taxpayer.
Implementation options
This measure can be implemented by amending the Income Tax Assessment Regulations 1997.
Assessment of impacts
Impact group identification
The measure will affect approximately 5,000 taxable individuals and 1,250 taxable companies who make gifts of property valued at more than $5,000 to certain funds, authorities and institutions. It will also affect the ATO.
Analysis of costs/ benefits
The Australian Valuation Office (AVO) will advise the Commissioner of the appropriate valuations. Taxpayers will be required to apply to the AVO for a valuation and will incur fees of $150 per hour for work carried out before 1 July 2000 and $162 per hour (GST inclusive) for work performed from 1 July 2000. The valuation costs will be tax deductible to the taxpayer. The cost of valuation after the deduction is estimated at $2 million per year and will be borne by the taxpayer.
In some cases, specialist valuations may be required by the AVO, and the actual cost of these valuations will be payable by the taxpayer. The number of these cases is likely to be small.
Where the property is not real property, a certificate of authenticity must be given to the AVO. In situations where the taxpayer does not possess such a certificate, the taxpayer will be required to bear the costs of obtaining a certificate of authenticity. The number of these cases is likely to be small. Donated property valued at more than $5,000 is likely to be either real property, or a valuable collectable which would generally be accompanied by a certificate of authenticity.
There may be a saving to taxpayers who previously would have sold their property and donated the proceeds to the fund in order to obtain an income tax deduction for the gift. By allowing a tax deduction for gifts of property valued at more than $5,000, these taxpayers will receive a benefit to the value of the costs that otherwise would have been incurred in selling the property. The benefit arising from this saving is unable to be calculated.
Administration costs
The AVO is a commercial business line of the Australian Taxation Office. The application fee, in addition to the fee structure for carrying out a valuation, will provide the AVO with full cost recovery. The cost of administering most specialist valuations undertaken by independent third parties will be recovered by way of the application fee.
The AVO 'charge out' rate of $150 per hour before 1 July 2000 and $162 (inclusive of GST) from 1 July 2000 represents the cost to provide a complete professional valuation service. This rate incorporates the costs associated with administering and undertaking a valuation, including all fixed and variable costs.
Where the AVO deems it necessary to review specialist valuations undertaken by third parties, this action will be considered to be an integral part of the valuation process and will be charged in accordance with the prescribed fee structure.
Conclusion and recommended option
There is only one option for implementing the Government's proposal and that is to amend the Income Tax Assessment Regulations 1997. The fee for valuation of donated property is set at an amount that will achieve full cost recovery to the AVO of providing the service. While the actual valuation costs will vary with each application submitted, the fees to be charged are a reflection of the costs involved for the making of each valuation.