Issued by authority of the Minister for Revenue
and Assistant Treasurer

Income Tax Assessment Act 1997

Income Tax Assessment Amendment Regulations 2007 (No. 7)

Subsection 909-1(1) of the Income Tax Assessment Act 1997 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The purpose of the Regulations is to insert into the Income Tax Assessment Regulations 1997 (the Principal Regulations) the circumstances in which a person ‘died in the line of duty’. The specified circumstances support provisions in the Act which provide that non‑dependants of defence and police personnel who die in the line of duty are treated as dependants for tax purposes.

From 1 July 2007, under the Simplified Superannuation reforms, lump sum superannuation death benefits paid to dependants of the deceased are tax free, while death benefits paid to non-dependants are taxed concessionally. That is, non‑dependant beneficiaries, for example parents and siblings, pay tax on lump sum superannuation death benefits received whereas dependants, such as spouses and minor children, pay no tax on lump sum superannuation death benefits received.

The Act was recently amended to allow non-dependants of a member of the Australian Defence Force (ADF), a member of the Australian Federal Police (ADF) or a State or Territory police force, or a Protective Service Officer (PSO), who died in the line of duty, to be treated as death benefits dependants for tax purposes. This means that lump sum superannuation death benefits paid to non‑dependants of defence and police personnel, such as parents and siblings, are also tax free from the 2007-08 income year onwards.

The Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments, and apply to an income year that begins on or after 1 July 2007.

Subsection 12(2) of the Legislative Instruments Act 2003 provides that a legislative instrument, or a provision of a legislative instrument, has no effect if it would take effect before the date of registration unless the rights of a person (other than the Commonwealth) would not be disadvantaged or no liabilities would be imposed on that person. The regulations apply retrospectively so non-dependants of defence and police personnel who died in the line of duty, who received the deceased’s superannuation death benefits on or after 1 July 2007, but before these regulations are made, are treated as death benefits dependants for tax purposes for that period. This concessional tax treatment is clearly to the non-dependants’ advantage. Therefore the amending regulations are not caught by subsection 12(2) of the Legislative Instruments Act 2003 Act and take effect in relation to an income year that begins on or after 1 July 2007.

The Act specifies no conditions that need to be met before the power to make the Regulations may be exercised.

The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Australian Defence Force, the Australian Federal Police and the Australian Taxation Office were consulted during the preparation of these Regulations.

Details of these Regulations are set out in the Attachment.

ATTACHMENT

Details of the Income Tax Assessment Amendment Regulations 2007 (No. 7)

Regulation 1 specifies the name of the Regulations as the Income Tax Assessment Amendment Regulations 2007 (No. 7).

Regulation 2 provides that the Regulations commence on the day after they are registered.

Regulation 3 provides that Schedule 1 amends the Income Tax Assessment Regulations 1997 (the Regulations).

Regulation 4 provides that the amendment made by Schedule 1 applies in relation to an income year that begins on or after 1 July 2007.

Schedule 1

Subsection 302-195(2) of the Act provides that a non-dependant beneficiary of a member of the ADF, the AFP, a state or territory police force or a PSO, who dies in the line of duty, is treated as a death benefits dependant for tax purposes in respect of the deceased’s lump sum superannuation death benefit.

That is, the death benefits received by the non-dependants of the deceased are tax free.

Subsection 302-195(3) of the Act provides that ADF personnel, Australian police force members and PSOs died in the line of duty if the person died in the circumstances specified in the regulations.

Regulation 302-195 sets out the circumstances in which a person died in the line of duty for the purposes of subsection 302-195(3) of the Act.

Regulation 302-195A sets out the circumstances in which a person is taken not to have died in the line of duty for the purposes of subsection 302-195(3) of the Act. If it can be definitively established that the death occurred in a circumstance prescribed in regulation 302‑195A, the non-dependants of the deceased would not be treated as death benefits dependants for tax purposes in respect of the deceased’s lump sum superannuation death benefit.

Item 1

Regulation 302-195

Persons covered by the Regulations

Subregulation 302-195(1) specifies the persons covered by regulation 302-195. The regulation applies to a person specified in subsection 302‑195(2) of the Act. The persons currently specified in the Act are:

•                a member of the Defence Force;

•                a member of the Australian Federal Police;

•                a member of a State or Territory police force; and

•                a Protective Service Officer (within the meaning of the Australian Federal Police Act 1979).

These persons are collectively referred to as military or police persons in the Regulations.

The circumstances under which a military or police person is taken to have died in the line of duty are summarised in paragraphs 302-195(1)(a) and (b). A military or police person is taken to have died in the line of duty if the death occurred, either in Australia or on overseas service, in one of the circumstances prescribed in subregulations 302-195 (2), (3), (4), (5), (9) and (10), or if the death occurred on overseas service in one of the circumstances prescribed in subregulations
302-195 (6), (7) and (8).

Any secondment arrangements between Australian police forces do not affect the tax treatment of non-dependants of members of deceased police persons who die in the line of duty. A member of an Australian police force who is seconded for service with another Australian police force, either in Australia or overseas, remains a member of the ‘lending’ force for the purposes of these regulations, and the performance of duties with the ‘borrowing’ force can be considered to be in the line of duty to the ‘lending’ force.

For example, the non-dependants of a member of a state or territory police force who is seconded to the AFP and dies in the line of duty would be treated as death benefits dependants for tax purposes.

Circumstances in which a person died in the line of duty

A military or police person is taken to have died in the line of duty if the death occurred under one of the following circumstances:

•                while performing the duties of a military or police person, or in certain specified circumstances while off-duty;

•                as a result of an injury sustained during the performance of their duties, or in certain specified circumstances while off‑duty, within 12 months of sustaining the injury;

•                during certain overseas service;

•                as a consequence of being a military or police person; or

•                where it cannot be definitively established that the death occurred in a circumstance prescribed by regulation 302-195A.

Performance of duties

Subregulation 302-195(2) provides that a military or police person died in the line of duty if the person died while performing the duties of a military or police person.

This would include, for example, the duties that the person was required to perform or undertake in their role as a military or police person.

Subregulation 302-195(3) provides that a military or police person died in the line of duty if the death occurred while the person was off-duty but was taking actions such as attempting to arrest a suspected offender, preventing an offence or rescue someone.

This circumstance recognises that military and police persons may still have an obligation to exercise their role under specific circumstances even though they are not officially on duty.

Example 1

While out shopping on a day off, a police officer is present at a robbery. In the course of trying to arrest the thief, the police officer is killed.

The circumstance also includes situations where the military or police person was recalled to work while off-duty. The person was not expecting to go to work but was required to attend.

Example 2

An ADF member is at home on the weekend and is not on call. The member is recalled to work on Sunday morning to deal with an emergency. The member dies in a traffic accident on the way to work.

This circumstance does not include a person who was rostered on duty or
on call.

Injury

Subregulation 302-195(4) provides that a military or police person died in the line of duty if the person died as a result of an injury.

For this circumstance to apply, the person sustained the injury while performing their duties as a military or police person, and the death occurred as a result of sustaining the injury within 12 months.

Example 3

A police officer is shot while investigating a crime. The officer dies as a result of the injury three months afterwards.

Subregulation 302-195(5) provides that a military or police person died in the line of duty if the person died as a result of injury that occurred in specific circumstances while off-duty, and the death occurred as a result of sustaining the injury within 12 months.

For this circumstance to apply, the person was off-duty at the time of sustaining the injury but was taking actions such as attempting to arrest a suspected offender, prevent an offence, rescue someone or travelling to work because the person was recalled to duty.

Subregulations 302-195(4) and (5) apply in cases where the death occurred within 12 months of the injury. If the death occurred more than 12 months after the injury, it could reasonably be expected that the person would have had the opportunity to access their superannuation benefit as a disability superannuation benefit.

Interpretation

Subregulation 302-195(11) provides that the times when a military or police person would be considered to be off-duty include:

•                travel to or from work; or

•                on a rostered day off work; or

•                on leave from work.

Overseas service

Subregulations 302-195(6), (7) and (8) provide that a military or police person died in the line of duty if the person died while serving overseas in the circumstances prescribed. These regulations recognise the dangerous or unusual circumstances of certain overseas service by military or police persons.

Military persons

A circumstance is that a member of the ADF died while serving overseas and the service was warlike service or non-warlike service as defined in the Military Rehabilitation and Compensation Act 2004.

The Minister for Defence may determine, in writing, that service with the ADF is warlike service or non-warlike service. The Minister for Defence makes this determination after considering all the relevant information available at the time and in consultation with the Prime Minister.

Recent examples of overseas service determined by the Minister of Defence to be warlike service or non-warlike service and covered by subregulation 302-195(6) include service with Operation Catalyst in the Middle East and service in East Timor.

A military person who dies during service overseas that has not been determined to be warlike or non-warlike service is taken to have died in the line of duty provided the death occurred under another circumstance prescribed by regulation 302-195.

Police persons

A circumstance is that a member of the AFP or a PSO died while serving at an overseas location specified in a determination under the Australian Federal Police Act 1979, and the person was serving at that overseas location on a peace-keeping or capacity-building mission.

The Commissioner for the Australian Federal Police may determine the place where an AFP member or a PSO is assigned to perform duty, including deployment overseas. The determination is made under subsection 40H(1) of the Australian Federal Police Act 1979.

A circumstance is that a member of a state or territory police force died while serving overseas as a special member of the AFP, and the person was serving at that overseas location on a peace-keeping or capacity-building mission.

The Commissioner may appoint a member of a state or territory police force as a special member of the AFP under section 40E of the Australian Federal Police Act 1979.

Peace-keeping or capacity-building missions assist in helping a country torn by conflict to create conditions for sustainable peace, or in enabling a country to establish or re-establish essential institutions.

Recent examples of overseas service covered by subregulations 302-195(7) and (8) include service with the Regional Assistance Mission to the Solomon Islands.

A police person who dies while serving overseas other than under the circumstances prescribed by subregulations 302-195(7) and (8) is taken to have died in the line of duty provided the death occurred under another circumstance prescribed by Regulation 302-195.

Consequences of duties

Subregulation 302-195(9) provides that a military or police person died in the line of duty if the person died as a result of action taken because the person was a military or police person, regardless of whether the person was on- or off-duty at the time of death.

For this circumstance to apply, the death occurred either at the time of the action, or as a result of sustaining an injury at the time the of action within 12 months of the injury.

This circumstance would include cases where a military or police person is the target of criminal activity, because of their role or previous role as a military or police person, for example the person is killed in retribution or in revenge. The circumstance would apply even if the person was no longer a military or police person at the time of death.

Example 4

A police officer is shot at home by a gang member for arresting members of the gang some years previously.

Uncertainty about circumstances of death

Subregulation 302-195(10) provides that a military or police person died in the line of duty if the circumstances of the death are uncertain. That is, the circumstances fall under regulation 302-195 but there is the possibility that the circumstances of the death may also fall under regulation 302-195A. One such example would be where it was unclear whether a death was accidental or suicide.

Subregulation 302‑195(8) clarifies that the non-dependants of the deceased are treated as death benefits dependants in cases where it cannot be definitively established that the circumstances of the death fall under regulation 302‑195A.

In the course of determining whether the circumstances of a death fall under regulation 302-195A, it is expected that the deceased’s non-dependants would obtain or have access to relevant documentation such as a death certificate, a letter from the deceased’s employer, a final report of a formal investigation or a coroner’s report.

Subregulation 302-195(108) provides certainty to non-dependants in the event that there is little or no information or evidence available about the circumstances of the death, or where investigation cannot determine with certainty the circumstances of
the death.

Regulation 302-195A

Regulation 302-195A sets out the circumstances in which a military or police person is taken not to have died in the line of duty. That is, if a military or police person died in one of the circumstances set out in Regulation 302-195A, their death is considered not to be in the line of duty. Consequently, the non-dependants of the deceased are not treated as death benefits dependants for tax purposes in respect of the deceased’s lump sum superannuation death benefit.

Persons covered by the proposed Regulations

Subregulation 302-195A(1) specifies the persons covered by the proposed regulation 302-195A. The proposed regulation applies to a person specified in subsection 302‑195(2) of the Act. The persons currently specified in the Act are:

•                a member of the Defence Force;

•                a member of the Australian Federal Police;

•                a member of a State or Territory police force.

•                a Protective Service Officer (within the meaning of the Australian Federal Police Act 1979).

Circumstances in which a person is taken not to have died in the line of duty

A military or police person is considered not to have died in the line of duty if the death occurred under one of the following circumstances:

•                while off-duty, or as a result of sustaining an injury while off-duty, except in certain specified circumstances;

•                during incidental activity, except during certain overseas service;

•                after retirement, except in certain specified circumstances;

•                suicide; or

•                from natural causes or from an illness or disease, except during certain overseas service.

Off-duty

Subregulation 302-195A(2) provides that a military or police person who dies while off-duty is taken not to have died in the line of duty.

Subregulation 302-195A(3) provides that a military or police person who dies as a result of sustaining an injury while off-duty is taken not to have died in the line of duty.

Subregulations 302-195A(2) and 302-195A(3) do not apply if the death occurred in specified circumstances. The specified circumstances are:

•                death during specified actions while off-duty (subregulation 302-195(3));

•                death from an injury sustained during specified actions while off-duty (subregulation 302‑195(5));

•                death during certain overseas service (subregulations 302‑195(6), (7) and (8)); and

•                death as a consequence of being a military or police person (subregulation 302‑195(9)).

Subregulation 302-195A(8) would provide that the times when a military or police person would be considered to be off-duty include:

•                travel to or from work; or

•                on a rostered day off work; or

•                on leave from work.

Incidental activity

Subregulation 302-195A(4) provides that a military or police person whose death is related to an activity which is not directly related to the performance of the person’s duties, is taken not to have died in the line of duty.

Example 5

An ADF member was fatally injured during a football game on the weekend.

This subregulation does not apply if the death occurred during certain overseas service (subregulations 302‑195(6), (7) and (8)).

Death after retirement

Subregulation 302-195A(5) provides that a military or police person who dies after retirement as a military or police person is taken not to have died in the line of duty.

This circumstance includes resignation from the defence or police forces, where the person obtains (or intends to obtain) other employment, and permanent retirement from the workforce.

Example 6

A police officer resigns from the police force and obtains other employment. The officer dies shortly after commencing employment with another employer.

This subregulation does not apply if the death occurred in specified circumstances after the person’s resignation or retirement from the defence or police forces. The specified circumstances are:

•                death within 12 months from an injury sustained while performing their duties (subregulation 302‑195(4));

•                death within 12 months from an injury sustained during specified actions while off-duty (subregulation 302‑195(5)); and

•                death as a consequence of being a military or police person
(subregulation 302‑195(9)).

Suicide

Subregulation 302-195A(6) provides that a military or police person who dies as a result of committing suicide is taken not to have died in the line of duty.

There are no exceptions to this subregulation.

Natural causes or disease

Subregulation 302-195A(7) provides that a military or police person who dies as a result of natural causes or from an illness or disease is taken not to have died in the line of duty.

Example 7

An ADF member suffers a fatal heart attack at his desk at work.

This subregulation does not apply if the death occurred during certain overseas service (subregulations 302-195(6), (7) and (8)).