Commonwealth Numbered Regulations - Explanatory Statements

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INCOME TAX ASSESSMENT AMENDMENT REGULATION 2013 (NO. 1) (SLI NO 24 OF 2013)

EXPLANATORY STATEMENT

Select Legislative Instrument 2013 No. 24

Issued by authority of the Assistant Treasurer

Subject -          Income Tax Assessment Act 1997

                        Income Tax Assessment Amendment Regulation 2013 (No. 1)

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 Regulation is to insert the 'cents per kilometre' rates for calculating tax deductions for car expenses for the 2012-13 income year in Part 2 of Schedule 1 to the Income Tax Assessment Regulations 1997 (the Principal Regulations).

Motor vehicle expenses incurred in the course of deriving assessable income or carrying on a business are tax deductible under section 8-1 of the Act.  Division 28 of the Act outlines the rules for calculating deductions for car expenses.

The taxpayer can calculate a deduction for car expenses using one of four specified methods. The 'cents per kilometre method' in section 28-25 of the Act is one of the four methods available to taxpayers. 

To calculate the deduction under the 'cents per kilometre method', the number of kilometres the car travelled for business purposes during the year of income is multiplied by a specified number of cents. The cents per kilometre rate is determined in relation to the car's engine capacity and is prescribed in the Principal Regulations. This method can be used for the first 5,000 business kilometres only. If a taxpayer wishes to claim for more than 5,000 business kilometres, he or she must use one of the other methods outlined in Division 28 of the Act.

The cents per kilometre rates are updated every year by regulation.  The rates increase when there is an upward movement of the Private Motoring Subgroup (series ID A2326656J) within the Consumer Price Index (ABS catalogue number 6401.0).  The rates are revised each year and the rates currently prescribed apply for the 2011-12 financial year.

The rates for the 2012-13 income year do not change from the 2011-12 rates, 2010-11 rates, 2009-10 rates and the 2008-09 rates, because the Private Motoring Subgroup index at September 2012 was still below its level at September 2008 and are as follows:

The Regulation is also relevant for the purposes of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986). The definition of 'basic car rate' in subsection 136(1) of the FBTAA 1986 provides that the rate is the same as that prescribed for the purposes of section 28-25 of the Act ('the cents per kilometre method'). The 'basic car rate' is used in the calculation of the taxable value of a number of fringe benefits.

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

The Regulation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Regulation commences on the day after it is registered on the Federal Register of Legislative Instruments.

A Statement of Compatibility with Human Rights has been completed for the Regulation, in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011. The Statement's assessment is that the measures in the Regulation are compatible with human rights. A copy of the Statement is at Attachment A.

ATTACHMENT A

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Income Tax Assessment Amendment Regulation 2013 (No. 1)

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

The purpose of the Legislative Instrument is to insert the 'cents per kilometre' rates for calculating tax deductions for car expenses for the 2012-13 income year into the Income Tax Assessment Regulations 1997.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms. 

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

Assistant Treasurer, the Hon David Bradbury

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