Commonwealth Numbered Regulations - Explanatory Statements

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INCOME TAX AMENDMENT REGULATIONS 1998 (NO. 5) 1998 NO. 313

STATUTORY RULES 1998 NO. 313

Issued by authority of the Assistant Treasurer

Income Tax Assessment Act 1936

Income Tax Amendment Regulations 1998 (No. 5)

Section 266 of the Income Tax Assessment Act 1936 (the Act) provides that the GovernorGeneral may make regulations for the purposes of the Act.

Purpose of the regulations

The purpose of the regulation is to:

*       ensure that the recent amendments to the Superannuation Industry (Supervision) Regulations (SISR) which are designed to broaden the range of pensions and annuities eligible for pension Reasonable Benefit Limits (RBL) are reflected in Income Tax Regulations (ITR).

Background

Part 5A of the ITR provide the detail for pension and annuity standards for the purposes of section 140L the Act. Section 140L provides that the pension and annuity standards are met if they adhere to the regulations.

Regulation 53J in Part 5A ensures that a person receiving a pension or an annuity under subregulation 1.06(2) and subregulation 1.05(2) of the SISR meets the standards for annuities and pensions eligible for the pension RBL.

The Government in the 1997-98 Budget announced a change making a broader range of pensions and annuities eligible for the higher pension RBL. The changes provide a greater consistency between the social security provisions and the SISR governing eligible income streams for RBL purposes. Specifically pensions and annuities complying under subregulation 1.05(9) and 1.06(7) of the SISR will now be eligible for the RBL.

Superannuants who take at least half of their total superannuation benefits in the form of certain pensions or annuities can access the higher pension RBL limit, currently $942,175, Eligible pensions and annuities are those that meet the standards set out in the SISR.

The standards set out in the SISR have been amended so that products purchased on or after 1 July 1998 which meet the following characteristics will also qualify for the higher pension RBL limit, provided they also largely meet. the standards currently prescribed under the SISR:

*       the term of the income stream contract must be fixed and must be for life expectancy (as set out in the Australian Life Tables prepared by the Australian Government Actuary) but can be a minimum of 15 years where life expectancy exceeds 15 years; and

*       where the term of the income stream contract is for life expectancy (or a minimum of 15 years) the term must commence on or after pension age or service pension age

The new amendments have been made to regulation 53J of the ITR. Reference to subregulation 1.05(9) and 1.06(7) of the SISR has been be inserted so that those pensions and annuities applying to those subregulations become complying pensions and annuities for the purposes of being eligible for the higher RBL.

The amendments commenced on gazettal.