Commonwealth Numbered Regulations - Explanatory Statements

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INCOME TAX AMENDMENT REGULATIONS 1999 (NO. 2) 1999 NO. 80

STATUTORY RULES 1999 NO. 80

Issued by the Authority of the Assistant Treasurer

Income Tax Assessment Act 1936

Income Tax Amendment Regulations 1999 (No. 2)

The Income Tax Assessment Act 1936 (the Act) provides for the assessment and collection of income tax and related matters. Section 266 of the Act provides that the Governor-General may make regulations, not inconsistent with the Act or the Income Tax Assessment Act 1997, prescribing all matters which by the Act or the Income Tax Assessment Act 1997 are required or permitted to be prescribed, or which are necessary or convenient to be prescribed for giving effect to the Act or the Income Tax Assessment Act 1997.

Purpose

The purpose of the regulations is to make certain decisions of the Commissioner of Taxation (the Commissioner) under the Income Tax Regulations reviewable under Part IVC of the Taxation Administration Act 1953 (TAA) and to make minor consequential amendments to the provisions governing those decisions. The decisions of the Commissioner that will be made reviewable relate to transitional reasonable benefit limits (transitional RBLs). RBLs limit the maximum amount of concessionally taxed superannuation benefits a person may receive over a lifetime.

Background

Section 14ZL of the TAA provides that a provision of an Act or regulations may make decisions of the Commissioner reviewable under Part IVC of that Act. The regulations will make the following decisions of the Commissioner reviewable:

*       a decision of the Commissioner under paragraph 47(3)(c) of the Income Tax Regulations (the Principal Regulations) as to the amount of a person's arms-length salary (used for the purposes of calculating that person's transitional RBL);

*       a decision of the Commissioner under regulation 51 of the Principal Regulations whether because of special circumstances, a person's transitional RBL is to be higher than it would be under Part 5A of the Principal Regulations; and

*       a decision of the Commissioner under regulation 53E of the Principal Regulations whether to allow the registration of a transitional RBL by a date later than 31 December 1996.

The regulations are beneficial to taxpayers as they will provide taxpayers with rights to have the decisions of the Commissioner in relation to transitional RBLs reviewed on their merits under Part IVC of the TAA. The regulations have a minimal financial and compliance cost impact and the Office of Regulation Review has advised that a Regulation Impact Statement is not required.

The regulations are described in detail in the attachment. The regulations commence on gazettal.

ATTACHMENT

Income Tax Amendment Regulations 1999 (No. 2)

Background

The Income Tax Assessment Act 1936 (the Act) and the Income Tax Regulations (the Principal Regulations) limit the maximum amount of concessionally taxed superannuation benefits a person may receive over a lifetime. This is the effect of Division 14 of Part 3 of the Act and Part SA of the Principal Regulations. These limits are referred to as reasonable benefit limits (RBLs).

Under section 140ZD of the Act, the lump sum RBL is 5471088 for the 1998199 year and the pension RBL is 5942 175 for the 1998199 year. Transitional RBLs were introduced in 1994 as a result of the transition from limits linked to a person's highest average salary to these flat dollar limits on 1 July 1994.

Section 140ZE of the Act provides that the Principal Regulations may prescribe rules for determining a transitional RBL. Regulations introducing rules for determining a transitional RBL were gazetted on 30 December 1994 as part of Statutory Rules No. 461 of 1994. The rules allow people to apply for a transitional RBL.

To ensure that all relevant factors were taken into account in determining the transitional RBL for an applicant, the rules provided the Commissioner of Taxation (the Commissioner) with discretions when determining a transitional RBL.

Part IVC of the Taxation Administration Act 1953 (TAA) provides for review of decisions of the Commissioner (including merits review). Generally, the only other review available is judicial review through the Courts. Until the commencement of the Taxation Laws (Technical Amendments) Act 1998, the review of decisions of the Commissioner under Part IVC of the TAA has been confined to decisions specified by an Act.

With effect from the commencement of the Taxation Laws (Technical Amendments) Act 1998 on 4 June. 1998, regulations can now specify decisions which are reviewable under Part IVC of the TAA.

These regulations (the Regulations) make the discretions of the Commissioner in relation to transitional RBLs reviewable under Part IVC of the TAA and make minor consequential amendments to the provisions governing those discretions.

Explanation of the Amendments

Regulation 1 specifies the name of the regulations as Income Tax Amendment Regulations 1999 (No. 2).

Regulation 2 provides that the regulations commence on gazettal.

Regulation 3 provides that Schedule 1 to the regulations amends the Principal Regulations.

Schedule 1 - Amendments

Item 1 of Schedule 1 substitutes a new regulation 51 for the existing regulation 51 of the Principal Regulations. The sole change to regulation 51 is that the Commissioner is required to have regard to any other relevant matter that comes to the notice of the Commissioner in making a decision under regulation 1. This requirement is to ensure that all relevant matters known to the Commissioner are before the Commissioner when the decision under regulation 51 is made.

Item 2 of Schedule 1 substitutes a new heading: 'Registration, procedure and review of decisions' for the existing heading of Division 3 of Part 5A of the Principal Regulations: 'Procedure'. This change is to reflect the following provisions:

*       the new review provision inserted by the Regulations into Division 3 of Part 5A of the Principal Regulations (new regulation 53FA of the Principal Regulations inserted by Item 6 of Schedule 1 of the Regulations); and

*       the registration provisions currently in Division 3 (existing regulations 53E and 53F of the Principal Regulations).

Item 3 of Schedule 1 is a consequential amendment which amends regulation 53E of the Principal Regulations to allow the insertion of provisions into that regulation by Items 4 and 5 of Schedule 1 of the Regulations.

Item 4 of Schedule 1 amends regulation 53E of the Principal Regulations to:

*       clarify the nature of the Commissioner's power to allow extensions of time for the registration of a transitional RBL in all or particular cases; and

*       ensure that new subregulation 53E(1) of the Principal Regulations is consistent with new subregulations 53E(2) and 53E(3) inserted by Item 5 of Schedule 1 of the Regulations.

Item 5 of Schedule 1 inserts new subregulations 53E(2) and 53E(3) into the Principal Regulations to provide that a person who wishes to have an extension of time in which to register their transitional RBL must apply to the Commissioner in writing and if the Commissioner refuses to allow the extension of time the Commissioner must provide the person with a written notice setting out the reasons for the refusal.

Item 6 of Schedule 1 inserts new regulation 53FA into the Principal Regulations to provide that a person who is dissatisfied with a decision of the Commissioner in relation to their transitional RBL (ie. a decision under subparagraph 47(3)(c)(ii), regulation 51 or regulation 53E of the Principal Regulations) may object against the decision in the manner set out in Part IVC of the TAA (new subregulations 53FA(1) and 53FA(2) of the Principal Regulations).

New regulation 53FA of the Principal Regulations extends to persons who are dissatisfied with a decision of the Commissioner in relation to their transitional RBL made before the commencement of the Regulations, provided the objection is lodged within twelve mouths of the commencement of the Regulations (new subregulation 53FA(3) of the Principal Regulations).