Issued by authority of the Minister for Revenue
and Assistant Treasurer

Income Tax Assessment Act 1936

Income Tax Amendment Regulations 2007 (No. 1)

The Tax Laws Amendment (Simplified Superannuation) Act 2007 and related Acts give effect to the Simplified Superannuation reforms, announced in the Government’s 5 September 2006 statement - A Plan to Simplify and Streamline Superannuation – Outcomes of Consultation. The reforms make superannuation easier to understand, improve incentives to work and save, and provide greater flexibility over how superannuation savings can be drawn down in retirement.

In particular, the reforms consolidate and streamline superannuation taxation laws into the Income Tax Assessment Act 1997 (ITAA 1997). The Superannuation Legislation Amendment (Simplification) Act 2007 also repeals redundant provisions from the Income Tax Assessment Act 1936 (ITAA 1936).

Section 266 of the ITAA 1936 provides that the Governor‑General may make regulations, not inconsistent with the ITAA 1936 or the ITAA 1997 prescribing all matters required or permitted by the Acts to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the ITAA 1936 or the ITAA 1997.

The purpose of the Regulations is to amend the Income Tax Regulations 1936 to omit regulations now made redundant as a result of the Simplified Superannuation reforms.

Details of the regulations are set out in the Attachment A.

The ITAA 1936 specifies no conditions that need to be met before the power to make the regulations can be exercised.

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

The Regulations commence on 1 July 2007.

ATTACHMENT A

Details of the Income Tax Amendment Regulations 2007 (No. 1)

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

Regulation 2 provides that the Regulations commence on 1 July 2007.

Subregulation 3(1) provides that Schedule 1 amends the Income Tax Regulations 1936 (1936 Regulations).

Subregulation 3(2) provides that the amendments made by Schedule 1 apply in relation to an income year that starts on or after 1 July 2007.

Schedule 1 – Amendments

Item 1

Regulation 7B prescribes benefits which fail to comply with standards prescribed in the Superannuation Industry Supervision Act 1993. This regulation supports section 26AFB of the ITAA 1936 which will be repealed. Item 1 omits regulation 7B.

Regulation 8 of the 1936 Regulations prescribes the Bank of New South Wales Nominees Pty Limited as an approved trustee. Item 1 omits this regulation as the Bank of New South Wales Nominees Pty Limited became part of Westpac in 1981.

Regulation 8A outlines the circumstances where an interdependent relationship exists. This regulation supports section 27AAB of the ITAA 1936 which will be repealed. Item 1 omits regulation 8A.

Item 2

Item 2 omits regulation 12A as it is redundant.

Item 3

Section 67AAA of the ITAA 1936 is being repealed for the 2007-08 income year and later years. This provision has been rewritten into the ITAA 1997 and provides that a deduction is allowed for borrowing costs on loans to pay life insurance premiums where the risk component of the premium is the entire premium. The meaning of ‘risk component’ for the purpose of this provision is worked out as specified in the regulations. Item 3 omits the related Part 3A in the 1936 Regulations.

Items 4 and 8

The Simplified Superannuation reforms remove the concept of a ‘reasonable benefit limit’. The Superannuation Legislation Amendment (Simplification) Act 2007 repeals Division 14 of Part III of the ITAA 1936, which sets out the provisions relating to reasonable benefit limits.

Item 4 omits Part 5A of the 1936 Regulations as it prescribes matters relating to reasonable benefits limits and is redundant. Item 8 omits Schedule 2A as it sets out the reasonable benefit multiple and is redundant. Item 8 also omits Schedule 2B as it sets out the information to be given to the Commissioner of Taxation in relation to reasonable benefit limits and is redundant.

Item 5

The Tax Laws Amendment (Simplified Superannuation) Act 2007 (Amendment Act) replaces the concept of an eligible termination payment with employment termination payments and superannuation lump sums in the ITAA 1997. Item 5 omits Part 7 Division 2 as these regulations relate to eligible termination payments and are now redundant. The reporting requirements still apply to events prior to 1 July 2007.

Item 6

Sections 275A and 275B of the ITAA 1936 which relate to pre-1 July 1988 funding credits, are being repealed from the ITAA 1936. Item 6 omits Part 9A and therefore regulation 170A found under that Part from the 1936 Regulations (Item 6). Regulation 170A provides guidance to trustees of a superannuation fund about the amount of pre‑1 July 1988 funding credits that a trustee can choose to apply to reduce the assessable income of a fund for an income year. A similar regulation is inserted into the 1997 Regulations.

Item 6 also omits regulation 170 in Part 9A of the 1936 Regulations. As part of the Simplified Superannuation reforms, Part IX of the ITAA 1936 is rewritten into Division 295 of the ITAA 1997. Regulation 170 to the 1936 Regulations supports Part IX and is therefore redundant.

Items 7 and 9

The Amendment Act inserts a definition of a constitutionally protected fund into the ITAA 1997. Items 7 and 9 omit regulation 177 and Schedule 14 of the 1936 Regulations as this regulation and Schedule prescribe constitutionally protected funds in support of section 267 of the ITAA 1936 which will be repealed.

The Amendment Act inserts a definition of a departing Australia superannuation payment into the ITAA 1997. That definition in subsection 27A(1) of the ITAA 1936 will be repealed. Item 7 also omits regulation 178 as it supports this subsection and is redundant.