Commonwealth Numbered Regulations - Explanatory Statements

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INCOME TAX AMENDMENT REGULATION 2012 (NO. 3) (SLI NO 174 OF 2012)

EXPLANATORY STATEMENT

 

Select Legislative Instrument 2012 No. 174

 

Issued by authority of the Treasurer

Income Tax Amendment Regulation 2012 (No. 3)

Income Tax Assessment Act 1936

Income Tax Regulations 1936

Section 266 of the Income Tax Assessment Act 1936 (the Act) provides, in part, that the Governor-General may make regulations not inconsistent with the Act, prescribing all matters which by the Act are required to be prescribed, or necessary or convenient to be prescribed for giving effect to the Act.

The purpose of the amending Regulation is to take account of the legislative amendments to the personal income tax rates and thresholds, which were part of the Government's Clean Energy Future Plan. 

The Income Tax Amendment Regulation 2012 (No. 1), which took effect on 1 July 2012, amended the Income Tax Regulations 1936 (the Principal Regulations) to reflect the merger of the pensioner tax offset (PTO) and the senior Australians tax offset (SATO) into the new seniors and pensioners tax offset (SAPTO). 

The amending Regulation amended the Principal Regulations in order to ensure that couples that were able to transfer amounts of PTO between themselves continue to be able to transfer amounts of SAPTO between themselves after 1 July 2012.

Section 160AAA of the Income Tax Assessment Act 1936 (ITAA 1936) provided for the PTO.  Subsection 160AAA(2) allowed recipients of certain pensions, allowances and benefits under the Social Security Act 1991 and the Veterans' Entitlements Act 1986, which are known as 'rebatable pensions', to receive the PTO. 

Prior to 1 July 2012, a person may have received the PTO if their pension were treated as taxable income.  These pensions, allowances and benefits are generally taxable income if the recipient is of Age Pension age or above, and are exempt for tax purposes if the recipient is below Age Pension age. 

The amount of PTO a person was entitled to receive was determined under Division 2 of Part 8 of the Principal Regulations.  The amount varied depending on the person's 'rebate income' and the rate of pension they were receiving. 

Subregulation 151(6) in Division 2 of Part 8 of the Principal Regulations prescribed the way in which an unused amount of PTO could be transferred from one member of a couple to another who was also eligible for either the PTO or the SATO. 

Subregulation 151(7) in Division 2 of Part 8 of the Principal Regulations allowed a recipient of certain exempt payments to receive an amount of the PTO solely for the purposes of transferring the amount to their partner who was eligible for the PTO or the SATO.  This was because the original recipient was not entitled to any PTO in their own right, because their payment was exempt for tax purposes. 

The Income Tax Amendment Regulation 2012 (No. 1) amended the Principal Regulations to omit Division 2 of Part 8 entirely.  In the absence of a clarifying Regulation, this would mean that a recipient of an exempt payment would not receive any SAPTO to transfer to their partner who is eligible for the SAPTO. 

The amending Regulation amended the Principal Regulations to ensure that the transferability of PTO is retained now that the PTO and the SATO have been replaced by the SAPTO. 

Regulations 150AE and 150AF of the Principal Regulations allow unused amounts of the offset to be transferred to a person's spouse if that spouse is entitled to the SATO.  

Items 1 and 2 of Schedule 1 to the amending Regulation amended the formulae used to determine a SAPTO recipient's rebate threshold to explicitly take account of the additional SAPTO a person may receive from their partner.  This means that a member of a couple who receives additional SAPTO from their partner will have their rebate threshold calculated taking into account the additional SAPTO they receive.  This will ensure that their SAPTO begins to be withdrawn once their income exceeds the higher, effective tax-free threshold that the formulae give them. 

Items 3 and 4 of Schedule 1 to the amending Regulation inserted a subregulation into Regulation 150AE and Regulation 150AF that reflects the omitted subregulation 151(7), and allows recipients of pensions that are made under Part 2.3, 2.4 or 2.5 of the Social Security Act 1991 or under Division 4 or 5 of Part III of the Veterans' Entitlements Act 1986, and that are exempt from tax, to receive some SAPTO solely so that they may transfer it to their partner who is eligible for SAPTO. 

A Regulation Impact Statement was prepared by the Department of Climate Change and Energy Efficiency and has been assessed as adequate by the Office of Best Practice Regulation.

No consultation was undertaken as the amendments are minor and machinery in nature.  Although the amending Regulation will apply retrospectively from 1 July 2012, it will only affect taxpayers on lodgement and assessment of their income tax returns for the 2012-13 income year.  Taxpayers who may be affected by the amending Regulation will consequently pay less tax. 

A statement of compatibility with human rights is provided at Attachment A.

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

The amending Regulation would be a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The amending Regulation is taken to have commenced on 1 July 2012. This retrospection is not detrimental.

 


ATTACHMENT A

Text Box: Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Income Tax Amendment Regulation 2012 (No. 3)

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 of the Legislative Instrument
The purpose of the Legislative Instrument is to amend the Income Tax Regulations 1936 (the Principal Regulations) to reflect the merger of the pensioner tax offset (PTO) and the senior Australians tax offset (SATO) into the new seniors and pensioners tax offset (SAPTO).  

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.

Wayne Maxwell Swan Deputy Prime Minister and Treasurer


 


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