Commonwealth Numbered Regulations - Explanatory Statements

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Statutory Rules 1995 No. 107

Issued by the Authority of the Assistant Treasurer

Income Tax Assessment Act 1936

Income Tax Regulations (Amendment)

The Governor-General may make regulations under section 266 of the Income Tax Assessment Act 1936 (the Act) for the purposes of the Act.

Regulation 5 of the Income Tax Regulations (the Principal Regulations) prescribes certain allowances and bounties for the purposes of subparagraph 23(t)(iii) of the Act.

Subparagraph 23(t)(iii) exempts, from income tax, payments of any allowance or bounty of a prescribed kind payable to, or in respect of, a member of the Australian Defence Forces (ADF).

Deployment Allowances are paid to ADF personnel assigned for duty with United Nations missions or similar forces to compensate for military, environmental and other hazards. The entitlement arises where a deployment is declared to be either "warlike" or "non-warlike" by the Minister for Defence.

In the case of "warlike" service, the pay and allowances earned by ADF personnel are exempt from income tax by, either section 23AC or 23AD of the Act.

However, ADF personnel engaged in "non-warlike" service are not currently entitled to an income tax exemption for either their pay or allowances. Personnel involved in "nonwarlike" service currently receive the Overseas Defence Force Rebate under section 79B of the Act.

The Government has decided to amend Regulation 5 to prescribe Deployment Allowances, paid to ADF personnel engaged in "non-warlike" service, for the purposes of subparagraph 23(t)(iii). This will exempt these allowances from income tax. However, the pay earned by ADF personnel engaged in "non-warlike" service will remain taxable.

The effect of the amendment will be that ADF personnel engaged in "non-warlike" service on or after 31 July 1.994 will receive both an exemption from income tax for their deployment allowances and the Overseas Defence Force Rebate.

Details of the Regulations are as follows.

Regulation 1 provides that the Regulations will commence on 31 July 1994. The Regulations operate retrospective from 31 July 1994 which was the date of the first deployment of ADF personnel to Rwanda. The changes will benefit taxpayers and win not impose any retrospective liability on any taxpayer. Therefore, they will not contravene subsection 48(2) of the Acts Interpretation Act 1901 which prohibits the retrospective operation of regulations which affect the rights of, or impose liabilities on, taxpayers.

Regulation 2 provides that the Regulations will amend the Principle Regulations.

Regulation 3 will prescribe the Deployment Allowances paid in respect of "non-warlike" service for the purposes of subparagraph 23(t)(iii). This will, in effect, exempt these allowance from income tax.

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