Commonwealth Numbered Regulations - Explanatory Statements

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INCOME TAX REGULATIONS (AMENDMENT) 1995 NO. 153

EXPLANATORY STATEMENT

STATUTORY RULES 1995 No. 153

ISSUED BY AUTHORITY OF THE ASSISTANT TREASURER

INCOME TAX ASSESSMENT ACT 1936

INCOME TAX REGULATIONS (AMENDMENT)

This Regulations amended the Income Tax Regulations to provide a minimum cost price of 35 cents per head of poultry for the purposes of livestock valuation.

Background

At the end of each financial year, primary producers with livestock such as cattle, pigs, and sheep have been called to account for any natural increase of that livestock for the purposes of live-stock valuation. A prescribed cost price per head of certain livestock was set out in subregulation 10(3) of the Income Tax Regulations.

However the subregulation did not specify any minimum cost price for poultry breeders. Accordingly poultry breeders have been valuing natural increase of birds at inconsistent amounts of usually between one to men cents a bird. This was significantly lower than the actual cost of reproduction.

Any excess of the closing value of livestock at the end of a year of income over the opening value at the beginning of that year must be included in a taxpayer's assessable income under subsection 28(2) of &c Act. The prescribed value of certain livestock in the Regulation places a minimum realistic value to correctly ascertain taxable income. If a lesser value is applied then this would constitute a one-off tax deferral.

Both the Assistant Treasurer's office and the Australian Taxation Office consulted with several major poultry producers in order to prescribe a minimum value in the Income Tax Regulations. The information provided by the major poultry producers placed a minimum cost price of 35 cents per bird.

This prescribed minimum cost price applies for all poultry (chickens, turkeys, ducks, geese etc), for both breeders and broilers. The expected one off increase in revenue. as a result of this proposal, was approximately 15 million dollars.

An amended subregulation 10(3) of the Income Tax Regulations has given effect to this proposal. However, the Taxation Laws Amendment Bill (No. 1) that was currently in Parliament at the time, provided that valuation for natural increase of livestock, whew there was no prescribed minimum value, must be at its cost of production. It was expected that the natural increase of poultry will attract a higher value than that sought to be prescribed by the proposed regulation. This provision in the Bill had a date of effect of 1 My 1994.

The Regulation had to also operate with effect 1 July 1994. Otherwise each poultry producer would have had to work out their individual actual cost of production for the year ending 30 June 1995, at significant administrative cost.


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