Commonwealth Numbered Regulations - Explanatory Statements

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INCOME TAX REGULATIONS (AMENDMENT) 1995 NO. 382

STATUTORY RULES 1995 No. 382

Issued by authority of the Assistant Treasurer

Income Tax Assessment Act 1936

Income Tax Regulations (Amendment)

The purpose of these regulations was to amend Part 8 of the Income Tax Regulations (the Regulations) to make changes in the provisions for beneficiary rebate. The amendments were necessary mainly because of:

•       the cessation of doubling payment of social security benefits such as newstart allowance to one member of a couple (effective 20 September 1994);

•       the introduction of the partner allowance for one member of a couple (effective 20 September 1994);

•       the introduction of the drought relief payment (effective from 1 October 1994 but the rebate is to be calculated as if effective from 1 July 1994);

•       the introduction of the youth training allowance (effective from 1 January 1995); and

•       the need to correct minor technical errors in Part 8 of the Regulations.

Section 266 of the Income Tax Assessment Act 1936 (the Act) provides that the GovernorGeneral may make regulations prescribing matters required for giving effect to the Act.

Section 160AAA of the Act authorises the making of regulations to determine the levels of rebate of income tax for which recipients of certain benefits and allowances are eligible.

Subsection 160AAA(5) of the Act overrides provisions of the Acts Interpretation Act 1901 that would otherwise prevent the making of regulations to apply retrospectively. The regulations for the purpose of section 160AAA may apply in relation to a year of income, any part of which occurred before the notification of the regulations.

The amending regulations amend Part 8 of the Regulations which cross-refers to a large degree to the Social Security Act 1991 (SSA91).

Social security changes

Prior to 20 September 1994 certain recipients of Job Search, Newstart and Sickness Allowance and Special Benefit had their basic allowance or benefit doubled by provisions in the Social Security Act 1991. This applied to persons partnered with dependent children where both the recipient and the spouse were aged 21 or over. The relevent benefit defined in the Regulations is the dependent partner-rate benefit.

As from 20 September 1994 this doubling of the allowance or benefit ceased. Instead, the partner of the primary recipient became eligible for the partner allowance. These changes required amendment of the Regulations so that the "annual benefit amount" can be calculated accordingly for both the dependent partner-rate benefit and the partner allowance. The "annual benefit amount" is fed in to the formula for calculating the beneficiary rebate.

The qualification of the partner for the partner allowance extinguishes the eligibility of the recipient of the dependent partner-rate benefit for the dependent spouse rebate (DSR). Therefore the applicable concessional rebate amount relating to the dependent partner-rate benefit is nil. This required further amendment of the regulations.

Drought relief payment (DRP)

The Government introduced DRP effective from 1 October 1994. Unlike the dependent partnerrate benefit the level of benefit paid as DRP dependent partner-rate benefit is not split between the partners. The primary recipient gets the full amount, that is, the basic amount is double that of the basic social security payment.

The calculation of the taxpayer's rebate amount is based on receipt of the benefit for the full year. This is because the beneficiary could well have been receiving job search or newstart allowance from 1 July 1994 to 30 September 1994, before the Government introduced the DRP. Consequently the applicable spouse rebate amount taken into account in the formula relates only to the period 1 July 1994 to 19 September 1994 (see earlier paragraphs on social security changes). This ensures eligibility for a higher level of beneficiary rebate than would otherwise be applicable. This concession resulted from a policy decision in the context of hardship.

Youth Training Allowance (YTA)

From 1 January 1995 the Government paid this allowance instead of job search allowance to persons finishing full-time education and who are aged under 18 years. All payments of YTA apply only to the second half of the income year 1994-95. Therefore, in the formula for beneficiary rebate, the general tax-free threshold will be pro-rated to half, that is $2,700, for these taxpayers.

Technical amendments

The amending regulations provide some minor technical amendments to Part 8 of the Regulations.

The Attachment contains details of the proposed amending regulations.

Authority: Section 266 of the Income Tax Assessment Act 1936

ATTACHMENT

Details of Income Tax Regulations Amendments

Commencement

Subregulation 1.1 provides that the amendment contained in amending subregulation 4.3 will be taken to have commenced on 1 July 1991.

Subregulation 1.2 provides that subregulations 3.4, 3.7 and 4.5 will be taken to have commenced on 1 July 1992. These amending subregulations provide for a technical correction in the age specified for persons eligible for a rebate at the level for persons aged 21 and over.

Subregulation 1.3 provides that the amendments contained in subregulations 3.1 and 3.2 will be taken to have commenced on 28 January 1993. These amendments provide for a technical correction to take account of a technical amendment of the Social Security Act 1991 (SSA91) which took effect from 28 January 1993.

Subregulation 2.1 provides that the Income Tax Regulations are amended as set out in the amending regulations.

Subregulation 3.1 amends the definition of the "18-20 at-home-rate benefit" in regulation 148 to take account of a technical amendment to the SSA91.

Subregulation 3.2 amends the definition of the " 18-20 independent-rate benefit" in regulation 148 to take account of a technical amendment to the SSA91. .

Subregulation 3.3 amends the definition of "18-20 partnered-rate benefit" in regulation 148 by adding a reference, item 10 in Table B (column 3 B) at point 1068-B I of SSA91. Item 10 refers to a person in this age group whose partner is in gaol. The amendment provided for in this subregulation does not result in any change in the rebate entitlement for these beneficiaries.

Subregulation 3.4 inserts a new definition, the "21 and over single-rate benefit", in regulation 148.

This is part of the process of technical correction for the definition of the benefit that relates to the rebate level for which a single person aged 21 and over is eligible.

Subregulation 3.5 extends the "21 and over single-rate benefit" definition in regulation 148 to items 4A and 4B of column 3B in Table B at point 1068-B1 of SSA91. Items 4A and 4B relate to certain categories of newstart allowees now provided for separately in Table B. Again, the amendment proposed in this subregulation does not result in any change in the rebate entitlement for these beneficiaries.

Subregulation 3.6 omits pararagraphs (c), (d), (e) and (f) in the definition in regulation 148 of the "dependent partner-rate benefit". Paragraphs (c) and (f) relate to a saving provision in the SSA91 that is no longer applicable. Paragraph (d) was designed to deal with possible instances that the other paragraphs did not cover. It has never been used and has been omitted. Paragraph (e) related to the provision of dependent partner rebate for ABSTUDY students at the same level as social security recipients. As a result of providing separately for the ABSTUDY dependent partner-rate benefit, paragraph (e) is no longer necessary.

Subregulation 3.7 omits the definition of "over 21 single-rate benefit" in regulation 148. This definition was replaced by the "21 and over single-rate benefit" by the amending subregulation 3.4. This is merely a technical correction to the title of the benefit.

Subregulation 3.8 omits the definition of "prescribed pension" in regulation 148. This definition is used in paragraphs (d) and (e) of the definition of dependent partner-rate benefit that is no longer relevent and which subregulation 3.6 proposes to omit.

Subregulation 3.9 adds to paragraph (b) of the definition of "sole-parent-rate-benefit" in regulation 148 a reference to item 5 in column 3A of Table B at point 1068-B1 of SSA91. The new item refers to a sole parent who has turned 60 and has been receiving social security benefit continuously for at least 6 months. The amendment does not result in any change in the rebate entitlement for these beneficiaries.

Subregulation 3.10 adds to the definition of "under 18 partnered-rate benefit", in regulation 148, a reference to item 5 in column 3 B of Table B at point 1067-B1 of SSA91. Item 5 refers to a person in this age group whose partner is in gaol. Again, the amendment does not result in any change in the rebate entitlement for these beneficiaries.

Subregulation 3.11 corrects an error in the title of "Veterans' Children Entitlement Scheme".

Subregulation 3.12 inserts a number of new definitions in regulation 148. Seven of the definitions relate to benefits paid as drought relief payment (DRP), referred to as "DRP rebatable benefit". This benefit is paid at different levels in circumstances corresponding to benefits paid under the SSA91. The relevant benefits are:

18-20 DRP at-home-rate benefit

18-20 DRP independent- rate benefit

18-20 DRP partnered-rate benefit

21 and over DRP single-rate benefit

DRP dependent partner-rate benefit

DRP illness-separated-rate benefit

DRP partnered rate benefit

The annual benefit amounts corresponding to each of the above benefits are defined in subregulation 152(5), as amended by these regulations.

The amending subregulation also provides a definition of "DRP rebatable benefit" which is a term used in each of the seven definitions referred to above.

The amending subregulation 3.12 also inserts four definitions specific to ABSTUDY.

• the "ABSTUDY dependent partner-rate benefit";

• the "ABSTUDY independent-rate benefit";

• the "adult ABSTUDY partnered half-rate benefit"; and

• the "adult ABSTUDY partnered-parent half-rate benefit". The first is paid to an ABSTUDY student who receives a dependent spouse allowance under the ABSTUDY scheme because the student has a dependent spouse and children. The second is paid to an adult single ABSTUDY student. The third applies where a partnered ABSTUDY student aged 21 or over has no dependent children. The last applies where an ABSTUDY student with a dependent child is partnered and the partner is not on AUSTUDY or ABSTUDY,

The amending subregulation 3.12 also inserts a definition, the "illness-separated partner-rate benefit", which relates to people who are separated from their partners and who are recipients of the partner allowance at any time in the period from 20 September 1994 to 30 June 1995.

A further definition, "partner allowance-rate benefit", is also provided by amending regulation 3.12. This relates to the ordinary partner allowance payable from 20 September 1995.

Five of the definitions provided in amending subregulation 3.12 relate to benefits paid as youth training allowance (YTA), referred to as YTA rebatable benefit. This benefit is paid at different levels in circumstances corresponding to those relating to benefits paid under the SSA91. The relevant benefits are:

YTA at-home-rate benefit

YTA independent-rate benefit

YTA partnered-parent-rate benefit

YTA partnered-rate benefit

YTA sole parent-rate benefit

The annual benefit amounts corresponding to each of the above benefits are defined in subregulation 152(5), as amended by these regulations.

The amending subregulation also provides a definition of "YTA rebatable benefit" which is a term used in the above five definitions.

Subregulation 4.1 inserts a new subregulation 152(3A). This subregulation provides for reduction of the "tax-free threshold" to one-half of the usual amount to apply in calculations of the rebate levels related to YTA. This insertion was required because, in the initial income year, 1994-95, the YTA was payable only for the latter half of the income year and the recipients will have their taxfree threshold pro-rated to $2,700.

Subregulation 4.2 removes the definition of "applicable concessional rebate amount" relating to the dependent partner-rate benefit. From 20 September 1994, the partner allowance was split from the dependent partner-rate benefit. In these circumstances the dependent spouse rebate (DSR), provided for in section 159J of the Act, is extinguished for the recipient of the dependent partnerrate benefit. The DSR is extinguished by the separate income of the partner allowee. Therefore the applicable concessional rebate amount no longer applies.

This amending subregulation inserts a new definition of "applicable concessional rebate amount" as paragraph 152(4)(a) which relates to the ABSTUDY dependent-partner rate benefit. Recipients have their benefit doubled by the dependent spouse allowance. The amendment is necessary because, for 1994-95, the dependent partner-rate benefit for ABSTUDY students is provided for separately for the first time. Calculation of the relevent rebate level requires deduction of the applicable concessional rebate amount in the formula for beneficiary rebate amount in subregulation 152(3). Where an ABSTUDY student receives a dependent spouse allowance the partner of that ABSTUDY student cannot receive partner allowance.

Subregulation 4.3 substitutes a new paragraph 152(4)(ab) for the former paragraph 152(4)(ab). Under paragraph 152(4)(aa), if the taxpayer is entitled to a sole parent rebate, the applicable concessional rebate amount is the amount of the sole parent rebate. The result is that the beneficiary rebate will be nil. This is because the taxpayer's sole parent rebate at the full amount is sufficient to negate the tax on the sole parent's social security benefit if the sole parent hat no other taxable income.

However, where the taxpayer is eligible for sole parent rebate for only part of the year the sole parent rebate may be insufficient to negate the tax on the social security benefit. The former paragraph 152(4)(ab) sought to provide that, where the sole parent rebate was less than what the full beneficiary rebate would be if the applicable concessional rebate amount were nil, the amount of the beneficiary rebate would be adjusted to negate any income tax on the social security payment.

The former provision was technically incorrect. The new paragraph provides a correct definition of "applicable concessional rebate amount" that will apply where the sole parent rebate has been reduced as a result of the operation of subsection 159K(2) of the Act. This amendment provides for a reduction in the applicable concessional rebate where a person is not entitled to the full sole parent rebate. The effect of the amendment is to increase the beneficiary rebate to a level necessary to negate the tax on the full-rate social security payment where the recipient has no other taxable income.

Subregulation 4.4 inserts two new paragraphs, 152(4)(ac) and 152(4)(ad). Paragraph 152(4)(ac) provides for the "applicable concessional rebate amount" related to the DRP partnered rate benefit. This rebate amount is equal to the maximum dependent spouse rebate where there are no children. Paragraph 152(4)(ad) provides for the "applicable concessional rebate amount" related to the DRP dependent partner-rate benefit. This rebate amount is the proportion of the DSR applicable to the part of the 1994-95 income year to 30 September 1994, the last date on which job search allowance would have been allowable to recipients of DRP.

Subregulation 4.5 corrects a technical error.

Subregulation 4.6 inserts a number of new definitions of annual benefit amounts in subregulation 152(5), These amounts are fed into the formula in subsection 152(3) to calculate various levels of beneficiary rebate. The various rebatable benefits to which the amending subregulation relates are:

Paragraph	Benefit
(m)	ABSTUDY independent-rate benefit
(n)	ABSTUDY dependent partner-rate benefit
(o)	adult ABSTUDY partnered half-rate benefit
(p)	adult ABSTUDY partnered parent half-rate benefit
(q)	18-20 DRP at-home-rate benefit
(r)	18-20 DRP independent-rate benefit
(s)	18-20 DRP partnered-rate benefit
(t)	21 and over DRP single-rate benefit
(u)	DRP partnered-rate benefit
(v)	DRP dependent partner-rate benefit
(w)	DRP illness-separated partner-rate benefit
(x)	illness-separated partner-rate benefit
(y)	partner allowance-rate benefit
(z)	YTA at-home-rate benefit
(za)	YTA independent-rate benefit
(zb)	YTA sole-parent-rate benefit
(zc)	YTA partnered-rate benefit
(zd)	YTA partnered-parent-rate benefit

Subregulation 5.1 provides that the regulations that commence on gazettal will apply to a year of income ending after 30 June 1994.