Commonwealth Numbered Regulations - Explanatory Statements

[Index] [Search] [Download] [Related Items] [Help]


INCOME TAX REGULATIONS (AMENDMENT) 1997 NO. 197

EXPLANATORY STATEMENT

Statutory Rules 1997 No. 197

Issued by the Authority of the Assistant Treasurer

Income Tax Assessment Act 1936

Income Tax Assessment Act 1997

Income Tax Regulations (Amendment)

Income Tax Assessment Regulations

The Governor-General may make regulations under:

* section 266 of the Income Tax Assessment Act 1936; and

* section 909-1 of the Income Tax Assessment Act 1997;

for the purposes of those Acts. Each of those sections allows the Governor-General to make regulations for the purposes of both Acts.

Background

The income tax law is being progressively rewritten by the Tax Law Improvement Project to give it a better structure and make it easier to understand.

The first instalment of that rewrite is the Income Tax Assessment Act 1997 (the 1997 Act), which came into operation on 1 July 1997 and will apply from the 19971998 income year.

The 1997 Act establishes the structure and framework of the new income tax law. The Act will, by instalments, progressively rewrite and replace the Income Tax Assessment Act 1936 (the 1936 Act). As each instalment is enacted, the rewritten provisions of the 1936 Act will be closed off (that is, they will cease to apply from the start of that instalment). The rewritten provisions in the new law will apply as soon as each instalment of new law is enacted. Until the 1936 Act is completely rewritten, there will be two Income Tax Assessment Acts, but only one set of operative provisions for each area of the law.

'The second instalment of the rewrite is the Tax Law Improvement Act 1997 (the TLI Act), which came into operation on 1 July 1997 and will apply from the 19971998 income year. The TLI Act includes further rewrites of provisions of the 1936 Act for incorporation in the 1997 Act.

Reason for amendments and new regulations

The Income Tax Regulations (Amendment) and the Income Tax Assessment Regulations are consequential on the enactment of the TLI Act.

As the 1936 and 1997 Acts will apply concurrently until the 1936 Act is fully rewritten:

*       the 1997 Act will need its own regulations (the Income Tax Assessment Regulations) to progressively replace the Income Tax Regulations made under the 1936 Act (Regulations 51-05.01 and 70-55.01);

*       the Income Tax Regulations need to be amended to make changes consequential on the rewrite (for example, to change references to rewritten provisions or to insert notes directing the reader to the provisions that will replace a particular regulation) (Regulations 3, 4, 5, 6, 7 and 8).

Both sets of regulations will commence on 1 July 1997.

The amending and new regulations will make no substantive changes to the law.

Details of the amendments are attached.

Section 48 of the Acts Interpretation Act 1901 provides that a regulation will have no effect if it would take effect before the date of notification in the Gazette if the rights of a person would be affected so as to disadvantage that person or liabilities would be imposed on a person in respect of anything done or omitted to be done before the date of notification. These regulations do not fall into either of those categories, and hence they may commence operation before the date of notification.

ATTACHMENT

Details

Details of the regulations are as follows.

Regulation 1 provides that the regulations will commence on 1 July 1997. The TLI Act commences on 1 July 1997.

Regulation 2 provides that the proposed regulations will amend the Income Tax Regulations (the principal regulations).

Regulation 3 will insert a note after regulation 5 signposting the reader to the new provisions in the 1997 Act and the Income Tax Assessment Regulations that provide for allowances and bounties prescribed for the 1997-98 or a later income year. Regulation 5 lists allowances and bounties payable to, or in respect of, a member of the Defence Force that are exempt income by virtue of subparagraph 23(t)(iii). That subparagraph has been rewritten as items 1.1 and 1.2 of section 51-5 of the 1997 Act. Regulation 51-5.01 of the Income Tax Assessment Regulations will list the same allowances and bounties for the purposes of the 1997 Act.

Regulation 4 will omit subregulation 10(1) of the principal regulations. That subregulation deals with the value of livestock for the purposes of the trading stock provisions of the 1936 Act. The trading stock provisions have been rewritten as part of the TLI Act (see Schedule 1, Division 70 of that Act).

Subregulation 10(1) prescribes the period within which a taxpayer can exercise the option, in subsection 32(7) of the 1936 Act, for valuing livestock. However, subsection 32(7) was repealed in 1992 and the subregulation has no current application.

Regulation 4 will also insert a note explaining that for working out the cost of natural increase of livestock occuring in the 1997-98 or a later income year, section 7055 of the 1997 Act and the Income Tax Assessment Regulations will apply. Regulation 7055.01 will rewrite subregulation 10(3), which sets out a minimum cost for natural increase.

Regulation 5 will insert a note after regulation 11 of the principal regulations explaining that if the date of death is during the 1997-98 or a later income year, section 70-105 of the 1997 Act will apply. Regulation 11 prescribes the time within which a trustee of a deceased estate and its beneficiaries can agree to modify the value of trading stock which has devolved to the beneficiaries from the deceased. This provision has been incorporated in the rewrite of the trading stock provisions (see Schedule 1, subsection 70-105(7) of the TLI Act).

Regulation 6 will amend regulation 80 of the principal regulations, which sets out the prescribed rate of deductions by employers from the salary or wages of an employee for certain amounts listed in regulation 80. One of the amounts listed is an amount in paragraph 26 (eb) of the 1936 Act - broadly, a return to work payment that is part of a taxpayer's assessable income. The assessable income provisions of the 1936 Act have been rewritten and return to work payments are now included in section 15-3 (Return to work payments) in the 1997 Act. The amendment will substitute a reference to an amount under section 15-3.

Regulation 7 will amend paragraph (b) of subregulation 151(7) of the principal regulations. Regulation 151 deals with rebates in respect of certain pension payments. Paragraph (7)(b), which is part of the calculation of the amount of the rebate, refers to an amount of pension that has not been included in a taxpayer's assessable income because of the operation of Division 1AA of Part Ill of the 1936 Act. Division 1AA exempts certain pensions and similar payments. The relevant parts have been rewritten as Subdivisions 52-A and 52-B in the 1997 Act. The amendment will substitute a reference to those Subdivisions.

Regulation 8 will amend subregulation 152L(3) of the principal regulations. Regulation 152L is part of the foreign income fund (FIF) provisions of the 1936 Act and allows notional deductions from the notional income of a FIF. These deductions extend to certain expenditure on a prescribed class of property. Regulation 152L specifies capital works to be a prescribed class of property and subregulation (3) defines capital works, in part, as excluding plant or articles within the meaning of section 54 of the 1936 Act, which is part of the depreciation provisions. The depreciation provisions have been rewritten and the definition of plant (including articles) is now set out in section 42-18 of the 1997 Act. The amendment will substitute a reference to that section.


[Index] [Related Items] [Search] [Download] [Help]