Income Tax Amendment Act 1987

Overview

The Income Tax Amendment Act 1987 was enacted by the Queen's assent and the authority of the Senate and the House of Representatives of the Commonwealth of Australia to address deficiencies and update the provisions of the Income Tax Act 1986. The Act, which received Royal Assent on 5 June 1987, specifically targets amendments to the Principal Act to ensure its provisions are up-to-date and effective in meeting the tax obligations of the time. This legislative action underscores the commitment of the Australian government to maintain a robust and responsive tax system. The policy objective behind this Act is to ensure that taxpayers are properly aligned with their fiscal responsibilities for the current and subsequent income years. The Income Tax Amendment Act 1987 introduces modifications to the Income Tax Act 1986, primarily focusing on the extension of the provisional tax system to cover the next succeeding year of income. This amendment reflects an effort to provide taxpayers with clearer guidelines and a more predictable tax framework, ensuring compliance and fairness in the taxation process.

Scope and Application

The Income Tax Amendment Act 1987 applies to any person or entity subject to the Income Tax Act 1986, which is referred to as the Principal Act in this legislation. This means it affects individuals, companies, trusts, partnerships, and other entities liable for income tax under Australian law. The Act modifies the scope of provisional tax obligations by extending the timeframe for these payments, impacting tax compliance and planning for these taxpayers. Geographically, the Act applies throughout the Commonwealth of Australia, as it amends federal legislation. There are no specific exclusions or thresholds mentioned in the Act itself, but the application of its provisions will depend on the specific details of each taxpayer's circumstances and the broader tax law framework. The Act may be further defined or extended through subordinate instruments, which can clarify or expand on the application of its provisions.

Key Provisions

The Income Tax Amendment Act 1987 (Act) introduces modifications to the Income Tax Act 1986 (Principal Act) with a particular focus on the provisional tax obligations of taxpayers. Section 3 of the Act amends Section 8 of the Principal Act, introducing a new requirement that provisional tax must be paid not only for the current income year but also for the next succeeding year of income (Section 8). This amendment ensures that taxpayers account for their income tax liabilities in a more forward-looking and structured manner. The Act imposes several obligations on taxpayers and the Australian Taxation Office (ATO). Firstly, taxpayers must now calculate and remit provisional tax for two consecutive years, rather than just the current year (Section 8). This change aims to smooth out cash flows for the ATO and ensure that tax liabilities are more evenly spread over the tax year. Additionally, the ATO is tasked with providing the necessary guidance and administrative support to help taxpayers comply with this new requirement. This includes updating forms, instructions, and potentially providing additional resources to assist taxpayers in understanding their new obligations. Failure to comply with the new provisional tax requirements can result in various consequences. Firstly, taxpayers who do not make the required provisional tax payments by the due dates may incur interest on any shortfall from the due date until the date of payment (Section 8). Furthermore, persistent failure to comply with tax obligations can lead to more severe penalties, including fines and, in extreme cases, criminal charges. The maximum penalties for serious tax offences can be substantial, reflecting the seriousness with which the law treats non-compliance. It is important for taxpayers to understand these obligations and seek professional advice if necessary to ensure full compliance with the Act.