Income Tax Amendment Regulation 2013 (No. 1)

Administered by Department of the Treasury

Legislation au F2013L01001 Regulations Not in force Legislative Instrument

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EXPLANATORY STATEMENT

 

Select Legislative Instrument 2013 No. 128

Issued by authority of the Assistant Treasurer

Income Tax Assessment Act 1936

Income Tax Amendment Regulation 2013 (No. 1)

Subsection 266(1) of the Income Tax Assessment Act 1936 (the Act) provides, in part, that the Governor-General may make regulations not inconsistent with the Act, prescribing all matters which by the Act are required to be prescribed, or necessary or convenient to be prescribed for giving effect to the Act.

The purpose of the Income Tax Amendment Regulation 2013 (No. 1) (the Regulation) is to amend the Income Tax Regulations 1936 (the Principal Regulations) to make technical amendments to the way in which the amount of seniors and pensioners tax offset (SAPTO) is determined in the case of foreign residents for tax purposes. 

The Regulation corrects an unintended consequence arising from amendments to the Principal Regulations which took account of the legislative amendments to the personal income tax rates and thresholds made as part of the Government's Clean Energy Future Plan in 2012.  The Income Tax Amendment Regulation 2012 (No. 1) amended the Principal Regulations to reflect the merger of the pensioner tax offset (PTO) and the senior Australians tax offset (SATO) into the SAPTO in the Act. 

The SAPTO is a tax offset that is available to certain low income aged persons and pensioners who are eligible to receive an Australian Government pension, including taxpayers who are foreign residents for tax purposes.  The tax offset is provided under section 160AAAA of the Act, and the method of determination is provided under the Principal Regulations.  The tax offset is generally limited to the amount of income tax otherwise payable, however, in the case of a person with a spouse, there is provision for any unused part of one partner’s offset to be transferred to the other partner where both are entitled to the SAPTO.

The 2012 amendments amended the way in which the amount of SAPTO that can be transferred between one eligible member of a couple and the other member is determined.  The intention was that the maximum amount of SAPTO that one eligible member of a couple could transfer to the other would remain the same as it was in 2011-12.  This was achieved by specifying the 2011-12 tax-free threshold and tax rate in the formula used to calculate SAPTO.

The 2012 amendments achieved their stated purpose in relation to taxpayers who are Australian residents for tax purposes.  However, incorporating the 2011-12 tax free threshold into the formula increased the amount of SAPTO available for transfer for foreign residents whose eligible spouse had taxable income greater than $6,000, which was not intended.  The amount of SAPTO for foreign residents with a spouse receiving SAPTO who had taxable income greater than $6,000 was increased because subsections 150AE(12) and 150AF(9) applied a formula which effectively allowed the individual a $6,000 tax free threshold, when foreign residents are not usually afforded a tax-free threshold under the tax laws.

The Regulation amends subsections 150AE(12) and 150AF(9) so that these subsections only apply to taxpayers who are Australian residents, whose taxable income for the year is greater than $6,000, and who have a spouse who is also receiving SAPTO.  For these subsections, it does not matter if the spouse is an Australian resident for tax purposes, or not.

The Regulation also inserts new subsections into sections 150AE and 150AF to deal with the transfer of SAPTO between foreign residents.  The new subsection 150AE(13) applies to foreign residents whose taxable income for the year is greater than $6,000, and provides that the amount of excess tax offset which may be transferred is the amount mentioned in paragraph 150AE(1)(b), that is, the amount of any unused tax offset of the taxpayer.  By directing the taxpayer to apply paragraph 150AE(1)(b), when calculating the excess offset, the relevant foreign resident tax rates apply.  This reinstates the operation of the offset in regard to foreign residents as it was prior to the 2012 amendments, which is the intended outcome.

The new subsection 150AF(10) mirrors the above treatment in section 150AE(13) in regard to a taxpayer who is a trustee.

The Regulation commences on the day after it is registered and applies in relation to the 2012-13 income year and later income years.

Eligibility for SAPTO for members of a couple is determined by the Australian Taxation Office on assessment of personal income tax returns, which generally occurs at the end of the income year.  Given that the Regulation commences before the end of the 2012-13 financial year, the Regulation does not have retrospective effect, since the determination of how much SAPTO may be transferred from one member of a couple to another does not crystallise until 30 June 2013.

The Act specifies no conditions which need to be satisfied before the Governor‑General’s power can be exercised.

There was no consultation carried out on this Regulation because the amendments are minor and machinery in nature.

 

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Income Tax Amendment Regulation 2013 (No. 1)

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The purpose of the Income Tax Amendment Regulation 2013 (No. 1) is to amend the Income Tax Regulations 1936 to make technical amendments to the way the seniors and pensioners tax offset is determined in the case of foreign residents for tax purposes. 

Human rights implications

The right to equality and non-discrimination is expressed in article 26 of the International Covenant on Civil and Political Rights as: ‘All persons are equal before the law and are entitled without any discrimination to the equal protection of the law. In this respect, the law shall prohibit any discrimination and guarantee to all persons equal and effective protection against discrimination on any ground such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.’  Engagement with these rights depends on viewing residency for tax purposes as falling within ‘other status’.

There is a well-established body of international law and practice recognising that taxation laws of a State can differentiate between the tax treatment of residents of that State and the tax treatment of non-residents.  For example, treaties to prevent double taxation use residence status as a way to allocate taxing rights between States.  At the same time, discrimination between residents of the same State on the basis of their nationality is prohibited.

The differential treatment in this measure according to an individual’s residence status (as opposed to their nationality) is consistent with that body of international law and practice.

In light of this, there is no basis to conclude that this different treatment amounts to discrimination on the basis of ‘other status’ under the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Conclusion

This Legislative Instrument is compatible with recognised human rights and freedoms.

 

Overview

The Income Tax Amendment Regulation 2013 (No. 1) was introduced to address an unintended consequence arising from the 2012 amendments to the Income Tax Regulations 1936, which affected the calculation of the seniors and pensioners tax offset (SAPTO) for foreign residents. Enacted by the Parliament of Australia under the authority of the Assistant Treasurer, the Regulation aims to correct the discrepancy that resulted in foreign residents receiving a higher SAPTO than intended. Specifically, it rectifies the issue where foreign residents with a spouse receiving SAPTO and taxable income exceeding $6,000 were afforded an unintended tax-free threshold. The Regulation ensures that the SAPTO calculations for foreign residents are aligned with the intended legislative outcomes by specifying the application of relevant foreign resident tax rates, thereby reinstating the offset operation as it was before the 2012 amendments. The Regulation applies from the day after its registration, affecting the 2012-13 income year and subsequent years.

Scope and Application

The Income Tax Amendment Regulation 2013 (No. 1) amends the Income Tax Regulations 1936 to correct an unintended consequence arising from previous amendments that affected the calculation of the seniors and pensioners tax offset (SAPTO) for foreign residents. This regulation applies to foreign residents who are eligible for the SAPTO and ensures that the amount of SAPTO that can be transferred between members of a couple aligns with the intended policy outcome, which is to provide the same level of offset as before the 2012 amendments. The regulation introduces new provisions that apply specifically to foreign residents, ensuring that the tax rates applicable to foreign residents are used in calculating the amount of SAPTO that can be transferred. The changes made by this regulation do not have retrospective effect and apply to the 2012-13 income year and subsequent years. The regulation operates within the framework of the Income Tax Assessment Act 1936 and is designed to ensure that the tax treatment of foreign residents is consistent with the policy intent, while respecting the international law principles that permit differentiation based on residency status.

Key Provisions

The Income Tax Amendment Regulation 2013 (No. 1) amends the Income Tax Regulations 1936 to make technical adjustments to how the seniors and pensioners tax offset (SAPTO) is determined for foreign residents for tax purposes. The primary operative sections of the Regulation are subsections 150AE(12) and 150AF(9) of the Principal Regulations, which have been amended to ensure that the method of calculating the SAPTO for foreign residents aligns with the intended legislative outcomes. Specifically, the amendments correct an unintended consequence of the 2012 amendments, which increased the amount of SAPTO available for transfer for foreign residents whose eligible spouse had taxable income greater than $6,000. The Regulation now ensures that subsections 150AE(12) and 150AF(9) apply only to Australian residents with taxable income exceeding $6,000 and a spouse receiving SAPTO, regardless of the spouse's residency status. New subsections 150AE(13) and 150AF(10) have been inserted to address the transfer of SAPTO between foreign residents, applying the relevant foreign resident tax rates and reinstating the intended operation of the offset. The obligations imposed by the Regulation on taxpayers and the Australian Taxation Office (ATO) are primarily focused on ensuring that the SAPTO calculations for foreign residents adhere to the amended provisions. Foreign residents who are eligible for SAPTO and have a spouse with taxable income over $6,000 must now ensure that the transfer of SAPTO between them is calculated according to the new rules set out in subsections 150AE(13) and 150AF(10). The ATO is responsible for assessing eligibility for SAPTO and ensuring that the correct amount of offset is applied, which involves verifying the residency status of the taxpayers and applying the appropriate tax rates. Any breach of the provisions set out in the Regulation may lead to civil consequences, including the imposition of additional taxes or penalties for underpayment of tax due to incorrect SAPTO calculations. Although the Regulation does not explicitly outline specific penalties, the Income Tax Assessment Act 1936 generally provides for penalties for non-compliance with tax laws. These penalties can include fines and interest on unpaid taxes. Additionally, if the non-compliance is deemed to be deliberate or reckless, it may also lead to criminal charges under the Act, potentially resulting in substantial fines and imprisonment. The Regulation is designed to ensure that foreign residents receive the correct amount of SAPTO, aligning with the intended legislative outcomes and correcting the unintended consequences of the 2012 amendments. By amending the calculation method for SAPTO transfers, the Regulation helps maintain the integrity of the tax system and ensures that taxpayers are not unduly advantaged or disadvantaged based on their residency status.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.