Income Tax Amendment Regulations 2001 (No. 4)

Income Tax Amendment Regulations 2001 (No. 4) 2001 No. 107

EXPLANATORY STATEMENT

STATUTORY RULES 2001 No. 107

Issued by authority of the Assistant Treasurer

Income Tax Assessment Act 1936

Income Tax Amendment Regulations 2001 (No. 4)

The Governor-General may make regulations under section 266 of the Income Tax Assessment Act 1936 (the Act) for the purposes of the Act.

The purpose of these regulations is to provide for an increase in the tax rebate amounts for aged pensioners and low income aged persons (senior Australians) under the Income Tax Regulations 1936 (the regulations). An aged pensioner is a person who is of pension age under either the Social Security Act 1991 or the Veterans Entitlements Act 1986 and in receipt of an aged pension or service pension under either of these Acts. The Government announced its intention, in the 2001-2002 Federal Budget, to group together all senior Australians for the purpose of allowing an increased amount of rebate.

The Act provides an entitlement to a pensioner rebate under section 160AAA, and an entitlement to a low income aged persons rebate under section 160AAAA. The calculation of the pensioner rebate is determined under regulation 151 and the low income aged persons rebate is calculated under regulation 150AD. An amendment to the Act (under Taxation Laws Amendment (Changes for Senior Australians) Act 2001) has ensured that an aged pensioner is now entitled to a rebate under 160AAAA and will now calculate their rebate under regulation 150AD, rather than regulation 151.

The amount of the low income aged persons rebate is determined by reference to the definition of rebate amount in subregulation 150AB, which has the meaning given by subregulations (2) and (2A).

Formerly, subregulation 150AB(2A) increased the rebate amount by $415 for a single low income aged person. For low income aged persons who are separated due to illness, the increased rebate amount was $331. For low income aged persons taken to be a member of a couple, the increased rebate amount was $304.

The Regulations amend the principal regulations so that the rebate amount is increased by $1,037 for all single senior Australians. For senior Australians who are married but separated due to illness, the rebate amount is increased by $900. For senior Australians taken to be a member of a couple the rebate amount is increased by $751 (the difference between the two latter rates is due to differing pension levels).

Pensioners who are not aged pensioners continue to receive the increased taxpayer's rebate amounts under subregulation 151(3A) of $415, $331 and $304, depending on their marital status. These regulations were gazetted on 11 May 2001 as Statutory Rules No. 81 of 2001.

The regulations also allow for any unused part of a low income aged persons rebate or pensioner rebate to be transferred between members of a couple who are each entitled to either of these rebates. This is consistent with the previous treatment under Regulation 151.

The new rebate amounts will mean that single senior Australians will now pay no income tax provided their taxable income does not exceed $20,000. Refer to the attached table (Table 1) which gives the previous and current nil income tax liability thresholds.

The Medicare levy low income thresholds, which provide an exemption from the Medicare levy for senior Australians, is amended to reflect the above-mentioned nil income tax liability thresholds.

The regulations commence on gazettal and apply to the 2000-2001 and later years of income. As the regulations apply to the 2000-2001 year of income they have a retrospective effect. However, the changes will benefit senior Australians and will not impose any retrospective liability. Therefore, the regulations will not contravene subsection 48(2) of the Acts Interpretation Act 1901.

Details of the Regulations are in the Attachment.

ATTACHMENT

Income Tax Amendment Regulations 2001 (No. 4)

Regulation 1: Names the Regulations.

Regulation 2: Provides that the regulations commence on gazettal.

Regulation 3: Provides that Schedule 1 amends the Income Tax Regulations 1936.

Schedule 1: This increases the tax rebate for age pensioners and low income aged persons.

This also allows for the transfer of any unused part of the rebate between couples where both

members of the couple are each entitled to a rebate under either sections 160AAAA or

160AAA of the ITAA 1936.

Details of the Regulations are as follows:

Regulation 1: Names the Regulations.

Regulation 2: Provides that the regulations commence on gazettal.

Regulation 3: Provides that Schedule 1 amends the Income Tax Regulations 1936.

Schedule 1: This increases the tax rebate for age pensioners and low income aged persons. The regulations also allows for the transfer of any unused part of the rebate between couples where both members of the couple are each entitled to a rebate under either sections 160AAAA or 160AAA of the Act.

Item 1

Amends subregulation 150AB(1) to allow a rebate for senior Australians.

Items 2, 3 and 4

Regulation 150AB(2A) increases the rebate amount for the income year ending on 30 June 2001 and all later years of income as follows:

- for taxpayers treated as single the additional rebate amount is $1,037 subregulation 150AB(2A)(a).

- for taxpayers treated as couples separated due to illness the additional rebate amount is $900 - subregulation 150AB(2A)(aa).

- for taxpayers treated as partnered couples the additional rebate amount is $751 subregulation 150AB(2A)(b).

Item 5

The formula for determining a rebate threshold in subregulation 150AB(3) now takes into account the 'low income rebate amount'.

Item 6

Defines 'low income rebate amount' to subregulation 150AB(3).

Item 7

Allows the transfer of an unused rebate amount from the spouse of a taxpayer and ensures that an exempt pension is taken into account in determining that spouse can transfer the unused part of their rebate.

Item 8

Paragraph 150AE(2)(a) calculates the reduction in the rebate amount to determine the excess, if any, to be transferred to the other member of a couple.

Item 9

Subparagraph 150AE(3)(a)(i) ensures that the unused part of the rebate can be transferred from senior Australians and pensioners who are not aged pensioners to a trustee who is entitled to a rebate under section 160AAAB of the Act.

Item 10

Ensures that in calculating the unused part of a rebate, a non-aged pensioner is required to calculate their adjusted rebate amount under regulation 151.

Item 11

Paragraph 150AE(4)(a) ensures that where a person in receipt of the unused rebate is a trustee, an exempt pension is taken into account in determining whether a member of a couple can transfer the unused part of their rebate to the trustee.

Item 12

Subregulation 150AE(10) ensures that the transfer of the unused part of the rebate does not apply to a member of a couple who was in receipt of a benefit under Part 2.11, 2.12, 2.14 or 2.15 of the Social Security Act 1991 on the last day of the year of income.

Item 13

Names the tide of Regulation 151 to ensure that it is referenced to section 160AAA of the Act.

Items 14, 15, 16,

Provides for the calculation of the unused part of the rebate which can be transferred between senior Australians and pensioners who are not aged pensioners, where they both are members of a couple.

Item 17

Ensures that a member can be treated as both the rebate recipient and the rebate transferor.

TABLE 1 - NIL INCOME TAX LIABILITY THRESHOLDS

Note: (A) Figures do not incorporate the low-income rebate.

(B) Figures incorporate the low-income rebate.

(C) These figures were changed by Statutory Rule No 81 of 2001 and the amendments made by these regulations do not affect these levels.