Income Tax Amendment Regulations 2002 (No. 1) 2002 No. 44
EXPLANATORY STATEMENT
STATUTORY RULES 2002 No. 44
Issued by authority of the Minister for Revenue and Assistant Treasurer
Income Tax Assessment Act 1936
Income Tax Amendment Regulations 2002 (No. 1)
Section 266 of the Income Tax Assessment Act 1936 (the Act) provides that the GovernorGeneral may make regulations not inconsistent with this Act or the Income Tax Assessment Act 1997, prescribing all matters which by this Act or the Income Tax Assessment Act 1997 are required or permitted to be prescribed, or which are necessary or convenient to be prescribed for giving effect to this Act or the Income Tax Assessment Act 1997.
Section 23AD of the Act provides an exemption from income tax of pay and allowances of Australian Defence Force (ADF) members performing certain overseas duty.
Subsection 23AD(2) of the Act provides that the Regulations may declare that duty with a specified organisation in a specified area outside Australia after a specified day is eligible duty for the purposes of section 23AD.
Subsection 23AD(1) of the Act exempts the pay and allowances earned by ADF members where there is a certificate in force, issued in writing by the Chief of the Defence Force, that the members are on eligible duty. The certificate comes into force at the later of the time specified in the certificate and the time the person arrives for duty in the specified area. The certificate continues to be in force until the earliest of either the time of departure from the specified area, the date of revocation or a time prescribed by regulation (subsection 23AD(3)) and is in force during any period of hospital treatment during the person's eligible duty.
The purpose of the amending Regulations is to amend the Income Tax Regulations 1936 (the Principal Regulations) to declare eligible duty to enable the pay and allowances received by ADF members, recently deployed to Afghanistan and related areas as part of the US-led coalition forces, to be exempt from income tax under section 23AD of the Act.
In October 2001, ADF members were deployed to Afghanistan at sea or in air space outside the land area of operations as part of the US-led coalition forces on Operation Slipper. The Government agreed to provide an exemption from income tax under section 23AD of the Act for the pay and allowances earned by ADF members deployed on Operation Slipper within certain specified areas. The amending Regulations amend Regulation 7A of the Principal Regulations to declare that duty with Operation Slipper within certain specified areas on or after 11 October 2001 is eligible duty for the purposes of subsection 23AD(2).
Similar regulations were made in relation to ADF members who served in East Timor with the International Force East Timor (INTERFET) and the United Nations Transitional Administration East Timor (UNTAET).
This amendment to the Income Tax Regulations 1936 prescribes eligible duty.
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 the Income Tax Regulations are amended as set out in these Regulations, by inserting Regulation 7A(e) to prescribe the following duty to be eligible duty.
Duty with Operation Slipper within at least 1 of the following specified areas, on or after 11 October 2001:
(i) the area bounded by the following geographical coordinates:
• 48°00'N 81°00'E;
• 48°00'N 35°00'E;
• 12°00'N 35°00'E;
• 12°00'N 81°00'E;
(ii) the Diego Garcia land mass and territorial waters; and
(iii) the greater of:
(A) the airspace of Diego Garcia for a radius of 250 nautical miles from Reference Point Point 07°18.6'S 072°24.6'E; and
(B) the declared Air Defence Identification Zone for Diego Garcia.
Overview
The Income Tax Amendment Regulations 2002 (No. 1), enacted under the authority of the Minister for Revenue and Assistant Treasurer, was introduced to address the specific issue of exempting the income tax of Australian Defence Force (ADF) members deployed on Operation Slipper in Afghanistan. This was a response to the ADF's deployment in October 2001 as part of the US-led coalition forces. The underlying purpose of these regulations is to align with section 23AD of the Income Tax Assessment Act 1936, which exempts the pay and allowances of ADF members on eligible duty. The regulations amend the Income Tax Regulations 1936 to declare specific duty with Operation Slipper within designated areas as eligible duty for tax exemption purposes. This amendment ensures that ADF members performing such duty are exempt from income tax in accordance with the relevant legislative provisions.
Scope and Application
The Income Tax Amendment Regulations 2002 (No. 1) applies to Australian Defence Force (ADF) members who were deployed to Afghanistan as part of the US-led coalition forces, specifically those involved in Operation Slipper, and to their pay and allowances. These Regulations amend the Income Tax Regulations 1936 to exempt from income tax the earnings of ADF members performing eligible duty in designated areas outside Australia, as per section 23AD of the Income Tax Assessment Act 1936. The exemption applies to duty carried out in specific geographical areas from 11 October 2001 onwards, as declared in the amending Regulations. The scope of the exemption is geographically limited to the areas specified in the Regulations, and it is contingent upon the issuance of a certificate by the Chief of the Defence Force, which remains in effect during the member's deployment and any subsequent hospital treatment. The Regulations extend the application of the Act by specifying additional circumstances under which ADF members' pay and allowances are exempt from income tax, and these details are further prescribed through subordinate instruments as necessary.
Key Provisions
The Income Tax Amendment Regulations 2002 (No. 1) provide specific amendments to the Income Tax Regulations 1936 to ensure that pay and allowances of Australian Defence Force (ADF) members who were deployed in Afghanistan and related areas as part of the US-led coalition forces, are exempt from income tax under section 23AD of the Income Tax Assessment Act 1936. Regulation 3 of the amending Regulations inserts Regulation 7A(e) into the Income Tax Regulations 1936 to declare that duty with Operation Slipper within certain specified areas on or after 11 October 2001 is eligible duty for the purposes of section 23AD(2). This declaration enables the exemption from income tax for ADF members deployed in these areas.
The amending Regulations impose specific obligations on the ADF members and the Chief of the Defence Force. ADF members must be on duty within the specified areas as part of Operation Slipper on or after 11 October 2001 to qualify for the tax exemption. The Chief of the Defence Force is required to issue a written certificate to ADF members confirming that they are on eligible duty under section 23AD(1). This certificate must specify the time it comes into force and continue to be in force until the earliest of either the time of departure from the specified area, the date of revocation, or a time prescribed by regulation (subsection 23AD(3)). The certificate is also in force during any period of hospital treatment during the person's eligible duty.
Breach of the requirements under section 23AD of the Income Tax Assessment Act 1936 does not necessarily constitute a criminal offence. However, failure to comply with the obligations imposed by the amending Regulations may result in the ADF members being liable for income tax on their pay and allowances earned during their eligible duty period. The Act does not specify maximum penalties for such breaches, but general tax evasion penalties may apply under other sections of the Act. These penalties can include fines and imprisonment depending on the severity of the breach and the discretion of the court.