Income Tax Amendment Regulations 2002 (No. 3) 2002 No. 101
EXPLANATORY STATEMENT
STATUTORY RULES 2002 No. 101
Issued by authority of the Minister for Revenue and Assistant Treasurer
Income Tax Assessment Act 1936
Income Tax Amendment Regulations 2002 (No. 3)
Section 266 of the Income Tax Assessment Act 1936 (the Act) provides that the GovernorGeneral may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The purpose of the proposed Regulations is to provide that payments made to temporary residents permanently departing Australia be classified as 'departing Australia superannuation payments' under subsection 27A(1) of the Act. As a result they will be subject to the special taxation treatment that applies to such payments (in most cases taxed at 30%).
Recent amendments to the Superannuation Industry (Supervision) Regulations (SIS Regulations) and the Retirement Savings Account Regulations (RSA Regulations) allow superannuation benefits that are normally required to be preserved until retirement to instead be paid to a temporary resident after they have permanently departed Australia.
As these payments will not be preserved until retirement it is not appropriate that they receive concessional taxation treatment. Accordingly the payments are to be subject to special taxation arrangements under the Act.
Details of the amending Regulations are set out in the attachment.
The amending Regulations commenced on 1 July 2002.
ATTACHMENT
Income Tax Amendment Regulations 2002 (No. 3)
Explanation of the amendments
Regulation 1 - specifies the name of the Regulations as the Income Tax Amendment Regulations 2002 (No. 3).
Regulation 2 - provides that the Regulations commenced on 1 July 2002.
Regulation 3 - provides that Schedule 1 amends the Income Tax Regulations 1936.
Schedule 1 amendments
Item 1 of Schedule 1 - provides that for the purposes of the definition of 'departing Australia superannuation payment' in subsection 27A(1) of the Act the following regulations are prescribed:
(a) Regulations 6.20A, 6.20B and 6.24A of the SIS Regulations; and
(b) Regulation 4.23A of the RSA Regulations.
Both the SIS and RSA Regulations that are specified deal with the circumstances in which a payment may be made to a temporary resident permanently departing Australia. This will mean that where a benefit is paid in accordance with these SIS and RSA Regulations then the benefit will be treated as a 'departing Australia superannuation payment' under subsection 27A(1) of the Act and thus subject to special taxation treatment.
Overview
The Income Tax Amendment Regulations 2002 (No. 3) were enacted to address the issue of superannuation payments made to temporary residents who permanently leave Australia, ensuring these payments are appropriately taxed. The regulations were introduced under the authority of the Minister for Revenue and Assistant Treasurer and aim to align the taxation treatment of these payments with the changes in the Superannuation Industry (Supervision) Regulations and the Retirement Savings Account Regulations. The policy objective is to ensure that superannuation benefits, which would otherwise be preserved until retirement, are subject to special taxation treatment when paid to temporary residents after they have departed Australia permanently, typically at a rate of 30%. These regulations came into effect on 1 July 2002, and they modify the Income Tax Regulations 1936 to classify such payments as 'departing Australia superannuation payments'.
Scope and Application
The Income Tax Amendment Regulations 2002 (No. 3) apply to temporary residents who are permanently departing Australia and to the superannuation payments made to them under certain conditions. These Regulations are made under section 266 of the Income Tax Assessment Act 1936 and aim to classify payments made to such temporary residents as "departing Australia superannuation payments." Consequently, these payments are subject to special taxation treatment, typically taxed at 30%. The Regulations came into effect on 1 July 2002 and amend the Income Tax Regulations 1936. They specify that superannuation payments made to temporary residents in accordance with certain regulations of the Superannuation Industry (Supervision) Regulations and the Retirement Savings Account Regulations will be treated as departing Australia superannuation payments. This means these payments will not be eligible for the concessional tax treatment generally applicable to superannuation payments and will instead be subject to the special taxation rules outlined in the Act.
Key Provisions
The Income Tax Amendment Regulations 2002 (No. 3) primarily seek to amend the definition of 'departing Australia superannuation payment' under subsection 27A(1) of the Income Tax Assessment Act 1936 (the Act). This is achieved by incorporating specific regulations from the Superannuation Industry (Supervision) Regulations (SIS Regulations) and the Retirement Savings Account Regulations (RSA Regulations) (Section 266). Regulation 1 designates these regulations as the Income Tax Amendment Regulations 2002 (No. 3), and Regulation 2 sets their commencement date as 1 July 2002. The substantive amendments are outlined in Schedule 1, particularly Item 1, which specifies that certain provisions of the SIS Regulations (Regulations 6.20A, 6.20B, and 6.24A) and the RSA Regulations (Regulation 4.23A) are to be considered in determining what constitutes a 'departing Australia superannuation payment'. This means that payments made to temporary residents who are permanently leaving Australia under these specified regulations will be classified as such and taxed at 30% under the Act.
The Regulations impose specific obligations on the entities and individuals involved. For instance, temporary residents who are permanently departing Australia and are entitled to a superannuation benefit must ensure that their payments are made in accordance with the specified provisions of the SIS and RSA Regulations. These provisions delineate the circumstances under which such payments can be made, ensuring they are not subject to preservation requirements that would otherwise apply until retirement. Additionally, the entities responsible for making these payments, such as superannuation funds or financial institutions, must adhere to these regulations to correctly classify and tax the payments as 'departing Australia superannuation payments'. This involves ensuring that the payments are processed in a manner that aligns with the special taxation treatment outlined in the Act.
Failure to comply with the provisions of the Income Tax Amendment Regulations 2002 (No. 3) can result in various civil or criminal consequences. While the Explanatory Statement does not explicitly detail the penalties for non-compliance, it is reasonable to infer that breaches of these regulations could lead to penalties under the Income Tax Assessment Act 1936. These penalties can include fines and other civil sanctions for incorrect classification or taxation of superannuation payments. In more severe cases, particularly where there is evidence of deliberate or repeated non-compliance, criminal charges could be pursued, potentially leading to imprisonment or substantial fines. The exact penalties would depend on the nature and severity of the breach, as well as any relevant precedents or guidelines provided by the relevant tax authorities.