Income Tax Amendment Regulations 2004 (No. 2)

Administered by Department of the Treasury

Legislation au F2004B00094 Regulations Not in force Legislative Instrument

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Income Tax Amendment Regulations 2004 (No. 2) 2004 No. 80

EXPLANATORY STATEMENT

Statutory Rules 2004 No. 80

Minute No. 17 of 2004 - Minister for Revenue and Assistant Treasurer

Subject -       Income Tax Assessment Act 1936

Income Tax Amendment Regulations 2004 (No. 2)

Section 266 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 or permitted to be prescribed, or which are necessary or convenient to be prescribed for giving effect to the Act.

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(1) of the Act exempts the pay and allowances earned by ADF members from income tax where there is a certificate in force, issued in writing by the Chief of the Defence Force, to the effect that the members are on eligible duty. The certificate comes into force at the later of either the time specified in the certificate or the time the person arrives for duty in the specified area. The certificate continues to be in force until the earliest of the time of departure from the specified area, the date of revocation of the certificate 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.

Subsection 23AD(2) of the Act provides that the regulations may declare that duty with a specified organisation in a specified area outside Australia and after a specified day is eligible duty for the purposes of section 23AD.

Regulation 7A of the Income Tax Regulations 1936 (the Principal Regulations) specifies duty with various organisations in various areas outside Australia and declares that duty to be eligible duty for the purposes of section 23AD of the 1936 Act.

The amending regulations:

•       correct an error in the declaration of eligible duty with the United Nations Mission of Support in East Timor (UNMISET) in the specified area of operations (generally in East Timor) and insert a closing date for that duty, being 17 August 2003;

•       declare that duty with Operation Catalyst in the specified area of operations (generally in the Middle East) is eligible duty on or after 16 July 2003; and

•       declare that duty with Operation Palate within the area of operations (generally in Afghanistan) is eligible duty on or after 18 April 2003.

The Principal Regulations were erroneously amended by the Income Tax Amendment Regulations 2003 (No. 1) with the insertion of paragraph 7A(f) to declare that duty with UNMISET be eligible duty from 20 May 2003 (rather than 20 May 2002). The amending regulations correct the erroneous clause of the Principal Regulations. Further, since service rendered by ADF personnel with UNMISET after 17 August 2003 has been declared to be no longer 'warlike', under the current arrangements the amending regulations include a closing date for eligible duty in paragraph 7A(f).

The amending regulations also declare that duty with Operation Catalyst and Operation Palate to be eligible duty. This is necessary because the Minister for Defence has declared service with these operations in the specified areas of operation to be 'warlike' service for the purposes of section 23AD of the Act.

Eligible duty for ADF members deployed with UNMISET would be taken to be from 20 May 2002 to 17 August 2003 (inclusive). Similarly, eligible duty for ADF members deployed with Operation Catalyst would be taken to commence on or after 16 July 2003. Subsection 48(2) of the Acts Interpretation Act 1901 provides that a regulation, or a provision of regulations, has no effect if it would take effect before the date of notification, unless the rights or liabilities of a person (other than the Commonwealth) would not be disadvantaged. Exemption from income tax for ADF members on eligible duty is clearly to their advantage. Therefore the amending regulations are not subject to subsection 48(2) of the Acts Interpretation Act 1901 and may be validly made.

Details of the amending regulations are as follows:

Regulation 1 - Name of Regulations

Regulation 1 provides that these Regulations are the Income Tax Amendment Regulations 2004 (No. 2).

Regulation 2 - Commencement

Regulation 2 provides that these Regulations commence on the date of their notification in the Gazette.

Regulation 3 - Amendment of Income Tax Regulations 1936

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

Schedule 1 - Amendments (regulation 3)

Item 1 - Paragraph 7A(f)

Item 1 substitutes the phrase in paragraph 7A(f) 'on or after 20 May 2003' with 'from 20 May 2002 to 17 August 2003 (inclusive)'.

The Principal Regulations were erroneously amended by the Income Tax Amendment Regulations 2003 (No. 1) with the insertion of paragraph 7A(f) to declare that duty with UNMISET be eligible duty from 20 May 2003 (rather than 20 May 2002). Item 1 corrects the erroneous clause of the Principal Regulations. Further, since service rendered by ADF personnel with UNMISET after 17 August 2003 has been declared to be no longer 'warlike', item 1 also includes a closing date for eligible duty in paragraph 7A(f).

Item 2 - Paragraph 7A(g)

Item 2 makes a technical amendment to paragraph 7A(g) to accommodate further paragraphs (see item 3 below).

Item 3 - After paragraph 7A

Item 3 inserts two new paragraphs after paragraph 7A(g).

Paragraph 7A(h) declares duty with Operation Palate to be eligible duty from 18 April 2003. This is necessary because the Minister for Defence has declared service with Operation Palate in the specified area of operations to be 'warlike' service for the purposes of section 23AD of the Income Tax Assessment Act 1936 (the Act).

Paragraph 7A(i) declares duty with Operation Catalyst to be eligible duty from 16 July 2003. This is necessary because the Minister for Defence has declared service with Operation Catalyst in the specified area of operations to be 'warlike' service for the purposes of section 23AD of the Act.

 

Overview

The Income Tax Amendment Regulations 2004 (No. 2) were enacted to address discrepancies in the Income Tax Regulations 1936 concerning the eligibility of Australian Defence Force (ADF) members for tax exemptions on certain overseas duties. The Act was introduced to correct an error in the previously enacted Income Tax Amendment Regulations 2003 (No. 1) and to update the eligibility dates for duties with specific operations such as the United Nations Mission of Support in East Timor (UNMISET), Operation Catalyst, and Operation Palate. The Income Tax Amendment Regulations 2004 (No. 2) were enacted by the Parliament of Australia, under the authority of the Income Tax Assessment Act 1936, to ensure that the regulations accurately reflect the Minister for Defence's declarations of 'warlike' service. The policy objective is to provide clarity and fairness in tax exemptions for ADF members serving in designated areas and to correct any administrative errors in prior legislation.

Scope and Application

The Income Tax Amendment Regulations 2004 (No. 2) amends the Income Tax Regulations 1936, addressing specific provisions concerning the exemption of income tax for Australian Defence Force (ADF) members engaged in eligible overseas duty. The regulations apply to ADF members and their pay and allowances earned while performing certain overseas duties, which are defined and declared by the Minister for Defence as 'warlike' service under section 23AD of the Income Tax Assessment Act 1936. The regulations specify the duty with particular operations and geographic areas as eligible for this exemption, including corrections to previous erroneous declarations and the addition of new operations. The geographic reach of these regulations is national, applying across Australia and its territories, as they pertain to Australian citizens and entities engaged in international defence operations. The regulations do not specify exclusions or exemptions beyond those defined within the Income Tax Assessment Act 1936 itself. They extend the application of the Act through subordinate instruments by detailing specific operations and time periods for which ADF members' duty is considered eligible for income tax exemption.

Key Provisions

The main operative sections of the Income Tax Amendment Regulations 2004 (No. 2) include the correction of an error regarding the United Nations Mission of Support in East Timor (UNMISET) (regulation 3, item 1), the declaration of eligible duty with Operation Catalyst (regulation 3, item 3, paragraph 7A(i)), and the declaration of eligible duty with Operation Palate (regulation 3, item 3, paragraph 7A(h)). Regulation 2 stipulates that these Regulations commence on the date of their notification in the Gazette, while Regulation 1 names the regulations as the Income Tax Amendment Regulations 2004 (No. 2). These regulations provide clarity and correct previous errors in the Income Tax Regulations 1936, ensuring that Australian Defence Force (ADF) members receive the correct tax treatment for their overseas duty. The Income Tax Amendment Regulations 2004 (No. 2) impose obligations on the Australian Taxation Office (ATO) to correctly apply the amendments to the Income Tax Regulations 1936. The ATO must ensure that ADF members who are eligible for the income tax exemption under section 23AD of the Income Tax Assessment Act 1936 are properly identified and that their pay and allowances are exempt from income tax during the specified periods. This includes updating internal systems and processes to reflect the corrected and new declarations of eligible duty. Additionally, the ATO must inform affected ADF members and relevant stakeholders about the changes and ensure that the necessary documentation, such as certificates, are accurately issued and managed. The Income Tax Amendment Regulations 2004 (No. 2) do not explicitly outline specific offences, penalties, or consequences for breaches. However, any failure by the ATO to correctly apply the regulations or by ADF members to declare their eligible duty could result in potential civil or criminal consequences. For instance, if the ATO fails to correctly apply the regulations, ADF members might not receive the income tax exemption they are entitled to, which could lead to disputes or claims for incorrect tax assessments. Conversely, if ADF members fail to declare their eligible duty correctly, they might be liable for additional taxes and penalties. While the regulations themselves do not stipulate specific penalties, breaches of the Income Tax Assessment Act 1936 or related regulations could attract penalties under other provisions of the Act, such as penalties for providing false or misleading statements.

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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.