EXPLANATORY STATEMENT
Select Legislative Instrument 2005 No. 195
Issued by authority of the Minister for Revenue
and Assistant Treasurer
Income Tax Assessment Act 1936
Income Tax Amendment Regulations 2005 (No. 6)
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.
The purpose of the amending Regulations is to make a minor technical correction to Income Tax Amendment Regulations 2005 (No. 4). A bracket was omitted from a formula, in relation to the senior Australians tax offset, that was contained in these Regulations.
The amending Regulations will ensure mathematical accuracy, by inserting a bracket in the formula for the rebate threshold for single senior Australians, before the first appearance of the letter ‘A’. This results in the following formula:
The rebate threshold is the level of taxable income beyond which the senior Australians tax offset begins to phase out. The formula above ensures that the rebate threshold is set at the ‘effective tax free threshold’ for senior Australians; that is, the point where their entitlement to the senior Australians tax offset and the low income tax offset will exactly offset the income tax that would otherwise be payable.
Using this formula, the rebate threshold for the 2005‑06 income year for single senior Australians is $21,968.
The amending Regulations commence on the commencement of the Tax Laws Amendment (Personal Income Tax Reduction) Act 2005. The Bill for this Act was introduced into Parliament on 12 May 2005, is expected to pass in the next sitting of the Senate (currently due in August 2005) and will commence on 1 July 2005. The amending Regulations apply to the 2005-06 year of income and later years of income.
Subsection 12(2) of the Legislative Instruments Act 2003 prohibits the retrospective operation of regulations, or a provision of regulations, which adversely affect the rights of, or impose liabilities on, a person other than the Commonwealth in respect of anything done or omitted to be done before the date of notification. The Office of Legislative Drafting and Publishing has advised that the Regulations do not contravene subsection 12(2) of the Legislative Instruments Act 2003.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Consultation was not undertaken in relation to this instrument because it is minor or machinery of government in nature and does not substantially change the law.
Overview
The Income Tax Amendment Regulations 2005 (No. 6) was enacted by the Parliament of Australia to address a technical error identified in the Income Tax Amendment Regulations 2005 (No. 4). Specifically, these amending regulations were introduced to correct a missing bracket in a formula related to the senior Australians tax offset, ensuring that the mathematical accuracy of the rebate threshold is maintained. The policy objective of these amendments is to rectify the technical oversight and ensure that the rebate threshold for single senior Australians is correctly calculated, aligning with the effective tax-free threshold for this demographic. These regulations are set to apply from the commencement of the Tax Laws Amendment (Personal Income Tax Reduction) Act 2005, which is expected to pass and commence on 1 July 2005.
Scope and Application
The amending regulations under the Income Tax Assessment Act 1936 address a technical correction to the Income Tax Amendment Regulations 2005 (No. 4), specifically rectifying an omission of a bracket in a formula related to the senior Australians tax offset. These regulations apply to individuals and entities that are subject to the income tax provisions in the Act, particularly focusing on senior Australians who qualify for the tax offset. Geographically, these regulations have a national reach across Australia as they pertain to the Commonwealth’s tax laws. The amendments are designed to ensure the correct application of the rebate threshold for the tax offset, thereby affecting the calculation of the effective tax-free threshold for eligible senior Australians. The changes will be applicable from the 2005-06 income year onwards, and they are crafted to avoid any retrospective implications that could adversely affect taxpayers, in line with the Legislative Instruments Act 2003. Given their technical nature, these regulations do not require consultation as they do not significantly alter existing legal frameworks.
Key Provisions
The Income Tax Amendment Regulations 2005 (No. 6) primarily address a technical correction to an existing formula under the Income Tax Assessment Act 1936 (the Act) (section 266). Specifically, it corrects an omission of a bracket in the formula for the senior Australians tax offset, which was originally contained in the Income Tax Amendment Regulations 2005 (No. 4). This correction ensures the mathematical accuracy of the formula, thereby accurately setting the rebate threshold for single senior Australians. The corrected formula is designed to ensure that the rebate threshold is the level of taxable income beyond which the senior Australians tax offset begins to phase out, effectively setting the threshold at the 'effective tax free threshold' for senior Australians. This means that the threshold is set at the point where the entitlement to the senior Australians tax offset and the low income tax offset will exactly offset the income tax that would otherwise be payable.
The amending Regulations impose certain obligations and requirements on the entities and individuals they govern. Firstly, the regulations ensure that the formula for calculating the rebate threshold for single senior Australians is accurately set, which is essential for determining the correct tax liability for these individuals. This accuracy is necessary for both the tax administration and the taxpayers to ensure that the correct amount of tax is both collected and offset by the appropriate tax benefits. The correction is crucial to avoid any discrepancies in the calculation of the tax offset, which could lead to either overpayment or underpayment of tax.
The amending Regulations do not introduce any new offences, penalties, or consequences for breach as they are purely corrective in nature. The regulations are designed to correct an error in an existing formula, and thus they do not alter the substantive law or introduce new legal obligations beyond ensuring the correct calculation of the senior Australians tax offset. The correction ensures compliance with the Act by providing the accurate formula for the rebate threshold, thereby avoiding any potential misinterpretation or misapplication of the tax law. Importantly, the Regulations do not have retrospective effect and do not adversely affect the rights or liabilities of individuals or entities in respect of actions taken before the date of notification, in accordance with subsection 12(2) of the Legislative Instruments Act 2003.