EXPLANATORY STATEMENT
Select Legislative Instrument 2005 No. 327
Issued by authority of the Minister for Revenue
and Assistant Treasurer
Income Tax Assessment Act 1936
Income Tax Amendment Regulations 2005 (No. 9)
Section 266 of the Income Tax Assessment Act 1936 (the Act) provides that the Governor‑General 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 amending Regulation is to amend the Income Tax Regulations 1936 to specify matters required for the support of the taxation regime that will apply to contributions‑splitting eligible termination payments (ETPs).
Extensive public consultation was undertaken in respect of the introduction of the superannuation contribution splitting regime. Draft versions of these regulations were exposed on a number of occasions to elicit public feedback on the operation of this aspect of the regime.
The Act does not specify any conditions that must be met before the power to make the Regulations may be exercised.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulations will commence on 1 January 2006.
ATTACHMENT
Details of the proposed Income Tax Amendment Regulations 2005 (No. 9)
Regulation 1 — specifies the name of the Regulations as the Income Tax Amendment Regulations 2005 (No. 9).
Regulation 2 — provides that the Regulations commence on 1 January 2006.
Regulation 3 — provides that Schedule 1 amends the Income Tax Amendment Regulations 1936.
Schedule 1 — Amendments
Item 1 inserts new definitions into subregulation 2(1). The new definitions provide that the terms RSA regulations and SIS regulations refer to the Retirement Savings Account Regulations 1997(RSA Regulations), and Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) respectively.
Item 2 inserts new regulations 98B to 98D.
Regulation 98B — Spouse contributions‑splitting amounts (Act section 27A)
Subsection 27A(1) of the Income Tax Assessment Act 1936 (the Act) contains the definition of an ETP and includes examples of the types of payments that are ETPs.
The definition of a ‘contributions‑splitting ETP’ in subsection 27A(1) of the Act provides that a contributions‑splitting ETP is an amount that satisfies the following two criteria:
• it is transferred within the superannuation system, either between funds or within the one fund; and
• it is designated as a contributions‑splitting amount in regulations made for the purposes of the definition.
Regulation 98B provides that a spouse contributions‑splitting amount is an amount that is rolled over, transferred or allotted under Division 6.7 of the SIS Regulations or Division 4.5 of the RSA Regulations.
Regulation 98C — Election taken to have been made in relation to a qualifying ETP that is a contributions‑splitting ETP (Act section 27D)
Benefits in a superannuation fund are divided into different components for taxation purposes. Section 27D(1) of the Act provides that a ‘taxpayer’ can ‘make an election’ specifying the taxation components of an ETP. In other words, when a member transfers their superannuation benefits, they can generally choose which taxation components to transfer.
Paragraphs 27D(8)(a) to 27D(8)(c) of the Act provide that the regulations may prescribe certain matters relating to the taxation components of a contributions‑splitting ETP. These paragraphs are addressed by subregulations 98C(1) to 98C(4).
Subregulation 98C(1) provides that for the purposes of paragraph 27D(8)(a) of the Act an election under subsection 27D(1) of the Act is taken to have been made when a roll‑over, transfer or allotment occurs under Division 6.7 of the SIS Regulations or Division 4.5 of the RSA Regulations.
Subregulation 98C(2) effectively limits the taxpayer’s election by providing that the taxpayer is taken to have specified that the ETP consists only of one or both of the taxed element of a post‑June 1983 component and undeducted contributions.
Subregulation 98C(3) clarifies that when applying section 27D of the Act to a contributions‑splitting ETP any references to the ‘taxpayer’ are considered to be references to the applicant, within the meaning of the SIS Regulations and RSA Regulations.
Paragraph 98C(4)(a) ensures that the amount of the taxed element of the post‑June 1983 component specified cannot exceed the amount of taxed splittable contributions specified in the contributions‑splitting application.
Paragraph 98C(4)(b) ensures that the amount of the undeducted contributions component specified cannot exceed the amount of untaxed splittable contributions specified in the contributions‑splitting application.
Regulation 98D —contribution‑splitting applications (Act section 82AAT)
Regulation 98D provides a definition of the term ‘contributions‑splitting application’ for the purposes of subsections 82AAT(1BA) and (1CCA) of the Act. The term is defined as an application made under regulation 6.44 of the SIS Regulations or regulation 4.41 of the RSA Regulations.
This definition is required as subsections 82AAT(1B) and (1CC) contain provisions preventing a person from giving a section 82AAT notice (that is, a notice of intent to claim a tax deduction for superannuation contributions) where a contributions‑splitting application has been made and not rejected.