Overview

The Income Tax Assessment (1936 Act) Amendment (Operation Orenda Eligible Duty) Regulations 2020 were introduced to amend the Income Tax (1936 Act) Regulation 2015. The purpose of these regulations is to ensure that duty performed by Australian Defence Force personnel serving on Operation Orenda is recognised as ‘eligible duty’ under section 23AD of the Income Tax Assessment Act 1936. This amendment allows the salary and allowances of ADF personnel on this operation to be exempt from income tax. The regulations were enacted by the Minister for Housing and Assistant Treasurer and are intended to provide ongoing tax exemptions for ADF members deployed in specific operations outside Australia, thereby supporting their financial wellbeing while serving their country. These regulations commenced on 1 April 2020, aligning with the deployment timeline of ADF personnel on Operation Orenda.

Scope and Application

The Income Tax Assessment (1936 Act) Amendment (Operation Orenda Eligible Duty) Regulations 2020 applies to Australian Defence Force (ADF) personnel serving on Operation Orenda in the land area and superjacent airspace of Mali, providing them with the benefit of having their remuneration exempt from income tax under section 23AD of the Income Tax Assessment Act 1936. These regulations amend the Income Tax (1936 Act) Regulation 2015 by including Operation Orenda as ‘eligible duty’. The eligibility criteria for this tax exemption are that the ADF member must be on duty in a specified area outside Australia, as certified by the Chief of the ADF, and the duty must not be as, or under, an attaché at an Australian embassy or legation. The regulations are effective from 1 April 2020 and are considered beneficial to ADF personnel involved in Operation Orenda without disadvantaging any other person. Public consultation was deemed unnecessary as these regulations pertain specifically to Defence Force operations and do not directly impact the public, although the Department of Defence was consulted during the development of the measure. The Act does not impose any conditions for the exercise of the power to make these regulations, and they are intended to have a negligible compliance cost impact.

Key Provisions

The Income Tax Assessment (1936 Act) Amendment (Operation Orenda Eligible Duty) Regulations 2020 (the Amending Regulations) serve to modify the Income Tax (1936 Act) Regulation 2015 (the Regulation) by classifying duty performed by Australian Defence Force (ADF) personnel on Operation Orenda as ‘eligible duty’ (section 6). This classification is crucial as it determines the taxability of their remuneration under section 23AD of the Income Tax Assessment Act 1936 (the Act). Specifically, section 23AD exempts from tax the remuneration of ADF members who are on ‘eligible duty’ in a specified area outside Australia, provided the Chief of the ADF issues a relevant certificate and the duty is not performed as an attaché at an Australian embassy or legation. By amending section 6, the Amending Regulations ensure that ADF personnel on Operation Orenda in Mali are exempt from income tax on their salary and allowances. The Amending Regulations impose specific obligations on the ADF and the Australian Taxation Office (ATO). For the ADF, this involves ensuring that personnel on Operation Orenda are aware of their tax-exempt status and that the Chief of the ADF issues the necessary certificates to validate their ‘eligible duty’ status. The ATO, on the other hand, must recognise and process these certificates to exempt the relevant personnel from income tax. Both entities must ensure compliance with the Amending Regulations by adhering to the specified conditions and maintaining proper documentation. Breach of the Amending Regulations could lead to civil or criminal consequences. For instance, if the ADF fails to provide accurate certificates or the ATO incorrectly taxes personnel on Operation Orenda, this could result in legal challenges and potential penalties. Although the Act does not explicitly state penalties for non-compliance with the Amending Regulations, breaches of tax laws generally carry significant fines and, in severe cases, criminal charges. The precise penalties would depend on the nature and extent of the breach, but they could include substantial fines for individuals and organisations, as well as potential imprisonment for more serious offences.