EXPLANATORY STATEMENT
Select Legislative Instrument 2013 No. 24
Issued by authority of the Assistant Treasurer
Subject - Income Tax Assessment Act 1997
Income Tax Assessment Amendment Regulation 2013 (No. 1)
Subsection 909-1(1) of the Income Tax Assessment Act 1997 (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 Regulation is to insert the ‘cents per kilometre’ rates for calculating tax deductions for car expenses for the 2012‑13 income year in Part 2 of Schedule 1 to the Income Tax Assessment Regulations 1997 (the Principal Regulations).
Motor vehicle expenses incurred in the course of deriving assessable income or carrying on a business are tax deductible under section 8-1 of the Act. Division 28 of the Act outlines the rules for calculating deductions for car expenses.
The taxpayer can calculate a deduction for car expenses using one of four specified methods. The ‘cents per kilometre method’ in section 28-25 of the Act is one of the four methods available to taxpayers.
To calculate the deduction under the ‘cents per kilometre method’, the number of kilometres the car travelled for business purposes during the year of income is multiplied by a specified number of cents. The cents per kilometre rate is determined in relation to the car’s engine capacity and is prescribed in the Principal Regulations. This method can be used for the first 5,000 business kilometres only. If a taxpayer wishes to claim for more than 5,000 business kilometres, he or she must use one of the other methods outlined in Division 28 of the Act.
The cents per kilometre rates are updated every year by regulation. The rates increase when there is an upward movement of the Private Motoring Subgroup (series ID A2326656J) within the Consumer Price Index (ABS catalogue number 6401.0). The rates are revised each year and the rates currently prescribed apply for the 2011-12 financial year.
The rates for the 2012-13 income year do not change from the 2011-12 rates, 2010‑11 rates, 2009-10 rates and the 2008-09 rates, because the Private Motoring Subgroup index at September 2012 was still below its level at September 2008 and are as follows:
Description | Engine capacity of car not powered by a rotary engine (cc) | Engine capacity of car powered by a rotary engine (cc) | Rate per kilometre (cents) |
Small car | Not exceeding 1600cc | Not exceeding 800cc | 63 |
Medium car | Exceeding 1600cc but not exceeding 2600cc | Exceeding 800cc but not exceeding 1300cc | 74 |
Large car | Exceeding 2600cc | Exceeding 1300cc | 75 |
The Regulation is also relevant for the purposes of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986). The definition of ‘basic car rate’ in subsection 136(1) of the FBTAA 1986 provides that the rate is the same as that prescribed for the purposes of section 28-25 of the Act (‘the cents per kilometre method’). The ‘basic car rate’ is used in the calculation of the taxable value of a number of fringe benefits.
Pursuant to section 18 of the Legislative Instruments Act 2003, no consultation was undertaken on the Regulation as it is both minor and machinery in nature.
The Act specifies no conditions that need to be met before the power to make the Regulation may be exercised.
The Regulation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulation commences on the day after it is registered on the Federal Register of Legislative Instruments.
A Statement of Compatibility with Human Rights has been completed for the Regulation, in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011. The Statement’s assessment is that the measures in the Regulation are compatible with human rights. A copy of the Statement is at Attachment A.
ATTACHMENT A
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Income Tax Assessment Amendment Regulation 2013 (No. 1)
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
The purpose of the Legislative Instrument is to insert the ‘cents per kilometre’ rates for calculating tax deductions for car expenses for the 2012 13 income year into the Income Tax Assessment Regulations 1997.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
Assistant Treasurer, the Hon David Bradbury
Overview
The Income Tax Assessment Amendment Regulation 2013 (No. 1) was enacted to update the 'cents per kilometre' rates for calculating tax deductions for car expenses for the 2012-13 income year, as required under the Income Tax Assessment Act 1997. The regulation was issued by the Assistant Treasurer and provides the rates for the various engine capacities of cars not powered by a rotary engine and those powered by a rotary engine, which are used to calculate the deduction under the 'cents per kilometre method'. The purpose of this regulation is to ensure that taxpayers can accurately claim deductions for motor vehicle expenses incurred in the course of deriving assessable income or carrying on a business. The regulation applies to both income tax and fringe benefits tax purposes, as the 'basic car rate' used in the FBTAA 1986 is the same as that prescribed for the purposes of section 28-25 of the Act. The regulation was made under the authority of the Legislative Instruments Act 2003, and a Statement of Compatibility with Human Rights has been completed to ensure that the measures in the Regulation are compatible with human rights.
Scope and Application
The Income Tax Assessment Amendment Regulation 2013 (No. 1) applies to individuals and businesses that incur motor vehicle expenses in the course of deriving assessable income or carrying on a business. Specifically, it affects those taxpayers who choose to calculate their car expenses using the ‘cents per kilometre’ method as outlined in Division 28 of the Income Tax Assessment Act 1997. This method allows for the deduction of a specified number of cents per kilometre travelled for the first 5,000 business kilometres, and the rates are determined by the car’s engine capacity. The Regulation updates these rates annually based on changes in the Consumer Price Index. The Act applies nationally across Australia, as it is a Commonwealth regulation, and it does not specify any exclusions, exemptions, or thresholds beyond those already defined in the primary Act. The Regulation is a minor and machinery instrument, and it is subject to the Legislative Instruments Act 2003. The rates for the 2012-13 income year remain unchanged from previous years due to the Private Motoring Subgroup index not surpassing its level from September 2008.
Key Provisions
The Income Tax Assessment Amendment Regulation 2013 (No. 1) (the Regulation) serves to update the rates for calculating tax deductions for car expenses under the ‘cents per kilometre method’ for the 2012-13 income year. Section 909-1(1) of the Income Tax Assessment Act 1997 (the Act) empowers the Governor-General to make these regulations. The Regulation inserts specific rates into Part 2 of Schedule 1 of the Income Tax Assessment Regulations 1997 (the Principal Regulations), ensuring taxpayers have the correct figures for their deductions. Section 8-1 of the Act permits the deduction of motor vehicle expenses incurred in deriving assessable income or carrying on a business. The 'cents per kilometre method' is one of four specified methods for calculating these deductions, as outlined in Division 28 of the Act. Under this method, the number of kilometres travelled for business purposes is multiplied by a specified rate, determined by the car’s engine capacity and prescribed in the Principal Regulations. The rates for the 2012-13 income year, as set out in the Regulation, remain unchanged from the previous years due to the Private Motoring Subgroup index remaining below its level at September 2008.
The Regulation imposes certain obligations on taxpayers and the Commissioner of Taxation. Taxpayers must use the prescribed rates to calculate their deductions for car expenses under the 'cents per kilometre method'. They must also ensure that any claimed deductions are accurate and supported by adequate records, as required under section 28-25 of the Act. The Commissioner of Taxation is responsible for enforcing compliance with these regulations and ensuring that taxpayers adhere to the prescribed rates. Additionally, the Regulation affects the calculation of the taxable value of fringe benefits under the Fringe Benefits Tax Assessment Act 1986, as the 'basic car rate' aligns with the rates prescribed for the ‘cents per kilometre method’.
There are no specific offences, penalties, or civil/criminal consequences outlined in the Regulation for non-compliance with the prescribed rates. However, the Act and related legislation provide general provisions for penalties in cases of non-compliance. For example, section 284-1 of the Act allows for penalties and interest on amounts not paid or overpaid as a result of incorrect deductions claimed. The penalties for providing false or misleading statements or documents can be severe, including fines and imprisonment, under section 284-15 of the Act. While the Regulation itself does not specify maximum penalties, taxpayers should be aware that general tax law provisions apply, and non-compliance can lead to significant financial and legal repercussions.