Income Tax Assessment Amendment Regulations 1999 (No. 1) 1999 No. 12
EXPLANATORY STATEMENT
STATUTORY RULES 1998 NO. 12
Issued by the Authority of the Assistant Treasurer
Income Tax Assessment Act 1997
Income Tax Assessment Amendment Regulations 1999 (No. 1)
The Governor-General may make regulations under section 909-1 of the Income Tax Assessment Act 1997 (the 1997 Act) for the purposes of that Act.
Purpose
The purpose of the regulations is to insert into the Income Tax Assessment Regulations, specifically regulation 28-25.01, for the purposes of Division 28 of the 1997 Act, the 'cents per kilometre' rates for use in calculating a deduction for car expenses for the 1998-99 income year.
The regulations are also used to calculate the taxable value of a number of fringe benefits that relate to motor vehicles (such as remote area holiday travel) provided in the fringe benefits tax year ending 31 March 1999.
This is achieved by the employer using the rates in the proposed regulations for the purposes of determining the amount of reimbursement to the employee where, for example, the employee has used his or her own vehicle for the holiday travel.
Background
Division 28 of the 1997 Act outlines four methods for taxpayers to calculate the amount of deduction they can claim for car expenses. If a taxpayer does not wish to claim for more than the first 5,000 kms of the income-producing use of a car owned or leased by the taxpayer, he or she can elect to claim a deduction for car expenses using the 'cents per kilometre' method out in section 28-25. That is, the deduction is calculated by multiplying the number of business kilometres by the prescribed rate applicable to the car's engine capacity.
If a taxpayer wishes to claim for more than 5,000 kms of the income-producing use of a car owned or leased by the taxpayer, he or she must use one of the other three methods outlined in Division 28 of the 1997 Act.
Since the 1986-1987 income year, the rates in the Regulations (formerly in the 1936 Act Regulations) have followed the rates of motor vehicle allowance for the Commonwealth Public Service set out by the Department of Employment, Workplace Relations and Small Business (formerly the Department of Industrial Relations). The rates are updated each year.
The updated rates produced by the Department of Employment, Workplace Relations and Small Business are lower than the rates stated in the Assistant Treasurer's Press Release No AT/020 of 15 May 1998. Accordingly, the rates will remain the same as those for the year ended 30 June 1998.
This will ensure taxpayers do not face a higher than expected income tax liability on allowances they receive based on the published rates. It will also ensure that taxpayers will not face higher than expected FBT liabilities in respect of motor vehicle allowance and reimbursement payments they may have made.
The regulations commenced on gazettal.
Overview
The Income Tax Assessment Amendment Regulations 1999 (No. 1) were issued under the authority of the Assistant Treasurer and are subsidiary legislation made under section 909-1 of the Income Tax Assessment Act 1997. These regulations were designed to update the 'cents per kilometre' rates for calculating car expense deductions and fringe benefits tax liabilities for the 1998-99 income year. Specifically, the regulations address the rates for motor vehicle expenses and ensure consistency with the motor vehicle allowance rates set by the Department of Employment, Workplace Relations and Small Business. The regulations were issued to avoid taxpayers facing higher than expected tax liabilities due to discrepancies between published rates and those used for tax calculations. The objective is to maintain fairness and predictability in the tax system by ensuring that taxpayers are not burdened with unexpected tax liabilities.
Scope and Application
The Income Tax Assessment Amendment Regulations 1999 (No. 1) applies to taxpayers in Australia who use the 'cents per kilometre' method to calculate a deduction for car expenses in the 1998-99 income year. These regulations also pertain to employers who reimburse employees for fringe benefits such as remote area holiday travel involving motor vehicles, in the fringe benefits tax year ending 31 March 1999. The scope of these regulations extends to both individuals and corporate entities that engage in income-producing activities using motor vehicles. The application of these regulations is governed by the Commonwealth of Australia under the authority of the Assistant Treasurer. The regulations were made under section 909-1 of the Income Tax Assessment Act 1997 and are instrumental in updating the prescribed rates for car expenses and certain fringe benefits, ensuring consistency with the motor vehicle allowance rates set by the Department of Employment, Workplace Relations and Small Business. These rates, which are updated annually, ensure taxpayers do not face unexpected increases in their tax liabilities.
Key Provisions
The Income Tax Assessment Amendment Regulations 1999 (No. 1) serve to adjust the 'cents per kilometre' rates for calculating deductions on car expenses for the 1998-99 income year under the Income Tax Assessment Act 1997 (the 1997 Act) (Section 909-1). Specifically, these regulations modify regulation 28-25.01 to reflect the prescribed rates for different engine capacities of cars used for income-producing purposes (Regulation 28-25.01). These rates are essential for taxpayers who opt to use the 'cents per kilometre' method for claiming deductions up to the first 5,000 kilometres of business use (Section 28-25).
The regulations also detail the taxable value of fringe benefits related to motor vehicles, such as remote area holiday travel, which must be calculated for the fringe benefits tax year ending 31 March 1999. Employers must use these rates to determine the reimbursement to employees who use their own vehicles for such purposes (Regulation 28-25). This ensures that employees are reimbursed accurately and that employers comply with fringe benefits tax obligations.
Entities and individuals governed by these regulations must adhere to the updated 'cents per kilometre' rates for calculating car expense deductions and fringe benefits. Employers must ensure that any reimbursements to employees for motor vehicle use are based on these prescribed rates to avoid discrepancies in taxable benefits. Taxpayers who opt to use the 'cents per kilometre' method must accurately calculate their deductions using the specified rates for their vehicle's engine capacity. These obligations are designed to maintain consistency and accuracy in tax calculations and reimbursements.
Failure to comply with these regulations may result in incorrect tax assessments, potentially leading to overpayment or underpayment of income tax and fringe benefits tax. The consequences of non-compliance can include financial penalties and interest on any unpaid taxes. For instance, if an employer fails to correctly apply the prescribed rates when reimbursing an employee for motor vehicle use, the employer may face penalties under the Fringe Benefits Tax Assessment Act 1986. Additionally, taxpayers who incorrectly calculate their car expense deductions may be liable for additional tax assessments and penalties for understating their income. The maximum penalties for non-compliance can vary, but they generally include fines and additional tax liabilities.