EXPLANATORY STATEMENT
Select Legislative Instrument 2006 No. 367
Issued by authority of the Minister for Revenue
and Assistant Treasurer
Income Tax Assessment Act 1997
Income Tax Assessment Amendment Regulations 2006 (No. 4)
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 Regulations is to amend the Income Tax Assessment Regulations 1997 (the Principal Regulations) to prescribe a religious institution as being exempt from income tax.
Section 50-5 of the Act lists various types of charitable, religious, scientific and educational entities that are exempt from income tax subject to the special conditions listed in section 50-50 of the Act.
Paragraph 50-50(c) of the Act provides that a charitable or religious institution is not exempt from income tax unless it is a prescribed institution that is located outside Australia and is exempt from income tax in the country in which it is resident.
Regulation 50-50.01 of the Principal Regulations provides that an institution is a prescribed institution on and after the date mentioned in the item listed under that regulation.
Government practice has been that bona fide charitable institutions based in Australia that pursue their activities outside Australia should generally continue to be exempt from income tax. Since 1 July 1997 eight Pacific Catholic Dioceses have been approved for prescription in the proposed Regulations.
The Diocese of Honiara Registered Trustees (Incorporated) has been prescribed for the purposes of paragraph 50-50(c) of the Act, to ensure that it will be exempt from income tax.
The Regulations would be taken to have commenced on the date Government approval for tax exempt status for Honiara was granted, 10 June 2005. While this date would be retrospective, the proposed Regulations would not contravene subsection 12(2) of the Legislative Instruments Act 2003 since they are beneficial to the institution funds and to taxpayers making donations to them.
Details of the new Regulations are set out in Attachment A.
The Act specifies no conditions that need to be met before the power to make the new Regulations may be exercised.
The Regulations are administrative in nature, rather than regulatory, so are of a minor or machinery of government nature and do not substantially alter existing arrangements. Accordingly, a Regulation Impact Statement is not mandatory and has not been prepared.
As the Regulations are a machinery of government and do not substantially alter existing arrangements consultation was not required.
The Minute recommends that Regulations be made in the form proposed.
ATTACHMENT A
The Income Tax Assessment Amendment Regulations 2006 (No. 4)
Details of the regulations are as follows:
Regulation 1: Names the regulations.
Regulation 2: Provides that the regulations commence on gazettal.
Regulation 3: Provides that Schedule 1 amends the Income Tax Assessment Regulations 1997.
Schedule 1: Amendments
Item 1 lists one new institution as a prescribed institution in regulation 50-50.01 for the purposes of paragraph 50-50(c). The institution and its date of effect is:
Item | Name of Institution | Date of Effect |
10 | Diocese of Honiara Registered Trustees (Incorporated) | 10 June 2005 |
Overview
The Income Tax Assessment Amendment Regulations 2006 (No. 4) were introduced to amend the Income Tax Assessment Regulations 1997, aligning with the Income Tax Assessment Act 1997. This legislative instrument was enacted to ensure that the Diocese of Honiara Registered Trustees (Incorporated), a charitable institution based in Australia but operating outside its borders, maintains its exemption from income tax. The Act empowers the Governor-General to make regulations necessary for carrying out or giving effect to the Act. These Regulations, proposed by the Minister for Revenue and Assistant Treasurer, aim to prescribe the institution as exempt from income tax, in line with government practice that supports the tax exemption of bona fide charitable institutions based in Australia but active outside the country. The Regulations came into effect on 10 June 2005, the date when government approval for the tax-exempt status for Honiara was granted, and are administrative in nature, not requiring a Regulation Impact Statement due to their minor alteration of existing arrangements.
Scope and Application
The Income Tax Assessment Amendment Regulations 2006 (No. 4) amends the Income Tax Assessment Regulations 1997 to prescribe the Diocese of Honiara Registered Trustees (Incorporated) as a religious institution that is exempt from income tax. The Act applies to this entity, which is recognised as a prescribed institution, thereby ensuring its exemption from income tax under the provisions of section 50-5 of the Income Tax Assessment Act 1997. This amendment is specifically for institutions that operate outside Australia but are based in Australia and pursue their activities overseas. The amendment is administrative, aligning with government practice to maintain the tax-exempt status of bona fide charitable institutions based in Australia but operating outside the country. The regulations came into effect on 10 June 2005, the date of government approval for tax-exempt status for the Honiara Diocese. This legislative action is in line with the broader framework established by the Income Tax Assessment Act 1997, which provides the authority to make such amendments through subordinate legislation.
Key Provisions
The main operative sections of the Income Tax Assessment Amendment Regulations 2006 (No. 4) are Regulation 3 and Schedule 1, which amend the Income Tax Assessment Regulations 1997. Regulation 3 specifies that the regulations commence on gazettal, while Schedule 1 provides the specific amendments. Item 1 of Schedule 1 amends regulation 50-50.01 of the Principal Regulations to include the Diocese of Honiara Registered Trustees (Incorporated) as a prescribed institution for the purposes of paragraph 50-50(c) of the Income Tax Assessment Act 1997 (the Act), effective from 10 June 2005.
These regulations impose specific obligations on the Diocese of Honiara Registered Trustees (Incorporated) by prescribing it as a religious institution exempt from income tax under the Act. This exemption is contingent upon the institution being located outside Australia and being exempt from income tax in the country where it is resident. By being prescribed under the regulations, the Diocese of Honiara Registered Trustees (Incorporated) is recognised as meeting these criteria and is therefore eligible for tax exemption.
The regulations do not explicitly mention any offences, penalties, or civil/criminal consequences for breach. However, it can be inferred that any institution that fails to meet the criteria for tax exemption as prescribed by these regulations could potentially be subject to taxation under the Act. Given the nature of the regulations as administrative rather than regulatory, there are no specific penalties outlined within the text. Nonetheless, any breach of the Act’s tax exemption provisions could result in the institution being required to pay back taxes, interest, and penalties as determined by the Commissioner of Taxation under the relevant sections of the Act.