Income Tax Assessment Regulations (Amendment) 1998 No. 85
EXPLANATORY STATEMENT
STATUTORY RULES 1998 NO. 85
Issued by the Authority of the Assistant Treasurer
Income Tax Assessment Act 1997
Income Tax Assessment Regulations (Amendment)
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.
Division 28 of to 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 =payer 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.
Division 28, as indeed the whole of the 1997 Act, applies for the 1997-98 and later years of income. Consequently, these rates have not been regulated previously. However, regulations have been made annually since 1986-87 and prescribed by regulation 147 and Schedule 6 of the Income Tax Regulations for the purposes of the former versions of Division 28, Schedule 2A and Division 3 of Part 3 of the Income Tax Assessment Act 1936.
The purpose of the proposed regulations is to insert into the Income Tax Assessment Regulations 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 1997-98 income year.
The regulations will also be 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 1998.
The Regulations are amended as follows:
Regulation 1 provides that the proposed regulations will commence on gazattal.
Regulation 2 provides for the amendment of the Regulations.
Regulation 3 inserts new regulation 28-25.01 setting out the prescribed rates for the year commencing 1 July 1997.
Having the regulations take effect after the close of the fringe benefits tax year is not in breach of section 48 of the Acts Interpretation Act 1901 which prevents retrospective operation of an amendment if it will be disadvantageous to a person. The rates are used in the calculation of the taxable value of a small number of miscellaneous fringe benefits to reduce their taxable value. This has the effect of reducing the fringe benefits tax otherwise payable which can only be beneficial to taxpayers subject to fringe benefits tax.
Overview
The Income Tax Assessment Regulations (Amendment) 1998 No. 85 was enacted to amend the Income Tax Assessment Regulations for the purposes of Division 28 of the Income Tax Assessment Act 1997. The primary objective of these regulations is to establish the 'cents per kilometre' rates for calculating car expense deductions and the taxable value of certain fringe benefits related to motor vehicles for the 1997-98 income year. These amendments address the need for up-to-date prescribed rates for taxpayers claiming deductions based on car usage beyond the 5,000 km threshold, as well as the valuation of fringe benefits provided in the fringe benefits tax year ending 31 March 1998. The regulations were issued by the Assistant Treasurer under the authority of the Income Tax Assessment Act 1997, ensuring they align with the legislative framework and policy objectives of the Act.
Scope and Application
The Income Tax Assessment Regulations (Amendment) 1998 No. 85 applies to taxpayers who utilise the 'cents per kilometre' method to calculate their car expense deductions as permitted under Division 28 of the Income Tax Assessment Act 1997. This method is specifically for those who do not wish to claim for more than 5,000 km of income-producing use of a car owned or leased by the taxpayer. The regulations establish the prescribed rates for this method applicable from 1 July 1997 for the 1997-98 income year. Furthermore, these regulations are instrumental in determining the taxable value of certain fringe benefits related to motor vehicles, such as remote area holiday travel, provided in the fringe benefits tax year ending 31 March 1998. The regulations do not apply retrospectively and are designed to avoid any disadvantage to taxpayers by reducing the taxable value of certain fringe benefits, thereby reducing the fringe benefits tax payable. The regulations are subject to amendment through subordinate instruments to keep the rates updated for subsequent years.
Key Provisions
The main operative sections of the Income Tax Assessment Regulations (Amendment) 1998 No. 85 pertain to the amendment of existing regulations under the Income Tax Assessment Act 1997. Regulation 2 specifically amends the existing regulations to incorporate the 'cents per kilometre' rates for the 1997-98 income year, as outlined in section 28-25 of the 1997 Act. Regulation 3 inserts a new regulation, 28-25.01, which sets out the prescribed rates for the year commencing 1 July 1997. These rates are critical for taxpayers who choose to use the 'cents per kilometre' method to claim deductions for car expenses.
The Act imposes specific obligations on taxpayers who choose to use the 'cents per kilometre' method. If a taxpayer opts to claim a deduction for car expenses for more than 5,000 kilometres of income-producing use of a car, they must adhere to one of the other three methods outlined in Division 28 of the 1997 Act. Conversely, for taxpayers claiming up to 5,000 kilometres, the 'cents per kilometre' method allows them to multiply the number of business kilometres by the prescribed rate applicable to the car's engine capacity. Furthermore, these rates are also applied in calculating the taxable value of certain fringe benefits related to motor vehicles, ensuring that the correct taxable value is determined for the fringe benefits tax year ending 31 March 1998.
Under the Income Tax Assessment Regulations, there are no explicit offences or penalties mentioned for non-compliance with the new rates. However, failure to comply with the prescribed methods for calculating car expenses deductions and fringe benefits could lead to incorrect tax assessments, potentially resulting in audits or penalties for underpayment of tax. The primary focus of these regulations is to ensure accurate and consistent application of the prescribed rates, thereby maintaining the integrity of the tax system.
The regulations are designed to take effect post the close of the fringe benefits tax year, thereby avoiding any retrospective disadvantage to taxpayers. This approach aligns with the provisions of section 48 of the Acts Interpretation Act 1901, which prevents retrospective operation of an amendment if it will be disadvantageous to a person. By reducing the taxable value of certain fringe benefits, the regulations ultimately benefit taxpayers subject to fringe benefits tax, ensuring they are not unfairly burdened by retrospective changes.