Income Tax (Excluded STBs) Regulations 1997 No. 275
EXPLANATORY STATEMENT
STATUTORY RULES 1997 No. 275
Issued by the Authority of the Assistant Treasurer
Income Tax Assessment Act 1936
Income Tax (Excluded STBs) Regulations
Section 266 of the Income Tax Assessment Act 1936 (the Act) empowers the Governor-General to make regulations, not inconsistent with the Act, prescribing matters which are required or permitted to be prescribed by regulations, or which are necessary or convenient to be prescribed by regulations, for giving effect to the Act.
The purpose of tile regulations is to prescribe those wholly-owned State and Territory Bodies (STBs) which are 'excluded STBs' for the purposes of section 24AM of the Act, that is, prescribe those STBs which are excluded from the income tax exemption provided by section 24AM of the Act and are therefore subject to income tax. STBs are bodies which are 'controlled' by one or more government entities, that is, they are entities owned States or Territories. Sections 24A0-24AS of the Act specify the control tests.
The Statement of Policy Intent (SOPI) agreed at the 1994 Premiers' Conference, required the Commonwealth to exempt all STBs from income tax and the States and Territories to subject all STBs to income tax equivalent regimes.
In order to comply with the SOPI, the Commonwealth amended the Act in 1995 to exempt all STBs from income tax (Section 24AM). Subsequently, all States and Territories have sought to exclude, on the grounds of administrative convenience, some STBs from the income tax exemption provided by section 24AM.
An STB will not be exempt from income tax under section 24AM if it is an 'excluded STB'. Paragraph (a) of section 24AT of the Act defines an 'excluded STB' as one that, at a particular time, is prescribed (by regulations) as an 'excluded M' in relation to that time for the purposes of the Act.
Subsection 24AV(1) of the Act requires that the States and Territories consent to regulations which prescribe that an STB is an 'excluded STB' for the purposes of the Act. Since the regulations prescribe those STBs which are 'excluded STBs' for the purposes of section 24AM of the Act, all State Premiers and Territory Chief Ministers have been consulted regarding the proposed regulations and have provided their written consent.
The regulations commenced on 1 July 1994. Under subsection 24AV(2) of the Act, despite section 48 of the Acts Interpretation Act 1901, a regulation prescribing an STB may provide that the STB is an 'excluded STB' in relation to a time before the day of the notification of the regulation in the Gazette.
Overview
The Income Tax (Excluded STBs) Regulations 1997 No. 275 were enacted in response to a need to clarify and implement the provisions of the Income Tax Assessment Act 1936 regarding the tax status of wholly-owned State and Territory Bodies (STBs). The Act, passed by the Australian Parliament, empowers the Governor-General to make regulations necessary for the Act's enforcement. These regulations aim to identify specific STBs that are excluded from the income tax exemption under section 24AM of the Act, thereby subjecting them to income tax. The legislative framework was necessitated by a 1994 policy agreement at the Premiers' Conference, which required the Commonwealth to exempt all STBs from income tax, while allowing states and territories to impose equivalent tax regimes on certain STBs for administrative convenience. The regulations commenced on 1 July 1994 and required the consent of all state and territory leaders, which was duly obtained.
Scope and Application
The Income Tax (Excluded STBs) Regulations 1997, which are subsidiary to the Income Tax Assessment Act 1936, are designed to specify the wholly-owned State and Territory Bodies (STBs) that are 'excluded STBs' under section 24AM of the Act. These regulations identify the STBs that are excluded from the income tax exemption provided by the Act, thus subjecting them to income tax. The regulations apply to entities that are controlled by state or territory governments and aim to give effect to the Statement of Policy Intent agreed upon in the 1994 Premiers' Conference, which required the Commonwealth to exempt all STBs from income tax, while the states and territories sought to exclude some STBs for administrative convenience. The regulations came into effect on 1 July 1994 and require the consent of all State Premiers and Territory Chief Ministers, as mandated by the Act, before any STB can be designated as an 'excluded STB'. These regulations provide the necessary framework for determining which STBs are exempt or not exempt from income tax, thereby ensuring compliance with the policy intent and legislative requirements.
Key Provisions
The main operative sections of the Income Tax (Excluded STBs) Regulations 1997 (the Regulations) pertain to the definition and identification of wholly-owned State and Territory Bodies (STBs) that are to be classified as 'excluded STBs' for income tax purposes. Section 24AM of the Income Tax Assessment Act 1936 (the Act) exempts STBs from income tax, but the Regulations, as per section 24AT(a), identify specific STBs that are excluded from this exemption. These excluded STBs are required to pay income tax under the Act, despite being wholly-owned by State or Territory governments. The Regulations commenced on 1 July 1994, and they allow for retrospective application of the exclusion, as provided under subsection 24AV(2) of the Act.
The Regulations impose specific obligations on the States and Territories, requiring their consent for the inclusion of an STB as an 'excluded STB'. Subsection 24AV(1) of the Act mandates that any regulation prescribing an STB as an 'excluded STB' must have the written consent of all State Premiers and Territory Chief Ministers. This ensures that the affected governments are in agreement with the taxation status of the STBs in question. In line with this requirement, all relevant Premiers and Chief Ministers have been consulted and have provided their consent for the Regulations.
Failure to comply with the Regulations may result in civil or criminal consequences. However, the Regulations themselves do not explicitly outline specific offences or penalties for breach. The primary enforcement mechanism is the requirement for consent from the States and Territories, which serves as a safeguard against improper classification of STBs. For breaches of the Act or other related regulations, the penalties would be as specified in those respective provisions. It is essential for practitioners to be aware of these broader legislative frameworks when advising on compliance and potential liabilities.