Income Tax Regulations (Amendment) 1997 No. 176
EXPLANATORY STATEMENT
Statutory Rules 1997 No. 176
Issued by the Authority of the Assistant Treasurer
Income Tax Assessment Act 1936
Income Tax Assessment Act 1997
Income Tax Regulations (Amendment)
The Governor-General may make regulations under:
* section 266 of the Income Tax Assessment Act 1936 (the 1936 Act); and
* section 909-1 of the Income Tax Assessment Act 1997 (the 1997 Act);
for the purposes of those Acts. Each of those sections allows the Governor-General to make regulations for both Acts.
Background
The proposed amendments of the Income Tax Regulations are consequential on the enactment of the 1997 Act, which is the first instalment of the rewrite of the 1936 Act by the Tax Law Improvement Project (TLIP).
The 1997 Act establishes the structure and framework of the new income tax law. The Act will, by instalments, progressively rewrite and replace the 1936 Act. As each instalment is enacted, the rewritten provisions of the 1936 Act will be closed off (that is, they will cease to apply from the commencement of that instalment). The rewritten provisions in the new law will apply as soon as each instalment of new law is enacted. The instalments are not being stockpiled until all the existing law has been rewritten. Until the 1936 Act is completely rewritten, there will be two Income Tax Assessment Acts, but only one set of operative provisions for each area of the law.
The 1997 Act also contains rewrites of the existing law dealing with:
* certain amounts that are included in a taxpayer's assessable or exempt income;
* deductions for current and prior year losses and transfers of company group losses;
* how to calculate deductions for car expenses;
* the evidence required for substantiating work-related expenses:
* special deductions for capital expenditure by the petroleum mining, general mining and quarrying industries; and
* special deductions for capital expenditure on buildings and other capital works.
The Act also brings together, for the first time, the most important key rules of the income tax law. These provisions are known as the core provisions.
The 1997 Act will commence on 1 July 1997 and will first apply for the 1997-98 income year.
Reason for amendments
From 1 July 1997, the 1936 Act and the 1997 Act will apply concurrently until the 1936 Act is completely rewritten. As a consequence, the Income Tax Regulations which are made under the 1936 Act - will need to be amended:
* in the case of regulations that refer to provisions of the 1936 Act that have been rewritten, to refer to the new provisions (Regulation 8); and
* in the case of regulations that apply generally throughout the 1936 Act, to ensure that they also apply generally throughout the 1997 Act (these regulations cover administrative requirements, such as providing documents, addresses for service, service of notices and signatures) (Regulations 4, 5, 6, 7, 9, 10, 11).
It is proposed that the amendments be made by, and apply from, 1 July 1997, which is the date on which the 1997 Act commences to apply.
The amending regulations will make no substantive changes to the law.
In time, the 1997 Act will need its own regulations, to progressively replace the Income Tax Regulations as the 1936 Act is rewritten. However, at this stage, new regulations are not required to give effect to the first instalment of the 1997 Act.
Details of the amendments are attached.
Section 4 of the Acts Interpretation Act 1901 provides for the making of a regulation before the Act concerned comes into operation as if it had come into operation. The 1997 Act amends the 1936 Act and is due to commence on 1 July 1997.
ATTACHMENT
Details
Details of the Regulations are as follows.
Regulation 1 provides that the regulations will commence on 1 July 1997. The 1997 Act commences on 1 July 1997.
Regulation 2 provides that the proposed Regulations will amend the Income Tax Regulations (the principal regulations).
Regulation 3 will insert a note after regulation 4 of the principal regulations explaining that for the 1997-98 or a later income year, section 330-60 of the 1997 Act deals with income derived by a genuine prospector from the sale of rights to mine. Regulation 4, which prescribes certain metals and minerals for the purposes of the capital write-off provisions for the mining industry, has been included as part of the rewrite of those provisions and incorporated into section 330-60 (Genuine prospector exemption for ordinary income derived from the sale of rights to mine) of the 1997 Act.
Regulation 4 will amend regulation 34 of the principal regulations. Broadly, regulation 34 provides that a taxpayer is not taken to have furnished a return to the Commissioner until:
* it is received in the proper form required by the Act and Regulations; and
* any documents required by the Act and Regulations are also received.
The amendment ensures that these requirements also apply to returns and documents required by the 1997 Act and any regulations made under the 1997 Act.
Regulation 5 will amend regulation 38 of the principal regulations. Regulation 38 prescribes what is the address for service of a person for all purposes of the Act and Regulations. The amendment ensures that this provision also applies for purposes under the 1997 Act and Regulations made under the 1997 Act.
Regulation 6 will amend regulation 39 of the principal regulations. Regulation 39 provides that the address for service for all purposes under the Act and Regulations is the last known place of business or abode in Australia of any person. The amendment ensures that this provision also applies for purposes under the 1997 Act and Regulations made under that Act.
Regulation 7 will amend regulation 40 of the principal regulations. Regulation 40 provides that a person who fails to notify a change of address cannot use that change of address as a defence in any proceedings instituted against them under the Act or Regulations. The amendment ensures that this provision also applies for proceedings under the 1997 Act and Regulations made under that Act.
Regulation 8 will amend regulation 152L of the principal regulations. Regulation 152L specifies buildings to be a prescribed class of property for which notional deductions will be allowed in calculating the notional income of a foreign income fund. Buildings are defined in regulation 152L, in part, as '...buildings for the purposes of Division 10D of Part III of the [1936] Act'. Buildings for the purposes of Division 10D include structural improvements covered by section 124ZFB of the 1936 Act and earthworks covered by section 124ZFC.
The 1997 Act replaces: Division 10D of the 1936 Act with Division 43 of the 1997 Act; and the term 'building' with 'capital works', asset out in section 43-20 of Division 43.
This regulation will amend regulation 152L by replacing the reference to 'buildings for the purposes of Division 10D' with a reference 'capital works that, regardless of when the works were begun, or when expenditure on the works first occurred, are of the kind that, under section 43-20 of the Income Tax Assessment Act 1997 are capital works to which Division 43 of that Act applies'. The amendment will ensure the continuing operation of the regulation despite the change in terminology and section references.
Regulation 9 will amend regulation 170 of the principal regulations. Regulation 170 sets out how the Commissioner may serve a 'notice or other communication' on a person. The amendment will state that a notice or communication also includes a notice or communication by or on behalf of the Commissioner under the 1997 Act or any regulations made under that Act.
Regulation 10 will amend regulation 171 of the principal regulations. Regulation 171 provides that any notice to be given by the Commissioner may be given by any officer authorised by the Commissioner. The amendment will state that such a notice includes a notice given by the Commissioner under the 1997 Act or any regulations made under that Act.
Regulation 11 will amend regulation 172 of the principal regulations. Subregulation 172(2) provides that a certificate, notice or other document bearing a written, printed or stamped name of the Commissioner or certain other persons is deemed to be signed by that person. The amendment will state that such a document includes a certificate, notice or other document given by the Commissioner under the 1997 Act or any regulations made under that Act.