Income Tax Regulations (Amendment) 1993 No. 46
EXPLANATORY STATEMENT
STATUTORY RULES 1993 No. 46
ISSUED BY THE AUTHORITY OF THE TREASURER
Income Tax Assessment Act 1936
Income Tax Regulations (Amendment)
These Regulations are made under the Income Tax Assessment Act 1936 (the Act) and are necessary following the publication by the Australian Government Actuary of the Australian Life Tables 1985-1987.
Regulation 9 specifies which Australian Life Tables apply for the purpose of ascertaining life expectation factors used in calculating the annual exclusion from assessable income of the capital cost component of an annuity. The Australian Life Tables 1975-1977 apply to annuities that first commenced to be payable before 1 September 1988. The Australian Life Tables 1980-1982 apply to annuities that first commenced to be payable on or after 1 September 1988. The amendments will make the recently published Australian Life Tables 1985-1987 the prescribed Life Tables for annuities that first commenced to be payable on or after 1 May 1993.
An explanation of the Regulations appears below.
Regulation 1 provides that the Income Tax Regulations will be amended as set out in the amending Regulations.
Regulation 2 amends Regulation 9 of the Income Tax Regulations. Regulation 9 prescribes Australian Life Tables for the purpose of the definition of "life expectation factor" in subsection 27H(4) of the Act.
Regulation 2.1 amends paragraph (b) of Regulation 9 to insert a limit on the operation of the paragraph. The paragraph, which currently provides that the 1980-1982 Australian Life Tables apply to an annuity which first commenced to be payable on or after 1 September 1988, is being amended to make the paragraph apply only where the annuity also first commenced to be payable before 1 May 1993.
Regulation 2.2 inserts a new paragraph (c) into Regulation 9. The new paragraph provides that, for annuities which first commenced to be payable on or after 1 May 1993, the prescribed Life Tables will be the Australian Life Tables 1985-1987 prepared by the Australian Government Actuary.
Overview
The Income Tax Regulations (Amendment) 1993 No. 46 was enacted under the authority of the Treasurer and pursuant to the provisions of the Income Tax Assessment Act 1936. This legislative amendment was introduced to address the need for updated actuarial data in the calculation of the annual exclusion from assessable income of the capital cost component of an annuity. The Australian Government Actuary's publication of the Australian Life Tables 1985-1987 necessitated these changes to ensure the relevance and accuracy of the life expectation factors used in income tax calculations. Regulation 9 of the Income Tax Regulations is specifically amended to incorporate these new life tables for annuities that commenced on or after 1 May 1993, thereby reflecting the most recent actuarial data available.
Scope and Application
The Income Tax Regulations (Amendment) 1993 No. 46 applies to the regulations governing the calculation of the annual exclusion from assessable income of the capital cost component of an annuity, as stipulated under the Income Tax Assessment Act 1936. The amendment is necessitated by the publication of the Australian Life Tables 1985-1987 and is concerned specifically with the application of these life tables to annuities. The amendment affects persons or entities with annuities that began to be payable on or after 1 May 1993, as it prescribes the use of the Australian Life Tables 1985-1987 for determining life expectation factors in this context. The jurisdictional reach of this regulation is the Commonwealth of Australia, and it applies nationally. The amendment does not specify any exclusions or thresholds but modifies existing regulations to reflect the new life tables, thereby ensuring that the relevant actuarial data used in income tax calculations is up to date. This amendment also extends the application of the regulations through subordinate instruments by specifying the applicable life tables for different periods of annuity commencement dates.
Key Provisions
The main operative sections of the Income Tax Regulations (Amendment) 1993 No. 46 involve amendments to the existing Income Tax Regulations, specifically Regulation 9, to update the prescribed Australian Life Tables used for calculating certain tax exclusions. Regulation 1 outlines the amendments made to the Income Tax Regulations. Regulation 2 amends Regulation 9 to adjust the applicability of the Australian Life Tables for different annuity commencement dates, while Regulations 2.1 and 2.2 further refine the criteria for applying specific Life Tables based on the annuity's start date.
The Act imposes obligations on taxpayers, financial institutions, and possibly annuity providers to ensure that they use the correct Life Tables when calculating the capital cost component of an annuity for tax purposes. Specifically, the Australian Life Tables 1975-1977 apply to annuities that began before 1 September 1988, while the Australian Life Tables 1980-1982 apply to those that began on or after 1 September 1988 but before 1 May 1993. For annuities commencing on or after 1 May 1993, the Australian Life Tables 1985-1987 must be used. Failure to apply the correct Life Tables could result in incorrect tax assessments and potential legal ramifications.
There are no explicit offences, penalties, or civil/criminal consequences mentioned in the text for breaching these regulations. However, non-compliance with the prescribed Life Tables could potentially lead to tax assessment errors, which might result in additional taxes owed or interest on underpaid taxes if the error is discovered by the Australian Taxation Office. While the text does not specify maximum penalties, taxpayers found to have deliberately misapplied the Life Tables could face penalties under the general tax law provisions, which might include fines or prosecution for tax evasion.