EXPLANATORY STATEMENT
STATUTORY RULE 1985 NO. 148
ISSUED BY THE AUTHORITY OF THE TREASURER INCOME TAX REGULATIONS (AMENDMENT)
This regulation preserves the long-standing income tax exemption of various allowances and a bounty paid to members of the Defence Force.
Sub-paragraph 23(t)(iii) of the Income Tax Assessment Act 1936 exempts from income tax payments of any allowance or bounty of a prescribed kind payable to or in respect of a member of the Defence Force. The payments exempted - separation, living out and education allowances and a re-engagement bounty - are those prescribed in regulation 4AAA of the Income Tax Regulations by reference to various regulations in the Defence Force (Salaries) Regulations, the Air Force Regulations, the Military Financial Regulations, the Naval Financial Regulations and the Defence Force (Bounties and Gratuities) Regulations’ under which these payments were previously made.
The Department of Defence recently completed transferring the prescription of certain financial conditions of service for Defence Force personnel, including the allowances and the bounty referred to above, from the Defence Force Regulations to Determinations made by the Minister for Defence under section 58B of the Defence Act 1903. The amendment to the Income Tax Regulations reflects the new authority for payment of the allowances and the bounty.
The amending regulation repeals the existing regulation 4AAA and substitutes a new regulation 4AAA which prescribes the allowances and the bounty that are exempt from income tax by reference to the Determinations made by the Minister for Defence authorising their payment. The relevant Determinations, their date of effect and the payments concerned are:
Determination | Date of Effect | Nature of Payment |
(a) Determination 0202 | 12 October 1982 | Separation allowance |
(b) Determination 0507 | 17 July 1984 | Living out allowance |
(c) Determination 0508 | 20 December 1984 | Living out away from home allowance |
(d) Determination 0501 | 23 October 1984 | Education allowance |
(e) Determination 0502 | 24 October 1984 | Scholarship allowance |
(f) Determination 3725 | 30 November 1984 | Education assistance overseas |
(g) Determination 3726 | 12 October 1984 | Child education allowance |
(h) Determination 0701 | 30 November 1984 | Re-engagement bounty. |
The exemption applies to payments of the allowances or bounty to members of the Defence Force made on or after the date the relevant Determination took effect.
Section 50 of the Acts Interpretation Act 1901 preserves the exemption of the allowances and the bounty extended during the life of the repealed regulation 4AAA. That section operates where a Commonwealth Act confers power to make regulations
so that, unless the contrary intention appears, the repeal of any regulation does not affect any right or privilege acquired under the regulation so repealed.
Overview
The Income Tax Regulations (Amendment) Statutory Rule 1985 No. 148, issued by the authority of the Treasurer, addresses the need to preserve the long-standing income tax exemption for various allowances and a bounty paid to members of the Defence Force. This amendment arises from the recent transfer of the prescription of certain financial conditions of service for Defence Force personnel from Defence Force Regulations to Determinations made by the Minister for Defence under section 58B of the Defence Act 1903. The policy objective is to ensure that the exemption from income tax remains applicable to these specific payments, now prescribed by the new Determinations, thereby maintaining the status quo and providing continuity for affected members of the Defence Force.
The regulation repeals the existing regulation 4AAA and substitutes it with a new regulation 4AAA, which prescribes the allowances and bounty that are exempt from income tax by reference to the relevant Determinations. This amendment ensures that the income tax exemption continues to apply to payments made on or after the effective dates of the Determinations, thus preserving the rights and privileges acquired under the repealed regulation 4AAA in accordance with section 50 of the Acts Interpretation Act 1901.
Scope and Application
The Income Tax Regulations (Amendment) Statutory Rule 1985 No. 148 applies to members of the Defence Force who receive certain allowances and a bounty that are exempt from income tax. This exemption is preserved by the Income Tax Assessment Act 1936 and is updated to reflect changes in the authority for the payment of these allowances and bounty. The exemption applies to payments made to Defence Force members on or after the effective dates of the relevant Determinations issued by the Minister for Defence under section 58B of the Defence Act 1903. These Determinations prescribe the allowances and bounty that are exempt from income tax. The amendment to the Income Tax Regulations substitutes the repealed regulation 4AAA with a new regulation 4AAA that references these Determinations. The exemption applies to the Commonwealth jurisdiction and extends to payments made on or after the dates specified in the Determinations, ensuring continuity of tax exemption for the affected Defence Force members.
Key Provisions
The key provisions of this Statutory Rule concern the income tax exemption for certain allowances and a bounty payable to members of the Australian Defence Force. Specifically, section 1 of the Statutory Rule amends regulation 4AAA of the Income Tax Regulations 1936, which details the allowances and bounty exempt from income tax. The regulation has been updated to reflect the new authority for payment of these allowances and bounty, following their transfer from the Defence Force Regulations to Determinations made by the Minister for Defence under section 58B of the Defence Act 1903.
This amendment imposes certain obligations on the parties involved. The Department of Defence is responsible for making the Determinations that prescribe the allowances and bounty exempt from income tax. These Determinations reference the specific payments covered and the dates from which the exemption applies. The Taxation Office must then apply the amended regulation in its assessment of Defence Force members' income tax liabilities, ensuring that the specified allowances and bounty are not subject to income tax.
The Statutory Rule does not explicitly state any offences, penalties, or consequences for breach. However, it is implied that non-compliance with the amended regulation could result in the Taxation Office imposing income tax on the allowances and bounty that are supposed to be exempt. This could lead to Defence Force members being required to pay tax on these payments, which would contravene the intent of the legislation. Such non-compliance would likely result in the Taxation Office taking appropriate action to rectify the situation, potentially including the imposition of penalties for underpaid tax, interest on the unpaid amounts, and legal proceedings if the matter is not resolved voluntarily.
The Statutory Rule ensures that the long-standing income tax exemption for certain allowances and a bounty paid to Defence Force members is preserved, reflecting the transfer of regulatory authority for these payments. It places the onus on the Department of Defence to issue the relevant Determinations and on the Taxation Office to apply the amended regulation correctly in its assessments. While the Statutory Rule does not specify penalties for non-compliance, it implies that failure to adhere to the amended regulation could lead to unintended tax liabilities for Defence Force members and subsequent enforcement action by the Taxation Office.