EXPLANATORY STATEMENT
STATUTORY RULES 1987 NO. 92
ISSUED BY THE AUTHORITY OF THE TREASURER INCOME TAX REGULATIONS (AMENDMENT)
The purpose of these regulations is to provide for new rates of tax instalment deductions (PAYE deductions) for salary or wages paid on or after 1 July 1987. The new rates of tax give effect to the second and final stage of reform of the personal income tax rate scale announced on 19 September 1985 in the Statement on Reform of the Australian taxation system. These new rates, together with the reduced rates that took effect from 1 December 1986, were declared in the Income Tax Rates Act 1986 which received the Royal Assent on 4 November 1986.
For resident taxpayers the changes to the rate scale from 1 July 1987 are as follows -
Taxable income range
Exceeding | Not Exceeding | Existing rate | Rate from 1 July 1987 |
$ | $ | % | % |
| | | |
5,100 | 12,600 | 24 | 24 |
12,600 | 19,500 | 29 | 29 |
19,500 | 35,000 | * | 40 |
35,000 | | 55 | 49 |
* previously $19,500 - $28,000 : 43 per cent
$28,000 - $35,000 : 46 per cent
For non-resident taxpayers, the reduced rates shown above apply to taxable income in the relevant ranges above $19,500.
Notes on each of the amending regulations are set out below:
Commencement
By Regulation 1 the amending regulations are to come into operation on 1 July 1987.
Third Schedule
Regulation 2 repeals the Third Schedule to the Income Tax Regulations and substitutes a new Third Schedule. The Third Schedule contains a series of tables specifying the values of components to be used in a formula from which an employee’s weekly tax instalment amounts will be calculated. Reflecting the personal income tax rate scale to apply from 1 July 1987, the new values of components and the new ranges of weekly earnings amounts to which those values are to apply from 1 July 1987 are set out in the new Third Schedule.
The tables in the Third Schedule also reflect the Medicare levy of 1.25 per cent, the low income thresholds below which no Medicare levy is payable by an individual, a married couple or a sole parent and the shading-in of the levy above the thresholds. By the operation of the low income thresholds, individuals with taxable incomes of $8,030 or less, and married couples and sole parents with family incomes of $13,370 or less are exempt from the levy. The income threshold for married couples and sole parents is increased by a further $1,660 for each dependent child or student.
Overview
The Income Tax Regulations (Amendment) Statutory Rules 1987 No. 92, issued under the authority of the Treasurer, were enacted to implement the new rates of tax instalment deductions (PAYE deductions) for salary or wages, effective from 1 July 1987. These amendments were introduced as part of the second and final stage of the personal income tax rate scale reform announced in September 1985. The reform was aimed at adjusting tax rates to reflect changes in the economic environment and to simplify the tax system. The new tax rates were declared in the Income Tax Rates Act 1986, which received Royal Assent on 4 November 1986. The policy objective was to ensure that the tax system remained fair and efficient by updating tax rates in line with economic changes and public policy goals.
These regulations also address the calculation of weekly tax instalment amounts for employees by updating the values of components in the formula, as specified in the new Third Schedule of the Income Tax Regulations. This Third Schedule reflects the updated personal income tax rates and includes provisions for the Medicare levy of 1.25 per cent, along with low income thresholds that exempt certain individuals and families from this levy. The income thresholds are adjusted for married couples and sole parents with dependent children or students, ensuring the tax system accommodates varying family structures and needs.
Scope and Application
The Income Tax Regulations (Amendment) Statutory Rules 1987 No. 92, issued by the authority of the Treasurer, introduce new rates of tax instalment deductions (PAYE deductions) effective from 1 July 1987. These amendments apply to resident and non-resident taxpayers and are aligned with the second and final stage of the personal income tax rate scale reform announced on 19 September 1985. The new rates, which reflect changes declared in the Income Tax Rates Act 1986, adjust the tax payable based on the taxable income of the taxpayer. The regulations detail specific income brackets and corresponding tax rates, including the introduction of a reduced Medicare levy for individuals with lower incomes, with exemptions for those below certain thresholds. These amendments cover all taxpayers subject to PAYE deductions and operate on a national level across Australia, with the new Third Schedule providing updated values and earnings ranges for calculating weekly tax instalments.
Key Provisions
The Income Tax Regulations (Amendment) Statutory Rules 1987 No. 92, issued by the authority of the Treasurer, primarily amend the rates of tax instalment deductions (PAYE deductions) for salary or wages paid on or after 1 July 1987. This amendment reflects the second and final stage of the reform of the personal income tax rate scale, which was announced on 19 September 1985 in the Statement on Reform of the Australian taxation system (Regulation 1). The new rates, together with the reduced rates that took effect from 1 December 1986, were declared in the Income Tax Rates Act 1986, which received the Royal Assent on 4 November 1986.
These regulations impose specific obligations on employers and taxpayers. Employers are required to use the new tax tables specified in the amended Third Schedule to calculate the weekly tax instalment amounts for employees' salaries or wages (Regulation 2). This calculation is based on a formula that incorporates the new tax rates, the Medicare levy, and the low income thresholds for levy exemption. Employers must also ensure that the new rates are applied from 1 July 1987 onwards. For taxpayers, the obligation is to declare their income correctly and to ensure that the correct amount of tax is deducted from their pay, as per the new tax rates.
Failure to comply with the provisions of these regulations can lead to civil and criminal consequences. Employers who fail to calculate and withhold the correct amount of tax may be liable for penalties. The specific penalties for non-compliance are not detailed in the explanatory statement, but it is known that such failures can result in financial penalties. Additionally, if the non-compliance is deemed to be deliberate or fraudulent, it could lead to criminal charges. The maximum penalties for such offences are not specified in the explanatory statement, but they are likely to be severe given the nature of tax law violations.