Income Tax Regulations (Amendment)

Overview

The Income Tax Regulations (Amendment) 1991 No. 156, issued by the authority of the Treasurer, was enacted to address the need to amend the Income Tax Regulations in response to changes made by the Taxation Laws Amendment Act (No. 5) 1990. This Act introduced a new deduction limit for tax deductible superannuation contributions, replacing the former flat $3,000 limit with a more flexible calculation. The new limit is the lesser of $3,000 plus 75% of the amount of contributions exceeding $3,000, or the amount of contributions needed to fund a benefit equal to the person's reasonable benefit limit. Regulation 2 inserts a new regulation 12A in the Income Tax Regulations to provide the basis for ascertaining this alternative deduction limit, linking it to the existing formula in subregulation 18B(9) of the Occupational Superannuation Standards (OSS) Regulations. The policy objective of this amendment is to provide a more equitable and flexible approach to superannuation contributions deductions, taking into account individual circumstances and the need to avoid exceeding a member's reasonable benefit limit.

Scope and Application

The Income Tax Regulations (Amendment) 1991 No. 156 amends the Income Tax Regulations to modify the tax deduction limits for superannuation contributions made by members of a superannuation fund, in line with the changes introduced by the Taxation Laws Amendment Act (No. 5) 1990. This amendment specifically affects the calculation of the maximum tax-deductible contributions for superannuation fund members who do not receive any superannuation support from an employer or other sources. The new deduction limit is the lesser of either $3,000 plus 75% of contributions exceeding $3,000, or the amount needed to fund a benefit equal to the member's reasonable benefit limit. The regulation applies to individuals contributing to superannuation funds, and its jurisdiction is across Australia, as it is a Commonwealth regulation. Subordinate instruments extend the application of these regulations, ensuring they cover contributions made on or after 1 July 1990, including the 1990-91 income year under the authority provided by the amending Act.

Key Provisions

The Income Tax Regulations (Amendment) 1991 No. 156 amends the Income Tax Regulations to introduce an alternative limit on the amount of tax-deductible superannuation contributions that can be made by a member of a superannuation fund. These amendments are a result of the Taxation Laws Amendment Act (No. 5) 1990 (the amending Act), which modified the Income Tax Assessment Act 1936 (the Act). Specifically, the amendment increased the previous flat limit of $3,000 on tax-deductible contributions for superannuation fund members who do not receive any superannuation support from someone else, such as an employer. The new deduction limit is now the lesser of $3,000 plus 75% of the amount of contributions exceeding $3,000 (subparagraph 82AAT(2)(a)(i) of the Act), and the amount of contributions needed to fund a benefit equal to the member's reasonable benefit limit (subparagraph 82AAT(2)(a)(ii) of the Act). Regulation 2 of the Income Tax Regulations (Amendment) 1991 No. 156 inserts a new regulation 12A in the Income Tax Regulations to provide the basis for determining the alternative deduction limit in subparagraph 82AAT(2)(a)(ii) of the Act. The calculation of a person's maximum deductible contributions is to be made using the existing formula in subregulation 18B(9) of the Occupational Superannuation Standards (OSS) Regulations. This formula calculates the maximum contribution that may be made to a superannuation fund without causing a member's accumulated benefits to be such that the member's reasonable benefit limit would be exceeded. New subregulation 12A(1) links the maximum deductible contributions for the purpose of subparagraph 82AAT(2)(a)(ii) of the Act to the amount determined under subregulation 18B(9) of the OSS Regulations. Paragraph 12A(1)(a) applies to cases where individuals contribute to only one superannuation fund in a year, in which case the deduction limit is the amount calculated under subregulation 18B(9) for that fund. Paragraph 12A(1)(b) applies to cases where individuals contribute to more than one fund in a year, in which case the limit is the greatest amount calculated under subregulation 18B(9) for each of the funds. The obligations imposed by these regulations require that the maximum deductible contributions for the purpose of subparagraph 82AAT(2)(a)(ii) of the Act be calculated using the formula in subregulation 18B(9) of the OSS Regulations. This means that the amount of tax-deductible contributions that can be made in total to all superannuation funds is limited to the amount calculated under subregulation 18B(9) for the fund with the highest contribution limit. Regulation 12A first has effect for the year of income that commenced on 1 July 1990, as the new deduction limit inserted by the amending Act applies to superannuation contributions made on or after 1 July 1990. Although the 1990-91 income year had already commenced, section 30 of the amending Act provides authority for these regulations to apply for that year of income. The consequences for non-compliance with these regulations include civil and criminal penalties. If an individual or entity fails to comply with the requirements of these regulations, they may be subject to civil penalties, such as fines or penalties, as well as criminal penalties, such as imprisonment, for serious or repeated breaches. The maximum penalties for breach of these regulations are not specified in the explanatory statement, but they may be found in the relevant legislation or regulations.