EXPLANATORY STATEMENT
STATUTORY RULES 1988 No. 382
ISSUED BY THE AUTHORITY OF THE TREASURER
INCOME TAX REGULATIONS (AMENDMENT)
Subdivision A of Division 2 of Part VI of the Income Tax Regulations authorises the deduction of instalments of income tax (including the Medicare levy) from payments of salary or wages that employees receive or are entitled to receive in respect of a week or part of a week.
The amending regulations amend Subdivision A to allow for additional information to be included in a form for an employment declaration, from 1 February 1989. At present an instalment declaration form, generally referred to as an Income Tax Instalment Declaration, is furnished by an employee to his or her employer and, amongst other things, is the method by which the instalment of income tax otherwise required to be deducted from the employee’s salary or wages is reduced to allow for a rebate of tax to which the employee will be entitled in a year of income on account of -
(a) a dependent spouse, daughter-housekeeper, invalid relative or parent (section 159J of the Act), a housekeeper caring for certain dependants (section 159L) or the employee is a sole parent (section 159K) (called “concessional rebates”); or
(b) the employee is resident in an isolated area and entitled to a zone rebate (section 79A).
The new employment declaration form to be available for use by employees from 1 February 1989 will incorporate information for the operation of the new tax file number system and will also continue the same basic function as the superseded instalment declaration as a vehicle for receiving the benefit of the general exemption or a concessional or zone rebate. The Act and the Income Tax Regulations were amended by the Taxation Laws Amendment (Tax File Numbers) Act 1988 (Act No. 97 of 1988, assented to on 25 November 1988) to give effect to the tax file number system and the issue of an employment declaration for that purpose.
However, in conjunction with the introduction of the new employment declaration form the method by which an employee makes his or her claim for a concessional rebate or a zone rebate will be changed. At present, an employee declares details of the dependant he or she is seeking a reduction of tax instalments in respect of and is given the benefit of the maximum rebate of tax for that dependant. Where, because the dependant is in receipt of income, an employee is not entitled to a full rebate he or she is expected to withdraw the claim part way through the income year to ensure that he or she only receives the benefit, by weekly reductions of tax instalment, to the appropriate level of the rebate entitlement.
The new method will allow the employee to estimate the
concessional rebate claim for an income year to which he or she will be entitled, whether it is the maximum amount or some lesser amount, and the weekly reduction in instalments of tax will be made on the basis of that estimate. Similarly the employee will be entitled to estimate the zone rebate to which he or she is entitled and receive a reduction on a weekly basis.
As at present, an employee will be required to notify his or her employer when circumstances change and a rebate entitlement ceases to exist or is reduced.
Notes on each of the amending regulations are set out below:
Commencement
Regulation 1 provides that the amending regulations shall come into operation on 1 February 1989.
Principal Regulations
Regulation 2 facilitates reference to the Income Tax Regulations which, in the amending regulations, are referred to as the “Principal Regulations”.
Interpretation
Regulation 3 makes a number of amendments to regulation 54A of the Principal Regulations which defines the meaning of certain terms used in Subdivision A of Division 2 of Part VI and also includes certain other interpretive provisions.
Paragraph (a) of regulation 3 omits the existing definition of “dependant” in subregulation 54A(1) as a consequence of the repeal of regulation 54DAE by regulation 9 and substitutes a new definition of “dependant” for the purposes of Subdivision A. The term “dependant” will have the same meaning as in section 159J of the Income Tax Assessment Act 1936 (the Act).
Paragraph (b) of regulation 3 omits from subregulation 54A(1) the definitions of “dependant rebate value”, “total rebate value”, “total zone rebate value”, “Zone A”, “Zone B”, “zone dependant” and “zone dependant rebate value”. These definitions are rendered unnecessary by the amending regulations and the changes to the declaration form to be furnished under subregulation 54DAC(1). In particular, the terms “dependant rebate value” and “zone dependant rebate value” specify a fixed maximum rebate entitlement which is included in a declaration pursuant to regulation 54DAD of the Principal Regulations and reflected in adjustments to tax instalment deductions by way of the definitions of “total rebate value” and “total zone rebate value”. Regulation 54DAD is repealed by regulation 8 and replaced by a new regulation which changes the information to be shown on a declaration form and enables the employee to claim by way of the declaration a partial rebate of tax in respect of a year of income. The term “zone dependant” is unnecessary given the repeal of regulation 54DAEA of the Principal Regulations by regulation 9.
Paragraph (c) inserts three new definitions into subregulation 54A(1) of the Principal Regulations -
“total concessional rebate amount” means the amount that an employee has specified under sub-subparagraph 54DAD(1)(c)(i)(B) (refer regulation 8) in a declaration to his or her employer as the sum of the rebates of tax ascertained in accordance with sections 159J, 159K and 159L of the Act (that is, the concessional rebates for dependants, housekeeper or sole parent) to which the employee claims to be entitled in respect of a year of income;
“total zone rebate amount” means the amount that the employee has specified under subparagraph 54DAD(1)(c)(ii) (refer regulation 8) in a declaration as the rebate of tax ascertained in accordance with section 79A of the Act (that is, the zone rebate as a consequence of residence in an isolated area, including any additional amounts for dependants) to which the employee claims to be entitled in respect of a year of income;
“zone declaration form” facilitates reference to the declaration (to be known as a Zone A and B employment declaration) referred to in subparagraph 54DAD(1)(a)(i) (refer regulation 8) that is to be completed by an employee claiming a zone rebate.
Paragraphs (d) and (e) make minor amendments of a drafting nature to paragraph 54A(2)(a) of the Principal Regulations.
Paragraph (f) substitutes a reference to sub-subparagraph 54DAD(1)(c)(i)(B) for subparagraphs 54DAD(3)(b)(i) or (ii) in paragraph 54A(4)(a), consequential on the repeal of the existing regulation 54DAD and the substitution of a new regulation 54DAD (refer regulation 8).
Paragraph (g) omits a reference to “rebate value of” in paragraph 54A(4)(b) and substitutes a reference to “concessional rebate amount in relation to”. This is consequential on the omission of the definition of “total rebate value” from subregulation 54A(1) and the insertion of a definition of “total concessional rebate amount”.
By subregulation 54A(4) an employee who specifies an amount in a declaration under Subdivision A as a rebate claim under sections 159J, 159K or 159L of the Act is to be deemed to have claimed a concessional rebate in respect of a dependant for the purposes of the Subdivision.
Paragraph (h) substitutes in subparagraph 54A(5)(a) a reference to subparagraph 54DAD(1)(c)(ii) and omits the reference to subparagraph 54DAD(4)(b)(i), consequential on the repeal of the existing regulation 54DAD and the substitution of a new regulation (refer regulation 8).
Paragraph (i) effectively substitutes a reference to the “total zone rebate amount” for the term “total zone rebate value” in
subregulation 54A(5) as a consequence of the amendment of subregulation 54A(1) to insert a definition of the former term.
The amendment by paragraph (j) is of a technical drafting nature and will omit the phrase “in respect of a zone dependant” from subregulation 54A(5).
Subregulation 54A(5) now provides that where an employee has specified an amount in a declaration under Subdivision A as a rebate claim under section 79A of the Act, the employee is to be deemed to have claimed a zone rebate for the purposes of the Subdivision.
By paragraph (k), subregulation 54A(6) is to be omitted. Under the amending regulations an employee will be required to claim his or her entitlement to a zone rebate on a zone declaration form. The authority for the rebate entitlement will be obtained from section 79A of the Act.
Rate of deductions - employee, not being a prescribed person etc., claiming a rebate in respect of a dependant
Regulation 4 amends regulation 54C of the Principal Regulations which prescribes the rate at which income tax instalment deductions for the purposes of section 221C of the Act are to be made from salary or wages (other than lump sum retirement amounts to which regulation 54DAAA applies) of an employee who claims a concessional rebate, that is a rebate for the maintenance of dependants or a housekeeper or a rebate as a sole parent.
Regulation 4 will omit paragraph 54C(d) and substitute a new paragraph (d). The prescribed rate of income tax deductions for employees to whom regulation 54C applies is now the amount equal to the difference between the amount that would have been the prescribed rate under regulation 54B and the amount (to the nearest 5 cents) ascertained by multiplying the total concessional rebate amount (a term defined in subregulation 54A(1) shown on a declaration form by 1.9 per cent. The factor of 1.9 per cent is used to convert an annual rebate claim into a weekly equivalent.
Rate of deductions - employee, being a prescribed person, claiming a rebate in respect of a dependant
Regulation 5 amends regulation 54CA of the Principal Regulations to omit paragraph (b) and to substitue a new paragraph (b). The amendment is to the same effect in relation to employees to whom regulation 54CA applies as the amendment made by regulation 4 above to regulation 54C of the Principal Regulations.
Rate of deductions where employee is a resident of a zone area
Regulation 6 repeals regulation 54DAA of the Principal Regulations and substitutes a new regulation 54DAA applying to the calculation of the rate of income tax instalment deductions for employees resident in an isolated area, and entitled to a zone rebate (that is, the rebate of tax under section 79A of the
Act). Regulation 54DAA does not apply to an amount referred to in paragraphs 54DAAA(a), (b) or (c) or to an employee to whom regulation 54DAAB applies.
The existing regulation 54DAA of the Principal Regulations provides for the zone rebate of tax to be reflected in the rate at which tax instalments are deducted from an employee’s salary or wages.
Under the new regulation 54DAA the employee will continue to be entitled to a reduction of instalments of tax on account of a zone rebate. However, this is now to be calculated on the declaration form as provided for by subparagraph 54DAD(1)(a)(i) (refer regulation 8).
By new regulation 54DAA, an employee who is a resident of a zone area within the meaning of subsection 79A(3B) of the Act will be entitled to a reduction of the weekly tax instalments otherwise applicable, calculated on the basis of the formula -
(ZR + CR) × 1.9 per cent,
where -
CR is the “total concessional rebate amount” as defined in subregulation 54A(1) of the Principal Regulations (refer regulation 3); and
ZR is the “total zone rebate amount” as defined in subregulation 54A(1) of the Principal Regulations (refer regulation 3).
The factor of 1.9 per cent is used to convert the annual rebate claim into a weekly equivalent.
Furnishing of declaration
Regulation 7 amends regulation 54DAC of the Principal Regulations which allows certain employees to furnish a declaration to their employers for the purpose of determining the appropriate amount to be deducted from their salary or wages for the purposes of section 221C of the Act.
Paragraphs (a) and (b) are drafting measures that omit certain words from paragraphs 54DAC(1)(c) and (d), respectively, consequent upon the introduction of an employment declaration that contains details to claim a zone rebate. In the new declaration form the employee will be required to set down the actual amount of zone rebate he or she wishes to be taken into account in respect of a year of income for tax instalment purposes, and in doing so to calculate the amount of the rebate having regard to the dependant rebates to which he or she is entitled.
Paragraphs (c) and (d) are also drafting measures.
Form and contents of declaration
Regulation 8 repeals regulation 54DAD of the Principal Regulations and substitutes a new regulation 54DAD. Broadly, existing regulation 54DAD governs the information required to be provided on a declaration furnished to an employer, being a declaration referred to in paragraph 54A(2)(a).
The new regulation 54DAD outlines the information requirements to be disclosed on the new employment declaration forms to be made available to employees, the zone declaration form (to be called the Zone A and B employment declaration) and the form where the employee is not claiming a zone rebate (to be called an employment declaration).
New subregulation 54DAD(1) requires that a declaration form shall -
(a) be in accordance with the form provided by the Commissioner of Taxation (paragraph (a)) being -
(i) where the employee is seeking to claim a zone rebate - a form of declaration (the zone declaration form) that provides for that information to be given (subparagraph (a)(i)); or
(ii) in any other case - a form of declaration that does not require information in respect of a zone rebate (the employment declaration) (subparagraph (a)(ii));
(b) be signed and dated by the employee (paragraph (b)):
(c) specify the following particulars, where they are applicable -
(i) if the employee is claiming a dependant rebate of the kind referred to in sections 159J, 159K and 159L of the Act, the amount of each rebate claim, the full name of each dependant and the total of the rebate claims subparagraph (1)(c)(i));
(ii) if the employee is claiming a zone rebate under section 79A of the Act, the amount of the rebate claim (subparagraph (c)(ii)); and
(iii) the sum of the dependant and zone rebate claims (subparagraph (c)(iii)).
New subregulation 54DAD(2) will allow a declaration referred to in paragraph 54A(2)(a), that is a declaration containing the information required to be shown by subregulation 54DAD(1), to be incorporated in the form for an employment declaration. The requirements for lodging, and the form of, an employment declaration are set out in section 202C of the Act.
Repeal of regulations 54DAE, 54DAEA and 54DAF
Regulation 9 repeals regulations 54DAE, 54DAEA and 54DAF of the Principal Regulations. Regulation 54DAE is relevant for the operation of the term “dependant” in subregulation 54A(1) of the Principal Regulations and defines when a person is a dependant of an employee. As a consequence of the term “dependant” being redefined by these amending regulations (refer regulation 3) the provisions of regulation 54DAE are no longer necessary.
Similarly, existing regulation 54DAEA is relevant for the operation of the term “zone dependant” in subregulation 54A(1). As a consequence of the omission of the term “zone dependant” from subregulation 54A(1), regulation 54DAEA is no longer necessary.
The basic operation of regulations 54DAE and 54DAEA will now be accomplished by the operation of the terms “total concessional rebate amount” and “total zone rebate amount” which are proposed to be inserted in subregulation 54A(1) by regulation 3.
Regulation 54DAF, which determines when an employee is entitled to obtain a reduction in tax instalments for the sole parent rebate, has also been repealed. The sole parent rebate will now be available by the operation of the terms “total concessional rebate amount” and “total zone rebate amount” in subregulation 54A(1).
Operation of declarations
Regulation 10 omits subregulation 54DAG(8) of the Principal Regulations and substitutes new subregulations (8) and (9).
By way of background, subregulation 54DAG(6) provides that declarations that employees furnish to their employers for tax instalment purposes may cease to have effect at the end of the day fixed by a determination by the Commissioner of Taxation under subregulation 54DAG(7).
Subregulation (8) operates so that where the Commissioner extends the time for which a declaration is to have effect in accordance with subregulation (7), the amount of any concessional or zone rebate claimed in an instalment declaration form is to be taken as the amount the employee could have claimed under Subdivision A if he or she had furnished a declaration on the date he or she is being paid the relevant salary or wages.
New subregulation (8) will effectively continue the operation of the existing subregulation (8), modified to take into account the new system that is to operate for claiming a concessional or zone rebate.
New subregulation (8) provides that where the amount of the rebate allowable in the assessment of taxpayers under sections 79A, 159J, 159K or 159L of the Act is increased (that is, by the Parliament increasing the amounts of the rebate entitlements available to taxpayers generally) an employer is required to
give effect to a declaration furnished by an employee during the determination period (refer subregulation (9)) as if -
(a) the total concessional rebate amount of the employee shown in the declaration was an amount calculated on the basis of the formula:
CR + CI
where :
CI is the total amount by which the rebates allowable in the assessment of the employee under sections 159J, 159K or 159L of the Act have been increased; and
CR is the “total concessional rebate amount” as defined in subregulation 54A(1) of the Principal Regulations (refer regulation 3); and
(b) the total zone rebate amount of the employee shown in the declaration was an amount calculated on the basis of the formula:
ZR + ZI
where :
ZI is the total amount by which the rebate allowable in the assessment of the employee under section 79A of the Act has been increased; and
ZR is the “total zone rebate amount” as defined in subregulation 54A(1) of the Principal Regulations (refer regulation 3).
New subregulation (9) specifies that the determination period, in relation to a declaration to which a determination under subregulation (7) applies (that is effectively extending the operation of all or some declarations made under Subdivision A), commences immediately before the day on which the increase in the rebate allowable in the assessment of taxpayers takes effect and ends at the end of the day specified in the determination under subregulation (7).
Commissioner’s certificate
Regulation 11 amends regulation 54DAJ of the Principal Regulations that operates where an employee furnishes a declaration under Subdivision A to the Commissioner of Taxation. Where that occurs the Commissioner may issue the employee with a certificate specifying certain matters relevant to the determination of the prescribed rate of deductions from the employee’s salary or wages.
The amendment by regulation 11 substitutes new subparagraphs (a) (ii) and (iii) in regulation 54DAJ to allow for the changes to subregulation 54A(1) to omit the terms “total rebate value” and “total zone rebate value” and the insertion of the terms “total
concessional rebate amount” and “total zone rebate amount”. In effect the operation of regulation 54DAJ will not change.
Effect of certificate
Regulation 54DAK of the Principal Regulations sets out the effect of a certificate issued by the Commissioner under regulation 54DAJ in response to the lodgment with him of a declaration under paragraph 54A(2)(a) or (b).
Regulation 12 substitutes new subparagraphs (d)(ii) and (iii) in regulation 54DAK following the changes in subregulation 54A(1) to define the terms “total concessional rebate amount” and “total zone rebate amount”. As a consequence of this amendment, where an employee lodges with his or her employer a certificate issued by the Commissioner under regulation 54DAJ (and subject to the other condition specified in subregulation 54DAK(1)), the prescribed rate of deduction to be made for the purposes of section 221C of the Act is the amount that would apply had a declaration been furnished directly to the employer specifying the relevant rebate amount or amounts.
Change in circumstances affecting entitlement of employee
Regulation 54DAM of the Principal Regulations applies where, because of changed circumstances, an employee is no longer entitled to some or all of the rebates of tax claimed in a declaration previously lodged with an employer or the Commissioner.
Regulation 13 omits subregulation 54DAM(1) and substitutes a new subregulation to continue the operation of the regulation in the changed circumstances of the new declaration forms provided for by new regulation 54DAD (refer regulation 8).
In effect, the new subregulation will require an employee who has furnished a declaration to either his employer or the Commissioner, and a subsequent change in circumstances reduces or eliminates the employee’s entitlement to a concessional or a zone rebate (or both), to either -
(a) direct the employer in writing to disregard the declaration or furnish another declaration within 14 days after the day the change occurred; or
(b) where the declaration was furnished to the Commissioner, return the certificate issued under regulation 54DAJ to the Commissioner within 14 days of when the change in circumstances occurred or the day on which the certificate was issued, whichever is the later.
Transitional
Subregulation 14(1) is a formal provision under which an declaration (known as an instalment declaration) made before 1 February 1989 is to continue to have effect on or after that day, and the former Regulations (as defined in
subregulation (4)) are to continue to apply to the declaration, as if the former Regulations had not been amended by these regulations.
In other words, in respect of all existing instalment declarations which are still effective the tax instalment system is to continue unaltered during the interim period (refer subregulation (4)).
Subregulation 14(2) is a drafting measure necessary to ensure the operation of regulation 54DAM (as amended) of the Principal Regulations in respect of instalment declarations lodged with employers before 1 February 1989. That is the requirement to furnish a new declaration or to inform the employer or the Commissioner where the circumstances of the employee have changed and he or she is no longer entitled to a rebate or the existing rebate entitlement is reduced.
Subregulation 14(3) provides that all declarations under Subdivision A, whenever made, will cease to have effect at the end of the interim period. The interim period commences on the commencement day for these regulations (1 February 1989) and ends on 31 March 1989 or such later day fixed by the Minister under paragraph 202C(4)(b) of the Act as the last day of the phasing-in period for the purposes of the tax file number system. The effect of this provision is that at the same time as all employees are to be required to complete the new form of employment declaration for the purposes of the tax file number system they will also be required to make, on the same form, new dependant or zone rebate claims.
Subregulation 14(4) contains a number of definitions relevant to regulation 14 -
“amended Regulations” means the Principal Regulations as amended by these Regulations;
“commencement day”, a term used in subregulations (1) and (2), means the day on which these amending regulations commence (1 February 1989);
“declaration” means a declaration made under Subdivision A of Division 2 of Part VI of the Principal Regulations;
“former Regulations” means the Principal Regulations as in force immediately before the commencement day;
“interim period” means the period which commences on the commencement day (1 February 1989) and ends at the end of 31 March 1989 or later day fixed by the Minister under paragraph 202C(4)(b) of the Act, on the last day of the phasing-in period for the purposes of the tax file number system.