EXPLANATORY STATEMENT
STATUTORY RULES 1989 NO. 141
ISSUED BY THE AUTHORITY OF THE TREASURER
The Minute proposes the making of Income Tax Regulations to provide for an alernative method of quoting a tax file number in respect of certain payments and to make other minor changes to the Income Tax Regulations (the Principal Regulations) relating to the tax file number system.
Regulation 1 provides for the commencement of regulation 3 on 1 July 1989.
Regulation 2 facilitates references to the Income Tax Regulations which are referred to as the “Principal Regulations”.
Regulation 3 extends the period for which employers are to retain copies of declaration forms, given to the employer under regulation 54DAC of the Principal Regulations, from the 1 July after the forms cease to have effect to the second 1 July after the forms cease to have effect. The declaration forms are used by employees to claim the general exemption and any rebates. The extended retention period will allow the Australian Taxation Office to have access to the copies of the forms during the financial year following the financial year during which a declaration ceases to have effect.
This amendment will not apply to declarations that ceased to have effect prior to 1 July 1989.
Background notes for regulations 4, 5 and 6
The provisions relating to the quoting of tax file numbers in respect of eligible termination payments were linked to regulation 54DAQ by the Taxation Laws Amendment (Tax File Numbers) Act 1988. Generally, regulation 54DAQ provides that before an employer, superannuation fund or rollover institution (the payer) makes an eligible termination payment to an employee the payer must, on a Statement of Termination Payment form, prepare details of the eligible termination payment showing all of its components. The payer must give this statement to the employee who fills in the rollover nomination and tax file number and returns it to the payer. The payer can then make the payment and issue a group certificate.
As this method of quoting tax file numbers has been found to be administratively cumbersome, the following amendments have been proposed.
Regulation 4 amends regulation 54DAP of the Principal Regulations. Regulation 54DAP prescribes the rate of deduction to be made from an eligible termination payment where an employer has not quoted, or is not taken to have quoted, a tax file number on in a statement under regulation 54DAQ. The amendments to be made by regulation 4 will -
(a) provide that quotation may be made in a statement under new regulation 54DAR of the Principal Regulations (see regulation 6 below);
(b) remove the reference in subregulation 54DAP(1B) to a statement made under regulation 54DAQ as the statements are to be made under new regulation 54DAR (see notes on regulation 6 below); and
(c) remove the concession that allows a recipient of an eligible termination payment to be taken to have quoted a tax file number for a period of 28 days if he or she has applied for a tax file number or for notification of his or her tax file number from the Commissioner of Taxation. As eligible termination payments are generally paid immediately upon termination of employment the effect of the concession was to enable a payer to make the payment and tax it at normal rates without a tax file number. As a person in a position to receive an eligible termination payment will have had opportunity to obtain a tax file number, this provision is not required. As a safeguarding measure the removal of the 28 day concessional period has been proposed.
Regulation 5 removes subregulation 54DAQ(2A) under which an employee in receipt of an eligible termination payment quoted his or her number on a statement of termination payment form prior to the payment being made. New regulation 54DAR (see notes on regulation 6 below) provides for the means of quoting a tax file number for an eligible termination payment.
Regulation 6 inserts new regulation 54DAR to provide alternate methods by which an employee may quote his or her tax file number to the payer of an eligible termination payment.
Paragraph 54DAR(1)(a) permits an employee to quote his or her tax file number on a statement of termination payment form relating to an eligible termination payment. Under paragraph 54DAR(1)(b) a new form may be used by an employee to quote a tax file number on termination of employment or withdrawal of an eligible termination payment from a rollover institution. The new form will be approved by and available from the Commissioner of Taxation.
New subregulation 54DAR(2) enables the form to be made available to the payer of the eligible termination payment. The form may be given directly to the payer or may be used to authorise an employer to transfer the tax file number to the payer on the termination of the employee’s employment.
The form is to be retained until the second 1 July after the payment of the eligible termination payment (subregulation 54DAR(3)). This requirement will allow the Australian Taxation Office to have access to the copies of the forms for up to 2 years.