Income Tax Regulations (Amendment) 1992 No. 313
EXPLANATORY STATEMENT
STATUTORY RULES 1992 No. 313
ISSUE BY THE AUTHORITY OF THE TREASURE
Income Tax Assessment Act 1936
Income Tax Regulations (Amendment)
These regulations will make amendments of the Income Tax Regulations that are consequential on amendments made to the Income Assessment Act 1936 (the Assessment Act) by the Taxation Laws Amendment (Self Assessment) Act 1992 (the Self Assessment Act).
There are instances in the Assessment Act where a taxpayer may make an election or exercise an option to override the ordinary operation of the law. In the past nearly all of the elections and options available to taxpayers under the Assessment Act have had to be in writing and lodged with the Commissioner. This put the Commissioner on notice so that he would take the taxpayer's decision into account when making an assessment of the taxpayer's taxable income and tax payable.
The Self Assessment Act generally removed the requirements under the Assessment Act for elections to be made in writing and lodged with the Commissioner of Taxation. Under the self assessment system the requirement for written notices to be given to the Commissioner has become redundant, as a taxpayer's decision to make an election or exercise an option available under the law is simply reflected in the taxable income returned by the taxpayer, which is in turn accepted by the Commissioner as a correct statement of taxable income.
There are two instances, involving an option under subsection 32(5) and a selection under paragraph 34(1)(b) of the Assessment Act, where the Income Tax Regulations prescribe (in subregulations 10(1) and (2)) that the option under subsection 32(5) and the selection under paragraph 34(1)(b) must be made by giving a written notice to the Commissioner. Consistent with the amendments to the Assessment Act made by the Self Assessment Act, those requirements are being removed by the regulations.
Section 32 allows a taxpayer to choose the basis for valuing live stock on hand at the end of a year of income. Section 33 of the Act prevents a taxpayer from changing the basis of valuation of live stock from year to year. This means that the relevant year for exercising an option under subsection 32(5) is the year in which the particular live stock is first taken into account for tax purposes. Paragraph 34(1)(b) allows a taxpayer to select a particular cost price for the natural increase of a class of live stock, e.g. horses, but only if there has never been another cost price allocated to natural increase of that class. For practical purposes this means that a selection under paragraph 34(1)(b) may only be made for the first year in which natural increase of a class of live stock is taken into account.
Regulation 2 omits the existing subregulations 10(1) and (2) and inserts two new subregulations in their place. New subregulations 10(1) and (2) retain the conditions in the former subregulations concerning the timing of the exercise of options under subsection 32(5) and selections under paragraph 34(1)(b) of the Assessment Act but do not require them to be in writing. By virtue of subsection 32(7), a subsection 32(5) option that is not exercised within the time prescribed in the regulations will be ignored. Similarly, paragraph 34(2)(a) allows a time limit to be prescribed for the making of selections under paragraph 34(1)(b). The new subregulations require an option under subsection 32(5) to be exercised, for the purposes of subsection 32(7), on or before the day of lodgment of a tax return for the relevant year of income, unless the Commissioner extends the time. The same time limit applies, for the purposes of paragraph 34(2)(a), to a selection to be made under paragraph 34(1)(b).
Overview
The Income Tax Regulations (Amendment) 1992 No. 313, issued by the authority of the Treasurer, amends the Income Tax Regulations to align with the changes introduced by the Taxation Laws Amendment (Self Assessment) Act 1992. This legislation was enacted to address the redundancy of certain requirements under the Income Tax Assessment Act 1936, particularly the need for taxpayers to make written elections or options to the Commissioner of Taxation. The policy objective of these amendments is to streamline the self-assessment process by removing unnecessary bureaucratic steps, allowing taxpayers' decisions to be reflected directly in the taxable income returned and accepted by the Commissioner as accurate statements of taxable income.
These regulations specifically modify the existing subregulations to eliminate the requirement for written notices for particular options related to the valuation of livestock and the selection of cost prices for natural increases in livestock classes. Instead, they stipulate that these options and selections must be exercised by the due date of the tax return for the relevant year of income, unless extended by the Commissioner. This amendment reflects the shift towards a more efficient and self-managed tax system under the self-assessment framework.
Scope and Application
The Income Tax Regulations (Amendment) 1992 No. 313 applies to taxpayers under the Income Tax Assessment Act 1936, specifically targeting the process of making elections or exercising options related to the valuation of livestock. The amendments made by these regulations are consequential to changes introduced by the Taxation Laws Amendment (Self Assessment) Act 1992, which streamlined the self-assessment system by removing the necessity for written notifications to the Commissioner of Taxation. Instead, these decisions are now reflected in the taxable income returned by the taxpayer, which the Commissioner accepts as a correct statement of taxable income. The regulations specifically address two instances where previously, written notices were required under subregulations 10(1) and (2) for options concerning the valuation of livestock and selections under paragraph 34(1)(b). These requirements have been removed, aligning with the broader changes to the Assessment Act. The regulations set out new subregulations 10(1) and (2) that maintain the conditions and timing for exercising these options and selections but eliminate the need for them to be in writing, thus simplifying the process for taxpayers.
Key Provisions
The Income Tax Regulations (Amendment) 1992 No. 313 primarily addresses the consequential amendments to the Income Tax Regulations following the changes introduced by the Taxation Laws Amendment (Self Assessment) Act 1992. Specifically, section 1 of the Amendment Regulations omits the existing requirements for taxpayers to make certain elections or options in writing and lodged with the Commissioner of Taxation. This amendment aligns with the new self-assessment system where taxpayers' decisions are reflected in the taxable income returned and accepted by the Commissioner as a correct statement of taxable income.
Section 32 of the Income Tax Assessment Act 1936 allows a taxpayer to choose the basis for valuing livestock on hand at the end of a year of income, and section 33 prevents changes in the valuation basis from year to year. Subsection 32(5) permits an option to be exercised regarding the valuation basis, and paragraph 34(1)(b) allows for the selection of a particular cost price for the natural increase of a class of livestock, but only if no other cost price has been allocated to the natural increase of that class. Regulation 2 of the Amendment Regulations removes the necessity for these options and selections to be in writing, while maintaining the timing conditions for exercising these rights. An option under subsection 32(5) must now be exercised by the day of lodgment of a tax return for the relevant year of income, unless the Commissioner extends the time. The same time limit applies to a selection under paragraph 34(1)(b).
The Amendment Regulations impose certain obligations on taxpayers. Most notably, they must now ensure that their decisions regarding the valuation of livestock and the selection of cost prices for natural increase are made within the prescribed time limits, and they no longer need to submit written notices to the Commissioner of Taxation. The new regulations require taxpayers to reflect these decisions directly in their tax returns. Additionally, the regulations mandate that any option under subsection 32(5) not exercised within the prescribed period will be disregarded, as per subsection 32(7). Similarly, paragraph 34(2)(a) allows the Commissioner to set time limits for making selections under paragraph 34(1)(b).
The Amendment Regulations do not explicitly outline specific offences, penalties, or consequences for breaches. However, the failure to exercise options within the prescribed time limits or to adhere to the new self-assessment requirements could result in the Commissioner disregarding certain decisions, potentially impacting the taxpayer's taxable income and tax payable. While the Amendment Regulations themselves do not stipulate penalties, the underlying Income Tax Assessment Act 1936 provides for penalties for non-compliance, including fines and imprisonment for serious or wilful breaches. The specific penalties would depend on the nature and severity of the breach as determined under the Income Tax Assessment Act.