EXPLANATORY STATEMENT
STATUTORY RULES 1985 NO. 278
ISSUED BY THE AUTHORITY OF THE TREASURER
These regulations amending the Income Tax Regulations arise from the 1985-86 Budget proposal to increase from $50,000 to $55,000 the maximum amount of the post 30 June 1983 component of lump sum termination payments (called eligible termination payments) that is subject to income tax at a rate of not more than 15% where made to a taxpayer aged 55 years or more. The post 30 June 1983 component of an eligible termination payment is the component that relates to service after 30 June 1983.
Reflecting amendments of the Income Tax Assessment Act (incorporated in the Taxation Laws Amendment Bill (No. 2) 1985) to give effect to the Budget proposal, the regulations amend Income Tax Regulation 54DAP, which prescribes the rate of pay-as-you-earn tax instalment deductions to be made from eligible termination payments. Regulation 54DAP, as amended, provides that tax instalment deductions at a rate of 16% (including Medicare levy of 1%) are to be made by an employer from the first $55,000 (instead of $50,000) of the post 30 June 1983 component of an eligible termination payment made to an employee aged 55 years or more at the date of payment.
Regulation 1 increases the previous $50,000 threshold amount to $55,000, while regulation 2 provides that the amendment made by regulation 1 applies in respect of an eligible termination payment included in any salary or wages that an employee receives, or is entitled to receive, on or after 1 November 1985.