EXPLANATORY STATEMENT
STATUTORY RULES 1990 No. 19
Issued By The Authority Of The Treasurer
INCOME TAX ASSESSMENT ACT 1936
INCOME TAX REGULATIONS (AMENDMENT)
The purpose of this regulation which amended the Income Tax Regulations (the Regulations) is to prescribe an area outside Australia as a special area for the purposes of section 23AC of the Income Tax Assessment Act 1936 (the Act) by reason of a state of disturbance in or affecting Namibia.
Section 23AC of the Act provides an exemption from income tax for the pay and allowances earned by Australian Defence Force personnel during their service in a special area.
The period of special service in respect of which the income tax exemption is given is set out in subsection 23AC(3). Broadly stated, the exemption of pay and allowances commences when a Defence Force member leaves Australia for service in the special area and ordinarily concludes when the member returns to Australia.
Subsection 23AC(4) authorises the making of a regulation to prescribe that on a specified date, an area outside Australia has become a special area for the purposes of section 23AC by reason of a state of disturbance in or affecting Namibia. In respect of the specified date, subsection 23AC(4) provides that the date may be a date before the commencement of the regulations or before the commencement of the subsection (19 December 1989) but not before 18 February 1989.
18 February 1989 is the date the first Defence Force member left Australia en route to Namibia for service as a member of the United Nations Transition Assistance Group.
New regulation 4ACA of the Regulations provides that by reason of a state of disturbance in or affecting Namibia, the area comprising the United Nations Mandated Territory of Namibia and the area of land extending 400 kilometres outwards from the borders of Namibia into the adjoining countries of Angola, Zambia, Zimbabwe, Botswana and South Africa (including Walvis Bay) is to be taken to have become a special area for the purpose of section 23AC of the Act on 18 February 1989. The area prescribed is the area declared in the Veterans’ Entitlements Act 1986 as the qualifying area of service for members of the Transition Assistance Group for the purpose of eligibility for pensions and associated benefits and allowances under that Act.
Overview
The Income Tax Regulations (Amendment) Statutory Rules 1990 No. 19, issued by the authority of the Treasurer, was enacted to amend the Income Tax Regulations and address a specific issue related to the income tax exemption for Australian Defence Force personnel serving in a special area due to a state of disturbance. This regulation was introduced to ensure that personnel serving in Namibia, which was affected by a state of disturbance, would be exempt from income tax for their pay and allowances earned during their service. The regulation was enacted by the Parliament of Australia and its policy objective is to provide a clear and specific exemption for Defence personnel serving in regions affected by disturbances, ensuring they are not subject to income tax for their service-related earnings.
The regulation amends the Income Tax Regulations by prescribing the area outside Australia as a special area for the purposes of section 23AC of the Income Tax Assessment Act 1936. This amendment ensures that the exemption applies to Defence Force members who served in Namibia from the date they left Australia for service, which was 18 February 1989. The regulation aligns with the Veterans’ Entitlements Act 1986 by ensuring the qualifying area of service for pensions and benefits under that Act is the same as the area exempted from income tax.
Scope and Application
The Income Tax Regulations (Amendment) pertains to the Income Tax Assessment Act 1936, focusing on the exemption of income tax for Australian Defence Force personnel serving in a special area outside Australia. This regulation specifically designates a region in and around Namibia as a special area, effective from 18 February 1989, due to a state of disturbance. This exemption applies to the pay and allowances of Defence Force members who leave Australia for service in the designated special area and continues until they return to Australia. The prescribed area includes the United Nations Mandated Territory of Namibia and a 400-kilometre radius extending into neighbouring countries, aligning with the qualifying area of service defined under the Veterans’ Entitlements Act 1986. The regulation was issued under the authority of the Treasurer and came into effect with the intention of providing a consistent framework for tax exemptions related to military service in disturbed regions.
Key Provisions
The main operative section of these regulations is the addition of regulation 4ACA to the Income Tax Regulations. This regulation specifies the area outside Australia, which, due to a state of disturbance in or affecting Namibia, is to be considered a special area for the purposes of section 23AC of the Income Tax Assessment Act 1936. Regulation 4ACA identifies this area as the United Nations Mandated Territory of Namibia and an extension of 400 kilometres into the neighbouring countries of Angola, Zambia, Zimbabwe, Botswana, and South Africa, including Walvis Bay. This area is considered to have become a special area for section 23AC purposes on 18 February 1989, the date the first Defence Force member left Australia for service in Namibia.
The Act imposes certain obligations on the Australian Taxation Office (ATO) and Defence Force personnel. For the ATO, the obligation is to administer the tax laws as they apply to the designated special area. This includes ensuring that Defence Force personnel serving in the prescribed area are correctly identified and their income tax liability is accurately assessed. For Defence Force personnel, the obligation is to declare their income and pay tax in accordance with the Act, with the specified exemption for income earned in the special area. The regulations also ensure that these personnel are aware of their tax obligations during their service in the designated areas.
Breaches of the requirements under the Income Tax Assessment Act 1936 can lead to both civil and criminal consequences. For instance, section 210 of the Act provides for civil penalties for failure to comply with the Act, including the underpayment of tax. The maximum penalty for a serious contravention can be up to 125% of the unpaid tax. Additionally, under section 213, failure to lodge a tax return or provide information can result in a penalty of up to $1,800 for individuals. In more severe cases, section 214 outlines criminal offences for intentional fraud or recklessness, which can result in imprisonment for up to five years. The regulations themselves do not specify additional penalties but reinforce the importance of compliance with the Act's provisions.