Income Tax Regulations (Amendment)

Overview

The Income Tax Regulations 1991, issued under the authority of the Treasurer, were enacted to amend the Income Tax Regulations and specifically address the tax treatment of certain allowances paid to members of the Australian Defence Force (ADF). The policy objective of these regulations is to provide tax exemptions for allowances that help ADF personnel manage the financial burden of out-of-pocket expenses related to their service, such as the costs associated with relocation and the accelerated depreciation of personal effects due to frequent moves. By aligning with the Income Tax Assessment Act 1936, the regulations ensure that the allowances for disturbance and transfer, as defined by the Defence Act 1903, are exempt from income tax, effective from 1 July 1991. These amendments aim to support ADF members without imposing any prejudicial liabilities on non-Commonwealth persons, in accordance with the Acts Interpretation Act 1901.

Scope and Application

The Income Tax Regulations 1991, as amended, apply to members of the Australian Defence Force (ADF) who are recipients of specific allowances, namely the Disturbance Allowance and the Transfer Allowance, both of which are now exempt from income tax. This amendment, introduced through Statutory Rules 1991 No. 300, aligns with subparagraph 23(t)(iii) of the Income Tax Assessment Act 1936, which already exempts certain allowances for Defence Force members from income tax. Regulation 5 of the Income Tax Regulations has been revised to include these two additional allowances, thereby extending the scope of tax exemptions to cover out-of-pocket expenses related to the removal and accelerated depreciation of furniture and effects for ADF personnel. These amendments do not affect the rights of any person other than the Commonwealth, ensuring compliance with the Acts Interpretation Act 1901.

Key Provisions

The main operative sections of the Income Tax Regulations 1991 (No. 300) amend the existing regulations to exempt certain allowances paid to members of the Australian Defence Force (ADF) from income tax. Specifically, Regulation 5, which details the prescribed allowances and bounties exempt from income tax, is updated to include two new allowances. The first is the Disturbance Allowance, which is payable under Determination 505 of the Defence Act 1903, and the second is the Transfer Allowance, payable under Determination 3702 of the same Act (Section 5). These allowances are intended to assist ADF personnel with out-of-pocket expenses related to relocation and the depreciation of furniture and effects caused by repeated moves. The disturbance allowance applies to relocations within Australia, while the transfer allowance applies to relocations overseas. The obligations and requirements imposed by these regulations are primarily administrative. The amendments to Regulation 5 ensure that any member of the ADF receiving a Disturbance Allowance or a Transfer Allowance on or after 1 July 1991 is exempt from paying income tax on those allowances. This means that the tax office will not include these allowances in the taxable income of ADF members. The regulations clarify that these changes do not affect the rights of any person other than the Commonwealth and do not impose any new liabilities on such persons, ensuring they are consistent with the Acts Interpretation Act 1901. Breach of these regulations, although not explicitly stated, could lead to civil or criminal consequences if the allowances are not correctly applied or if there is fraudulent intent behind their distribution. Given that these regulations are connected to income tax laws, non-compliance could result in penalties for tax evasion or fraud, which can include fines and imprisonment under the Income Tax Assessment Act 1936. While the specific penalties are not detailed in the explanatory statement, it is clear that failure to comply with the tax laws could lead to significant legal repercussions.