Income Tax Regulations (Amendment) 1996 No. 114
EXPLANATORY STATEMENT
STATUTORY RULES 1996 No. 114
Issued by authority of the Assistant Treasurer
Income Tax Assessment Act 1936
Income Tax Regulations (Amendment)
For the purposes of the Income Tax Assessment Act (the Act), the Governor-General may make regulations under section 266 of the Act.
These regulations amend income tax subregulation 10(3) of the Income Tax Regulations to include a prescribed minimum cost price for natural increase of emus.
A taxpayer who returns income from farming livestock is required to include the cost price of natural increase of livestock in assessing any difference between the opening and closing values of livestock. This difference is included in calculation of assessable income. The 'prescribed minimum cost price' is the cost price taxpayers are required to use in this calculation where applicable. Where no minimum cost price is prescribed, taxpayers must calculate the 'actual cost price' of natural increase (subsection 34(2B) of the Act).
The accepted method of determining actual cost price is complex and time consuming, and involves calculating all direct and indirect costs of producing the natural increase. To alleviate the potential burden of calculating actual cost price, it was decided to set minimum values for new classes of livestock where farmers of the class of livestock seek such values.
Emus are not currently listed in subregulation 10(3). Members of the Emu Farmers' Federation of Australia have requested that a minimum cost be prescribed for natural increase in emus, to reduce the cost of complying with the law. The data provided by emu farmers indicates that a minimum cost price of $8.00 per head should be prescribed.
If subregulation 10(3) were not amended as described, emu farmers would be required to calculate the actual cost price of all natural increase in their emu herds each year in order to complete their income tax returns in accordance with subsection 34(213). This would result in high on-going compliance costs to those farmers.
As sub-regulation 10(3) applies from 1 July 1994, the prescribed cost price of natural increase of emus will retrospectively apply from that date. This is unlikely to disadvantage emu farmers. However, any emu farmer who has calculated a cost price and wishes to use that calculation may elect to use a lower cost price or, with the Commissioner's leave, may select a higher cost than that prescribed (see subparagraphs 34(1)(b)(ii) or 34(1)(a)(ii) and (iii) of the Act, respectively). Therefore the measure does not impose any disadvantage or liabilities on any person affected.
These regulations insert a prescribed minimum cost price of $8.00 per head for natural increase of emus into subregulation 10(3).
Details of the amending regulations are as follows:
Regulation 1 provides that the Income Tax Regulations are to he amended as set out in the unending regulations.
Regulation 2 amends subregulation 10(3) by inserting item 8 at the end of the table to prescribe the minimum cost price in relation to emus to be $8.00.
Overview
The Income Tax Regulations (Amendment) 1996 No. 114 was enacted to address the burden on emu farmers when calculating the cost price of natural increase in their livestock for income tax purposes. The Income Tax Assessment Act 1936, administered by the Commonwealth Parliament, enables the Governor-General to make regulations under section 266, and these amendments were made to subregulation 10(3) of the Income Tax Regulations to include a prescribed minimum cost price for the natural increase of emus. The policy objective of these regulations was to reduce the compliance costs for emu farmers by setting a minimum cost price of $8.00 per head for natural increase of emus, thereby simplifying the calculation process and addressing requests from the Emu Farmers' Federation of Australia.
Scope and Application
The Income Tax Regulations (Amendment) 1996 No. 114 applies to taxpayers engaged in farming livestock, specifically targeting emu farmers under the Income Tax Assessment Act 1936. This amendment introduces a prescribed minimum cost price for the natural increase of emus, simplifying the calculation of assessable income for these farmers. The regulation applies to the natural increase of emus, providing a minimum cost price of $8.00 per head to alleviate the complexity and burden of calculating the actual cost price. This measure was introduced in response to requests from the Emu Farmers' Federation of Australia and is designed to reduce compliance costs for emu farmers. The regulation applies retrospectively from 1 July 1994, and while it sets a minimum cost, emu farmers retain the option to use a lower cost price if they have already calculated it or seek a higher price with the Commissioner's approval. This ensures that the regulation does not impose any disadvantage or liabilities on affected parties.
Key Provisions
The Income Tax Regulations (Amendment) 1996 No. 114 amends subregulation 10(3) of the Income Tax Regulations to introduce a prescribed minimum cost price for natural increase of emus, specifically setting it at $8.00 per head (Regulation 2). This amendment responds to requests from the Emu Farmers' Federation of Australia, who sought a standardised minimum cost price to simplify tax compliance for emu farmers. Under the existing regulations, taxpayers must include the cost price of natural increase of livestock in their assessable income calculations, which can be a complex and time-consuming process (subsection 34(2B) of the Income Tax Assessment Act 1936). The introduction of a prescribed minimum cost price aims to alleviate the burden on emu farmers by providing a straightforward value to use in their calculations, rather than requiring them to compute the actual cost price (subsection 34(213) of the Act).
The regulations impose a requirement on emu farmers to use the prescribed minimum cost price of $8.00 per head for natural increase of emus in their tax assessments, unless they elect to use a different cost price under specific conditions outlined in the Act (subsections 34(1)(b)(ii) and 34(1)(a)(ii) and (iii)). This obligation is designed to streamline compliance and reduce the administrative burden on farmers, making it easier to complete their tax returns. The amendment is retrospective, applying from 1 July 1994, and while it introduces a minimum cost price, it allows for flexibility by permitting farmers to use a lower cost price or seek approval for a higher cost from the Commissioner.
Breach of the provisions outlined in the regulations may lead to civil or criminal consequences under the Income Tax Assessment Act 1936. The Act provides for various penalties, including fines and imprisonment, for non-compliance or incorrect reporting of assessable income. Specifically, section 207 of the Act outlines penalties for failure to lodge tax returns or provide necessary information, while section 212 imposes penalties for providing false or misleading statements. The maximum penalties for serious or repeated breaches can be substantial, reflecting the seriousness with which the law regards non-compliance. The regulations themselves do not specify penalties but operate within the broader legal framework that governs tax compliance and enforcement.