EXPLANATORY STATEMENT
STATUTORY RULES 1983 NO.87
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE
INCOME TAX REGULATIONS (AMENDMENT)
This regulation amends regulation 54DB of the Income Tax Regulations to withdraw from employee taxpayers, after 30 June 1983, the option to reduce their tax instalment deductions under the PAYE (pay-as-you-earn) scheme in anticipation of an entitlement to a rebate of tax on home loan interest in excess of 10 per cent per annum.
The Treasurer announced in his Economic Statement on 19 May 1983 that the rebate would not be available for interest payments made on or after 1 July 1983. The Income Tax Assessment Amendment Act (No. 2) 1983 (Act No. 25 of 1983), assented to on 19 June 1983, gives effect to the Treasurer’s announcement.
The Income Tax Assessment Act 1936 contains two schemes which provide for a rebate of tax, in end-of-year assessments, for certain home loan interest payments made on or after 1 July 1932 by resident taxpayers in respect of a sole or principal residence in Australia. The first scheme applies during the first five years of owner-occupancy of the residence commencing on or after 1 July 1977 and before 1 July 1985. The now terminated second or “universal” scheme allowed a rebate of tax for interest payments on a home loan to the extent that they were attributable to such part of the interest rate as exceeded 10 per cent per annum (calculated on a reducing balance basis) in respect of the first $60,000 of a loan or loans on a taxpayer’s sole or principal residence.
Under the Income Tax Regulations an employee who wishes to have the benefit of a reduction in PAYE deductions to reflect his anticipated entitlement to a home loan interest rebate under either scheme must lodge a declaration with his employer or the Commissioner of Taxation. The declaration requires the employee, using information provided by the lender, to furnish an estimate,
for the relevant scheme or schemes, of home loan interest he will be required to pay and which will attract a rebate. The employer or Commissioner then determines the appropriate reduction in PAYE deductions. Where an employee provides information in respect of both rebate schemes the employer or Commissioner determines the instalment reduction appropriate to the scheme which provides the greater rebate.
The amending regulation withdraws the availability of the universal scheme rebate through the PAYE system by making an amendment to the definition of “estimated excess home loan interest” in sub-regulation 54DB(1), so that interest paid or payable after 30 June 1983 does not come within the meaning of that term. The option of reduced PAYE instalment deductions on account of a rebate entitlement under the other home loan interest rebate scheme remains in place.