Taxation Administration Act
Notice exempting entities from giving a payment summary for lump sum superannuation benefits to certain recipients with a terminal medical condition
Explanatory Statement
General Outline of Instrument
- This instrument is a notice removing the requirement to issue a payment summary to the recipient of a withholding payment under paragraph 12-85(a) of Schedule 1 to the Taxation Administration Act 1953, where the payee is classified as having a terminal medical condition.
- This instrument is made by the Commissioner of Taxation (the Commissioner) pursuant to section 16-180 of Schedule 1 to the Taxation Administration Act 1953 (TAA).
- This is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
- This legislative instrument will revoke Legislative Instrument No. F2007L03956 registered on the 4th day of October 2007.
Date of effect
5. The instrument applies from 1 July 2007.
What is this Instrument about?
6. On 13 February 2008, the Government introduced into Parliament, Tax Laws Amendment (2008 Measures No 2) Bill, to amend the Income Tax Assessment Act 1997 so that lump sum payments will be tax free when paid to members with a terminal medical condition . The announced change in law is to apply to all relevant payments made from 1 July 2007.
7. This instrument removes the requirement for superannuation funds to issue a payment summary providing details of the relevant payments.
8. This instrument is retrospectively dated to 1 July 2007 to ensure that those granted the variation under Legislative Instrument No. F2007L03956 and those additional payees that will be eligible once the legislation is passed will not be disadvantaged.
9. Legislative Instrument No. F2007L03956 was based upon the policy announced by the previous government, applying to payees having a terminal illness, with a commencement date of 12 September 2007. The amendments introduced in February 2008, broaden eligibility to those with a Terminal Medical Condition, with an earlier commencement date of 1 July 2007.
What is the effect of this Instrument?
10. The announced law changes will ensure that no tax will be payable on the relevant payments when an assessment of income tax is made.
11. This instrument ensures that superannuation funds paying these amounts will not be required to issue the payee a payment summary for payments that are made from the announced date of effect of the planned legislative amendments.
12. It is not desirable that superannuation funds be required to issue payment summaries for these payments as the recipient will not be liable for income tax in respect of these payments.
Background
13. The Commissioner has the power to exempt entities from giving payment summaries, and this power must be made by way of a written notice.
14. In this case the power has been used in advance of the enactment of the relevant legislation to ensure that superannuation funds are not required to provide unnecessary documentation to payees.
Consultation
15. This instrument implements an announced change to the law which will remove an unnecessary administrative burden from superannuation funds.
16. In accordance with subsection 12(2) of the Legislative Instruments Act 2003, the retrospective operation of this determination does not adversely affect the rights or liabilities of any person other than the Commonwealth.
17. This instrument is urgently required to avoid unnecessary hardship for affected members of the community. Consultation would have delayed this process unreasonably.
Erin Holland
Deputy Commissioner of Taxation
30 May 2008
Legislative references:
Taxation Administration Act 1953
Legislative Instruments Act 2003
Income Tax Assessment Act 1997
Superannuation Industry (Supervision) Act 1993
Retirement Savings Accounts Act 1997
Overview
The Taxation Administration Act 1953, enacted by the Parliament of Australia, aims to streamline the administration of taxation laws and ensure compliance. One specific problem the Act addresses is the administrative burden placed on superannuation funds when issuing payment summaries for lump sum superannuation benefits to recipients with a terminal medical condition. The Act was amended to ensure that these payments are tax-free, and consequently, to relieve superannuation funds from the requirement of issuing payment summaries for such payments. The instrument, made by the Commissioner of Taxation under section 16-180 of Schedule 1 to the Taxation Administration Act, removes the necessity for superannuation funds to issue payment summaries to beneficiaries with a terminal medical condition. This legislative instrument is designed to align with the policy objective of reducing administrative burdens on superannuation funds and ensuring that affected individuals are not subjected to unnecessary documentation, thereby facilitating a smoother process for those who are exempt from income tax on these payments.
Scope and Application
The Taxation Administration Act Notice exempting entities from giving a payment summary for lump sum superannuation benefits to certain recipients with a terminal medical condition, dated 13 February 2008, applies to superannuation funds and other entities making relevant payments to recipients classified with a terminal medical condition. This legislative instrument operates under the authority of the Commissioner of Taxation, pursuant to section 16-180 of Schedule 1 to the Taxation Administration Act 1953. The notice removes the requirement for these entities to issue a payment summary for the specified lump sum payments, effectively relieving them of this administrative burden. This notice is retroactively effective from 1 July 2007, aligning with the commencement date of the relevant legislative amendments made under the Tax Laws Amendment (2008 Measures No 2) Bill. The instrument broadens the eligibility criteria from those with a terminal illness to those with a terminal medical condition, ensuring that those who fall under this category will not incur tax liabilities for these payments and that superannuation funds will not need to provide unnecessary documentation.
Key Provisions
The main operative sections of this legislative instrument are set out under section 16-180 of Schedule 1 to the Taxation Administration Act 1953 (TAA) (paragraph 1). This section provides the Commissioner of Taxation with the power to issue a notice exempting entities from giving a payment summary for certain lump sum superannuation benefits to recipients with a terminal medical condition. The instrument aims to remove the administrative burden on superannuation funds by not requiring them to issue payment summaries for these tax-free payments, which will be effective from 1 July 2007 (paragraph 7). The notice is dated back to this earlier date to ensure continuity and fairness for those already eligible under previous legislation (paragraph 9).
The obligations and requirements imposed by this Act on the parties it governs are primarily centred around the exemption from issuing payment summaries for lump sum superannuation benefits. Superannuation funds are relieved from the obligation to provide payment summaries for these tax-free payments (paragraph 11). This exemption is intended to streamline the administrative processes for superannuation funds and reduce the paperwork burden while ensuring that recipients with terminal medical conditions are not disadvantaged (paragraph 12). The Commissioner's power to issue such notices is exercised under the TAA, ensuring that the exemption is legally sound and in line with the legislative framework.
There are no explicit offences or penalties outlined in the legislative instrument for breach of the notice's provisions. However, failure to comply with the notice’s requirements could potentially lead to administrative penalties under the TAA. Typically, non-compliance with notices issued by the Commissioner could result in fines or other administrative consequences. The notice itself is designed to ensure compliance without imposing additional penalties, focusing instead on the practical benefit of reducing unnecessary administrative tasks for superannuation funds (paragraph 14).