Taxation Administration Act
Variation to the rate of withholding from lump sum superannuation member benefits for certain recipients with a terminal medical condition
Explanatory Statement
General Outline of Instrument
- This instrument is a notice removing the requirement to withhold amounts from lump sum superannuation member benefit payments made to a beneficiary who has a terminal medical condition.
- This instrument is made by the Commissioner of Taxation (the Commissioner) pursuant to section 15-15 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. F2007L03872 registered on the 25th day of September 2007.
Date of effect
5. The instrument applies from 1 July 2007.
6. If a payer has withheld amounts from payments which are covered by this instrument after 1 July 2007, the payee may be entitled to a refund of those amounts.
What is this instrument about?
7. 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.
8. This instrument varies to nil the amount withheld from super lump sum payments when certification is provided that a terminal medical condition existed at the time the payment is received. Certification that a medical condition existed can be provided within 90 days of receiving the payment. This period can be extended for payments made in the 2007-08 financial year to 30 June 2008 if this results in a longer period.
9. This instrument is retrospectively dated to 1 July 2007 to ensure that those granted the variation under Legislative Instrument No. F2007L03872 and those additional payees that will be eligible once the legislation is passed will not be disadvantaged.
10. Legislative Instrument No. F2007L03872 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?
11. The announced law changes will ensure that no tax will be payable on the relevant payments when an assessment of income tax is made.
12. This instrument ensures that no amounts will be withheld from these payments from the announced date of effect of the planned legislative amendments.
13. It is not desirable for withholding to take place as the recipient will not be liable for income tax in respect of these payments.
Background
14. The Commissioner’s power to vary the rate of withholding for a class of payees is very broad. The general intent of the variation power is that it be used to ensure that withholding amounts are a reasonable approximation of the tax payable on the relevant payment.
15. In this case the power has been used in advance of the enactment of the relevant legislation to ensure that affected payees are spared unnecessary hardship.
Consultation
16. This instrument implements an announced change to the law which will benefit all affected payees.
17. 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.
18. 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
28 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