Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2004-2005-2006-2007
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
SOCIAL SECURITY LEGISLATION AMENDMENT (2007 BUDGET MEASURES FOR
STUDENTS) BILL 2007
SUPPLEMENTARY EXPLANATORY MEMORANDUM
Amendment to be moved on behalf of the Government
(Circulated by authority of the Minister for Education, Science and Training,
the Honourable Julie Bishop MP)
SOCIAL SECURITY LEGISLATION AMENDMENT (2007 BUDGET MEASURES FOR
STUDENTS) BILL 2007
OUTLINE
These Government amendments to the Social Security Legislation Amendment (2007 Budget
Measures for Students) Bill 2007 (which was introduced in the House of Representatives on 21
June 2007) amend the Income Tax Assessment Act 1997 to ensure that payments under the
ABSTUDY scheme (including the new ABSTUDY Crisis and Bereavement payments) are
treated in the same way as Crisis and Bereavement payments under the Social Security Act 1991.
The extension of Crisis and Bereavement payments to ABSTUDY recipients was announced in
the 2007-08 Budget.
From 1 January 2008, ABSTUDY students in receipt of an ABSTUDY Living Allowance will
be able to access the Crisis and Bereavement payments under the ABSTUDY Scheme. These
amendments will provide for payments to be wholly or partly exempted from income tax and
methods for calculating the tax exemption in various circumstances.
FINANCIAL IMPACT
Tax arrangements for ABSTUDY Crisis and Bereavement payments
The revenue cost against the forward estimates is nil.
SOCIAL SECURITY LEGISLATION AMENDMENT (2007 BUDGET MEASURES FOR
STUDENTS) BILL 2007
NOTES ON AMENDMENTS
Amendment 1 - Clause 2, page 2 (at the end of the table)
Adds table item 6 to the commencement table in clause 2 of the Bill to reflect the addition of
Schedule 3 by amendment 2. Schedule 3 is to commence on 1 January 2008.
Amendment 2 - Page 8 (after line 22), at the end of the Bill
Adds a new Schedule 3 to the Bill to amend the Income Tax Assessment Act 1997 to provide for
the new (non-statutory) ABSTUDY Crisis and Bereavement payments to be exempt from
income tax in line with the tax treatment of similar payments under the Social Security Act 1991.
Schedule 3--Amendment of the Income Tax Assessment Act 1997
Item 1 Section 11-15 (table)
Amends the table in section 11-15 (which lists ordinary or statutory income which is exempt
from tax if it is derived by certain entities) by adding payments under the ABSTUDY scheme as
set out in new Subdivision 52-E (inserted by item 4).
Items 2 and 3 Sections 51-35 (note) and 51-40 (note)
Amend the notes to sections 51-35 and 51-40 to reflect the insertion of new Subdivision 52-E by
item 4.
Item 4 After Subdivision 52-D
Inserts a new Subdivision 52-E specifying those payments under the ABSTUDY scheme that are
wholly or partly exempt from income tax, the circumstances, conditions or exceptions that apply
for tax exemption and how to calculate how much of a payment is exempt.
Subdivision 52-E--Exempt payments under the ABSTUDY scheme
Guide to Subdivision 52-E
52-130 What this Subdivision is about
Proposed section 52-130 provides a guide to explain what Subdivision 52-E is about.
Operative provisions
52-131 Payments under ABSTUDY scheme
Proposed subsection 52-131(1) explains that section 52-131 deals with the income tax treatment
of a payment under the ABSTUDY scheme made in respect of a period commencing at a time
when the recipient was at least 16 years old. A note to the subsection explains that the whole of
a payment under the ABSTUDY scheme in respect of a period commencing at a time when the
recipient was under 16 years of age may be exempt under section 51-10.
Proposed subsection 52-131(2) has the effect of providing that a crisis payment made to a person
under the ABSTUDY scheme is exempt from income tax.
Proposed subsection 52-131(3) has the effect of providing that, if an ordinary payment becomes
due to a person and that payment is not covered by subsections 52-131(4) or (6), then the
supplementary amount of the ordinary payment is exempt from income tax. A note to the
subsection explains that the reader should refer to section 52-132 to work out the supplementary
amount of the ordinary payment.
Proposed subsection 52-131(4) has the effect of providing that, if an ABSTUDY recipient's
partner dies, the recipient does not qualify for a payment under the ABSTUDY scheme in
respect of that death and an ordinary payment becomes due to the recipient during the
bereavement period, then the supplementary amount and the tax-free amount of the ordinary
payment are exempt from income tax. Notes to the subsection explain that the supplementary
amount of the ordinary payment is worked out under section 52-132 and the tax-free amount of
the ordinary payment is worked out under section 52-133.
Proposed subsection 52-131(5) has the effect of providing that, if a payment becomes due to a
person under the ABSTUDY scheme because of someone's death (except a lump sum payment
because of their partner's death), the payment is exempt from income tax.
Proposed subsection 52-131(6) has the effect of providing that, if a person's partner dies and a
lump sum payment under the ABSTUDY scheme becomes due to that person because of their
partner's death, then the total of the lump sum payment and all other payments that become due
to the person under the ABSTUDY scheme during the bereavement lump sum period are exempt
from income tax up to the tax free amount. A note to the subsection explains that the tax-free
amount is worked out under section 52-134.
Proposed subsections 52-131(7) and (8) provide definitions of the expressions ABSTUDY
scheme and Ordinary payment respectively.
Proposed subsection 52-131(9) provides a list of expressions used in Subdivision 52-D that have
the same meaning as in the ABSTUDY Policy Manual. A note to the subsection explains to the
reader that, in 2007, the ABSTUDY Policy Manual was accessible through the website of the
Department of Education, Science and Training.
52-132 Supplementary amount of payment
Proposed section 52-132 has the effect of providing that the supplementary amount of a payment
is the total of:
(a) so much of the payment as is included to assist a person with (or to reimburse
them for) the costs of any one or more of the following:
· rent;
· living in a remote area;
· commencing employment;
· travel to (or participation in) courses, interviews, education or training;
· a child or children wholly or substantially dependent on them;
· telephone bills;
· living away from their usual residence;
· maintaining their usual residence while living away from that residence;
· accommodation, books or equipment;
· discharging a HEC assessment debt (within the meaning of Chapter 4 of
the Higher Education Funding Act 1988) ;
· discharging a compulsory repayment amount (within the meaning of the
Higher Education Support Act 2003) ;
· transport in travelling to undertake education or training, or to visit their
usual residence when undertaking education or training away from that
residence;
· if the person is disabled - acquiring any special equipment, services or
transport as a result of the disability;
· anything that would otherwise prevent them from beginning, continuing
or completing any education or training; and
(b) so much of the payment as is included by way of pharmaceutical allowance.
52-133 Tax-free amount of ordinary payment on death of partner if no bereavement
payment payable
Proposed section 52-133 provides a method statement for calculating the tax-free amount of an
ordinary payment for the purposes of subsection 52-131(4).
52-134 Tax-free amount if you receive a bereavement lump sum payment
Proposed section 52-134 provides a method statement for calculating the tax-free amount of an
ordinary payment for the purposes of subsection 52-131(6).
Items 5 and 6 At the end of subsection 52-140(1)
Section 52-140 provides that the supplementary amount of a Commonwealth education or
training payment is tax exempt. Item 5 amends subsection 52-140(1) to have the effect of
excluding a payment to or on behalf of a student under the scheme known as ABSTUDY from
the ambit of the section and item 6 inserts a note to the subsection to reflect the insertion of new
Subdivision 52-E by item 4.
Items 7 to 9 Subsection 995-1(1)
Replace (item 7) and amend (items 8 and 9) the definitions of ordinary payment,
supplementary amount and tax-free amount in the dictionary at subsection 995-1(1).
Item 10 Application
An application provision which provides that the amendments made by Schedule 3 apply in
relation to a payment made on or after 1 January 2008.
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