Commonwealth Numbered Regulations - Explanatory Statements

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TAXATION ADMINISTRATION AMENDMENT REGULATIONS 2001 (NO. 1) 2001 NO. 164

STATUTORY RULES 2001 No. 164

Issued by Authority of the Assistant Treasurer

Taxation Administration Act 1953

Taxation Administration Amendment Regulations 2001 (No. 1)

Section 18 of the Taxation Administration Act 1953 (the Act) provides that the GovernorGeneral may make regulations for the purposes of the Act.

Section 15-30 of Schedule 1 to the Act provides that the Commissioner of Taxation (Commissioner) must take into consideration prescribed tax offsets when making the withholding schedules. The withholding schedules are documents published and distributed by the Commissioner that specify in tabular form the amount of tax to be withheld by payers from amounts that they pay to others, for example the amounts of tax to be withheld by employers from salary or wage payments to their employees.

Section 15-50(1) of Schedule 1 to the Act provides that an individual who expects to receive certain payments subject to Pay As You Go withholding (PAYG(W)) may make a declaration for the payer to have regard to in determining the amount to withhold based on the withholding schedules.

The low income aged persons tax rebate described in section 160AAAA of the Income Tax Assessment Act 1936 has been inserted into Regulation 24 of the Taxation Administration Regulations 1976 as an additional prescribed tax offset that the Commissioner must have regard to when making a withholding schedule under 9 section 15-30 of Schedule 1 to the Act. An entitlement to this rebate has been inserted into Regulation 26 as an additional prescribed matter about -which an individual can make a declaration under section 15-50(1) of Schedule 1 to the Act.

The Taxation Laws Amendment (Changes for Senior Australians) Act 2001 enacted the Government's announcement in the 2001-2002 Federal Budget to increase the low income aged person rebate and the pensioner rebate for Australians of age pension age. The measures enable specified classes of senior Australians to earn up to particular amounts of income without having any liability to income tax.

The PAYG(W) system for the collection of income tax, contained in Part 2-5 of Schedule 1 to the Act, provides that amounts are to be withheld by payers from certain payments subject to withholding. The payments to which withholding applies include payments commonly made to the specified classes of senior Australians such as pensions and annuities. The amounts to be withheld from these payments are specified in withholding schedules made by the Commissioner pursuant to section 15-25 of the Act. Section 15-30 of the Act provides that the Commissioner must have regard to certain matters, such as the rates of income tax, liability to the Medicare levy and eligibility of persons to certain prescribed tax offsets or rebates, when making the withholding schedules.

Regulation 24 of the Taxation Administration Regulations 1976 has been amended to list the rebate for low income aged persons as a prescribed tax offset. This amendment provides that eligibility of persons to the increased low income aged person rebate is a matter to be taken into account by the Commissioner in making the withholding schedules which determine the amount to be withheld.

The Regulations have also been amended to insert into Regulation 26 of the Taxation Administration Regulations 1976 a reference to whether the individual is entitled to a rebate available in section 160AAAA of the Income Tax Assessment Act 1936. This change provides that the rebate is a matter in relation to which a person may make a declaration to be taken into account by a payer, in applying the withholding schedules to determine the amount to withhold from a payment.

The original low income aged persons rebate is available to eligible persons on assessment, that is, when they lodge their income tax returns. Persons entitled to the rebate may request the Commissioner to vary, under section 15-15 of the Act, the amounts to be withheld from payments to them during the income year, to take account of the rebate. However, the process for variations is considered inappropriate for the increased rebate as it would impose a considerable compliance and administrative burden for the affected taxpayers to apply to the Commissioner in each case.

The withholding declaration is considered a more appropriate means of providing for the rebate to be taken into account for PAYG(W) purposes as it does not require the participation of the Commissioner in each case. In addition, the declaration may be implemented through the completion of a separate declaration form with accompanying instructions that are tailored to the needs of senior Australians.

The change to the withholding schedules and to the payee declaration rules does not apply to the $150 low income rebate provided by section 159N of the Income Tax Assessment Act 193 6. The reason for this is that the low income rebate is available to a much broader range of persons than the low income aged person rebate. The $150 low income rebate continues to be available only on assessment.

The amending Regulations commenced from the date of Gazettal.