Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon. P.J. Keating, M.P.)NOTES ON SCHEDULE
AMENDMENTS RELATING TO SEX DISCRIMINATION
An explanation of the amendments of the various Acts listed in the Schedule is contained in the following notes.
PART 1: INCOME TAX ASSESSMENT ACT 1936
Subsection 6(1) is the general interpretation section of the Income Tax Assessment Act 1936 (the Assessment Act). The definitions of terms contained in that subsection apply throughout the Assessment Act unless the contrary intention appears.
Subsection 6(1) will be amended by omitting the definition of "daughter". This definition will become unnecessary as a consequence of the omission of the daughter-housekeeper rebate, allowable under section 159J of the Assessment Act and the insertion of a child-housekeeper rebate under the same section, proposed later in the Schedule.
The Schedule will also insert a definition of "spouse", to include a de facto spouse, in subsection 6(1). With the exception of those provisions in the Assessment Act in which a de facto spouse is specifically included within the meaning of spouse of a person, the term "spouse" takes its common law meaning of a partner in a legal marriage. The insertion of a definition of "spouse" to include a de facto spouse will remove, as far as possible, discrimination between legally married spouses and de facto spouses where the latter would otherwise be treated as single.
The meaning of the term "spouse" is directly relevant to the definitions of the terms "associate", "associated person", "dependant", "relative", "resident" and "resident of Australia". The last two terms are also used in Australia's comprehensive double taxation agreements contained in the Schedules to the Income Tax (International Agreements) Act 1953.
The insertion of a definition of "spouse" in subsection 6(1) will necessitate consequential adjustments to a number of other provisions of the Assessment Act. Accordingly, Part 1 of the Schedule will make consequential amendments of paragraphs 23(1), 51AE(7)(a), 51AE(7)(b), 51AE(7)(c), 82KV(5)(c), 159J(3)(c) and subsections 27A(1), 51AE(1), 51AF(1), 51AG(1), 51AG(2), 65(2), 73B(1A), 82KT(1), 108(4), 109(3), 124ZF(1), 158B(2), 159GZC(2), 159GZZZC(2), 159H(3), 159L(4), 159ZA(1), 159ZR(2), 160K(2), 221YBA(11), 221YHAAA(2) and 251R(2).
Payments to Relatives (section 65)
Section 65 of the Assessment Act authorises the disallowance of a deduction, in whole or in part, for an amount otherwise allowable and incurred or paid by a taxpayer in respect of an associated person if the amount is excessive. Under subsection 65(2), however, no deduction is allowable in respect of expenditure incurred, and payments becoming due, by a taxpayer in a year of income in or for the maintenance of the taxpayer's spouse or of any member of the taxpayer's family under the age of 16 years, whether or not the expenditure was incurred in the production of assessable income.
Subsection 65(2) applies, therefore, to deny a deduction to a taxpayer in respect of expenditure in or for the maintenance of a person who is his or her legally married spouse even though they live apart. It does not deny a deduction in respect of a former de facto spouse. As such it effectively treats a taxpayer in the former circumstance as still married while treating a taxpayer in the latter circumstance as single.
To remedy this discrimination, Part 1 of the Schedule proposes to insert a new subsection (3) in section 65 so that subsection 65(2) does not operate to deny a deduction to a taxpayer for maintenance in respect of a spouse where the parties are living separately and apart on a permanent basis.
Revocable Trusts (section 102)
Where a settlor has created a trust under which:
- (a)
- the settlor has a power to revoke or alter so as to acquire a beneficial interest; and
- (b)
- the income is payable to, or accumulated or applicable for the benefit of, the settlor's unmarried children under the age of 21 years,
the Commissioner of Taxation may assess the trustee to pay tax under section 102 of the Assessment Act.
Part 1 of the Schedule provides for the age limit referred to in paragraphs 102(1)(b) and 102(2)(c) to be reduced from 21 years to 18 years to comply with the legal age of adulthood. Part 3 of the Schedule, as explained later in these notes, will further amend paragraphs 102(1)(b) and 102(2)(c).
Daughter-Housekeeper Rebate (section 159J)
Where, during a year of income, a widowed taxpayer who is a resident contributes to the maintenance of his or her daughter, being a daughter who is a resident and wholly engaged in keeping house for the taxpayer, the taxpayer is entitled to a rebate of tax. The maximum rebate allowable in 1990-91 of $1080 ($1296 where there is a dependent child) reduces by $1 for every $4 by which the daughter's separate net income exceeds $282.
The provision of such a rebate solely to widowed taxpayers is discriminatory. The requirement that the dependant be the taxpayer's daughter as opposed to his or her son who is so maintained etc., while being discriminatory according to present social mores, is not strictly discriminatory in terms of the Sex Discrimination Act 1984.
Part 1 of the Schedule provides for subsections 159J(2), 159J(5D), 159J(6) and paragraphs 159J(3)(d), 159K(1)(a) and 159K(1)(b) of the Assessment Act to be amended to allow a rebate for a "child-housekeeper", the term meaning the child of a taxpayer who is wholly engaged in keeping house for the taxpayer. The qualification for the taxpayer claiming the rebate to be widowed is to be removed.
Subsection 251R(2) of the Income Tax Assessment Act 1936 currently provides that a "legally married" person in the Medicare Levy Act 1986 will be taken to include a de facto spouse. By an amendment of subsection 251R(2) of the Income Tax Assessment Act by Part 1 of the Schedule, the term "legally married" is to be replaced by the term "married". This is a presentational change so that the style and approach will be consistent with other provisions of the Income Tax Assessment Act.
Part 1 of the Schedule will make consequential amendments of sections 3 and 8 of the Medicare Levy Act also to replace the term "legally married" by the term "married". This change will not affect the substantive operation of subsection 251R(2) or the Medicare Levy Act.
By subclause 38(1) of the Bill the amendments by Part 1 of the Schedule apply in respect of assessments for the 1991-92 and subsequent income years.
PART 2: FRINGE BENEFITS TAX ASSESSMENT ACT 1986
Subsection 159(1) of the Fringe Benefits Tax Assessment Act 1986 states that, for the purposes of deciding whether a person is an "associate" or "relative" of another person within the meaning of the Act, the Income Tax Assessment Act 1936 applies as if a reference in that Act to a spouse included a de facto spouse.
Part 1 of the Schedule proposes that a definition of "spouse", to include a de facto spouse, be inserted in subsection 6(1) of the Income Tax Assessment Act. As a consequence of that amendment, Part 2 of the Schedule will omit subsection 159(1) from the Fringe Benefits Tax Assessment Act.
The amendment by this Part will apply from Royal Assent.
TAXATION (UNPAID COMPANY TAX) ASSESSMENT ACT 1982
Subsection 4(1) of the Taxation (Unpaid Company Tax) Assessment Act 1982 provides for certain definitions of terms in the Income Tax Assessment Act 1936 to be carried over for use in the Act. Included among these terms are the definitions made by section 6 of the Income Tax Assessment Act. The definition of "spouse" to be inserted into subsection 6(1) of the Income Tax Assessment Act by Part 1 of the Schedule is not to be carried over to the Taxation (Unpaid Company Tax) Assessment Act. Assessing action under the Act is near completion and a change to the law now may place those persons assessed after the application date of the amendment in a different position than those persons assessed earlier.
Part 2 of the Schedule provides that the new definition of "spouse" in the Income Tax Assessment Act will not have effect for the purposes of the Taxation (Unpaid Company Tax) Assessment Act.
PART 3: INCOME TAX ASSESSMENT ACT 1936
Revocable Trusts (section 102)
Where a settlor has created a trust under which:
- (a)
- the settlor has a power to revoke or alter so as to acquire a beneficial interest; and
- (b)
- the income is payable to, or accumulated or applicable for the benefit of, the settlor's unmarried children under the age of 21 years,
the Commissioner may assess the trustee to pay tax under section 102 of the Income Tax Assessment Act 1936 (the Assessment Act). The provisions thereby discriminate against unmarried children.
Part 3 of the Schedule amends Paragraphs 102(1)(b) and 102(2)(c) of the Assessment Act so that section 102 applies equally whether the children referred to therein are married or not. Part 1 of the Schedule, as explained in the notes above, will reduce the age limit for the operation of the section from 21 years to 18 years.
Income of Children (Division 6AA)
By paragraph 102AC(2)(a) of the Assessment Act the special rules of Division 6AA of the Assessment Act, taxing the unearned income of certain minors under 18 years at a special rate (currently 47 %), do not apply to a minor who is a married person on the last day of the year of income. The Division was introduced mainly to discourage income splitting by means of diversion of income to children. Part 3 of the Schedule proposes to omit paragraph 102AC(2)(a) to remove discrimination on the grounds of marital status.
To ensure an equitable result, the removal of the marital status limitations in sections 102 and 102AC of the Assessment Act will not take effect for two years after the commencement of the amendment reducing the age limit (refer to Part 1 of the Schedule). Married women under 18 years of age would otherwise be disadvantaged by this amendment because the Marriage Act 1961 allows women to marry at age 16 while men cannot marry until they are 18 years of age. Accordingly, by subclause 38(3) of this Bill the amendments made by Part 3 of the Schedule apply to assessments in respect of the 1993-94 and subsequent income years.
PART 4: INCOME TAX ASSESSMENT ACT 1936
This Part of the Schedule will make amendments to the provisions of the Income Tax Assessment Act 1936 as amended by the Taxation Laws Amendment (Foreign Income) Bill 1990 when that Bill becomes law. The amendments made to the proposed section 102AAB and subsection 318(7) of the Income Tax Assessment Act are a consequence of the amendment made by Part 1 of the Schedule to insert a definition of "spouse", to include a de facto spouse, into subsection 6(1) of that Act.