Revised Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello MP)Chapter 3 Extension of the beneficiary tax offset to interim income support payments
Outline of chapter
3.1 Schedule 3 to this Bill amends the Income Tax Assessment Act 1936 (ITAA 1936) and the Income Tax Assessment Act 1997 (ITAA 1997) to extend eligibility for the beneficiary tax offset to drought affected taxpayers in receipt of interim income support payments.
Context of amendments
Exceptional circumstances relief payments
3.2 Welfare support for drought affected farmers in areas declared to be in exceptional circumstances is mainly provided through exceptional circumstances relief payments and is delivered by Centrelink on behalf of the Department of Agriculture, Fisheries and Forestry.
3.3 Exceptional circumstances relief payments is a taxable payment paid under the authority of the Farm Household Support Act 1992 . However, exceptional circumstances relief payments is a 'rebatable benefit' to which the beneficiary tax offset applies.
Interim income support payments
3.4 Interim income support payments are made to farmers in areas where an exceptional circumstances application lodged by a state demonstrates a prima facie case for full exceptional circumstances assistance.
3.5 Interim income support is available for up to six months while the case for full exceptional circumstances assistance is being considered.
3.6 In contrast to exceptional circumstances relief payments, interim income support is a temporary payment paid under the general category of emergency and general assistance payments. Emergency and general assistance payments are not made under any specific legislation, rather they are a payment made on ministerial direction, similar to an ex-gratia payment.
3.7 In contrast to exceptional circumstances relief payments, interim income support payments are not eligible for the beneficiary tax offset.
Summary of new law
3.8 This measure amends:
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- subsection 160AAA(1) of the ITAA 1936 to include interim income support payments in the definition of a 'rebatable benefit' to which the beneficiary tax offset applies; and
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- section 13-1 of the ITAA 1997 to list interim income support payments as a payment that is allowed a tax offset.
Detailed explanation of new law
Include interim income support payments in the definition of 'rebatable benefit' for beneficiary tax offset purposes
3.9 This measure amends subsection 160AAA(1) of the ITAA 1936 to include interim income support payments as a 'rebatable benefit' to which the beneficiary tax offset applies. This will ensure consistent taxation treatment with exceptional circumstances relief payments. [Schedule 3, item 1, subsection 160AAA(1)]
3.10 Subsection 160AAA(3) of the ITAA 1936 provides that where a taxpayer receives an amount of 'rebatable benefit', the taxpayer is entitled to a tax offset.
3.11 Subsection 160AAA(1) of the ITAA 1936 lists certain pensions, benefits and payments that are considered to be a 'rebatable benefit'.
3.12 Paragraph (da) of subsection 160AAA(1) includes exceptional circumstances relief payments under the Farm Household Support Act 1992 as rebatable benefits. Paragraph (db) includes grants of financial assistance also made under the Farm Household Support Act 1992 as a 'rebatable benefit'.
3.13 Interim income support payments are paid under the general category of emergency and general assistance payments which are made by ministerial direction and not under any specific legislation. As interim income support payments are not made under the Farm Household Support Act 1992 or otherwise included as a 'rebatable benefit', they are not rebatable benefits and as such are not currently entitled to the tax offset.
Include interim income support payments in the Division 13 guide of tax offsets
3.14 Section 13-1 of the ITAA 1997 lists payments that are allowed a tax offset and the relevant provision of the ITAA 1936 or ITAA 1997 that provides that offset. Payments are listed under headings classifying the type of payment.
3.15 The first amendment to section 13-1 of the ITAA 1997 will include interim income support payments in the list of payments that attract a tax offset and will direct readers to the item in the table headed 'social security and other benefit payments'. [Schedule 3, item 2, section 13-1]
3.16 The second amendment to section 13-1 lists interim income support payments under the item in the table headed 'primary production' and directs readers to the item in the table headed 'social security and other benefit payments'. [Schedule 3, item 3, section 13-1]
3.17 The third amendment to section 13-1 lists the reference to interim income support payments at subsection 160AAA(3) under the item in the table headed 'social security and other benefit payments'. [Schedule 3, item 4, section 13-1]
Application and transitional provisions
3.18 These amendments are to apply to the 2005-06 year of income and later years of income.