House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon Wayne Swan MP)

Chapter 5 Amendment of income tests

Outline of chapter

10.1 Part 3 of Schedule 3 to this Bill amends income tests across various Acts to include reportable superannuation contributions; reportable employer superannuation contributions (RESC), and total net investment losses where appropriate.

10.2 The Acts amended, and the programs to which the amendments relate, are outlined in Table 5.1.

Context of amendments

10.3 The various definitions of income used to assess eligibility for particular tax and transfer payments are located in different Acts. For some programs, the means test arrangements are located in non-legislative instruments or guidelines.

10.4 There is no single definition of income for all means-tested tax and transfer programs. As a result, income definitions for individual programs must be amended to provide for the new income components.

Summary of new law

10.5 Part 3 of Schedule 3 amends relevant income definitions to include reportable superannuation contributions, RESC and total net investment losses where appropriate. In some instances, to avoid duplication, references to net rental property losses are repealed as these losses are a component of the new 'total net investment loss' definition to be included in the ITAA 1997.

10.6 In respect of the Medicare levy surcharge, the ANTS (MLS) Act 1999 and the MLA 1986 are amended to recognise the new definition of 'income for surcharge purposes' which is to be included in the ITAA 1997.

10.7 The amendments also revise the parental income test, and family actual means test, which are used to determine a dependant's eligibility for Youth Allowance, to ensure that the particular superannuation contributions and losses that are assessed as income for the purposes of those tests align with the reportable superannuation contributions and 'total net investment loss' definitions.

Detailed explanation of new law

Amendment of the A New Tax System (Family Assistance) Act 1999

10.8 The A New Tax System (Family Assistance) Act 1999 provides the means test arrangements for family assistance programs such as Family Tax Benefit, Child Care Benefit and Baby Bonus. Eligibility for these programs is assessed against 'adjusted taxable income' which is defined in Schedule 3 to the A New Tax System (Family Assistance) Act 1999 .

10.9 Part 3 of Schedule 3 amends the definition of 'adjusted taxable income' in clause 2 of Schedule 3 to include an individual's total net investment loss and RSC. [Schedule 3, Part 3, items 19 and 20]

10.10 This means an individual's 'total net investment loss' and reportable superannuation contributions will be assessed as income in determining their eligibility for Family Tax Benefit (Parts A and B); Child Care Benefit; and Baby Bonus.

10.11 The reference to net rental property losses in the current 'adjusted taxable income' definition is substituted with a reference to an individual's total net investment loss, as the definition of 'total net investment loss' captures an individual's net rental property loss.

10.12 The definition of 'net rental property loss' in clause 6 of Schedule 3 to the A New Tax System (Family Assistance) Act 1999 is repealed. [Schedule 3, Part 3, item 21]

Amendment of the A New Tax System (Medicare levy surcharge - Fringe Benefits) Act 1999 and the Medicare Levy Act 1986

10.13 Part 3 of Schedule 3 amends the ANTS (MLS) Act 1999 and the MLA 1986 which provide the arrangements for determining whether an individual is liable to pay the Medicare levy surcharge.

10.14 The ANTS (MLS) Act 1999 determines whether an individual is liable to pay the Medicare levy surcharge in respect of a reportable fringe benefits total they or their spouse may have. The MLA 1986 determines whether an individual is liable to pay the Medicare levy surcharge in respect of their, or their spouse's, taxable income.

10.15 The test for whether an individual must pay the Medicare levy surcharge depends on whether the individual's modified taxable income and reportable fringe benefits total (if any) exceed prescribed income thresholds.

10.16 Under the current law, taxable income is modified by different provisions of the two Acts. In particular, the Acts include modified definitions of 'taxable income' in section 9 of the ANTS (MLS) Act 1999 and subsection 3(2A) of the MLA 1986.

10.17 These definitions apply in determining an individual's liability to pay the Medicare levy surcharge. Further adjustments to modified 'taxable income' are made where the taxpayer or their spouse is the beneficiary of a trust estate whose trustee is liable to be assessed under section 98 of the ITAA 1936.

10.18 The amendments revise the ANTS (MLS) Act 1999 and the MLA 1986 to recognise the new 'income for surcharge purposes' definition. A cross-reference to the 'income for surcharge purposes' definition in the ITAA 1997 is inserted in the definition sections of both Acts. [Schedule 3, Part 3, items 22 and 48]

10.19 'Income for surcharge purposes' includes the modifications to taxable income that are made by section 9 of the ANTS (MLS) Act 1999 and subsection 3(2A) of the MLA 1986. As such, the amendments repeal section 9. The amendments also repeal the definition of 'taxable income' which cross-references section 9 from the list of definitions in section 3 of the ANTS (MLS) Act 1999. [Schedule 3, Part 3, items 24 and 25]

10.20 Further, the amendments simplify the definition of 'reportable fringe benefits total' in the ANTS (MLS) Act 1999 and remove the 'reportable fringe benefits total' definition from the MLA 1986 as the need to refer separately to reportable fringe benefits is removed by references to 'income for surcharge purposes' which includes reportable fringe benefits. [Schedule 3, Part 3, items 23 and 49]

10.21 Although subsection 3(2A) of the MLA 1986 currently amends 'taxable income' for the purposes of sections 8B to 8G, the amendments do not alter this provision. As a result, any reference to 'taxable income' in those provisions should continue to be read as being modified by subsection 3(2A). That is, the Medicare levy surcharge continues to be 1 per cent of an individual's taxable income (as modified by subsection 3(2A)).

10.22 Under the ANTS (MLS) Act 1999 and the MLA 1986, separate sections prescribe the income tests to apply in respect of periods where a taxpayer is a single person without dependants, a single person with dependants, or person with a spouse.

10.23 The income tests used in respect of a single person without dependants are contained in section 12 of the ANTS (MLS) Act 1999 and section 8B of the MLA 1986. The amendments modify the income test in these sections so that 'income for surcharge purposes' substitutes for references to taxable income. [Schedule 3, Part 3, items 26 and 51]

10.24 The tests used in respect of a single person with dependants are contained in section 13 of the ANTS (MLS) Act 1999 and section 8C of the MLA 1986. The amendments modify these sections so that an individual's 'income for surcharge purposes' is assessed in determining their Medicare levy surcharge liability. [Schedule 3, Part 3, items 27 and 52]

10.25 In respect of a period where a taxpayer has a spouse, the income relevant in determining their Medicare levy surcharge liability is both the taxpayer's income and the income of their spouse. Sections 15 and 16 of the ANTS (MLS) Act 1999 provide the test to determine an individual's Medicare levy surcharge liability on their reportable fringe benefits total. The relevant section in the MLA 1986 is section 8D.

10.26 The amendments revise the definitions of 'income' used to assess liability to pay the Medicare levy surcharge in those provisions so that 'income for surcharge purposes' of both the taxpayer and their spouse is assessed in determining the taxpayer's Medicare levy surcharge liability. [Schedule 3, Part 3, items 28, 30, 31 and 53 to 55]

10.27 Subsection 8D(5) of the MLA 1986 currently includes a modified definition of 'taxable income' that is to be used for the purposes of that section. The amendments repeal this definition and insert a new definition where modifications are made to the taxpayer's spouse's 'income for surcharge purposes' which is the new income base used to determine an individual's Medicare levy surcharge liability rather than their taxable income. [Schedule 3, Part 3, item 56]

10.28 The amendments also substitute references to taxable income in section 8G of the MLA 1986 with references to 'income for surcharge purposes'. [Schedule 3, Part 3, items 58 and 59]

10.29 Section 8G of the MLA 1986 requires trustees of a trust estate who are liable to be assessed under section 98 of the ITAA 1936 in respect of a share of the net income of a trust estate to which a beneficiary is presently entitled, to pay the Medicare levy surcharge where the sum of the beneficiary's trust income and the beneficiary's spouse's taxable income or reportable fringe benefits total (if any) is greater than the family surcharge threshold provided in section 3A of the ITAA 1936.

10.30 The amendments alter section 8G of the MLA 1986 so that the trustee of a trust estate will need to pay the Medicare levy surcharge where the sum of the beneficiary's trust income and the beneficiary's spouse's 'income for surcharge purposes' exceed the family surcharge threshold in section 3A of the ITAA 1936. [Schedule 3, Part 3, item 58]

10.31 Subsection 8G(3) of the MLA 1986, which is relevant where section 8G applies to a beneficiary for only some days in the income year, is amended to substitute references to taxable income with 'income for surcharge purposes'. [Schedule 3, Part 3, items 59 and 60]

10.32 The amendments also repeal subsection 8G(4) of the MLA 1986, which modifies 'taxable income', and insert a new subsection where the modifications are made to 'income for surcharge purposes' rather than taxable income. [Schedule 3, Part 3, item 61]

10.33 The ANTS (MLS) Act 1999 has specific provisions dealing with the income test that applies where a taxpayer's spouse is a presently entitled beneficiary in a trust. These are subsections 15(2) and 16(5) of the ANTS (MLS) Act 1999.

10.34 These subsections prescribe that a taxpayer's spouse's 'taxable income' should be assumed to include any share in the net income of a trust estate to which the spouse is presently entitled in respect of which the trustee of the trust estate is liable to be assessed under section 98 of the ITAA 1936.

10.35 The amendments revise subsections 15(2) and 16(5) of the ANTS (MLS) Act 1999 to substitute references to 'taxable income' with references to 'income for surcharge purposes'. [Schedule 3, Part 3, items 29 and 32]

10.36 There is also an amendment to substitute a new subsection 3(2) of the MLA 1986. This subsection substitutes the reference to 'taxable income' with a reference to 'income for surcharge purposes'. [Schedule 3, Part 3, item 50]

10.37 To assist understanding, and more closely relate provisions to the Medicare levy surcharge, the amendments revise the headings of current provisions so that they commence with 'Levy Surcharge' rather than 'Increase in Levy'.

10.38 Also, section 8F of the MLA 1986 is amended to ensure the wording used in respect of an individual's 'family surcharge threshold' is consistent with the wording in other amended provisions. That is, the wording refers to the 'beneficiary's family surcharge threshold' rather than the 'family surcharge threshold of the beneficiary'. [Schedule 3, Part 3, item 57]

Amendment of the Child Support Assessment) Act 1989

10.39 Part 3 of Schedule 3 amends the Child Support (Assessment) Act 1989 to include a parent's total net investment loss and reportable superannuation contributions in the person's 'adjusted taxable income'. 'Adjusted taxable income' is used to determine a parent's capacity to meet the costs of his or her children. [Schedule 3, Part 3, items 34 and 35]

10.40 The definition of 'net rental property' loss in the Child Support (Assessment) Act 1989 is repealed as net rental property losses are included in the definition of 'total net investment loss'. [Schedule 3, Part 3, item 33]

Amendment of the Higher Education Support Act 2003

10.41 Part 3 of Schedule 3 amends the Higher Education Support Act 2003 (HESA 2003) to include a person's total net investment loss and reportable superannuation contributions in the definition of 'repayment income'. The amendments also simplify the language used to describe a person's exempt foreign income. [Schedule 3, Part 3, items 36 and 37]

10.42 Repayment income is assessed in determining whether an individual is required to make a compulsory repayment of an accumulated 'HELP debt' (defined in the HESA 2003). If an individual's repayment income exceeds the minimum repayment income for the income year, as determined in accordance with the HESA 2003, the individual must make a compulsory repayment towards any accumulated HELP debt.

10.43 The components of repayment income currently include an individual's taxable income; exempt foreign income, as defined in the HESA 2003; and an individual's reportable fringe benefits total. The definition also includes an individual's net rental property loss.

10.44 The amendments repeal provisions in respect of net rental property losses as those losses are included in an individual's total net investment loss. [Schedule 3, Part 3, items 38 and 39]

10.45 The 'total net investment loss' definition includes losses from property that is held by an individual as a member of a partnership. This is because the 'total net investment loss' definition is intended to capture all income and losses derived by an individual from rental investments.

Amendment of the Income Tax Assessment Act 1936

10.46 Part 3 of Schedule 3 amends the ITAA 1936 to extend the income definitions used for the purposes of the senior Australians tax offset (SATO) and the tax rebate in section 160AAAB for trustees assessed under section 98 of the ITAA 1936.

Senior Australians tax offset

10.47 To be eligible for the SATO, taxpayers must satisfy particular age and income requirements, and not be in gaol for the whole income year. The income assessed in determining whether income requirements are met is currently taxable income. These amendments mean that the new concept of an individual's 'rebate income', as defined in the ITAA 1997, will be the relevant income definition that is assessed in determining eligibility for the SATO. [Schedule 3, Part 3, item 40]

10.48 Where a taxpayer has a spouse, the current income definition in subsection 160AAAA(4) of the ITAA 1936 assesses the taxpayer's taxable income; the actual taxable income of their spouse (reduced by any amount included in the spouse's assessable income under section 100 of the ITAA 1936); and any share of the net income of a trust estate to which the spouse is presently entitled and that is assessed under section 98 of the ITAA 1936.

10.49 These amendments repeal the current subsection 160AAAA(4) of the ITAA 1936 and insert a new subsection that replaces references to 'taxable income' with 'rebate income' so that components such as reportable superannuation contributions and total net investment losses are assessed for both the taxpayer and their spouse. [Schedule 3, Part 3, item 41]

Tax offset in section 160AAAB for particular trustees assessed under section 98 of the ITAA 1936

10.50 Section 160AAAB of the ITAA 1936 provides a tax offset for trustees who are assessed under section 98 of the ITAA 1936 in respect of a beneficiary's share of the net income of a trust estate, provided particular conditions in subsections 160AAAB(2) and (3) of the ITAA 1936 are met.

10.51 In particular, the relevant beneficiary must satisfy requirements that would entitle them to the SATO. That is, the beneficiary must have income below the relevant thresholds, and meet age or pension entitlement requirements and not have been in gaol for the entire income year.

10.52 Depending on whether the beneficiary has a spouse or not will affect the actual income assessed against the income thresholds. Subsection 160AAAB(4) deems a single beneficiary's taxable income to be their share in the net income of the trustee's trust estate.

10.53 The taxable income of a beneficiary with a spouse is assumed to be half the sum of the beneficiary's share of the net income of the trust estate; any share of the trust estate to which the beneficiary's spouse is presently entitled and that is assessed under section 98 of the ITAA 1936; and the spouse's actual taxable income ( reduced by any amount included in the spouse's assessable income under section 100 of the ITAA 1936).

10.54 These amendments extend the definition of 'beneficiary income' that is assessed in determining the trustee's entitlement for an offset under section 160AAAB of the ITAA 1936 to include other components of rebate income.

10.55 This means the income of a single beneficiary that will be assessed in determining the trustee's offset entitlement is the beneficiary's rebate income, as defined in the ITAA 1997, modified so that 'taxable income' equates to the beneficiary's share of the net income of the trust estate. [Schedule 3, Part 3, items 42 and 43]

10.56 In respect of a beneficiary that has a spouse, the income to be assessed is that income which would have been assessed under the current law but modified to include what extra amounts would be assessed if the beneficiary did not have a spouse together with the rebate income of the beneficiary's spouse (reduced by any amount included in the spouse's assessable income under section 100 of the ITAA 1936). [Schedule 3, Part 3, item 43]

Amendment of the Income Tax Assessment Act 1997

10.57 Part 3 of Schedule 3 amends the ITAA 1997 to extend the income definitions used for the purposes of the mature age worker tax offset; the tax offset for the Medicare levy surcharge (lump sum payments in arrears); the spouse superannuation contributions tax offset; and deduction for personal superannuation contributions.

Mature age worker tax offset

10.58 The mature age worker tax offset is available to Australians aged 55 or over at the end of an income year who derive income from employment-related activities, known as 'net income from working', and that income is within particular thresholds.

10.59 Current components of 'net income from working' under section 61-570 of the ITAA 1997 include net personal services income and net business income, plus amounts included in income as a result of the repayment of a farm management deposit. Specific income excluded from the 'net income from working' definition by subsection 61-570(2) of the ITAA 1997 includes amounts of superannuation lump sums in employment termination payments and amounts of unused annual leave or long service leave.

10.60 'Net income from working' is designed to capture assessable income that is primarily a reward for an individual's personal efforts or skills, less any related deductions. Salary or wages from employment are an example of 'net income from working'.

10.61 RESC represent amounts of salary or wages that have been taken in the form of contributions to a superannuation fund. That is, RESC are amounts paid in the form of superannuation contributions that are made in respect of an individual's personal efforts or skills.

10.62 The amendments revise the 'net income from working' definition to include RESC. [Schedule 3, Part 3, item 44]

Tax offset for the Medicare levy surcharge (lump sum payments in arrears)

10.63 Subdivision 61-L of the ITAA 1997 provides a tax offset for taxpayers who are liable to pay additional Medicare levy surcharge because a 'MLS lump sum' was paid to them or their spouse in the current income year.

10.64 'MLS lump sums' are lump sum amounts of unpaid salary or wages from previous years that are included in an individual's assessable income. 'MLS lump sums' may also include lump sum payments included in an individual's exempt foreign employment income (but only to the extent that the payments accrued during a period ending more than 12 months before the date on which the lump sum was paid).

10.65 To qualify for the offset, the total of the MLS lump sums paid to a taxpayer must be greater than, or equal to, one-eleventh of the income that would be assessed in determining whether that individual is liable to pay the Medicare levy surcharge. That is, the income test used to determine an individual's Medicare levy surcharge liability should be consistent with the income test used to determine whether an individual is eligible for the offset.

10.66 The income test for the purposes of the Medicare levy surcharge is amended to include an individual's reportable superannuation contributions and total net investment loss as a result of the introduction of the 'income for surcharge purposes' definition. For consistency, the income definition used to determine eligibility for the offset should also be amended to include reportable superannuation contributions and total net investment losses. [Schedule 3, Part 3, item 45]

Deduction for personal superannuation contributions

10.67 The ITAA 1997 allows an individual to deduct contributions made to a superannuation fund or a retirement savings account, subject to certain conditions. In particular, the contribution must be made to a complying superannuation fund and the individual must have provided the fund or the retirement savings account provider with a valid notice, in the approved form and in accordance with the relevant timeframes, of their intent to claim the deduction. The trustee of the fund or the retirement savings account provider must give the individual an acknowledgement of this notice. There are also age-related conditions to claiming a deduction for personal superannuation contributions.

10.68 Section 290-160 of the ITAA 1997 limits an individual's capacity to deduct personal contributions where the individual has derived income from activities that resulted in them being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA 1992). To be eligible to deduct the personal contribution in these circumstances, less than 10 per cent of the individual's assessable income and reportable fringe benefits total must be attributable to the activities. This is designed to ensure that only primarily self-employed individuals may claim the deduction.

10.69 Under the current arrangements, individuals may reduce the proportion of their income that is related to employee activities by entering into an arrangement with their employer to have some or all of their income from those activities contributed to superannuation by their employer. These amounts would ordinarily be attributable to activities that result in the individual being treated as an employee for the purposes of the SGAA 1992. However, as a result of the arrangement, the amounts are not included in the assessable income of the individual.

10.70 The amendments include RESC in the income base that is used in determining whether personal superannuation contributions may be deducted. [Schedule 3, Part 3, item 46]

10.71 The amendments do not add reportable superannuation contributions or an individual's total net investment loss to income as the income base is assessable income which is an individual's gross income before deductions are applied.

Spouse superannuation contributions tax offset

10.72 Under section 290-230 of the ITAA 1997, a taxpayer is entitled to a tax offset in an income year for a contribution they make in that year to a superannuation fund or the retirement savings account for the purpose of providing a superannuation benefit for their spouse.

10.73 However, to qualify for the offset, the taxpayer and their spouse must satisfy particular conditions in subsection 290-230(2) of the ITAA 1997, including a requirement that the spouse's assessable income and reportable fringe benefits total be less than $13,800 per annum.

10.74 The amendments extend this income definition to include any RESC of the spouse. [Schedule 3, Part 3, item 47]

10.75 This means a spouse's assessable income, reportable fringe benefits total and RESC will need to be less than $13,800 per annum for the taxpayer to be eligible for the offset. The amendments do not add reportable superannuation contributions or an individual's total net investment loss to income as the income base is assessable income which is an individual's gross income before deductions are applied.

Amendment of the Social Security Act 1991

10.76 Part 3 of Schedule 3 amends the Social Security Act 1991 (SS Act 1991) to extend income definitions used for the purposes of the parental income test on Youth Allowance; the Commonwealth Seniors Health Card; and the Student Financial Supplement Scheme to include total net investment losses and reportable superannuation contributions where appropriate.

Commonwealth Seniors Health Card

10.77 The amendments to point 1071-3 of the SS Act 1991 expand the definition of income used to determine eligibility for the Commonwealth Seniors Health Card to include an individual's total net investment loss. [Schedule 3, Part 3, item 81]

10.78 The amendments also repeal the definition of 'net rental property loss' in section 10A of the SS Act 1991, and references to net rental property losses in points 1071-3 and 1071-8. [Schedule 3, Part 3, items 62, 63, 82 and 83]

10.79 Net rental property losses are assessed as income for the purposes of the Commonwealth Seniors Health Card. However, because the 'total net investment loss' definition includes net rental property losses, it is no longer necessary for those losses to be separately defined.

Parental income test, Youth Allowance

10.80 Where a Youth Allowance applicant is considered to be dependent on their parents, a parental means test will apply to assess the extent to which the individual's parents can financially support the applicant while they are studying or looking for work.

10.81 The amendments to point 1067G-F10 of the SS Act 1991 revise the parental income test to include the parent's reportable superannuation contributions and the parent's total net investment loss amount for the income year. [Schedule 3, Part 3, item 73]

10.82 This will ensure a broader range of resources are assessed for parental means test purposes.

10.83 The amendments also repeal the concept of 'net passive business losses'. These losses, which were defined as losses from particular business activities in which a person is usually engaged for less than 17.5 hours per week, are replaced by the concept of an individual's total net investment loss. [Schedule 3, Part 3, items 74 to 76]

10.84 This ensures the definition of losses assessed for the Youth Allowance parental income test is consistent with the losses added to income for other means-tested programs. The 'total net investment loss' definition captures aspects of the former 'net passive business loss' definition such as losses from share trading activity and rental property investments.

Family actual means test, Youth Allowance

10.85 The 'family actual means test' is provided for in Module G of Part 3.5 of the SS Act 1991. The test is used to determine the income of 'designated parents' such as those who are self-employed; have a business loss or an interest in a company or trust; or have overseas income or assets worth $2,500 or more.

10.86 The 'family actual means test' assesses the actual means of a parent, defined in subpoint 1067G-G8(1) of the SS Act 1991 as an amount equal to the total spending and savings of the person in the relevant tax year. There are specific exclusions from the actual means definition.

10.87 For example, paragraph 1067G-G9(3)(a) of the SS Act 1991 excludes an amount equal to what would be an allowable deduction under the income tax law for the individual because the amount was necessarily incurred in carrying on the business. This exclusion is qualified by subpoint 1067G-G9(4) which limits the amount allowed as a deduction in respect of superannuation contributions.

10.88 The amendments to point 1067G-G9 of the SS Act 1991 revise this qualification so that reportable superannuation contributions are the excess superannuation contributions that are effectively included in a person's actual means. [Schedule 3, Part 3, item 77]

10.89 The amendments also repeal references to net passive business losses from the 'family actual means test' provisions. This includes the definitions of 'net passive business loss' and 'passive business' from the family actual means test definitions section in section 10B of the SS Act 1991. [Schedule 3, Part 3, items 65 and 66]

10.90 The definition of 'business' from section 10B is revised to reflect the definition of 'business' from subpoint 1067G-F19A(2) of the SS Act 1991 which is repealed by item 76. Also, a definition of 'total net investment loss' is inserted in subsection 10B(2). [Schedule 3, Part 3, items 64 and 67]

10.91 The concept of net passive business losses is replaced by the 'total net investment loss' definition to ensure greater consistency in the definition of losses added to income definitions across the tax and transfer systems. The amendments substitute references to net passive business losses in the 'family actual means test' provisions with references to an individual's 'total net investment loss. [Schedule 3, Part 3, items 78 to 80]

10.92 Further, the definition of 'designated parent', which is used in determining whether the 'family actual means test' applies, is amended to substitute a reference to 'net passive business loss' with 'total net investment loss'. [Schedule 3, Part 3, items 69 and 72]

10.93 The amendments ensure the 'family actual means test' assesses a consistent definition of excess superannuation contributions to that which will be assessed as income for the purposes of other means-tested tax and transfer programs, including the Youth Allowance parental income test.

Student Financial Supplement Scheme

10.94 The amendments to section 1061ZZFA of the SS Act 1991 extend the definition of 'repayment income', which is used to determine an individual's obligation to repay an accumulated Financial Supplement debt under the now closed Student Financial Supplement Scheme, to include an individual's total net investment loss and reportable superannuation contributions for the income year. [Schedule 3, Part 3, items 70 and 71]

10.95 The amendments also repeal provisions dealing with the definition of 'rental property loss' as rental property losses are included in the definition of 'total net investment loss'. [Schedule 3, Part 3, items 69 and 72]

Amendment of the Student Assistance Act 1973

10.96 Part 3 of Schedule 3 amends section 12ZL of the Student Assistance Act 1973 to include an individual's total net investment loss and reportable superannuation contributions for the income year in the 'repayment income' definition under that Act. [Schedule 3, Part 3, items 85 and 86]

10.97 Because the 'total net investment loss' definition includes an individual's net rental property losses, references to net rental property losses are removed. [Schedule 3, Part 3, items 84 and 87]

10.98 The 'repayment income' test is used to assess an individual's obligations to repay an accumulated Student Financial Supplement Scheme debt.

Amendment of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003

10.99 Part 3 of Schedule 3 amends the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 to expand the definition of income that is used to determine an individual's entitlement under the Government's superannuation co-contribution scheme, to include the individual's RESC. [Schedule 3, Part 3, item 88]

10.100 The amendments do not add reportable superannuation contributions or an individual's total net investment loss to income as the income base is assessable income which is an individual's gross income before deductions are applied.

Amendment of the Veterans' Entitlement Act 1986

10.101 Part 3 of Schedule 3 amends section 118ZZA of the Veterans' Entitlement Act 1986 to include a person's total net investment loss in the definition of 'adjusted taxable income' provided for in that section. This definition is used to determine an individual's eligibility for the Commonwealth Seniors Health Card for the purposes of the Veterans' Entitlement Act 1986 . [Schedule 3, Part 3, item 89]

10.102 The definition of 'adjusted taxable income' currently includes an individual's accepted estimate of their net rental property losses for the income year. The amendments repeal references to net rental property losses or replace references with a reference to an individual's total net investment loss. [Schedule 3, Part 3, items 90 and 91]

Application and transitional provisions

10.103 The amendments in this chapter will commence the day after Royal Assent.

10.104 The amendments will apply to income assessments made in the 2009-10 income year and later income years.

10.105 The amendments will not apply in relation to a claim for Baby Bonus under the A New Tax System (Family Assistance) Act 1999 if the relevant income period commenced before 1 July 2009 (even if the period continues after 1 July 2009).

10.106 Further, the amendments will not apply in respect of both the real and estimated adjusted taxable income that is assessed for the remainder of a child support period following an election under section 60 of the Child Support (Assessment) Act 1989 , if the remaining period commenced before 1 July 2009.

10.107 The amendments will not apply in determining the actual amount that would be the parents adjusted taxable income for the purposes of subsection 60A(1) of the Child Support Assessment Act 1989 if the relevant remaining period commenced before 1 July 2009.