House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurerthe Hon John Dawkins, M.P.)

CHAPTER TWO Low-Income Rebate

Summary of amendments

2.1 Purpose of the amendments: To amend the Income Tax Assessment Act 1936 to provide a rebate of up to $150 to taxpayers whose taxable income is below $24,450 [Clause 11] . The full rebate entitlement will be available to taxpayers whose taxable income does not exceed $20,700. The rebate reduces at the rate of 4 cents for each $1 of taxable income above $20,700.

2.2 Date of Effect: Assessments for the 1993-94 and later years of income.

Background to the legislation

2.3 In the 1993-94 Budget, it was announced that there would be a rebate on assessment, in the 1993-94 and later years of income, for taxpayers whose taxable income is below $23,200. On 30 August 1993, the Government announced that the rebate would be increased to $150. The $50 increase in the rebate will result in the upper taxable income threshold being increased from $23,200 to $24,450.

Taxpayers with a taxable income of up to $20,700 will be entitled to a $150 rebate. Taxpayers with taxable incomes between $20,700 and $24,450 will have the $150 rebate reduced at the rate of 4 cents for each $1 of taxable income in excess of $20,700. There will be no entitlement to the rebate where taxable income is $24,450 or greater.

Explanation of the amendments

2.4 The Bill will introduce new section 159N into the Income Tax Assessment Act 1936 to give effect to the rebate for low-income taxpayers which was announced in the 1993 Budget. Taxpayers whose taxable income on assessment is below $24,450 will be entitled to the rebate on assessment in the 1993-94 and later income years [Clauses 12 and 13].

2.5 Taxpayers with a taxable incomes of up to $20,700 will be entitled to a rebate of $150 on assessment. The rebate will be reduced at the rate of 4 cents for each dollar of taxable income in excess of $20,700 [New subsection 159N(2)] .

Example

2.6 A taxpayer with taxable income of $22,000 for the 1993-94 year of income will be entitled to a low-income rebate, calculated on assessment as follows:

(a)

Rebate before reduction: $150

(b)

Reduction in rebate [(22,000-20,700) x .04]: $ 52

(c)

Rebate entitlement on assessment for 1993-94 [(a)-(b)]: $ 98