Revised Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)
Chapter 5 - Youth allowance and austudy payment
Overview
5.1 The amendments in Schedule 7 to this Bill amend the:
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- Income Tax Assessment Act 1936 (ITAA 1936) ; and
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- Income Tax Assessment Act 1997 (ITAA 1997).
5.2 The amendments correct a technical error which occurred in the ITAA 1936 as a result of the amendments contained in the Social Security Legislation Amendment (Youth Allowance Consequential and Related Measures) Act 1998 (Social Security legislation). They also ensure that the rewritten definition of Commonwealth education or training payment in the ITAA 1997 is correct.
Summary of the amendments
5.3 The amendments in Schedule 7 correct a technical error in the definition of Commonwealth education or training payment.
5.4 The amendments in Schedule 7 will apply to assessments for the 1998-1999 income year and later income years. [Item 3]
Background to the legislation
5.5 AUSTUDY and Youth Training Allowance were replaced with the youth allowance and the austudy payment from 1 July 1998. Payments of AUSTUDY and Youth Training Allowance to full-time students were fully assessable but subject to the beneficiary rebate.
5.6 The replacement of the former payments necessitated changes to the taxation law to provide similar taxation treatment for the new payments. However, due to a technical error in the Social Security legislation, youth allowance and austudy payments to full-time students were made exempt from income tax.
Explanation of the amendments
5.7 The amendments contained in Schedule 7 amend the definition of Commonwealth education or training payment to ensure that youth allowance and austudy payments to full-time students are included in assessable income but are subject to the beneficiary rebate under section 160AAA of the ITAA 1936.
5.8 Item 1 inserts new paragraphs (v) and (vi) in the definition of Commonwealth education or training payment contained in subsection 6(1) of the ITAA 1936. Item 2 inserts new paragraphs (iv) and (v) in the definition of Commonwealth education or training payment contained in subsection 52-145(1) of the ITAA 1997.