Supplementary Explanatory Memorandum
Circulated by the authority of the Treasurer, the Hon Wayne Swan MPGlossary
The following abbreviation is used throughout this supplementary explanatory memorandum.
| Abbreviation | Definition |
| ITAA 1997 | Income Tax Assessment Act 1997 |
General outline and financial impact
AMENDMENTS 2 AND 3
Amendments 2 and 3 add Schedules 12 and 13 to the Bill. These Schedules were previously Schedules 3 and 4 to the Tax Laws Amendment (2008 Measures No. 3) Bill 2008.
Income tax treatment of rent assistance paid to Austudy recipients
Schedule 12 amends the Income Tax Assessment Act 1997 to exempt rent assistance paid to Austudy recipients from income tax.
Date of effect : This measure applies to rent assistance paid to Austudy recipients in the 2007-08 income year and later income years.
Proposal announced : This measure has not previously been announced.
Financial impact : Nil.
Compliance cost impact : Nil.
Income tax treatment of the Carer Adjustment Payment
Schedule 13 amends the Income Tax Assessment Act 1997 to exempt the Carer Adjustment Payment from income tax.
Date of effect : This measure applies to Carer Adjustment Payments paid in the 2007-08 income year and later income years.
Proposal announced : This measure has not previously been announced.
Financial impact : Nil.
Compliance cost impact : Nil.
Chapter 1 Overview
Amendment 1
2.1 Amendment 1 amends the commencement table to provide for the commencement of two additional Schedules. The commencements are identical to those that were for the equivalent Schedules (Schedules 3 and 4) in Tax Laws Amendment (2008 Measures No. 3) Bill 2008.
Amendment 2
2.2 Amendment 2 adds Schedule 12 to the Bill. This Schedule was previously Schedule 3 to the Tax Laws Amendment (2008 Measures No. 3) Bill 2008.
Amendment 3
2.3 Amendment 3 adds Schedule 13 to the Bill. This Schedule was previously Schedule 4 to the Tax Laws Amendment (2008 Measures No. 3) Bill 2008.
Chapter 2 Income tax treatment of rent assistance paid to Austudy recipients
AMENDMENT 2
2.1 Amendment 2 adds new Schedule 12 to the Bill. This Schedule was previously Schedule 3 to the Tax Laws Amendment (2008 Measures No. 3) Bill 2008.
Outline of chapter
2.2 Schedule 12 amends the Income Tax Assessment Act 1997 (ITAA 1997) to exempt rent assistance paid to Austudy recipients from income tax.
Context of amendments
2.3 The then Minister for Education, Science and Training announced the payment of rent assistance to Austudy recipients in Press Release No. BUDB 07/07 of 8 May 2007.
2.4 This measure is a consequential amendment that ensures the tax-free status for rent assistance paid to Newstart Allowance and Youth Allowance recipients is extended to rent assistance paid to Austudy recipients. Rent assistance has been payable to Austudy recipients from 1 January 2008.
Summary of new law
2.5 This measure provides that rent assistance paid to Austudy recipients will be exempt from income tax and applies to assessments for the 2007-08 income year and later income years.
Comparison of key features of new law and current law
| New law | Current law |
| Rent assistance paid to Austudy recipients is exempt from income tax. | Rent assistance received by Austudy recipients is considered to be 'ordinary income' and therefore taxed at the recipient's marginal tax rate. |
Detailed explanation of new law
2.6 Section 52-10 of the ITAA 1997 sets out the taxation treatment for social security payments. The table at section 52-10 lists payments under the Social Security Act 1991 that are wholly or partly exempt from income tax.
2.7 Item 2A.1 of the table sets out the taxation treatment of Austudy payments. Item 2A.1 provides that the 'supplementary amount' of Austudy payment is exempt from income tax.
2.8 Section 52-15 of the ITAA 1997 provides a table for working out the supplementary amount of a social security payment for the purposes of section 52-10.
2.9 Under item 4 in the table, the definition of 'supplementary amount' of Austudy payment is amended to include so much of the payment as is included by way of rental assistance. This ensures that Austudy recipients who receive rent assistance pay no tax on that assistance. [ Schedule 12, item 4, section 52 - 15 ]
Application and transitional provisions
2.10 This measure applies to assessments for the 2007-08 income year and later income years.
Chapter 3 Income tax treatment of the Carer Adjustment Payment
AMENDMENT 3
3.1 Amendment 3 adds new Schedule 13 to the Bill. This Schedule was previously Schedule 4 to the Tax Laws Amendment (2008 Measures No. 3) Bill 2008.
Outline of chapter
3.2 Schedule 13 amends the Income Tax Assessment Act 1997 (ITAA 1997) to exempt the Carer Adjustment Payment from income tax.
Context of amendments
3.3 The Carer Adjustment Payment was announced as part of the 2007-08 Budget.
3.4 These amendments are consequential amendments that ensure the Carer Adjustment Payment is treated as tax-free for all recipients.
3.5 The Carer Adjustment Payment has been payable to eligible carers from 1 July 2007.
Summary of new law
3.6 This measure provides that the Carer Adjustment Payment will be exempt from income tax and applies to assessments for the 2007-08 income year and later income years.
Comparison of key features of new law and current law
| New law | Current law |
| The Carer Adjustment Payment is exempt from income tax. | The Carer Adjustment Payment may, in the hands of some recipients, be considered assessable income and therefore taxed at the recipient's marginal tax rate. |
Detailed explanation of new law
3.7 These amendments include the Carer Adjustment Payment into the table at section 53-10 of the ITAA 1997.
3.8 This table sets out the taxation treatment of various types of payments. The table lists payments that are wholly or partly exempt from income tax, the authority under which the payments are made, and any exceptions or special conditions that apply to the payments in order for them to be tax exempt.
3.9 The amendment to section 53-10 includes the Carer Adjustment Payment as a separate item in the table made under the Commonwealth power to make ex-gratia payments. There are no exceptions or special conditions under which the tax exemption has been extended to the Carer Adjustment Payment. This amendment ensures that recipients of the Carer Adjustment Payment pay no tax on the payment. [ Schedule 13, item 1, section 53 - 10 ]
3.10 These amendments also include the Carer Adjustment Payment into the list of ordinary or statutory income at section 11-15 of the ITAA 1997. This section lists types of ordinary or statutory income which are exempt from income tax. The amendment to section 11-15 includes the Carer Adjustment Payment in this list. [ Schedule 13, item 1, section 11 - 15 ]
Application and transitional provisions
3.11 This measure applies to assessments for the 2007-08 income year and later income years.
Index
Schedule 12: Austudy rent assistance
| Bill reference | Paragraph number |
| Item 4, section 52-15 | 2.9 |
Schedule 13: Carer adjustment payments
| Bill reference | Paragraph number |
| Item 1, section 11-15 | 3.10 |
| Item 1, section 53-10 | 3.9 |