Explanatory Statement

Issued by the Authority of the Minister for Revenue and Assistant Treasurer

EXPLANATORY STATEMENT

Fringe Benefits Tax Assessment Act 1986

Section 135 of the Fringe Benefits Tax Assessment Act 1986 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The purpose of the amending Regulations is to prescribe three funds for the purposes of paragraph 58PB(2)(a) of the Act as approved worker entitlement funds. A worker entitlement fund is a fund that provides for the protection and portability of employee entitlements, such as unused leave or redundancy payments.

Sections 58PA and 58PB of the Act provide an exemption from fringe benefits tax (FBT) for certain payments to approved worker entitlement funds. This exemption is designed to ensure that certain payments to approved worker entitlement funds are not taxed twice - once as a fringe benefit when paid into the fund and again when paid out of the fund to the employee.

The Regulations also moved the list of approved worker entitlement funds from regulation 6 of the Principal Regulations to a schedule, reordered the funds in alphabetical order and included the date from which listing took effect.

The Regulations commenced on 1 April 2006, and apply for the 2006-07 FBT year and later years. Subsection 12(2) of the Legislative Instruments Act 2003 (LIA 2003) prohibits the retrospective operation of regulations, or a provision of regulations, which adversely affect the rights of, or impose liabilities on, a person other than the Commonwealth in respect of anything done or omitted to be done before the date of notification. The retrospective commencement does not contravene subsection 12(2) because the regulations confer a benefit, in that payments which would otherwise be subject to FBT are now exempt from that tax.

Consultation was not undertaken in relation to this instrument because it is minor or machinery in nature and does not substantially change the law.