Explanatory Statement

Issued by authority of the Assistant Treasurer, Minister for Housing and Minister for Homelessness, Social and Community Housing

Income Tax Assessment (1936 Act) Amendment (Operations Paladin and Augury Eligible Duty) Regulations 2021

Section 266 of the Income Tax Assessment Act 1936 (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 Income Tax Assessment (1936 Act) Amendment (Operations Paladin and Augury Eligible Duty) Regulations 2021 (the Amending Regulations) is to amend the Income Tax (1936 Act) Regulation 2015 (the Regulation) to provide that duty performed by Australian Defence Force (ADF) personnel serving on Operation Paladin is 'eligible duty' for the purpose of section 23AD of the Act. It also amends the Regulation to expand the eligible area for Operation Augury to include Iraq and Syria.

Section 23AD of the Act provides that the remuneration of ADF members is exempt from tax if:

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the individual is on 'eligible duty' with a specified organisation in a specified area outside Australia and the Chief of the ADF has issued a certificate to that effect; and

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the eligible duty is not as, or under, an attaché at an Australian embassy or legation.

Subsection 23AD(2) of the Act provides that regulations may declare that duty with a specified organisation in a specified area outside Australia and after a specified day is 'eligible duty' for the tax exemption.

The table at section 6 of the Regulation lists defence operations declared 'eligible duty' with reference to the specific geographical area and period in which the duty is an 'eligible duty'. The Amending Regulations amend the table in section 6 to include Operation Paladin, which is carried out in the land area, territorial waters, airspace, and superjacent airspace of Egypt, Israel, Jordan, Lebanon, and Syria. The Amending Regulations also amend the table in section 6 to include Iraq and Syria to the geographical area of warlike operations for Operation Augury.

The Amending Regulations expand the income tax exemption by adding to the list of 'eligible duty' to deliver fair and consistent tax outcomes for ADF personnel deployed overseas.

The amendments for Operation Paladin apply from 1 July 2020. This ensures that all personnel deployed in respect of that operation are subject to consistent tax treatment. The addition of Iraq and Syria to the Area of Operations for Operation Augury is to apply from 1 December 2020. The amendments are beneficial to members of the ADF on duty for Operation Paladin and Augury and no person is disadvantaged by the retrospective application of the amendments.

The Act specifies no conditions that need to be met before the power to make the Amending Regulations may be exercised.

Public consultation was not undertaken as the Amending Regulations exclusively relate to Defence Force operations. The Department of Defence and Australian Taxation Office have been consulted in the development of this measure.

The Amending Regulations has a negligible compliance cost impact.

The Regulations are a legislative instrument for the purposes of the Legislation Act 2003.

The Regulations commenced on the day after it was registered.

A statement of Compatibility with Human Rights is in the Attachment.

ATTACHMENT

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Income Tax Assessment (1936 Act) Amendment (Operations Paladin and Augury Eligible Duty) Regulations 2021

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The purpose of the Income Tax Assessment (1936 Act) Amendment (Operations Paladin and Augury Eligible Duty) 2021 (the Amending Regulations) is to amend the Income Tax (1936 Act) Regulation 2015 (the Regulation) to provide that duty performed by Australian Defence Force (ADF) personnel serving on Operation Paladin is 'eligible duty' for the purpose of section 23AD of the Act. It also amends the Regulations to expand the eligible area for Operation Augury to include Iraq and Syria. This allows the salary and allowances of ADF personnel serving on these operations to be exempt from income tax on an ongoing basis.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.