House of Representatives

Tax Laws Amendment (2008 Measures No. 3) Bill 2008

Tax Laws Amendment (2008 Measures No. 3) Act 2008

Explanatory Memorandum

Circulated by authority of the Treasurer, the Hon Wayne Swan MP

Chapter 4 - Income tax treatment of the Carer Adjustment Payment

Outline of chapter

4.1 Schedule 4 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to exempt the Carer Adjustment Payment from income tax.

Context of amendments

4.2 The Carer Adjustment Payment was announced as part of the 2007-08 Budget.

4.3 These amendments are consequential amendments that ensure the Carer Adjustment Payment is treated as tax-free for all recipients.

4.4 The Carer Adjustment Payment has been payable to eligible carers from 1 July 2007.

Summary of new law

4.5 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

4.6 These amendments include the Carer Adjustment Payment into the table at section 53-10 of the ITAA 1997.

4.7 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.

4.8 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 4, item 1, section 53 - 10 ]

4.9 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 4, item 1, section 11 - 15 ]

Application and transitional provisions

4.10 This measure applies to assessments for the 2007-08 income year and later income years.


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