Explanatory Memorandum
(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)Chapter 2 Tax exemption for ex-gratia payments to New Zealand non-protected special category visa holders
Outline of chapter
2.1 Schedule 1 to this Bill also amends the Income Tax Assessment Act 1997 (ITAA 1997) to exempt from income tax ex-gratia payments to New Zealand non-protected special category visa holders for a disaster that occurred in Australia during the 2010-11 financial year.
Context of amendments
2.2 New Zealand citizens who arrived in Australia after 26 February 2001 are classified as non-protected special category visa holders and are not eligible for the Australian Government Disaster Recovery Payment.
2.3 The Australian Government Disaster Recovery Payment provides short-term financial assistance to individuals adversely affected by a major or widespread disaster, such as the floods that occurred in Australia on or after 29 November 2010, Cyclone Yasi which devastated parts of Queensland in February 2011, or the Western Australian bushfires of February 2011.
2.4 In light of the hardship these recent disasters may have caused New Zealand special category visa holders, the Government agreed to make ex-gratia payments to affected eligible New Zealand special category visa holders.
2.5 The ex-gratia payment provides assistance to New Zealand non-protected special category visa holders who have been adversely affected by the 2010-11 disasters in Australia. This assistance is payable in local government areas where the Australian Government Disaster Recovery Payment has been made available due to the disasters which commenced in November 2010 and continued into 2011.
2.6 The ex-gratia payment will reflect the Australian Government Disaster Recovery Payment rates of $1,000 for eligible adults and $400 for eligible children.
2.7 The ex-gratia payment is administered by Centrelink, and can be claimed until and including 31 July 2011.
2.8 Exempting from income tax the ex-gratia payment to New Zealand special category visa holders who have been affected by the recent disasters ensures that the payment receives the same tax treatment as the Australian Government Disaster Recovery Payment made to eligible individuals.
Summary of new law
2.9 This measure amends section 51-30 of the ITAA 1997 to list the assistance for New Zealand non-protected special category visa holders as exempt from income tax if it has been claimed after 30 January 2011 and before 1 August 2011.
Detailed explanation of new law
2.10 Section 11-15 of the ITAA 1997 lists income which is exempt from income tax. This list will be amended to include the assistance for New Zealand non-protected special category visa holders for a disaster that occurred in Australia during the 2010-11 financial year, as an exempt payment. [Schedule 1, item 1]
2.11 Section 51-30 of the ITAA 1997 contains a table listing welfare payments that are exempt from income tax and any exceptions and special conditions that must be met to qualify for the exemption.
2.12 The amendment to section 51-30 will make the assistance for New Zealand non-protected special category visa holders for a disaster that occurred in Australia during the 2010-11 financial year, exempt from income tax. [Schedule 1, item 2]
Application and transitional provisions
2.13 These amendments exempt from income tax ex-gratia payments made to New Zealand non-protected special category visa holders who were adversely affected by a disaster that occurred in Australia during the 2010-11 financial year, where these payments are made after 30 January 2011.
2.14 These amendments will be repealed on 1 July 2014, by which time the amendments would have become inoperative. [Schedule 1, items 3 and 4]