Explanatory Memorandum
(Circulated by the authority of the Treasurer,the Hon Ralph Willis, M.P.)Chapter 14 Education Entry Payment
Clauses: 7,8,9 and 63
Overview
Ensures that the education entry payment to be paid to sole parent pensioners from 1 January 1992 will be taxed.
Education Entry Payment
Summary of the proposed amendments
14.1 This Bill proposes to amend various provisions of the Income Tax Assessment Act 1936 (the Act), to ensure that the education entry payment paid to sole parent pensioners, is included in assessable income.
14.2 It is proposed that the amendments take effect from 1 January 1992, the commencement date for the education entry payment.
Background to the legislation
14.3 In the August 1991 Budget the Government announced that from 1 January 1992 an amount of $200 would be paid to sole parent pensioners commencing or continuing full-time or part-time education courses which attract payment of AUSTUDY. AUSTUDY payments are subject to tax.
14.4 This Bill proposes amendments to the Act, to ensure that the education entry payment is not exempt from income tax.
14.5 The provisions of the Act which are affected by the proposed amendments contained in the Bill include:
14.6 Paragraph 23(z): exempts from tax certain scholarships, educational allowances or assistance payments paid to students receiving full-time education at a school, college or university. This exemption does not extend to certain payments listed under paragraph 23(z), including AUSTUDY allowances.
14.7 Paragraph 23(zaa): operates to exempt from income tax certain payments made under a Commonwealth scheme for secondary educational assistance. The exemption does not extend to AUSTUDY payments made in connection with secondary education.
14.8 Division 1AA: specifies which payments under the Social Security Act 1991 and the Veteran's Entitlements Act 1986 are exempt from tax.
Explanation of the proposed amendments
14.9 The Social Security legislation allows an education entry payment to be paid to sole parent pensioners commencing or continuing full-time or part-time education courses which attract payment of AUSTUDY. Such a payment is payable under Part 2.13A of the Social Security Act 1991 . Part 2.13A was included in that Act by the Social Security Legislation Amendment Act (No.3) 1991.
14.10 Amendments to paragraphs 23(z) and 23(zaa) ensure that the education entry payment is not exempt from income tax. [Clause 7]
14.11 The Bill also proposes to amend Division 1AA of the Act to state that the education entry payment is not exempt from income tax. [Clause 9 - new Section 24ABNA]
14.12 These amendments mean that the education entry payment is included in the assessable income of the recipient and is not exempt from tax.
Commencement date
14.13 The amendments relating to the education entry payment will take effect from the commencement date for the payments, 1 January 1992.
Clauses involved in the proposed amendments
Clause 7: proposes to insert new subparagraph 23(z)(x) into the Act to ensure that the education entry payment is not exempt from income tax.
Clause 7: proposes to insert new subparagraph 23(zaa)(vii) into the Act to ensure that the education entry payment is not exempt from income tax.
Clause 8: proposes to amend the section 24AB Social Security Payments table to include the education entry payment.
Clause 9: proposes to insert new section 24ABNA into the Act to state that education entry payments are not exempt from income tax.
Subclause 63(2): provides that these amendments apply to payments received on or after 1 January 1992.