Explanatory Memorandum
(Circulated by the authority of the Treasurer,the Hon. John Dawkins, M.P.)Exemption from income tax: family payment advance
Summary of proposed amendments
Purpose of amendment: To exempt family payment advance from income tax.
Date of Effect: On or after 1 January 1993.
The Table in section 24AB of the Income Tax Assessment Act (the Act) is an index of payments made under the Social Security Act 1991 which are generally exempt from income tax. At present it lists, among other things, the "family allowance" and the "family allowance supplement" which are exempt from income tax under sections 24ABW and 24ABX of the Act respectively.
The Social Security Act has been amended to replace these two payments with one payment, the "family payment". This amendment has effect from 1 January 1993. That amending Act also amended the Income Tax Assessment Act, with effect from the same date, to replace the exemption for "family allowance" and "family allowance supplement" with an exemption for "family payment". The exemption for family payment will be provided for by section 24ABW of the Act.
As a result of these amendments the "family allowance" and "family allowance supplement" are to remain in the Table in section 24AB of the Act until 1 January 1993 when they will be replaced by "family payment". The existing sections 24ABW and 24ABX will also remain in the Act until 1 January 1993 when they will be replaced by a new section 24ABW which will exempt the "family payment" from income tax.
The Social Security Amendment Bill (No. 2) 1992, presently awaiting Royal Assent, proposes to allow, from 1 January 1993, recipients of family payment an option to receive part of their entitlement as a lump sum advance for up to six months. As a result of this initiative there is a need to make a consequential amendment of the Act to ensure that the advance is exempt from income tax. This will result in the advance being treated in the same manner as the family payment.
Explanation of proposed amendments
The Bill proposes to amend section 24AB of the Act to include "family payment advance" in the index of payments covered by Subdivision B. Generally such payments are exempt from income tax [Clause 10] .
The Bill proposes to insert a new section 24ABX in to Subdivision B to exempt family payment advance from income tax [Clause 11] .
These amendments will commence on 1 January 1993, immediately after the commencement of the Social Security Amendment Act (No.2) 1992 [Clause 12] .