Explanatory Statement

Issued by authority of the Minister for Revenue and Assistant Treasurer

Income Tax Assessment Act 1997

Section 909-1 of the Income Tax Assessment Act 1997 (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.

On 20 August 2001, the Prime Minister announced that the Government would provide concessional taxation treatment from 1 July 2002 for conservation covenants entered into by certain taxpayers in order to protect areas of high conservation value. Division 31 was inserted into the Act to give effect to these measures by means of Act 167 of 2001.

The Regulations amend the Income Tax Assessment Regulations 1997 (the principal Regulations) to establish procedures for the valuation of land over which a conservation covenant has been entered into in accordance with section 31-5 of the Act and to set the valuation fees the Commissioner of Taxation (Commissioner) may charge. Amendments are also made in relation to the valuation of particular gifts of property.

Section 31-5 of the Act provides that an income tax deduction is allowable to a taxpayer who enters into a conservation covenant and satisfies certain conditions. The amount of the deduction is the difference between the market value of the land just before the covenant is entered into and its decreased market value just after that time, to the extent that the decrease is due to entering into the covenant. A conservation covenant over land is a covenant that, inter alia, restricts or prohibits certain activities on the land that could degrade the environmental value of the land.

Subsection 31-15(1) of the Act states that a valuation for the change in market value of the land must be obtained from the Commissioner. Subsection 31-15(2) of the Act allows the Commissioner to charge for making the valuation in accordance with the Regulations.

The Regulations set the following procedures and fees:

(i)
A taxpayer must apply to the Australian Valuation Office for a valuation on the approved form and include:

·
an application fee of $174; and
·
a copy of the conservation covenant.

(ii)
The fee is $174 per hour from the commencement of these regulations. Where specialist valuation advice is required, the taxpayer will be charged for the actual cost of the valuation. The applicant is liable for any fees accrued when an application is withdrawn after the commencement of the valuation.
(iii)
An applicant may request an estimate of the likely valuation fee. Although the Commissioner must provide an estimate, when requested, the estimate is not binding on the Commissioner.
(iv)
The Commissioner may request advance payment or payments within 14 days of receiving the application and must explain how the amount was calculated. The applicant must make the payment within 14 days of receiving the request. Advance payments will be credited against the total fees and excess amounts will be refunded.
(v)
When a valuation has been completed and all fees have been paid, the Commissioner must give the applicant a valuation certificate which includes:

(a)
the date the valuation was completed;
(b)
a description of the land (including a lot and plan number, title reference and the location of the land);
(c)
a statement of the market value of the land immediately before the conservation covenant was entered into;
(d)
a statement of the market value of the land immediately after the conservation covenant was entered into;
(e)
a statement of the difference between the market value mentioned in paragraph (c) and the market value mentioned in paragraph (d);
(f)
a statement of the extent to which the decrease mentioned in paragraph (e) is attributable to the conservation covenant being entered into; and
(g)
any other relevant information.

In addition, there are some minor amendments to Regulations 30-212.01 to 30-212.12 relating to the valuation of particular gifts of property.

Because the definition of 'approved form' in section 388-50 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) applies to all taxation laws, Regulation 30-212.02 has been updated with a reference to 'approved form'.

Further, the Regulations increase the hourly fees that the Australian Valuation Office may charge for a valuation of particular gifts of property. The fees increased from $162 per hour to $174 per hour from the gazettal of these regulations. The fees are calculated on a cost recovery basis and the administration costs for a valuation have risen since the original fees were prescribed on 1 July 2000. The Minister for Revenue and Assistant Treasurer has approved the increase and the Regulations are updated to reflect these changes.

Details of the Regulations are set out in the Attachment.

The Regulations commenced on gazettal.

ATTACHMENT

Income Tax Assessment Amendment Regulations 2002 (No. 4)

Regulation 1: Names the Regulations as the Income Tax Assessment Amendment Regulations 2002 (No. 4).

Regulation 2: Provides that the regulations commenced on gazettal.

Regulation 3: Amends the Income Tax Assessment Amendment Regulations 1997. The amendments are contained in Schedule 1 of the Regulations.

Schedule 1

Items 1, 2, 3, 11, 12, 13, 14 and 15

With additional matters being gazetted in the Regulations, it is appropriate to group regulations on similar topics into Divisions. Including Division numbers for each topic will make it easier to reference the Regulations. There is no change to the way the regulations operate as all these items do is insert a Division heading and topic into the Regulations.

Item 4

As a result of grouping regulations on similar topics into Divisions, there is no need for the words "regulations 30-212.02 to 30-212.11 (inclusive)" to be in Regulation 30-212.01. They have been replaced with the words 'this Division'. There is no change to the meaning of this Regulation.

Item 5

Regulations 30-212.02 to 30-212.04 state the manner in which a taxpayer must lodge a request for a valuation of certain types of property, and the details that needed to be included with the application. Section 388-50 of Schedule 1 to the TAA 1953 came into effect on 1 July 2000 and states that any application made in relation to a taxation law must be in the manner and form approved by the Commissioner.

Since the enactment of section 388-50 of the TAA 1953, not as many details need to be prescribed in the regulations. The new Regulation 30-212.02 replaces the former Regulations 30-212.02 to 30-212.04 inclusive to specify the reference to 'approved form'.

Items 6, 7 and 8

The Minister for Revenue and Assistant Treasurer approved an increase in the fees charged for a valuation of certain gifts of property. These fees commenced on gazettal of these regulations. Regulation 30-212.10, as amended, shows the fees applicable from that date.

Item 9

The application fee for a valuation is prescribed by Regulation 30-212.04. With this detail now included in Regulation 30-212.02, as amended, the reference in sub-regulation 30-212.11(1) is updated. There is no change to the way the current regulation operates.

Item 10

The regulations relating to the procedures and charges for valuations to determine the change in market value of land over which a conservation covenant has been placed are inserted in the regulations as Division 31.

The Regulations require a request for a valuation to be made in writing on a form approved by the Commissioner, lodged with the General Manager, Australian Valuation Office and to include the application fee.

An applicant may ask the Commissioner for an estimate of the likely fees for the valuation. The Commissioner must provide the estimate, although the Commissioner is not bound by the estimate.

The Commissioner may ask for an advance payment of fees that may be payable for the valuation. If this occurs, then the Commissioner must request the payment within 14 days from the date of receipt of the application. An explanation of the calculation of the advance payment must also be provided. The Commissioner may ask for more than one advance payment from the same applicant, but each request must be within 14 days from the date of receipt of the application. The applicant is required to pay each advance payment within 14 days of receiving the request.

The Regulations list the conditions under which the Commissioner is not required to consider certain applications. If the Commissioner determines that an advance payment of the fees is required, no further work on the valuation is needed until the advance payment has been paid. Also, if the applicant has sought an estimate of the fees, then the Commissioner is not required to do any further work on the valuation until the estimate has been given to the applicant.

The Regulations provide the circumstances under which the Commissioner may treat an application as having no effect:

·
the applicant has not submitted the application on the approved form to the General Manager, Australian Valuation Office;
·
the applicant has not furnished the required application fee; and
·
the Commissioner has required payment of an advance fee and the applicant has not forwarded this within the required time.

The Regulations prescribe an hourly fee of $174 and $2.90 per minute for part hours from the gazettal of these regulations, to be charged for the time spent by the Commissioner in determining the value of the change in the market value of the land. If an applicant withdraws the request for a valuation, fees for the incomplete valuation are due up to the time the notice of withdrawal is received by the Commissioner.

The Regulations prescribe that the application fee and any advance payment made for the valuation are to be credited against the fees due. However, if the total fees paid by the applicant exceed the amount due to the Commissioner, the Commissioner must refund the difference to the applicant as soon as practicable.

The Regulations state that once a valuation is completed and all fees are paid, the Commissioner must issue a valuation certificate to the applicant. The details to be included on the Certificate are:

(a)
the date on which the valuation was completed;
(b)
a description of the land (including a lot and plan number, title reference and the location of the land;
(c)
a statement of the market value of the land immediately before the conservation covenant was entered into;
(d)
a statement of the market value of the land immediately after the conservation covenant was entered into;
(e)
a statement of the difference in the market value of the land immediately before and after the conservation covenant was entered into;
(f)
a statement of the extent to which the difference mentioned in paragraph (e) is attributable to the conservation covenant being entered into; and
(g)
any other relevant information.