Explanatory StatementIssued by authority of the Minister for Revenue and Assistant Treasurer
Income Tax Assessment Act 1936
Income Tax Amendment Regulations 2005 (No. 2)
Section 266 of the Income Tax Assessment Act 1936 (the Act) provides, in part, that the Governor-General may make regulations not inconsistent with the Act, prescribing all matters which by the Act are required or permitted to be prescribed, or which are necessary or convenient to be prescribed for giving effect to the Act.
Section 282B of the Act provides that any amount of normal assessable income derived by a complying superannuation fund from assets that, when the income is derived, are segregated current pensions assets, is exempt from tax.
Section 273A of the Act defines segregated current pension assets. Broadly, they are assets which are held for the sole purpose of enabling the fund to discharge current pension liabilities. The Superannuation Laws Amendment (2004 Measures No. 2) Act 2004, which received the Royal Assent on 30 June 2004, amends that definition to provide that an actuary's certificate is not required in order to meet the definition of segregated current pension assets when the only type of pension that a superannuation fund is paying is a type that is prescribed in the Income Tax Regulations 1936. The amendment to section 273A commenced on Royal Assent.
The purpose of the Regulations is to specify that an allocated pension and a market linked pension, within the meaning of the Superannuation Industry (Supervision) Regulations 1994, are prescribed pensions for the purposes of section 273A of the Act.
Details of the Regulations are as follows:
Regulation 1 specifies the name of the Regulations as the Income Tax Amendment Regulations 2005 (No. 2).
Regulation 2 provides that regulations 1 to 3 and Schedule 1, which deals with allocated pensions, are taken to have commenced on 1 July 2004, and that Schedule 2, which deals with market linked pensions, is taken to have commenced on 20 September 2004.
Regulation 3 provides that schedules 1 and 2 amend the Income Tax Regulations 1936.
Schedule 1 inserts new Part 9A Taxation of superannuation business and related business and new regulation 170 Segregated current pension assets - prescribed pensions into the Income Tax Regulations 1936 and specifies that an allocated pension (within the meaning of the Superannuation (Industry) Supervision Regulations 1994) is a prescribed pension.
Schedule 2 amends regulation 170 Segregated current pension assets - prescribed pensions by listing a market linked pension as a prescribed pension in addition to the existing allocated pension.
Regulation 170 provides that for subsections 273A(2) and (3) of the Act, an allocated pension and a market linked pension (within the meaning of the Superannuation Industry (Supervision) Regulations 1994) are prescribed pensions.
This means that if allocated pensions and/or market linked pensions are the only kind of pensions paid by a superannuation fund, then an actuary's certificate is not required in order for assets supporting those pensions to meet the definition of segregated current pension assets, so long as they are segregated from other assets of the fund. Any amount of normal assessable income derived by the fund from segregated current pension assets is exempt from tax. The requirement for an actuary's certificate in this circumstance is redundant and the removal of the requirement will reduce compliance costs for these funds.
The Act specifies no conditions that need to be met before the power to make the proposed Regulations may be exercised.
The Regulations are taken to have commenced on 1 July 2004 in respect of allocated pensions and 20 September 2004 in respect of market linked pensions and are therefore retrospective. The Office of Legislative Drafting has advised that the legislative instrument does not infringe subsection 12(2) of the Legislative Instruments Act 2003 because the amendments are beneficial in nature, and do not affect the rights of a person (other than the Commonwealth or an authority of the Commonwealth) as at the date of registration under the Legislative Instruments Act 2003 so as to disadvantage that person. Further, the legislative instrument does not impose any liabilities on any person (other than the Commonwealth or an authority of the Commonwealth) in respect of anything done or omitted to be done before the date of registration.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Consultation was not undertaken in relation to this instrument because it is minor or machinery in nature and does not substantially change the law.