Tax Laws Amendment (2006 Measures No. 2) Act 2006 (58 of 2006)

Schedule 7   Technical corrections and improvements

Part 1   Amendments commencing on Royal Assent

Income Tax Assessment Act 1997

64   After Division 61

Insert:

Division 63 - Common rules for tax offsets

Guide to Division 63

63-1 What this Division is about

This Division sets out some rules that are common to all tax offsets.

Table of sections

63-10 Priority rules

63-10 Priority rules

(1) If you have one or more *tax offsets for an income year, apply them against your basic income tax liability in the order shown in the table. To the extent that an amount of a tax offset remains, the table tells you what happens to it.

Order of applying tax offsets

Item

Tax offset

What happens to any excess

5

*Tax offset under section 160AAAA of the Income Tax Assessment Act 1936 (tax offset for low income aged persons)

Your entitlement to it is transferred in accordance with regulations made under that Act

10

*Tax offset under section 160AAAB of the Income Tax Assessment Act 1936 (tax offset for low income aged persons - trustee assessed under section 98)

Your entitlement to it is transferred in accordance with regulations made under that Act

15

*Tax offset under section 160AAA of the Income Tax Assessment Act 1936 (tax offset in respect of certain pensions)

Your entitlement to it is transferred in accordance with regulations made under that Act

20

Any *tax offset not covered by another item in this table

You cannot get a refund of it, you cannot transfer it and you cannot carry it forward to a later income year

25

Child care *tax offset under Subdivision 61-IA

You may transfer your entitlement to it to your *spouse (under sections 61-496 and 61-497)

30

Landcare and water facility *tax offset under the former Subdivision 388-A

You may carry it forward to a later income year (under Division 65)

35

Foreign tax credit under Division 18 of Part III of the Income Tax Assessment Act 1936

You may carry it forward to a later income year (under section 160AFE of that Act)

40

*Tax offset that is subject to the refundable tax offset rules in Division 67

You can get a refund of the remaining amount

45

*Tax offset arising from payment of *franking deficit tax (see section 205-70)

You may carry it forward to a later income year (under section 205-70)

Note 1: Section 13-1 lists tax offsets.

Note 2: Former Division 388 was repealed by the New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001.

Note 3: Section 160AFE of the Income Tax Assessment Act 1936 also affects how much of a foreign tax credit can be applied against your basic income tax liability.

Note 4: The remaining amount of a carry forward tax offset may be reduced by section 65-30 or 65-35 to take account of net exempt income.

Note 5: Tax offsets mentioned in items 5 and 10 are more commonly referred to as the Senior Australians Tax Offset.

(2) Within each item, apply the tax offsets in the order in which they arose.

Note: This would be relevant if you have carry forward tax offsets of the same category for different income years.