Senate

Supplementary Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 3 - Exempt income - education and training payments

Amendments 2-17

Purpose the amendments

3.1 The amendments will omit from the Bill the rewrite of provisions which exempt from tax certain educational and training payments.

3.2 These amendments will make no change to the law.

Background to the amendments

3.3 Schedule 1 to the Bill includes a rewrite of the exempt income provisions of the 1936 Act. Schedule 3 contains consequential amendments of the Income Tax Assessment Act 1997 ( the 1997 Act ) and the 1936 Act to give effect to those provisions.

3.4 The provisions of the 1936 Act, which exempt from tax certain educational and training assistance to students, are to be amended by the Taxation Laws Amendment Bill (No. 1) 1997 ( the No. 1 Bill ). As the rewritten provisions do not include the changes proposed to the 1936 Act by the No. 1 Bill, the Government has decided to remove the rewrite of the current provisions. At a later date those provisions of the 1936 Act as at 1 July 1997 will be rewritten.

Explanation of the amendments

Amendments 2 and 4 (Education and training payments to full-time students)

3.5 These amendments will remove the rewrite of:

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the exemption for education and training payments to full-time students [Amendment 2 - Schedule 1: item 2.1 of section 51-10] ; and

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the exclusions from that exemption [Amendment 4 - Schedule 1: section 51-35] .

3.6 The exemption and exclusions will remain as set out in paragraph 23(z) of the 1936 Act.

Amendment 3, 5 and 6 (Commonwealth educational assistance)

3.7 These amendments will remove the rewrite of:

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the exemption of certain Commonwealth educational assistance [Amendment 3 - Schedule 1: item 2.2 of section 51-10] ; and

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the exclusions from that exemption [Amendment 5 - Schedule 1: section 51-40] .

3.8 The exemption and exclusions will remain as set out in paragraph 23(zaa) of the 1936 Act.

3.9 As amendments 4 and 5 will remove sections 51-35 and 51-40, a note will be inserted after section 51-30 explaining that the next section is section 51-45 [Amendment 6] .

Amendment 7 (Youth training allowance)

3.10 This amendment will remove the rewrite of the exemption of the supplementary amount of youth training allowance [Schedule 1: Subdivision 52-D] . The exemption will remain as set out in Subdivision BA of Division 1AA of Part 3 of the 1936 Act.

Amendments 8 and 9 (Youth training allowance)

3.11 The 1997 Act contains a complete list of all the items of income that will be exempt if derived by certain entities and sets out for each item the reference to the provision of the 1936 Act or the 1997 Act where that exemption is located (section 11-15). The Bill proposes to update the references to items of exempt income that have been rewritten in the Bill. Amendments 8 and 9 will ensure that the update of the list excludes the items no longer being rewritten by the Bill as a result of these amendments [Schedule 3: items 6 and 9] .

Amendments 10, 11 and 12 (Dictionary definitions)

3.12 The Bill proposes to insert in the Dictionary to the 1997 Act references to the defined terms ordinary payment, supplementary payment and tax free amount . These terms are used, and defined, in the rewrite of the exempt income provisions. The Dictionary signposts readers to where these terms are defined. Amendments 8 to 10 will remove signpost references to provisions that are proposed to be omitted from the Bill by the amendments discussed in this chapter [Schedule 3: items 26, 29 and 30] .

Amendments 13, 14 and 15 (Application of 1936 Act provisions)

3.13 As a consequence of the rewrite of the exempt income provisions in the 1936 Act, the Bill proposes to amend those provisions by closing off their Amendments 13,14 and 15 propose to omit from those closing-off amendments the provisions dealing with educational and training assistance which are proposed to be omitted from the Bill [Schedule 3: items 31 and 36] .

Amendments 16 and 17 (Definitions in the 1936 Act)

3.14 The Bill proposes to amend the definitions of eligible income and salary and wages in the 1936 Act by replacing references to certain provisions that exempt payments with references to their equivalent provisions in the 1997 Act. Amendments 16 and 17 will modify those references to reflect the changes proposed by the other amendments discussed in this chapter [Schedule 3: items 55 and 58] .