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Ruling

Subject: PAYG instalment variation - NRAS offset

Question 1

Is the National Rental Affordability Scheme (NRAS) tax offset taken into account when calculating a Pay As You Go Instalment (PAYGI) variation?

Answer

Yes

Question 2

Is the State or Territory government component of the NRAS taken into account when calculating a PAYGI variation?

Answer

No

This ruling applies for the following periods

Year ending 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commences on:

1 July 2012

Relevant facts and circumstances

You wish to purchase a property which is eligible for the NRAS. You wish to determine whether the NRAS tax offset and contribution component will be taken into account when varying a PAYG instalment amount.

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 380,

Income Tax Assessment Act 1997 Section 380-35,

Income Tax Assessment Act 1997 Subsection 6-15(3),

Taxation Administration Act 1953 Schedule 1 Section 45-112,

Taxation Administration Act 1953 Schedule 1 Paragraph 45-112(1)(b),

Taxation Administration Act 1953 Schedule 1 Section 45-365,

Taxation Administration Act 1953 Schedule 1 Section 45-370 and

Taxation Administration Act 1953 Schedule 1 Section 45-375.

Reasons for decision

Federal Government offset

The provisions of the National Rental Affordability Scheme (NRAS) are contained in the National Rental Affordability Scheme Act 2008. The NRAS comprises two parts. The Federal Government provides a refundable tax offset as per Division 380 of the Income Tax Assessment Act 1997 (ITAA 1997), and an additional payment or an amount in kind is provided by the State and Territory governments.

The Pay As You Go Instalments (PAYGI) system legislation is contained in the Taxation Administration Act 1953 (TAA) Schedule 1, Part 2-10, Division 45.

Section 45-112 of Schedule 1 to the TAA allows taxpayers who are in the PAYGI system to vary their instalments if they believe the Commissioner's assessed amount is not an accurate assessment of their tax liability. Paragraph 45-112(1)(b) of Schedule 1 to the TAA states that if you choose to work out your instalment on the basis of your assessment of your benchmark tax, the amount of your instalment is the amount worked out under Subdivision 45-M.

Section 45-365 of Schedule 1 to the TAA states that your benchmark tax is your adjusted assessed tax on your adjusted assessed taxable income for the variation year. Subsection 45-365(3) states that your benchmark tax is reduced by any PAYG withholding credits to which you are entitled.

Section 45-370 of Schedule 1 to the TAA states that your adjusted assessed taxable income is your taxable income for the year reduced by any net capital gains.

Section 45-375 to Schedule 1 to the TAA states that your adjusted assessed tax is calculated as follows:

a) calculate the tax payable on your adjusted assessed taxable income

b) disregard the following tax offsets:

· the private health insurance tax offset

· the child care tax offset

· the mature age worker tax offset

· the tax offset for Medicare levy surcharge (lump sum payments in arrears)

· the education expenses tax offset

· the tax offset for franking deficit tax liabilities

· the low income tax offset; and

· the tax offset for spouse superannuation contributions

c) calculate the Medicare levy (disregard any Medicare levy surcharge)

d) calculate any compulsory HELP and SFSS repayments

The total of these amounts is your adjusted assessed tax.

As the NRAS tax offset is not amongst the tax offsets which are disregarded, you will take the NRAS offset into account when calculating your adjusted assessed tax (i.e. it will reduce your adjusted assessable tax).

State or territory Government payment

Section 380-35 of the ITAA 1997 states that payments or non-cash benefits received from a State or Territory under the NRAS are not assessable income and are not exempt income.

Subsection 6-15(3) of the ITAA 1997 states that non-assessable, non-exempt income is not assessable income.

The State payment or non-cash benefit is therefore not assessable income and will not be taken into consideration when calculating your PAYGI.