Commonwealth Numbered Regulations - Explanatory Statements

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INCOME TAX AMENDMENT REGULATIONS 2004 (NO. 2) 2004 NO. 80

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 23AD of the Act provides an exemption from income tax of pay and allowances of Australian Defence Force (ADF) members performing certain overseas duty.

Subsection 23AD(1) of the Act exempts the pay and allowances earned by ADF members from income tax where there is a certificate in force, issued in writing by the Chief of the Defence Force, to the effect that the members are on eligible duty. The certificate comes into force at the later of either the time specified in the certificate or the time the person arrives for duty in the specified area. The certificate continues to be in force until the earliest of the time of departure from the specified area, the date of revocation of the certificate or a time prescribed by regulation (subsection 23AD(3)) and is in force during any period of hospital treatment during the person's eligible duty.

Subsection 23AD(2) of the Act provides that the regulations may declare that duty with a specified organisation in a specified area outside Australia and after a specified day is eligible duty for the purposes of section 23AD.

Regulation 7A of the Income Tax Regulations 1936 (the Principal Regulations) specifies duty with various organisations in various areas outside Australia and declares that duty to be eligible duty for the purposes of section 23AD of the 1936 Act.

The amending regulations:

•       correct an error in the declaration of eligible duty with the United Nations Mission of Support in East Timor (UNMISET) in the specified area of operations (generally in East Timor) and insert a closing date for that duty, being 17 August 2003;

•       declare that duty with Operation Catalyst in the specified area of operations (generally in the Middle East) is eligible duty on or after 16 July 2003; and

•       declare that duty with Operation Palate within the area of operations (generally in Afghanistan) is eligible duty on or after 18 April 2003.

The Principal Regulations were erroneously amended by the Income Tax Amendment Regulations 2003 (No. 1) with the insertion of paragraph 7A(f) to declare that duty with UNMISET be eligible duty from 20 May 2003 (rather than 20 May 2002). The amending regulations correct the erroneous clause of the Principal Regulations. Further, since service rendered by ADF personnel with UNMISET after 17 August 2003 has been declared to be no longer 'warlike', under the current arrangements the amending regulations include a closing date for eligible duty in paragraph 7A(f).

The amending regulations also declare that duty with Operation Catalyst and Operation Palate to be eligible duty. This is necessary because the Minister for Defence has declared service with these operations in the specified areas of operation to be 'warlike' service for the purposes of section 23AD of the Act.

Eligible duty for ADF members deployed with UNMISET would be taken to be from 20 May 2002 to 17 August 2003 (inclusive). Similarly, eligible duty for ADF members deployed with Operation Catalyst would be taken to commence on or after 16 July 2003. Subsection 48(2) of the Acts Interpretation Act 1901 provides that a regulation, or a provision of regulations, has no effect if it would take effect before the date of notification, unless the rights or liabilities of a person (other than the Commonwealth) would not be disadvantaged. Exemption from income tax for ADF members on eligible duty is clearly to their advantage. Therefore the amending regulations are not subject to subsection 48(2) of the Acts Interpretation Act 1901 and may be validly made.

Details of the amending regulations are as follows:

Regulation 1 - Name of Regulations

Regulation 1 provides that these Regulations are the Income Tax Amendment Regulations 2004 (No. 2).

Regulation 2 - Commencement

Regulation 2 provides that these Regulations commence on the date of their notification in the Gazette.

Regulation 3 - Amendment of Income Tax Regulations 1936

Regulation 3 provides that Schedule 1 amends the Income Tax Regulations 1936.

Schedule 1 - Amendments (regulation 3)

Item 1 - Paragraph 7A(f)

Item 1 substitutes the phrase in paragraph 7A(f) 'on or after 20 May 2003' with 'from 20 May 2002 to 17 August 2003 (inclusive)'.

The Principal Regulations were erroneously amended by the Income Tax Amendment Regulations 2003 (No. 1) with the insertion of paragraph 7A(f) to declare that duty with UNMISET be eligible duty from 20 May 2003 (rather than 20 May 2002). Item 1 corrects the erroneous clause of the Principal Regulations. Further, since service rendered by ADF personnel with UNMISET after 17 August 2003 has been declared to be no longer 'warlike', item 1 also includes a closing date for eligible duty in paragraph 7A(f).

Item 2 - Paragraph 7A(g)

Item 2 makes a technical amendment to paragraph 7A(g) to accommodate further paragraphs (see item 3 below).

Item 3 - After paragraph 7A

Item 3 inserts two new paragraphs after paragraph 7A(g).

Paragraph 7A(h) declares duty with Operation Palate to be eligible duty from 18 April 2003. This is necessary because the Minister for Defence has declared service with Operation Palate in the specified area of operations to be 'warlike' service for the purposes of section 23AD of the Income Tax Assessment Act 1936 (the Act).

Paragraph 7A(i) declares duty with Operation Catalyst to be eligible duty from 16 July 2003. This is necessary because the Minister for Defence has declared service with Operation Catalyst in the specified area of operations to be 'warlike' service for the purposes of section 23AD of the Act.