Commonwealth Numbered Regulations - Explanatory Statements

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INCOME TAX REGULATIONS (AMENDMENT) 1996 NO. 114

STATUTORY RULES 1996 No. 114

Issued by authority of the Assistant Treasurer

Income Tax Assessment Act 1936

Income Tax Regulations (Amendment)

For the purposes of the Income Tax Assessment Act (the Act), the Governor-General may make regulations under section 266 of the Act.

These regulations amend income tax subregulation 10(3) of the Income Tax Regulations to include a prescribed minimum cost price for natural increase of emus.

A taxpayer who returns income from farming livestock is required to include the cost price of natural increase of livestock in assessing any difference between the opening and closing values of livestock. This difference is included in calculation of assessable income. The 'prescribed minimum cost price' is the cost price taxpayers are required to use in this calculation where applicable. Where no minimum cost price is prescribed, taxpayers must calculate the 'actual cost price' of natural increase (subsection 34(2B) of the Act).

The accepted method of determining actual cost price is complex and time consuming, and involves calculating all direct and indirect costs of producing the natural increase. To alleviate the potential burden of calculating actual cost price, it was decided to set minimum values for new classes of livestock where farmers of the class of livestock seek such values.

Emus are not currently listed in subregulation 10(3). Members of the Emu Farmers' Federation of Australia have requested that a minimum cost be prescribed for natural increase in emus, to reduce the cost of complying with the law. The data provided by emu farmers indicates that a minimum cost price of $8.00 per head should be prescribed.

If subregulation 10(3) were not amended as described, emu farmers would be required to calculate the actual cost price of all natural increase in their emu herds each year in order to complete their income tax returns in accordance with subsection 34(213). This would result in high on-going compliance costs to those farmers.

As sub-regulation 10(3) applies from 1 July 1994, the prescribed cost price of natural increase of emus will retrospectively apply from that date. This is unlikely to disadvantage emu farmers. However, any emu farmer who has calculated a cost price and wishes to use that calculation may elect to use a lower cost price or, with the Commissioner's leave, may select a higher cost than that prescribed (see subparagraphs 34(1)(b)(ii) or 34(1)(a)(ii) and (iii) of the Act, respectively). Therefore the measure does not impose any disadvantage or liabilities on any person affected.

These regulations insert a prescribed minimum cost price of $8.00 per head for natural increase of emus into subregulation 10(3).

Details of the amending regulations are as follows:

Regulation 1 provides that the Income Tax Regulations are to he amended as set out in the unending regulations.

Regulation 2 amends subregulation 10(3) by inserting item 8 at the end of the table to prescribe the minimum cost price in relation to emus to be $8.00.