Chapter 3: Tax expenditures

Date

28 August 2012

3.6 Income tax benchmark

Most Australian Government taxes are imposed on income rather than commodities. The following sections outline the general features of the income tax benchmark.

Separate benchmarks are used for personal income, business income, superannuation, fringe benefits and capital gains because they have distinct tax regimes that affect how tax expenditures are measured against the general income tax benchmark.

Detailed descriptions of the income tax benchmarks are provided in Appendix A.

Personal income

General features of the personal income tax benchmark:

a tax base including all nominal income less expenses incurred in earning income;
a tax scale comprising tax rates, associated income tax thresholds, Medicare levy and low income tax offset;
the individual as the tax unit; and
the financial year as the tax period.

Tax expenditures for general public services

A1 Deduction for expenses incurred by election candidates

General public services — Legislative and executive affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
2	2	2	2	3	3	3	3
Tax expenditure type:		Deduction			2009 TES code:		A1
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Sections 25-60, 25-65 and 25-70 of the Income Tax Assessment Act 1997

Certain expenses incurred by candidates contesting federal, state and territory government elections are deductible. Expenses of up to $1,000 per election incurred by candidates contesting local government elections are also deductible. Candidates are eligible for the deduction irrespective of whether they successfully contest the election.

A2 Exemption of official salaries and certain other income of the Governor-General and Governor of any State

General public services — Legislative and executive affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
..	..	..	..	..	..	-	-
Tax expenditure type:		Exemption			2009 TES code:		A2
Estimate Reliability:		High
Commencement date:		Introduced before 1985			Expiry date:		No longer available for appointments after 28 June 2001
Legislative reference:		Former section 51-15 of the Income Tax Assessment Act 1997

The ordinary and statutory income of the Governor-General and State Governors derived from a source outside Australia, along with their official salaries, were exempt from income tax. This exemption is not available for appointments made after 28 June 2001.

The NSW Governor is the only remaining State Governor appointed before 28 June 2001.

A3 Exemption of income earned by Australians from working on approved overseas projects

General public services — Foreign affairs and economic aid ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
320	340	395	260	85	90	100	110
Tax expenditure type:		Exemption			2009 TES code:		A3
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Section 23AF of the Income Tax Assessment Act 1936

Note: estimates include tax expenditures A3 and A4.

Income earned by Australians from working on certain approved overseas projects for a continuous period of 91 days or more may be exempt from income tax. To be approved, projects must be considered to be in the national interest by the Minister for Trade (or the Minister's delegate).

A4 Exemption of income earned by Australians working in a foreign country

General public services — Foreign affairs and economic aid ($m)

2006-07	2008-09	2011-12	2013-14
Included in A3
Tax expenditure type:	Exemption	2009 TES code:	A4
Estimate Reliability:
Commencement date:	1986	Expiry date:
Legislative reference:	Section 23AG of the Income Tax Assessment Act 1936

Foreign earnings derived by an Australian individual engaged in continuous foreign service for not less than 91 days may be exempt from income tax if the foreign service is directly attributable to:

the delivery of Australia's overseas aid program by the individual's employer;
the activities of the individual's employer in operating a developing country relief fund or a public disaster relief fund;
the activities of the individual's employer being a prescribed institution that is exempt from Australian income tax;
the individual's deployment outside Australia by an Australian government (or an authority thereof) as a member of a disciplines force; or
an activity of a kind specified in the regulations.

This exemption does not apply where the foreign earnings are exempt from income tax in the foreign countr
y for certain reasons.

This concession was modified in the 2009-10 Budget by replacing the previous broader exemption with the targeted concession above, with effect from 1 July 2009.

A5 Exemption of income of certain visitors to Australia

General public services — Foreign affairs and economic aid ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
1	1	1	1	1	1	1	1
Tax expenditure type:		Exemption			2009 TES code:		A5
Estimate Reliability:		Very Low
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Section 842-105 and Section 768-100 of the Income Tax Assessment Act 1997

The earnings of certain foreign residents and visitors to Australia are exempt from income tax.

This exemption broadly applies to Australian sourced income earned by foreign residents in their official capacity:

as a visiting foreign government representative or member of their entourage;
as a representative of an educational, scientific, religious or philanthropic society or association;
as a member of the foreign media reporting on proceedings relating to a visitor referred to in one of the preceding points;
as an advisor to an Australian Government Agency or as a member of a Royal Commission; or
in assisting the Australian Government in regards to Australia's defence where the income is non-exempt in their country of residence.

The official salary and foreign sourced income earned by visitors to Australia are also exempt from income tax where reciprocal tax exemptions are provided by their home country and the visitor is:

a foreign Government representative or staff of the representative when the Vienna Conventions on Consular or Diplomatic Relations do not apply; or
an officer of a British Commonwealth of Nations Country in Australia to either provide their services on behalf of their country or an Australian Government Agency in accordance with intergovernmental arrangements.

A6 Exemption of official salary and emoluments of officials of prescribed international organisations

General public services — Foreign affairs and economic aid ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
*	*	*	*	*	*	*	*
Tax expenditure type:		Exemption			2009 TES code:		A6
Estimate Reliability:		Not Applicable			* Category		1+
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		International Organisations (Privileges and Immunities) Act 1963

The official salary and emoluments of officials of prescribed international organisations may be exempt from income tax as part of the privileges and immunities required under the terms of certain international agreements. Prescribed international organisations include the United Nations organisations, the OECD, the International Court of Justice and the International Atomic Energy Agency.

A7 Exemption from income tax and Medicare levy of residents of Norfolk Island

General public services — General services ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
8	8	7	8	8	8	9	10
Tax expenditure type:		Exemption			2009 TES code:		A7
Estimate Reliability:		Low
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Division 1A of Part III and sections 251T and 251U of the Income Tax Assessment Act 1936

Income earned by residents of Norfolk Island is exempt from income tax and the Medicare levy.

Tax expenditures for defence

A8 Exemption from the Medicare levy for current and veteran Australian Defence Force members and their relatives and associates

Defence ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
50	60	70	75	80	80	85	90
Tax expenditure type:		Exemption			2009 TES code:		A8
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Sections 251T and 251U of the Income Tax Assessment Act 1936

Income earned by current and veteran Australian Defence Force personnel and people who are entitled to free medical treatment because they are relatives of, or individuals otherwise associated with, Australian Defence Force personnel, such as a repatriation beneficiary, is generally exempt from the Medicare levy.

A9 Exemption of certain allowances paid to Australian Defence Force personnel

Defence ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013 -14
40	50	70	70	80	75	80	80
Tax expenditure type:		Exemption			2009 TES code:		A9
Estimate Reliability:		Medium — Low
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Section 51-5 of the Income Tax Assessment Act 1997 Regulation 51-5.01 of the Income Tax Assessment Regulations 1997

Certain allowances payable to Australian Defence Force personnel are exempt from income tax. These include the following allowances — separation allowance, disturbance allowance, rent allowance paid to a member without dependents or a member with dependents (unaccompanied), transfer allowance, and deployment allowance.

In the case of rent allowance paid to Australian Defence Force personnel, the benchmark treatment is compensation for the actual additional cost faced by employees in living away from their homes. Accordingly, this tax expenditure relates solely to that part of the allowance that is in excess of this compensation.

A10 Exemption of certain rehabilitation and compensation payments

Defence ($m)

2006-07	2008-09	2011-12	2013-14
Tax expenditure type:	Exemption	2009 TES code:	New
Estimate Reliability:	Medium-Low
Commencement date:	2004	Expiry date:
Legislative reference:	Subdivisions 52-CA and 52-CB of the Income Tax Assessment Act 1997

Certain payments made under the Military Rehabilitation and Compensation Act 2004 and the Australian Participants in British Nuclear Tests (Treatment) Act 2006 are wholly or partly exempt from income tax.

A11 Exemption of compensation for loss of deployment allowance paid to Australian Defence Force members

Defence ($m)

2006-07	2008-09	2011-12	2013-14
Tax expenditure type:	Exemption	2009 TES code:	A10
Estimate Reliability:	Medium
Commencement date:	1996	Expiry date:
Legislative reference:	Sections 51-5 and 51-32 of the Income Tax Assessment Act 1997

Australian Defence Force personnel may receive compensation for the loss of deployment allowance where the deployment allowance ceases to be paid upon repatriation to Australia due to injuries sustained in a warlike situation. Such compensation payments are exempt from income tax.

A12 Exemption of compensation for loss of pay and allowances paid to Australian Defence Force Reserve personnel

Defence ($m)

2006-07	2008-09	2011-12	2013-14
Tax expenditure type:	Exemption	2009 TES code:	A11
Estimate Reliability:	Low
Commencement date:	1996	Expiry date:
Legislative reference:	Sections 51-5 and 51-33 of the Income Tax Assessment Act 1997

Australian Defence Force Reserve personnel who are forced to resign due to injuries sustained whilst employed by the Reserves may receive compensation for the loss of pay and allowances. Such compensation payments are exempt from income tax.

A13 Exemption of pay and allowances earned by members of the Australian Defence Force on eligible duty

Defence ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
55	70	65	80	75	80	80	80
Tax expenditure type:		Exemption			2009 TES code:		A12
Estimate Reliability:		Medium — Low
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Sections 23AC and 23AD of the Income Tax Assessment Act 1936

Base pay and allowances, which are not exempt from income tax under another provision of the income tax law, made to Australian Defence Force personnel while on eligible duty at a specified area, are exempt from income tax.

A14 Exemption of pay and allowances earned in Australia by foreign forces

Defence ($m)

2006-07	2008-09	2011-12	2013-14
Tax expenditure type:	Exemption	2009 TES code:	A13
Estimate Reliability:	Very Low
Commencement date:	Introduced before 1985	Expiry date:
Legislative reference:	Section 842-105 of the Income Tax Assessment Act 1997

Pay and allowances earned in Australia as a member of a foreign force is exempt from income tax. This does not apply if the Australian Government makes the payment.

A15 Exemption of pay and allowances for part-time Australian Defence Force Reserve personnel

Defence ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
35	50	50	55	55	55	60	60
Tax expenditure type:		Exemption			2009 TES code:		A14
Estimate Reliability:		Medium — Low
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Section 51-5 of the Income Tax Assessment Act 1997

The pay and allowances of part-time Australian Defence Force Reserve personnel are exempt from income tax.

A16 Exemption of some payments to Australian Federal Police and civilian personnel in service with an armed force of the United Nations

Defence ($m)

2006-07	2008-09	2011-12	2013-14
Tax expenditure type:	Exemption	2009 TES code:	A15
Estimate Reliability:	Very Low
Commencement date:	Introduced before 1985	Expiry date:
Legislative reference:	Section 23AB of the Income Tax Assessment Act 1936

Australian Federal Police and civilian personnel contributed by Australia to an armed force of the United Nations may receive compensation in respect of death, impairment or incapacity resulting from their service. Such compensation payments are exempt from income tax. The estate of a deceased civilian who has performed United Nations service may also receive relief from unpaid tax in respect of pay and allowances. In addition, a partial income tax exemption applies to living allowances paid to civilians who died during periods of United Nations service.

A17 Tax offsets for Australian Defence Force personnel serving overseas and for Australian Federal Police and civilians serving with United Nations forces

Defence ($m)

2006-07	2008-09	2011-12	2013-14
Included in A52
Tax expenditure type:	Offset	2009 TES code:	A16
Estimate Reliability:
Commencement date:	Introduced before 1985	Expiry date:
Legislative reference:	Sections 79B and 23AB(7) of the Income Tax Assessment Act 1936

Australian Defence Force personnel who serve overseas and civilian personnel contributed by Australia to an armed force of the United Nations may be eligible for a tax offset. Personnel or civilians qualify for the full offset amount if their total period of overseas service is more than half the income year or if they die while on service. Personnel or civilians who serve for less than half the income year receive a proportion of the full amount. The offset is made up of a base amount with additional entitlements for individuals who maintain dependants.

Tax expenditures for education

A18 Denial of deductibility for certain self-education expenses

Education ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
*	*	*	*	*	*	*	*
Tax expenditure type:		Denial of deduction			2009 TES code:		A18
Estimate Reliability:		Not Applicable			* Category		3-
Commencement date:		1989			Expiry date:
Legislative reference:		Section 26-20 of the Income Tax Assessment Act 1997

Course fees and interest repayments for a Higher Education Contribution Scheme Higher Education Loan Programme (HECS-HELP) place funded by the individual are not tax deductible, even for the proportion that relates to income earning activities.

Self-education expenses would otherwise be deductible to the extent that the self-education is to maintain or improve skills or knowledge which the taxpayer uses in income earning activities.

A19 Education Tax Refund

Education ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-	-	-	-	130	150	160	190
Tax expenditure type:		Exemption			2009 TES code:		A17
Estimate Reliability:		Medium
Commencement date:		2008			Expiry date:
Legislative reference:		Subdivision 61-M of the Income Tax Assessment Act 1997

Education Tax Refund payments are exempt from income tax.

Eligible taxpayers can claim a refundable tax offset for 50 per cent of eligible education expenses incurred in respect of a student undertaking prima
ry or secondary school studies, up to a maximum amount. For expenses incurred in 2008-09, the maximum amount of the Education Tax Refund was $375 for each primary school student and $750 for each secondary school student. In later years, these maximum amounts are indexed in line with increases in the Consumer Price Index.

The Education Tax Refund applies to eligible expenses incurred from 1 July 2008.

A20 Exemption of income from certain educational scholarships, payments to apprentices or similar forms of assistance

Education ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
24	26	34	30	31	30	30	30
Tax expenditure type:		Exemption			2009 TES code:		A19
Estimate Reliability:		Low
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Sections 51-10, 51-35, 51-40, 51-42 and 842-105 of the Income Tax Assessment Act 1997

Income derived by way of scholarships, bursaries or other educational allowances to a student receiving full-time education at a school, college or university may be exempt from income tax. Income derived as part of an Australian Government scheme to assist secondary education or the education of isolated children is exempt from income tax, excluding federal education or training payments or education entry payments provided under the Social Security Act 1991.

A number of other educational assistance payments are also exempt from income tax, including grants from the Australian American Educational Foundation (that is, Fulbright Scholarships), and the early completion bonus payments for apprentices in trades suffering a skills shortage. Other eligible payments are listed in the Income Tax Assessment Act 1997.

A21 Threshold for the deductibility of self-education expenses

Education ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-11	-10	-11	-11	-12	-12	-12	-13
Tax expenditure type:		Denial of deduction			2009 TES code:		A20
Estimate Reliability:		Medium — Low
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Section 82A of the Income Tax Assessment Act 1936

Self-education expenses are deductible if the purpose of the self-education is to maintain or improve skills or knowledge which the taxpayer uses in income earning activities. In certain circumstances taxpayers may have to reduce their allowable self-education expenses by $250, which may reduce the deduction that they can claim for self-education expenses. Self-education expenses that are non-deductible, such as child care costs and non-deductible travel expenses which relate to self-education, can be offset against the $250 threshold.

Tax expenditures for health

A22 Deduction for payment of United Medical Protection Limited support payments

Health ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
1	..	-	-	-	-	-	-
Tax expenditure type:		Deduction			2009 TES code:		A21
Estimate Reliability:		Low
Commencement date:		2003			Expiry date:
Legislative reference:		Section 25-105 of the Income Tax Assessment Act 1997

From 2003-04, a specific tax deduction is available for all medical practitioners (including retirees) who are required to pay United Medical Protection Limited (UMP) support payments, equal to the full amount of the payment. UMP support payments are required of medical practitioners to fund the Australian Government's assumption of certain medical indemnity liabilities from medical defence organisations.

A23 Exemption from the Medicare levy for residents with a taxable income below a threshold

Health ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
920	980	1,040	1,080	1,130	1,190	1,240	1,300
Tax expenditure type:		Exemption			2009 TES code:		A22
Estimate Reliability:		Low
Commencement date:		1986			Expiry date:
Legislative reference:		Section 7 of the Medicare Levy Act 1986

The Medicare levy generally applies at a flat rate to a taxpayer's whole taxable income. Residents whose taxable income falls below a threshold are exempt from the Medicare levy, with the levy phased in once the taxpayer's income exceeds the threshold.

A24 Exemption of 30 per cent private health insurance refund, including expense equivalent

Health ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
980	1,020	1,070	1,140	1,250	1,260	1,140	1,190
Tax expenditure type:		Exemption			2009 TES code:		A23
Estimate Reliability:		Medium — High
Commencement date:		1998			Expiry date:
Legislative reference:		Section 52-125 of the Income Tax Assessment Act 1997

Taxpayers can receive a 30 per cent refund on the costs of private health insurance either as a refundable tax offset, direct payment or through reduced premiums. From 1 April 2005, the refund increased from 30 per cent to 35 per cent for individuals aged between 65 and 69 years, and to 40 per cent for individuals aged 70 years and over. These payments are exempt from income tax.

From 1 July 2011 the Government will introduce three new 'Private Health Insurance Tiers' which may affect the amount of refund a taxpayer can receive. The tiers lower the amount of private health insurance refund claimable for individuals and couples on certain incomes. Individuals and couples who earn less than the Medicare levy surcharge thresholds will continue to receive the full refund amount.

A25 Medical expenses tax offset

Health ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
345	390	420	505	540	480	510	545
Tax expenditure type:		Offset			2009 TES code:		A24
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Section 159P of the Income Tax Assessment Act 1936

A tax offset is available to a taxpayer whose net medical expenses in the income year exceed a certain threshold. Qualifying medical expenses may relate both to resident taxpayers and any resident dependants but are net of available reimbursements, such as Medicare and private health insurance refunds. From 1 July 2010 the value of the offset will be 20 per cent of the excess of eligible net medical expenses above a threshold of $2,000. This threshold will be indexed annually with the first indexation to occur on 1 July 2011.

A26 Medicare levy exemption for blind pensioners, sickness allowance recipients and foreign government representatives

Health ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
105	105	110	120	135	150	170	185
Tax expenditure type:		Exemption			2009 TES code:		A25
Estimate Reliability:		Medium
Commencement date:		1986			Expiry date:
Legislative reference:		Sections 251T and 251U of the Income Tax Assessment Act 1936

The income of recipients of specified payments made under the Social Security Act 1991 and foreign government representatives is generally exempt from the Medicare levy.

A27 Medicare levy surcharge lump sum payment in arrears offset

Health ($m)

2006-07	2008-09	2011-12	2013-14
Tax expenditure type:	Offset	2009 TES code:	A26
Estimate Reliability:	High
Commencement date:	1 July 2005	Expiry date:
Legislative reference:	Subdivision 61L of the Income Tax Assessment Act 1997

From 2005-06, concessional Medicare levy surcharge treatment has been provided to eligible taxpayers who receive certain lump sum payments in arrears. This measure allows taxpayers who have a Medicare levy surcharge liability, or an increased liability, as a result of certain lump sum payments in arrears to receive concessional treatment in respect of their surcharge liability.

A28 Private health insurance surcharge on income earners who do not hold private health insurance

Health ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-330	-400	-510	-200	-210	-220	-310	-330
Tax expenditure type:		Increased rate			2009 TES code:		A27
Estimate Reliability:		Medium
Commencement date:		1997			Expiry date:
Legislative reference:		Sections 8B to 8D of the Medicare Levy Act 1986 A New Tax System (Medicare Levy Surcharge — Fringe Benefits) Act 1999

Individuals and couples who do not have appropriate private health insurance and whose income exceeds a threshold are subject to an increased Medicare levy, known as the Medicare levy surcharge. From 1 July 2010, the income for surcharge threshold purposes above which the private health insurance surcharge is payable is $77,000 for single individuals and $154,000 for couples and families. For families with more than one dependent child the threshold is increased by $1,500 for each dependent child after the first. The singles threshold is indexed annually to changes in average wee
kly ordinary time earnings. The couples and families threshold is double the singles threshold. The surcharge has applied since 1 July 1997 and is a negative tax expenditure.

From 1 July 2011 the Government will introduce three new 'Private Health Insurance Tiers' which may affect the amount of surcharge to which a taxpayer is subject. The tiers increase the level of the Medicare levy surcharge for individuals and couples on certain incomes.

Tax expenditures for social security and welfare

A29 Exemption of disaster relief payments for individuals

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
1	14	42	19	*	*	*	*
Tax expenditure type:		Exemption			2009 TES code:		New
Estimate Reliability:		Medium — Low			* Category		2+
Commencement date:		1 July 2008			Expiry date:
Legislative reference:		Section 51-30 of the Income Tax Assessment Act 1997

Certain payments made to individuals who are victims of natural disasters or acts of terrorism are made exempt from income tax.

Without a specific exempting provision, such payments would generally be treated as assessable income.

A30 Exemption of the Baby Bonus

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
175	165	165	165	125	110	120	125
Tax expenditure type:		Exemption			2009 TES code:		A29
Estimate Reliability:		Medium
Commencement date:		1 July 2004			Expiry date:
Legislative reference:		Section 52-150 of the Income Tax Assessment Act 1997

The Baby Bonus (previously known as the Maternity Payment) is exempt from income tax.

The Baby Bonus is available in respect of children born or adopted from 1 July 2004. Prior to 1 July 2004, taxpayers may have been eligible for the first child tax offset (also known as the Baby Bonus). See also the related tax expenditure A47 Exemption of the first child tax offset (Baby Bonus).

The Maternity Immunisation Allowance is also exempt from income tax and is included in this tax expenditure.

A31 Exemption of the Child Care Tax Rebate

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-	-	120	545	370	380	415	455
Tax expenditure type:		Exemption			2009 TES code:		A30
Estimate Reliability:		Medium
Commencement date:		1 July 2007			Expiry date:
Legislative reference:		Section 52-150 of the Income Tax Assessment Act 1997

The Child Care Tax Rebate (CCTR) is exempt from income tax.

From 1 July 2007 families may receive CCTR to cover a proportion of out-of-pocket expenses on approved child care, up to a maximum amount per child. For expenses incurred in 2006-07 and 2007-08, this proportion was 30 per cent and the maximum amount per child was $4,211 in 2006-07 and $4,354 in 2007-08. For expenses incurred in 2008-09 and later years, this proportion is 50 per cent. The maximum amount per child was $7,500 per child in 2008-09 and is indexed in line with increases in the Consumer Price Index in later years.

For child care expenses incurred in 2004-05 and 2005-06, taxpayers may have been eligible for a tax offset in the next income year. See also the related tax expenditure A34 Tax offset for child care.

Tax concessions for certain taxpayers

A32 Release from particular tax liabilities in cases of serious hardship

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
21	29	46	38	*	*	*	*
Tax expenditure type:		Exemption			2009 TES code:		A31
Estimate Reliability:		High			* Category		2+
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Division 340 in Schedule 1 to the Tax Administration Act 1953

An individual taxpayer can be released from a tax liability where payment of the liability would cause serious hardship. This release from tax liability acts like a tax exemption.

A33 Senior Australians' Tax Offset

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
1,340	1,190	710	930	960	1,100	1,260	1,540
Tax expenditure type:		Offset			2009 TES code:		A32
Estimate Reliability:		Medium — Low
Commencement date:		1996			Expiry date:
Legislative reference:		Sections 160AAAA and 160AAAB of the Income Tax Assessment Act 1936

The Senior Australians' Tax Offset (SATO) may be available to taxpayers who are eligible to receive the age pension or a veterans' benefit, pension or allowance. This includes individuals who qualify for, but do not receive a benefit (for example, because they do not meet the means testing criteria).

A34 Tax offset for child care

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
270	365	55	-	-	-	-	-
Tax expenditure type:		Offset			2009 TES code:		A33
Estimate Reliability:		High
Commencement date:		1 July 2004			Expiry date:		30 June 2007
Legislative reference:		Subdivision 61-IA of the Income Tax Assessment Act 1997

For the income years 2005-06 and 2006-07, taxpayers could claim a tax offset for out-of-pocket child care expenses incurred in the previous income year. To be eligible for the tax offset, the taxpayer must have received Child Care Benefit (CCB) for approved child care and met the CCB work/training/study test (or otherwise been eligible for up to 50 hours of CCB).

The rebate covered 30 per cent of out-of-pocket expenses on approved child care, up to a maximum amount per child. This maximum amount was $4,000 in 2005-06 and $4,096 in 2006-07.

For child care expenses incurred in 2006-07 and later years, taxpayers may be eligible for the Child Care Tax Rebate. See also the related tax expenditure A31 Exemption of the Child Care Tax Rebate.

A35 Tax offset for recipients of certain social security benefits, pensions or allowances

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
390	350	250	250	240	250	270	290
Tax expenditure type:		Offset			2009 TES code:		A34
Estimate Reliability:		Medium — Low
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Section 160AAA of the Income Tax Assessment Act 1936

Taxpayers who receive certain social security benefits, pensions or allowances may be eligible for a tax offset (the beneficiary or the pensioner tax offsets). Qualifying government payments include:

various income support payments (for example, Newstart or Sickness Allowance);
various pensions (for example, age pension — where not eligible for the Senior Australians' Tax Offset — and carer payment);
Australian Government education and training payments (for example, Youth Allowance); and
various other payments (for example, payments to Community Development Employment Project (CDEP) participants, equine influenza wage supplement payments and exceptional circumstances relief payments).

A36 Tax offsets for dependent spouse, child-housekeeper and housekeeper who cares for a prescribed dependant

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
420	430	555	550	515	485	480	480
Tax expenditure type:		Offset			2009 TES code:		A35
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Sections 159J and 159L of the Income Tax Assessment Act 1936

A taxpayer may be entitled to claim a tax offset for that part of an income year where they contribute to the maintenance of:

a dependent spouse;
a child-housekeeper; or
a housekeeper, where the housekeeper cares for one or more of certain dependants of the taxpayer.

A taxpayer is not eligible to claim a tax offset for that part of an income year where the taxpayer or the taxpayer's spouse is eligible for Family Tax Benefit Part B.

From the 2008-09 income year, a taxpayer with income above a threshold will not be able to claim an offset. This threshold is $150,000 and will be indexed in line with increases in the Consumer Price Index from 1 July 2012 onwards.

A37 Tax offsets for taxpayers supporting a parent, parent-in-law, or invalid relative

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
30	40	40	40	40	40	40	40
Tax expenditure type:		Offset			2009 TES code:		A36
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Section 159J of the Income Tax Assessment Act 1936

A taxpayer may be entitled to claim a tax offset for that part of an income year where they contribute to the maintenance of a parent, parent-in-law or invalid relative.

A38 Mature Age Worker Tax Offset

Other economic affairs — Total labour and employment affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
470	455	460	445	445	445	455	465
Tax expenditure type:		Offset			2009 TES code:		A37
Estimate Reliability:		Medium
Commencement date:		2004			Expiry date:
Legislative reference:		Subdivision 61-K of the Income Tax Assessment Act 1997

Workers aged 55 years and over may be entitled to a tax offset, based on the amount of their net income from working. The offset applies from the 2004-05 income year. A maximum offset amount of $500 is payable on assessment.

A39 Asian Development Bank — income tax exemption for Australian staff

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2008-09	2011-12	2013-14
Tax expenditure type:	Exemption	2009 TES code:	A38
Estimate Reliability:	Medium — Low
Commencement date:	17 September 2005	Expiry date:
Legislative reference:	Regulation 6 of the Asian Development Bank (Privileges and Immunities) Regulations 1967

The income of Australian resident officers of the Asian Development Bank (ADB) is exempt from tax. This exemption is part of the broader arrangement with the ADB that facilitates the day-to-day running of the Australian office which services the needs of the Pacific Island countries.

A40 International taxation — foreign income exemption for temporary residents

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-	40	40	45	50	50	55	55
Tax expenditure type:		Exemption			2009 TES code:		A39
Estimate Reliability:		Low
Commencement date:		1 July 2006			Expiry date:
Legislative reference:		Subdivision 768-R of the Income Tax Assessment Act 1997

The majority of foreign source income of temporary residents is exempt from income tax and capital gains on only some Australian assets of temporary residents are taxed. Interest paid to foreign lenders by temporary residents is exempt from withholding tax.

Tax exemptions for certain government income support payments

A41 Exemption of certain income support benefits, pensions or allowances

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
650	640	500	430	450	480	530	560
Tax expenditure type:		Exemption			2009 TES code:		A40
Estimate Reliability:		Low
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Subdivisions 52-A, 52-E and 52-F of the Income Tax Assessment Act 1997

Certain social security pensions, benefits and allowances and certain repatriation pensions paid under the Social Security Act 1991 and the National Health Act 1953 are exempt from income tax.

Certain amounts of Commonwealth education or training payments and certain parts of payments under the Abstudy scheme are exempt from income tax.

A42 Exemption of certain pensions, annuities or allowances paid for persecution

Social security and welfare ($m)

2006-07	2008-09	2011-12	2013-14
Included in A43
Tax expenditure type:	Exemption	2009 TES code:	A41
Estimate Reliability:
Commencement date:	Introduced before 1985	Expiry date:
Legislative reference:	Section 768-105 of the Income Tax Assessment Act 1997

From 2001-02, certain foreign source World War II payments are exempt from income tax. This applies where the payment is in connection with:

any wrong or injury;
loss of, or dama
ge to, property; or
any other detriment;

suffered as a result of:

persecution by an enemy of the Commonwealth, or enemy associated regime, during World War II;
flight from such persecution; or
participation in a resistance movement against such forces.

Prior to 2001-02, certain pensions, annuities and allowances paid by the Federal Republic of Germany and the Kingdom of the Netherlands, as compensation for persecution or disability arising during World War II, were exempt from income tax.

A43 Exemption of certain war-related payments and pensions

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
410	430	430	440	440	440	450	450
Tax expenditure type:		Exemption			2009 TES code:		A42
Estimate Reliability:		Medium — Low
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Subdivisions 52-B and 52-C of the Income Tax Assessment Act 1997

Note: estimates include tax expenditures A43 and A42.

Repatriation pensions, or pensions, allowances and payments of a similar nature, and certain war-related payments and pensions are exempt from income tax.

A44 Exemption of Child Care Benefit

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
365	455	460	465	465	490	515	545
Tax expenditure type:		Exemption			2009 TES code:		A43
Estimate Reliability:		Medium — High
Commencement date:		2000			Expiry date:
Legislative reference:		Section 52-150 of the Income Tax Assessment Act 1997

Child Care Benefit paid by the Australian Government is exempt from income tax.

Child Care Benefit can be paid directly to child care service providers to reduce the fees charged. Alternatively, the payment can be made directly to parents as a lump sum at the end of the income year.

A45 Exemption of Family Tax Benefit, Parts A and B, including expense equivalent

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
2,200	2,230	2,330	2,010	1,950	2,010	2,080	2,170
Tax expenditure type:		Exemption			2009 TES code:		A44
Estimate Reliability:		Medium
Commencement date:		2000			Expiry date:
Legislative reference:		Section 52-150 of the Income Tax Assessment Act 1997

Family Tax Benefit payments are exempt from income tax.

A46 Exemption of rent subsidy payments under the Commonwealth/State mortgage and rent relief schemes

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
3	3	3	-	-	-	-	-
Tax expenditure type:		Exemption			2009 TES code:		A45
Estimate Reliability:		Medium — Low
Commencement date:		Introduced before 1985			Expiry date:		2008
Legislative reference:		Section 51-30 of the Income Tax Assessment Act 1997

Rent subsidy payments received by renters and paid under the Mortgage and Rent Relief Scheme by an Australian Government agency are exempt from income tax.

A47 Exemption of the first child tax offset (Baby Bonus)

Social security and welfare ($m)


2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
28	22	16	8	2	..	..	-
Tax expenditure type:		Exemption			2009 TES code:		A46
Estimate Reliability:		Medium — High
Commencement date:		2002			Expiry date:		Children born (or legal responsibility gained) on or before 30 June 2004
Legislative reference:		Subdivision 61-I of the Income Tax Assessment Act 1997

First child tax offset payments are exempt from income tax.

The first child tax offset (also known as the Baby Bonus) is available to parents who gained legal responsibility for a child between 1 July 2001 and 30 June 2004 and remain
s available until that child turns five.

See also the related tax expenditure A30 Exemption of the Baby Bonus.

A48 Exemption of Utilities Allowance and Seniors' Concession Allowance

Social security and welfare ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
28	38	62	114	19	1	1	1
Tax expenditure type:		Exemption			2009 TES code:		A47
Estimate Reliability:		Medium
Commencement date:		2004			Expiry date:
Legislative reference:		Sections 52-10 and 52-65 of the Income Tax Assessment Act 1997

Utilities Allowances and Seniors' Concession Allowances payable to senior Australians up to 20 September 2009 were exempt from income tax.

From 20 September 2009 the Utilities Allowance was absorbed into the Pension Supplement and the Seniors' Concession Allowance, together with the Telephone Allowance, became part of the Seniors' Supplement.

Utilities Allowance continues to be payable to recipients of Widow Allowance and Partner Allowance who are under age pension age and Disability Support Pension recipients who are aged under 21 years without children.

Tax expenditures for housing and community amenities

A49 Exemption of payments made under the First Home Owners Grant Scheme

Housing and community amenities ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
315	325	325	685	760	395	330	330
Tax expenditure type:		Exemption			2009 TES code:		A48
Estimate Reliability:		Medium
Commencement date:		2000			Expiry date:
Legislative reference:		A New Tax System (Commonwealth State Financial Arrangements) Act 1999 Appendix D, Intergovernmental Agreement on Commonwealth State Financial Relations Appropriation Act (No. 2) 2001-02 (for the additional grant) and relevant state legislation

Payments made under the First Home Owners Grant Scheme are exempt from tax. Eligible applicants purchasing or building their first home from 1 July 2000 are entitled to $7,000 assistance to compensate for the impact of the GST on the price of houses.

On 14 October 2008, the Australian Government announced that eligible first home buyers would receive an additional $7,000 for an established home ($14,000 in total) or an additional $14,000 for a new home ($21,000 in total) when purchasing between 14 October and 30 June 2009 (inclusive).

In the 2009-10 Budget the Australian Government announced that the additional assistance for eligible first home buyers would be extended to 30 September 2009 (inclusive) at the previously announced levels. For eligible first home buyers entering into contracts between 1 October 2009 and 31 December 2009 (inclusive) additional assistance of $3,500 ($10,500 in total) will be provided for the purchase of established homes and $7,000 for the purchase of new homes ($14,000 in total).

A number of State governments also provide additional grants to eligible first home buyers which are also exempt from tax.

A50 First Home Saver Accounts — Earnings

Housing and community amenities ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-	-	-	..	-1	..	1	3
Tax expenditure type:		Concessional rate			2009 TES code:		A63
Estimate Reliability:		Low
Commencement date:		1 October 2008			Expiry date:
Legislative reference:		Division 295 of the Income Tax Assessment Act 1997 Division 320 of the Income Tax Assessment Act 1997 Division 345 of the Income Tax Assessment Act 1997

First Home Saver Accounts provide a vehicle for individuals to save for the purchase of their first home. The income earned by First Home Saver Accounts is taxed to the account provider at a rate of 15 per cent.

The tax expenditure reflects the extra tax in a particular year that may be collected if First Home Saver Account earnings were included in the assessable income of the account holder and taxed at their marginal rate, rather than at 15 per cent.

A51 First Home Saver Accounts — Income tax exemption for the Government contribution

Housing and community amenities ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-	-	-	-	2	3	7	12
Tax expenditure type:		Exemption			2009 TES code:		A28
Estimate Reliability:		Low
Commencement date:		1 October 2008			Expiry date:
Legislative reference:		Subsection 345-50(3) of the Income Tax Assessment Act 1997

First Home Saver Account contributions made by the Government are exempt from tax. In 2010-11, account holders are eligible for a Government contribution of 17 per cent on the first $5,500 of personal contributions made to their accounts each year. An
individual who makes a contribution of $5,500 to their First Home Saver Account will be eligible for the maximum Government contribution of $935.

A52 Zone tax offsets

Housing and community amenities ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
210	220	240	235	250	250	255	260
Tax expenditure type:		Offset			2009 TES code:		A49
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Section 79A of the Income Tax Assessment Act 1936

Note: estimates include tax expenditures A52 and A17.

Taxpayers who live in prescribed remote areas of Australia are eligible for a tax offset.

Tax expenditures for recreation and culture

A53 Exemption of certain prizes

Recreation and culture ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-	..	..	..	..	..	..	..
Tax expenditure type:		Exemption			2009 TES code:		A50
Estimate Reliability:		High
Commencement date:		1 July 2006			Expiry date:
Legislative reference:		Section 51-60 of the Income Tax Assessment Act 1997

The Prime Minister's Prize for Australian History and Prime Minister's Prize for Science are exempt from income tax.

The Prime Minister's Literary Award is exempt from income tax from 1 July 2007.

A54 Income averaging for authors, inventors, performing artists, production associates and sportspersons

Recreation and culture ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
7	8	11	13	13	13	13	13
Tax expenditure type:		Concessional rate			2009 TES code:		A51
Estimate Reliability:		Medium — High
Commencement date:		1987			Expiry date:
Legislative reference:		Division 405 of the Income Tax Assessment Act 1997

Authors (including composers and artists), inventors, performing artists, production associates and sportspersons can be subject to significant fluctuations in their income. These taxpayers may be eligible for an income averaging scheme that provides concessional rates of tax for abnormal receipts above average income.

Tax expenditures for transport and communications

A55 Income tax exemption for LPG conversion grants

Transport and communication ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-	35	50	50	20	30	25	15
Tax expenditure type:		Exemption			2009 TES code:		New
Estimate Reliability:		Medium
Commencement date:		14 August 2006			Expiry date:
Legislative reference:		Section 6-15 of the Income Tax Assessment Act 1997

Payments made under the LPG Vehicle Scheme are exempt from tax. The scheme provides grants for the LPG conversion of a registered motor vehicle or the purchase of a new vehicle with LPG prior to first registration, subject to eligibility criteria.

For 2010-11 the grant for the conversion of a registered motor vehicle to LPG is $1,500. This will fall to $1,250 for 2011-12 and to $1,000 for 2012-13 and 2013-14. For purchases of new vehicles with LPG fitted the grant is $2,000 in each financial year.

Tax expenditures for other economic affairs

A56 Deductibility of union dues and subscriptions to business associations

Other economic affairs — Total labour and employment affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
*	*	*	*	*	*	*	*
Tax expenditure type:		Deduction			2009 TES code:		A52
Estimate Reliability:		Not Applicable			* Category		2+
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Section 25-55 of the Income Tax Assessment Act 1997

Union dues and subscriptions to trade, business or professional associations are specifically tax deductible up to a maximum amount of $42. This deduction is available in addition to any work related expense deduction.

A57 Deferral of tax and exemption for discounted shares or rights provided under employee share schemes

Other economic affairs — Total labour and employment affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
*	*	*	*	*	*	*	*
Tax expenditure type:		Exemption, Deferral			2009 TES code:		A53
Estimate Reliability:		Not Applicable			* Category		3+
Commencement date:		1995			Expiry date:
Legislative reference:		Former section 26AAC and Division 13A of the Income Tax Assessment Act 1936 Division 83A of the Income Tax Assessment Act 1997

Discounts on shares and rights acquired under an employee share scheme are generally included in a taxpayer's assessable income in the year the shares or rights are acquired. However, two tax concessions may be provided; either an upfront tax exemption or the deferral of tax.

Tax may be deferred in employee share schemes where there is a 'real risk of forfeiture' or the scheme is a capped salary sacrifice based scheme, subject to certain other conditions. The maximum period of deferral is seven years. This deferral period may be shortened by the occurrence of certain events, such as the employee ceasing employment. The deferral arrangements for salary sacrifice based schemes apply up to a cap of $5,000 worth of shares.

For taxpayers who pay tax upfront, a $1,000 tax exemption is available to taxpayers with an adjusted taxable income of less of than $180,000, if the taxpayer and the scheme satisfy certain other conditions.

Some shares or rights acquired under an employee share scheme prior to 1 July 2009 have different conditions for deferral of tax applying to them.

A58 Non-commercial losses — deductions allowed for certain taxpayers with an adjusted taxable income under $250,000

Other economic affairs — Total labour and employment affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
*	*	*	*	*	*	*	*
Tax expenditure type:		Deduction			2009 TES code:		A58
Estimate Reliability:		Not Applicable			* Category		3+
Commencement date:		1 July 2000			Expiry date:
Legislative reference:		Division 35 of the Income Tax Assessment Act 1997

The non-commercial losses rules prevent individuals carrying on unprofitable business activities claiming deductions for losses arising from such activities against their other income. Where a business's activity is objectively determined to be commercial in nature, the Commissioner of Taxation allows the taxpayer to apply those losses against their other income.

In order to reduce the compliance burden on taxpayers, individuals carrying on a business who have an adjusted taxable incomes of less than $250,000 may apply losses from a business activity against their other income in an income year if they satisfy one of four statutory tests in that year. These tests apply in place of the objective test by the Commissioner of Taxation. The four tests are designed to identify those businesses that are commercial in nature by looking at various known characteristics of a business, such as prior years' profits, assets used in carrying on the business, and revenues.

A proportion of individuals with an adjusted taxable income under $250,000 that meet one of the four tests and apply losses from their business activity against their other income will nonetheless be carrying on an uncommercial business activity.

A59 Non-commercial losses — exceptions to the non-commercial losses rules for primary producers and artists

Other economic affairs — Total labour and employment affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
105	105	90	125	125	125	125	125
Tax expenditure type:		Exemption			2009 TES code:		A71
Estimate Reliability:		Medium
Commencement date:		2000			Expiry date:
Legislative reference:		Subsection 35-10(4) of the Income Tax Assessment Act 1997

Individuals that carry on a primary production or professional arts business, who have income from other sources of less than $40,000, are exempt from the non-commercial losses provisions.

A proportion of individuals carrying on primary production or professional arts businesses that access this exemption and apply losses from their business activity against their other income will nonetheless be carrying on an uncommercial business activity.

A60 Tax deferral advantage arising from return of after-tax contributions to a pension or annuity

Other economic affairs — Total labour and employment affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
*	*	*	*	*	*	*	*
Tax expenditure type:		Deferral			2009 TES code:	A54
Estimate Reliability:		Not Applicable			* Category		2+
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Section 27H of the Income Tax Assessment Act 1936

The value of a pension or annuity may partly consist of contributions towards the income stream from the recipient's after-tax income. This part of the income stream is not taxed again when it is returned in the form of pension or annuity payments. A tax expenditure arises because the tax free part of a pension or annuity is apportioned evenly over the term of the income stream, providing a tax deferral advantage.

A61 50 per cent discount for interest income

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-	-	-	-	-	-	-	280
Tax expenditure type:		Concessional rate			2009 TES code:		New
Estimate Reliability:		Medium
Commencement date:		1 July 2012			Expiry date:
Legislative reference:		Not yet legislated

From 1 July 2012 the Government will provide Australian resident individuals with a 50 per cent tax discount for interest income. The discount will be capped at $500 of interest income received directly and indirectly (such as via a trust or partnership) from authorised deposit taking institutions (banks, building societies and credit unions) as well as bonds, debentures and annuities. The cap will increase to $1,000 from 1 July 2013.

A62 Denial of deductions for illegal activities

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
*	*	*	*	*	*	*	*
Tax expenditure type:		Deduction			2009 TES code:		A55
Estimate Reliability:		Not Applicable			* Category		1-
Commencement date:		1 July 1999			Expiry date:
Legislative reference:		Sections 26-52, 26-53 and 26-54 of the Income Tax Assessment Act 1997

Deductibility is denied for a loss or outgoing that is a bribe to a public official, including a foreign public official.

From 30 April 2005, deductions are also denied for expenditure to the extent it is incurred in the furtherance of, or directly in relation to, activities in respect of which the taxpayer has been convicted of an indictable offence. Indictable offences are those punishable by imprisonment for at least one year.

A63 Exemption of Tax Bonus for Working Australians

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-	-	-	2,065	105	1	-	-
Tax expenditure type:		Exemption			2009 TES code:		A56
Estimate Reliability:		Medium — High
Commencement date:		18 February 2009			Expiry date:
Legislative reference:		Section 59-45 of the Income Tax Assessment Act 1997

Payments of the Tax Bonus for Working Australians of up to $900 to eligible taxpayers from April 2009 are exempt from income tax. The Bonus is subject to an income threshold. A $900 Bonus was paid to eligible taxpayers with a taxable income in 2007-08 of up to $80,000. A $600 Bonus was paid to eligible taxpayers with a taxable income in 2007-08 of between $80,000 and $90,000 and a $250 Bonus was paid to eligible taxpayers with a taxable income in 2007-08 of between $90,000 and $100,000.

A64 Increased tax rates for certain minors

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-19	-16	-10	-9	-8	-6	-6	-6
Tax expenditure type:		Increased rate			2009 TES code:		A57
Estimate Reliability:		Medium
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Part III Division 6AA of the Income Tax Assessment Act 1936

Higher rates of taxation apply to the 'unearned income' of certain minors. 'Unearned income'includes dividend, interest, rent, royalties and other income from property. The special rates do not apply to minors classed as being in a full-time occupation.

A65 Part-year tax free threshold

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-40	-40	-45	-40	-40	-40	-40	-40
Tax expenditure type:		Increased rate			2009 TES code:		A59
Estimate Reliability:		Medium — High
Commencement date:		1986			Expiry date:
Legislative reference:		Sections 16 to 20 of the Income Tax Rates Act 1986

Taxpayers who become an Australian resident for the first time, or cease to be an Australian resident, receive a pro-rated tax free threshold. This corresponds to the number of months that the taxpayer is an Australian resident.

Prior to the 2006-07 income year, a student who ceased full-time education for the first time received a pro-rated tax free threshold, corresponding to the number of months that the student was not enrolled in full-time education.

A66 Philanthropy — Deduction for gifts to deductible gift recipients

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
710	820	940	700	760	810	890	970
Tax expenditure type:		Deduction			2009 TES code:		A67
Estimate Reliability:		Medium — Low
Commencement date:		Introduced before 1985			Expiry date:
Legislative reference:		Division 30 of the Income Tax Assessment Act 1997

Note: estimates include tax expenditures A66 and A67.

Gifts of cash and property (subject to certain conditions) of a value of $2 or more to deductible gift recipients (DGRs) are able to be claimed as a deduction by donors.

DGRs are listed in tables in Subdivision 30-B of the Income Tax Assessment Act 1997.

A67 Philanthropy — Deduction for gifts to deductible gift recipients where the donor receives a minor benefit

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2008-09	2011-12	2013-14
Included in A66
Tax expenditure type:	Deduction	2009 TES code:	A65
Estimate Reliability:
Commencement date:	1 July 2004	Expiry date:
Legislative reference:	Items 7 & 8 of the table in Section 30-15 of the Income Tax Assessment Act 1997

Subject to certain conditions, individual taxpayers may claim an income tax deduction for the net amount of contributions made to a deductible gift recipient (DGR) even though the taxpayer receives an associated minor benefit and the contribution is therefore not a 'gift'. The deduction available is the contribution less the market value of the minor benefit.

The minimum contribution an individual must make to be eligible for a deduction is $150, and the value of the benefit that can be received is up to 20 per cent of the contribution. The maximum capped benefit allowed for each contribution is $150.

A68 Philanthropy — Deduction for gifts to private ancillary funds

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
160	210	325	410	380	370	365	365
Tax expenditure type:		Deduction			2009 TES code:		A66
Estimate Reliability:		Medium — Low
Commencement date:		1 October 2009			Expiry date:
Legislative reference:		Item 2 of the table in Section 30-15 of the Income Tax Assessment Act 1997

Private ancillary funds allow businesses, families and individuals to establish and donate to a charitable or philanthropic trust. Private ancillary funds have deductible gift recipients (DGR) status. This means that donations of $2 or more to endorsed Private Ancillary Funds are tax deductible.

Private ancillary funds must disburse funds to deductible gift recipients (DGRs).

A69 Standard deduction for work-related expenses and the cost of managing tax affairs

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
-	-	-	-	-	-	-	410
Tax expenditure type:		Deduction			2009 TES code:		New
Estimate Reliability:		Medium
Commencement date:		1 July 2012			Expiry date:
Legislative reference:		Not yet legislated

From 1 July 2012 the Government will provide individual taxpayers with an optional standard deduction of $500 in lieu of claiming work-related expenses and the cost of managing tax affairs. The standard d
eduction will increase to $1,000 from 1 July 2013.

Concessions under the substantiation provisions for employment-related expenses

A70 A reasonable overtime meal allowance

Other economic affairs — Total labour and employment affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
*	*	*	*	*	*	*	*
Tax expenditure type:		Deduction			2009 TES code:		A60
Estimate Reliability:		Not Applicable			* Category		0
Commencement date:		1987			Expiry date:
Legislative reference:		Section 900-60 of the Income Tax Assessment Act 1997

A taxpayer is able to claim a deduction for a 'reasonable' overtime meal allowance expense payable under an industrial instrument.

A71 Alternatives to the logbook method of substantiating car expenses

Other economic affairs — Total labour and employment affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
*	*	*	*	*	*	*	*
Tax expenditure type:		Deduction			2009 TES code:		A61
Estimate Reliability:		Not Applicable			* Category		1+
Commencement date:		1987			Expiry date:
Legislative reference:		Division 28 and Subdivision 900-C of the Income Tax Assessment Act 1997

Three alternative methods to the logbook method (which is based on actual expenditure) are available to value car expense deductions:

the one third of actual expenses method (only available if business use exceeds 5,000 kilometres);
the 12 per cent of original value method (only available if business use exceeds 5,000 kilometres); and
the cents per kilometre method (only available up to a maximum of 5,000 business kilometres).

A72 Certain travel expenses in and outside Australia

Other economic affairs — Total labour and employment affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
*	*	*	*	*	*	*	*
Tax expenditure type:		Deduction			2009 TES code:		A62
Estimate Reliability:		Not Applicable			* Category		0
Commencement date:		1987			Expiry date:
Legislative reference:		Sections 900-50 and 900-55 of the Income Tax Assessment Act 1997

A taxpayer is able to claim a deduction in relation to a travel allowance for reasonable expenses on accommodation, meals and incidental costs of travel in Australia, and meals and incidental costs of travel outside Australia.

Miscellaneous tax expenditures

A73 Tax offset on certain payments of income received in arrears

Other economic affairs — Total labour and employment affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
4	5	6	6	6	6	6	6
Tax expenditure type:		Offset			2009 TES code:		A64
Estimate Reliability:		Medium — Low
Commencement date:		1986			Expiry date:
Legislative reference:		Sections 159ZR to 159ZRD of the Income Tax Assessment Act 1936

Individual taxpayers that receive lump sum payments of certain income that accrued in earlier income years may be entitled to a tax offset. Income that qualifies for the tax offset includes certain back payments of salary or wages, lump sum payments of workers' or accident compensation, and social security and other benefits, received on or after 1 July 1986.

A74 Exemption for structured settlements and structured orders

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
..	..	..	..	..	..	..	..
Tax expenditure type:		Exemption			2009 TES code:		A68
Estimate Reliability:		Low
Commencement date:		2001			Expiry date:
Legislative reference:		Division 54 of the Income Tax Assessment Act 1997

Certain annuities provided to personal injury victims under structured settlements and structured orders are exempt from income tax. These provisions allow personal injury victims who would be eligible to receive larg
e tax free lump sum compensation payments to receive all or part of their compensation in the form of a tax free annuity or annuities.

A75 Exemption of post-judgment interest awards in personal injury compensation cases

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
2	2	2	2	2	2	2	2
Tax expenditure type:		Exemption			2009 TES code:		A69
Estimate Reliability:		Low
Commencement date:		1992			Expiry date:
Legislative reference:		Section 51-57 of the Income Tax Assessment Act 1997

Interest may accrue on a judgment debt arising in personal injury compensation cases relating to the period between the original judgment and when the judgment is finalised. Such interest is exempt from tax.

A76 Immediate deduction for low-value depreciating assets not used in business

Other economic affairs — Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
*	*	*	*	*	*	*	*
Tax expenditure type:		Deduction			2009 TES code:		A70
Estimate Reliability:		Not Applicable			* Category		2+
Commencement date:		2001			Expiry date:
Legislative reference:		Sections 40-25 and 40-80(2) of the Income Tax Assessment Act 1997

An immediate deduction is available for depreciating assets costing $300 or less where those assets are used predominantly for the purpose of producing assessable income and where that income is not income from carrying on a business.