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Personal Income

Date

2.2 Tax expenditures (continued)

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.
A1 Deduction for expenses incurred by election candidates
General public services — Legislative and executive affairs ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
2 2 1 1 1 1 1 1
Tax expenditure type: Deduction 2012 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)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
.. .. .. .. .. - - -
Tax expenditure type: Exemption 2012 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 certain income earned by Australians working overseas
General public services — Foreign affairs and economic aid ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
220 65 55 50 50 50 55 55
Tax expenditure type: Exemption 2012 TES code: A3
Estimate Reliability: Medium  
Commencement date: Introduced before 1985 Expiry date:
Legislative reference: Sections 23AF and 23AG of the Income Tax Assessment Act 1936

Income earned by Australians working overseas for a continuous period of 91 days or more may be exempt from income tax if they are employed to work on certain approved overseas projects or if their foreign employment 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 may not apply where the foreign earnings are exempt from income tax in the foreign country.

A4 Exemption of income of certain visitors to Australia
General public services — Foreign affairs and economic aid ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
* * * * * * * *
Tax expenditure type: Exemption 2012 TES code: A12 and A4
Estimate Reliability: Low * Category 1+
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 philanthropi
    c 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;
  • in assisting the Australian Government in regards to Australia’s defence where the income is non-exempt in their country of residence; or
  • as a member of a foreign force in Australia (this does not apply if the Australian Government makes the payment).
  • 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 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.
A5 Exemption of official salary and emoluments of officials of prescribed international organisations
General public services — Foreign affairs and economic aid ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
* * * * * * * *
Tax expenditure type: Exemption 2012 TES code: A5
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.

A6 Exemption from income tax and the Medicare levy for residents of Norfolk Island
General public services — General services ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
6 6 6 6 7 7 7 7
Tax expenditure type: Exemption 2012 TES code: A6
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.

A7 Exemption from the Medicare levy for current and veteran Australian Defence Force members and their relatives and associates
Defence ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
50 50 50 55 55 75 80 85
Tax expenditure type: Exemption 2012 TES code: A7
Estimate Reliability: Medium — High
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. Prior to 30 June 2014, the Medicare levy is applied at a flat rate of 1.5 per cent. From 1 July 2014, the Medicare levy will increase to 2 per cent.

A8 Exemption of certain allowances paid to Australian Defence Force personnel
Defence ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
70 80 85 90 85 85 90 90
Tax expenditure type: Exemption 2012 TES code: A8
Estimate Reliability: Medium
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 dependants or a member with dependants (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. A
ccordingly, this tax expenditure relates solely to that part of the allowance that is in excess of this compensation.

A9 Exemption of compensation for loss of deployment allowance paid to Australian Defence Force members
Defence ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
1 1 1 1 * * * *
Tax expenditure type: Exemption 2012 TES code: A9
Estimate Reliability: Medium * Category 1+
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.

A10 Exemption of compensation for loss of pay and allowances paid to Australian Defence Force Reserve personnel
Defence ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
.. .. .. .. .. .. .. ..
Tax expenditure type: Exemption 2012 TES code: A10
Estimate Reliability: Medium
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.

A11 Exemption of pay and allowances earned by members of the Australian Defence Force on eligible duty
Defence ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
75 90 95 95 55 * * *
Tax expenditure type: Exemption 2012 TES code: A11
Estimate Reliability: Medium * Category 2+
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.

A12 Exemption of pay and allowances for part-time Australian Defence Force Reserve personnel
Defence ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
60 60 60 60 60 60 60 65
Tax expenditure type: Exemption 2012 TES code: A13
Estimate Reliability: Medium
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.

A13 Exemption of some payments to Australian Federal Police and civilian personnel in service with an armed force of the United Nations
Defence ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
.. .. .. .. .. .. .. ..
Tax expenditure type: Exemption 2012 TES code: A14
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 w
ho died during periods of United Nations service.

A14 Tax offsets for Australian Defence Force personnel serving overseas and for Australian Federal Police and civilians serving with United Nations forces
Defence ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
Included in A49
Tax expenditure type: Offset 2012 TES code: A15
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.

A15 Denial of deductibility for certain self-education expenses
Education ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
* * * * * * * *
Tax expenditure type: Denial of deduction 2012 TES code: A16
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 Program (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.

A16 Education Tax Refund
Education ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
- 130 140 160 4 3 - -
Tax expenditure type: Exemption 2012 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.

For the income years 2008-09 to 2010‑11, eligible individuals were able to claim a refundable tax offset for 50 per cent of eligible education expenses incurred in respect of a student undertaking primary or secondary school studies, up to a maximum amount. For expenses incurred in 2010‑11, the maximum amount of the Education Tax Refund was $397 for each primary school student and $794 for each secondary school student. These maximum amounts were indexed in line with increases in the Consumer Price Index.

The Education Tax Refund was replaced by the Schoolkids Bonus on 26 May 2012. See related item A30 Exemption of the Schoolkids Bonus.

A17 Exemption of income from certain educational scholarships, payments to apprentices or similar forms of assistance
Education ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
30 * * * * * * *
Tax expenditure type: Exemption 2012 TES code: A18
Estimate Reliability: Very Low * Category 2+
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.

A18 Threshold for the deductibility of self-education expenses
Education ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
-12 -12 -11 -12 -12 -12 -13 -13
Tax expenditure type: Denial of deduction 2012 TES code: A19
Estimate Reliability: 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.

A19 Exemption from the Medicare levy for residents with a taxable income below a threshold
Health ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
1,100 1,150 1,170 1,260 1,320 1,790 1,960 2,040
Tax expenditure type: Exemption 2012 TES code: A20
Estimate Reliability: Medium
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. Prior to 30 June 2014, the Medicare levy is applied at a flat rate of 1.5 per cent. From 1 July 2014, the Medicare levy will increase to 2 per cent. 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.

A20 Exemption of the private health insurance rebate, including expense equivalent
Health ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
1,140 1,220 1,330 1,600 1,450 1,510 1,600 1,650
Tax expenditure type: Exemption 2012 TES code: A21
Estimate Reliability: Medium
Commencement date: 1998 Expiry date:
Legislative reference: Section 52-125 of the Income Tax Assessment Act 1997

Taxpayers can receive up to a 30 per cent refund (up to 35 per cent for people aged 65 to 69, and up to 40 per cent for people aged 70 and over) on the costs of private health insurance either as a refundable tax offset, direct payment or through reduced premiums. These payments are exempt from income tax. Commencing on 1 July 2012, there are 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.

From 1 April 2014, growth in the average Government contribution to individual private health insurance policies through the rebate will be limited to no more than growth in the annual Consumer Price Index (CPI).

A21 Increased Medicare levy for income earners who do not hold private health insurance
Health ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
-210 -210 -220 -220 -300 -310 -310 -310
Tax expenditure type: Increased rate 2012 TES code: A22
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 certain thresholds are subject to an increased Medicare levy, known as the Medicare levy surcharge (MLS). From 1 July 2013 to 30 June 2014, the income for surcharge threshold purposes above which MLS is payable is $88,000 for single individuals and $176,000 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.

Prior to 1 July 2012, the rate of the MLS was a flat 1 per cent. Since 1 July 2012, the rate of MLS a taxpayer is subject to may be 1 per cent, 1.25 per cent or 2 per cent, depending on which income-tested ‘Private Health Insurance Tier’ the taxpayer is in. These tiers are the same as the ones used to determine the amount of private health insurance rebate that a person may be entitled to (see also the related tax expenditure A20 Exemption of the private health insurance rebate).

The income thresholds on which the tiers are based are indexed annually to changes in average weekly ordinary time earnings. The coupl
es and families thresholds are double the singles amounts, with an additional $1,500 for each dependent child after the first.

The Medicare levy surcharge has applied since 1 July 1997 and is a negative tax expenditure.

A22 Medical expenses tax offset
Health ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
460 530 510 540 420 255 185 30
Tax expenditure type: Offset 2012 TES code: A23
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, which is medical expenses less available reimbursements such as Medicare and private health insurance refunds, in the income year exceed a certain threshold. Qualifying medical expenses may relate both to resident taxpayers and any resident dependants of the taxpayer. From 1 July 2012, the threshold above which a taxpayer may claim the offset and the rate at which the offset applies was means tested.

From 2013‑14, this offset will be phased out with two types of transitional arrangements for those currently claiming the offset. Firstly, the offset will continue to be available for taxpayers for out of pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019. Secondly, from 1 July 2013, those taxpayers who claimed the offset for the 2012‑13 income year will continue to be eligible for the offset for the 2013‑14 income year if they have eligible out of pocket medical expenses above the relevant thresholds (based on the existing definition of eligible expenses). Similarly, those who claim the offset in 2013‑14 will continue to be eligible for the offset in 2014‑15. Eligibility for claims (other than disability aids, attendant care or aged care) will cease from 1 July 2015.

A23 Medicare levy exemption for blind pensioners, sickness allowance recipients and foreign government representatives
Health ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
125 140 155 170 185 275 290 300
Tax expenditure type: Exemption 2012 TES code: A24
Estimate Reliability: Medium — High
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. Prior to 30 June 2014, the Medicare levy is applied at a flat rate of 1.5 per cent. From 1 July 2014, the Medicare levy will increase to 2 per cent.

A24 Medicare levy surcharge lump sum payment in arrears offset
Health ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
.. .. .. .. .. .. .. ..
Tax expenditure type: Offset 2012 TES code: A25
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.

A25 Exemption for Defence Abuse Reparation Payment Scheme
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
- - - - - 10 10 -
Tax expenditure type: Exemption 2012 TES code: New
Estimate Reliability: Low
Commencement date: 1 July 2013 Expiry date: 1 July 2015
Legislative reference: Section 51-5 of the Income Tax Assessment Act 1997

Reparation payments to individuals under the Defence Abuse Reparation Payment Scheme will be capped at $50,000 and income tax exempt. The amount provided to each complainant will be determined on a case-by-case basis taking into account their individual circumstances.

The Scheme is part of the response to the DLA Piper Report of the review of allegations of sexual and other abuse in Defence.

A26 Exemption for National Disability Insurance Scheme amounts
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
- - - - - 40 80 240
Tax expenditure type: Exemption 2012 TES code: New
Estimate Reliability: Very Low
Commencement date: 1 July 2013 Expiry date:
Legislative reference: Sections 6-5; 11-15; 12-5; 26-100; 40-235; 52-180; and 995.1 of the Income Tax Assessment Act 1997

Payments and benefits provided under the National Disability Insurance Scheme (NDIS) , whether directly or otherwise, to NDIS participants for approved reasonable and necessary supports are exempt from income tax.

The exemption will apply to all NDIS amounts paid directly to the NDIS participant by the National Disability Insurance Agency, or benefits that are provided to NDIS participants indirectly, by third parties funded under the National Disability Insurance Scheme Act 2013.

Taxpayers are unable to claim a deduction for assets purchased, or expenditure incurred, related to income tax-exempt NDIS amounts. This includes deductions for depreciation of capital assets, or certain other capital expenditure.

A27 Exemption of disaster relief payments for individuals
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
19 285 25 70 * * * *
Tax expenditure type: Exemption 2012 TES code: A26
Estimate Reliability: Medium * 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, such as the Australian Government Disaster Relief Payments (AGDRPs) after the 2010‑11 floods and cyclones and the 2011‑12 floods, and the Disaster Income Recovery Subsidy payments provided between 3 January 2013 and 30 September 2013.

Ex-gratia payments to New Zealand non-protected Special Category Visa holders affected by natural disasters that occurred in 2012‑13 are also made exempt from income tax. These ex-gratia payments are equivalent to the AGDRP and assist New Zealanders who would have been eligible for the AGDRP, but for their visa status.

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

A28 Exemption of the Baby Bonus
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
165 135 115 100 45 - - -
Tax expenditure type: Exemption 2012 TES code: A27
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 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 A43 Exemption of the first child tax offset (Baby Bonus).

Families cannot get the Baby Bonus and Parental Leave Pay for the same child. From 1 July 2013 the Baby Bonus for the second and subsequent children will be reduced to $3,000 but will remain at $5,000 for the first child of a recipient and for multiple births.

The Baby Bonus will be discontinued from 1 March 2014. It will be replaced by changes to Family Tax Benefit Part A.

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

See the related tax expenditure A42 Exemption of Family Tax Benefit, Parts A and B.

A29 Exemption of the Child Care Rebate
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
485 360 410 490 565 645 715 785
Tax expenditure type: Exemption 2012 TES code: A28
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 Rebate (CCR) is exempt from income tax.

From 1 July 2007 families may receive the CCR 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 annual CCR amount per child was increased to $7,500 in 2008-09. The rebate limit was indexed in line with increases in the Consumer Price Index in 2009‑10 to $7,778 and in 2010‑11 to $7,941. In 2011&#820
9;12, the limit was returned to $7,500. Indexation of the annual cap has been paused until 30 June 2017.

A30 Exemption of the Schoolkids Bonus
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
- - - 320 200 370 20 -
Tax expenditure type: Exemption 2012 TES code: A29
Estimate Reliability: Medium
Commencement date: 27 May 2012 Expiry date:
Legislative reference: Section 52-150 of the Income Tax Assessment Act 1997

The Schoolkids Bonus and the one-off transitional Education Tax Refund (ETR) lump sum payment for 2011‑12 are exempt from income tax. These payments are available to eligible families to assist with expenses incurred in respect of students undertaking primary or secondary school studies.

The Schoolkids Bonus replaced the ETR, and is paid in two equal instalments in January and July each year. Subject to the passage of the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013, the Schoolkids Bonus will be abolished from 30 June 2014.

See also the related tax expenditure A16 Education Tax Refund.

A31 Flood and cyclone reconstruction levy
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
- - -1,525 -135 - - - -
Tax expenditure type: Increased rate 2012 TES code: A30
Estimate Reliability: High
Commencement date: 1 July 2011 Expiry date: 30 June 2012
Legislative reference: Section 4-10 of the Income Tax (Transitional Provisions) Act 1997

A temporary flood and cyclone reconstruction levy applied to taxable income for the 2011‑12 income year to contribute towards the cost of rebuilding flood and cyclone affected regions. Taxpayers who, during 2010‑11 or 2011‑12, received an Australian Government Disaster Relief Payment (AGDRP); were affected by a Natural Disaster Recovery and Relief (NDRRA) disaster; or were a New Zealand Special Category Visa Holder who received an ex-gratia payment for a disaster were exempt from paying the levy.

A32 Release from particular tax liabilities in cases of serious hardship
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
38 74 61 62 * * * *
Tax expenditure type: Exemption 2012 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’ and Pensioners’ Tax Offset
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
980 1,040 1,190 650 710 710 710 710
Tax expenditure type: Offset 2012 TES code: A32
Estimate Reliability: Medium
Commencement date: 1996 Expiry date:
Legislative reference: Sections 160AAAA and 160AAAB of the Income Tax Assessment Act 1936

The Senior Australians’ and Pensioners’ Tax Offset (SAPTO) is available to taxpayers who receive certain taxable pensions such as the Age Pension and Disability Support Pension (taxpayers of Age Pension age) and other payments such as Bereavement Allowance, Carer Payment and Parenting Payment (single). Taxpayers who are Age Pension age or older and eligible to receive an age pension, including individuals who qualify but do not receive a benefit (for example, because they do not meet the means testing criteria) can also claim the SAPTO.

Prior to the 2012‑13 income year, this tax expenditure was called the Senior Australians Tax Offset (SATO) and was available to taxpayers who are eligible to receive the age pension or a veterans’ benefit, pension or allowance, including individuals who qualify for, but do not receive a benefit (for example, because they do not meet the means testing criteria). As part of the Clean Energy Future Plan, the Pensioner Tax Offset (PTO) and the SATO were combined from the 2012‑13 income year onward. Prior to the 2012‑13 income year, the PTO was part of tax expenditure A34 Tax Offset for recipients of certain social security allowances of benefits.

A34 Tax offset for recipients of certain social security allowances or benefits
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
260 270 300 260 45 45 45 45
Tax expenditure type: Offset 2012 TES code: A34
Estimate Reliability: Medium
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 and allowances may be eligible for the beneficiary tax offset, which reduces the tax payable on the allowance or benefit. Qualifying government payments include:

  • various income support allowances (for example, Newstart Allowance, Sickness Allowance or Youth Allowance);
  • Australian Government education and training payments (for example, ABSTUDY and Austudy); and
  • various other payments (for example Parenting Payment (partnered), Northern Territory CDEP transition payment and exceptional circumstances relief payments).

Prior to the 2012‑13 income year, this tax expenditure included the Pensioner Tax Offset (PTO), which may be claimed by taxpayers who receive a qualifying government taxable pension — for example, Parenting Payment (single). From the 2012- 13 income year onward, the PTO and the SATO are combined in the same tax expenditure (see tax expenditure A33 Senior Australians’ and Pensioners’ Tax Offset.).

A35 Tax offsets for dependent spouse, child-housekeeper, housekeeper who cares for a prescribed dependant and invalid or carer dependants
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
585 560 500 400 175 175 175 175
Tax expenditure type: Offset 2012 TES code: A35 and A36
Estimate Reliability: Low
Commencement date: Introduced before 1985 Expiry date:
Legislative reference: Sections 159J and 159L of the Income Tax Assessment Act 1936

The three types of dependency offset that may be claimed by taxpayers in respect of a dependent spouse, dependent invalid or carer, parent, parent-in-law, child-housekeeper or housekeeper are:

  • the Dependent Spouse Tax Offset (DSTO);
  • the Dependent (Invalid and Carer) Tax Offset (DICTO); and
  • the invalid relative, parent, parent-in-law, housekeeper, housekeeper (with child) child-housekeeper and child-housekeeper (with child) tax offsets that may only be received by taxpayers eligible for the Zone Tax Offset, Overseas Civilians Tax Offset or the Overseas Forces Tax Offset.

Since the 2008-09 income year, the dependency offsets have been means tested. To be eligible to receive an offset in respect of a spouse, a taxpayer must have adjusted taxable income below a specified income threshold. To be eligible to receive an amount of offset in respect of any other type of dependant, the combined adjusted taxable income of the taxpayer and the taxpayer’s spouse must be below the same threshold. This threshold is currently $150,000 and is ordinarily indexed in line with increases in the Consumer Price Index but indexation has been paused until 1 July 2017.

For the 2011‑12 income year, the DSTO may only be claimed by taxpayers with a dependent spouse born before 1 July 1971. From the 2012‑13 income year forward, the DSTO may only be claimed by taxpayers with a dependent spouse born on or before 1 July 1952. Taxpayers who are eligible for the Zone Tax Offset, Overseas Civilians Tax Offset or the Overseas Forces Tax Offset may continue to claim the DSTO regardless of the age of their dependent spouse.

From the 2012‑13 income year onward, the invalid spouse, carer spouse, housekeeper, housekeeper (with child), child housekeeper, child housekeeper (with child), invalid relative, parent, and parent-in-law tax offsets have been consolidated into the DICTO. The DICTO is only available to taxpayers who maintain a dependant who is genuinely unable to work due to invalidity or carer obligations. Taxpayers who are eligible for the Zone Tax Offset, Overseas Civilians Tax Offset or the Overseas Forces Tax Offset are not affected by the consolidation of dependency offsets into the DICTO, and may continue to be eligible for amounts of the eight dependency offsets under the pre-2012‑13 arrangements.

This item incorporates the former A36 Tax offsets for taxpayers supporting a parent, parent-in-law, or invalid relative from the 2012 TES.

A36 Mature Age Worker Tax Offset
Other economic affairs — Total labour and employment affairs ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
430 435 440 470 370 330 290 255
Tax expenditure type: Offset 2012 TES code: A37
Estimate Reliability: Medium — High
Commencement date: 2004 Expiry date:
Legislative reference: Subdivision 61-K of the Income Tax Assessment Act 1997

From 1 July 2012 workers born before 1 July 1957 may be entitled to a tax offset based on the amount of their net income from working. The maximum offset amount of $500 is payable on assessment for taxpayers with net income from working between $10,000 and $53,000. Prior to 1 July 2012 workers were required to be 55 years or over for eligibility.

A37 Seasonal Labour Mobility Program
Other economic affairs — Total labour and employment affairs ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
- - 1 1 1 2 2 3
Tax expenditure type: Concessional rate 2012 TES code: A38
Estimate Reliability: Medium — Low
Commencement date: 1 July 2011 Expiry date:
Legislative reference: Schedule 7 of the Income Tax Rates Act 1986

From 2012‑13, non-resident workers employed under the Seasonal Labour Mobility Program will be subject to a final withholding tax of 15 per cent. This program replaced the Pacific Seasonal Workers Pilot Scheme, which provided a 15 per cent rate on an assessment basis for the 2011‑12 income year for the first $37,000 of income.

Other non-resident workers will continue to be subject to an assessment basis of taxation with a lowest marginal tax rate of 29 per cent.

A38 Asian Development Bank — income tax exemption for Australian staff
Other economic affairs — Other economic affairs, nec ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
.. .. 1 1 1 1 1 1
Tax expenditure type: Exemption 2012 TES code: A39
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.

A39 International taxation — foreign income exemption for temporary residents
Other economic affairs — Other economic affairs, nec ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
45 40 40 45 45 45 45 45
Tax expenditure type: Exemption 2012 TES code: A40
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.

A40 Exemption of certain income support benefits, pensions or allowances
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
590 770 980 620 670 730 780 840
Tax expenditure type: Exemption 2012 TES code: A41
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, 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 payment and certain parts of payments under the ABSTUDY scheme are exempt from income tax.

A41 Exemption of Child Care Benefit
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
270 290 325 360 380 405 425 445
Tax expenditure type: Exemption 2012 TES code: A42
Estimate Reliability: Medium
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 fortnightly, quarterly or at the end of the income year.

A42 Exemption of Family Tax Benefit, Parts A and B
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
1,960 1,900 1,950 2,040 2,080 2,180 2,240 2,290
Tax expenditure type: Exemption 2012 TES code: A43
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. Since 1 July 2009, these payments have only been paid and claimed through Centrelink and Medicare, and not through the tax system.

From 1 March 2014, in the year following the birth or adoption of a first child or each child in multiple births, Family Tax Benefit Part A payments will be increased by $2,000 per annum. For second and subsequent children Family Tax Benefit Part A payments will increase by $1,000. These new arrangements will replace the Baby Bonus. Families claiming Parental Leave Pay in respect of the child will not be eligible for this increase.

See related tax expenditure A28 Exemption of the Baby Bonus.

A43 Exemption of the first child tax offset (Baby Bonus)
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
8 4 1 - - - - -
Tax expenditure type: Exemption 2012 TES code: A45
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 remains available until that child turns five.

See also the related tax expenditure A28 Exemption of the Baby Bonus, and A42 Exemption of Family Tax Benefit, Parts A and B.

A44 Exemption of Utilities Allowance and Seniors’ Concession Allowance
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
114 19 1 1 1 1 1 1
Tax expenditure type: Exemption 2012 TES code: A46
Estimate Reliability: Medium
Commencement date: 2004 Expiry date:
Legislative reference: Sections 52-10 and 52-65 of the Income Tax Assessment Act 1997

The Utilities Allowance and Seniors’ Concession Allowance payable to Commonwealth Seniors Health Card holders up to 20 September 2009 were exempt from income tax.

From 20 September 2009, the value of the Utilities Allowance was incorporated into the Pension Supplement, and the Seniors Concession Allowance and the Telephone Allowance were combined into a Seniors Supplement.

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

A45 Exemptions of certain veterans’ pensions, allowances or benefits, compensations, and particular World War II-related payments for persecution
Social security and welfare ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
430 490 440 400 400 410 410 400
Tax expenditure type: Exemption 2012 TES code: A47
Estimate Reliability: Medium
Commencement date: Introduced before 1985 Expiry date:
Legislative reference: Subdivisions 52-B and 52-C and Section 768-105 of the Income Tax Assessment Act 1997

Repatriation pensions, certain payments under the Veterans Entitlements Act 1985 and Military Rehabilitation and Compensation Act 2004, and payments under the Australian Participants in British Nuclear Tests (Treatment) 2006, are wholly or partly exempt from income tax.

Foreign source World War II payments are also exempt from income tax. This applies where the payment is in connection with:

  • any wrong or injury;
  • loss of, or damage 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 persecution; or
  • participation in a resistance movement against such forces.

From 1 July 2013, compensation provided for legal advice to beneficiaries under the Military Rehabilitation and Compensation Act 2004 is exempt from income tax

A46 Exemption of payments made under the First Home Owners Grant Scheme
Housing and community amenities ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
685 730 270 305 285 165 130 135
Tax expenditure type: Exemption 2012 TES code: A48
Estimate Reliability: Medium
Commencement date: 2000 Expiry date:
Legislative reference: A New Tax System (Commonwealth State Financial Arrangements) Act 1999 Appendix A, Intergovernmental Agreement on Federal Financial Relations Appropriation (Economic Security Strategy) Act (No. 2) 2008-09 (for the First Home Owners Boost) and relevant state legislation.

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

Since 2012, every State has retargeted their FHOG so that extra assistance is provided to first home buyers who purchase a new home. Every State except Western Australia and the Northern Territory has also announced that they will cease the FHOG for first home buyers of established homes. All States and Territories other than Tasmania have caps on the purchase value of first homes eligible for the FHOG.

Under the First Home Owners Boost (FHOB), eligible first home buyers received 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 2008 and 30 September 2009 (inclusive). 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) was provided for the purchase of established homes and $7,000 for the purchase of new homes ($14,000 in total).

A47 First Home Saver Accounts — earnings
Housing and community amenities ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
.. -1 .. 1 2 2 3 3
Tax expenditure type: Concessional rate 2012 TES code: A49
Estimate Reliability: Medium — Low
Commencement date: 1 October 2008 Expiry date:
Legislative reference: Divisions 295, 320 and 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.

A48 First Home Saver Accounts — income tax exemption for the Government contribution
Housing and community amenities ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
- 2 3 4 5 6 6 6
Tax expenditure type: Exemption 2012 TES code: A50
Estimate Reliability: Medium — 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 2013‑14, account holders are eligible for a Government contribution of 17 per cent on the first $6,000 of personal contributions made to their accounts each year. An individual who makes a contribution of $6,000 to their First Home Saver Account will be eligible for the maximum Government contribution of $1,020.

A49 Zone tax offsets
Housing and community amenities ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
230 240 265 280 280 285 290 295
Tax expenditure type: Offset 2012 TES code: A51
Estimate Reliability: Medium — High
Commencement date: Introduced before 1985 Expiry date:
Legislative reference: Section 79A of the Income Tax Assessment Act 1936

Note: estimates include tax expenditures A49 and A14

Taxpayers who live in prescribed remote areas of Australia are eligible for a tax offset. The amount of the tax offset varies depending on the taxpayer’s location.

A50 Exemption of certain prizes
Recreation and culture ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
.. .. .. .. .. .. .. ..
Tax expenditure type: Exemption 2012 TES code: A52
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 the Prime Minister’s Literary Award are exempt from income tax.

A51 Incom
e averaging for authors, inventors, performing artists, production associates and sportspersons
Recreation and culture ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
14 16 17 20 22 23 24 25
Tax expenditure type: Concessional rate 2012 TES code: A53
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.

A52 Income tax exemption for LPG conversion grants
Transport and communication ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
50 25 13 8 3 8 - -
Tax expenditure type: Exemption 2012 TES code: A54
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 2011‑12 the grant for the conversion of a registered motor vehicle to LPG was $1,250. This fell to $1,000 from 2012‑13. For purchases of new vehicles with LPG fitted, the grant is $2,000 in each financial year. The LPG Vehicle scheme is scheduled to end on 30 June 2014.

A53 Deductibility of union dues and subscriptions to business associations
Other economic affairs — Total labour and employment affairs ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
* * * * * * * *
Tax expenditure type: Deduction 2012 TES code: A55
Estimate Reliability: Not Applicable * Category 1+
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.

A54 Deferral of tax and exemption for discounted shares or rights provided under employee share schemes
Other economic affairs — Total labour and employment affairs ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
* * * * * * * *
Tax expenditure type: Exemption, Deferral 2012 TES code: A56
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 a 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 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.

A55 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)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
* * * * * * * *
Tax expenditure type: Deduction2012 TES code: A57
Estimate Reliability: Not Applicable * Category 3+
Commencement date: 1 July 2000 Expiry date:
Legislative reference: Division 35 of the Income Tax Assessment Act 1997

Under the income tax benchmark, losses from non-commercial activities are presumed to be incurred for private benefit, which makes the denial of such losses a part of the benchmark treatment. The Commissioner of Taxation’s objective determination of whether a business is commercial in nature, despite making a loss in a given income year, is the test for determining whether a business loss is commercial or personal consumption.

In order to reduce the compliance burden on taxpayers from having to apply for a determination, individuals carrying on a business and who have an adjusted taxable of less than $250,000 may apply losses from a business activity against their other income in that year if they satisfy one of four statutory tests in that year. These tests can be used in place of the objective test by the Commissioner of Taxation. The four tests look at various known characteristics of a business, such as prior years’ profits, assets used in carrying on the business, and revenues.

This approach, while reducing compliance costs, results in some businesses that are really non-commercial in nature being classified as commercial, and allowing them to offset losses against other activities gives rise to a tax expenditure.

A56 Non-commercial losses — exceptions to the non-commercial losses rules for primary producers and artists
Other economic affairs — Total labour and employment affairs ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
50 50 30 30 30 30 30 30
Tax expenditure type: Exemption 2012 TES code: A58
Estimate Reliability: Medium
Commencement date: 1 January 2000 Expiry date:
Legislative reference: Subsection 35-10(4) 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’ activity is objectively determined to be commercial in nature, the Commissioner of Taxation allows the taxpayer to apply those losses against their other income.

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.

A57 Tax deferral advantage arising from return of after-tax contributions to a pension or annuity
Other economic affairs — Total labour and employment affairs ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
* * * * * * * *
Tax expenditure type: Deferral 2012 TES code: A59
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.

A58 Denial of deductions for illegal activities
Other economic affairs — Other economic affairs, nec ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
* * * * * * * *
Tax expenditure type: Deduction 2012 TES code: A60
Estimate Reliability: Not Applicable * Category 1-
Commencement date: 1 July 1999 (bribery), 30 April 2005 (illegal activities) 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.

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.

A59 Exemption of Tax Bonus for Working Australians
Other economic affairs — Other economic affairs, nec ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
2,060 90 4 1 3 .. - -
Tax expenditure type: Exemption 2012 TES code: A61
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.

On 12 December 2013, the Government introduced the Tax Bonus for Working Australians Repeal Bill 2013 into Parliament, to ensure that the ATO does not issue any further cheques for tax bonus payments. Subject to passage, the Bill will take effect from the day after Royal Assent.

A60 Increased tax rates for certain minors
Other economic affairs — Other economic affairs, nec ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
-8 -3 -4 -6 -7 -7 -7 -7
Tax expenditure type: Increased rate 2012 TES code: A62
Estimate Reliability: Medium — Low
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.

From 1 July 2011 minors can no longer access the low-income tax offset to reduce tax payable on their ‘unearned income’. This increases the effective impact of the higher tax rates on the ‘unearned income’ of minors.

A61 Part-year tax free threshold
Other economic affairs — Other economic affairs, nec ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
-40 -40 -45 -55 -25 -25 -25 -25
Tax expenditure type: Increased rate 2012 TES code: A63
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, do not receive the full value of the statutory tax-free threshold. From 1 July 2012, they receive a pro-rated share of $4,736 that corresponds to the number of months in the year that they are a resident for tax purposes. They also receive the difference between the statutory tax-free threshold and $4,736 in full.

Prior to the 2012‑13 income year, taxpayers who became an Australian resident for the first time, or ceased to be an Australian resident, received a pro-rated tax free threshold that corresponded to the number of months the taxpayer was an Australian resident.

A62 Philanthropy — deduction for gifts to deductible gift recipients
Other economic affairs — Other economic affairs, nec ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
960 870 980 1,080 1,150 1,230 1,330 1,410
Tax expenditure type: Deduction 2012 TES code: A64
Estimate Reliability: Medium — Low
Commencement date: Introduced before 1985 Expiry date:
Legislative reference: Division 30 of the Income Tax Assessment Act 1997

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

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

A63 Philanthropy — deduction for gifts to private ancillary funds
Other economic affairs — Other economic affairs, nec ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
120 140 185 130 130 130 130 130
Tax expenditure type: Deduction 2012 TES code: A65
Estimate Reliability: Medium
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 charita
ble or philanthropic trust. Private ancillary funds have deductible gift recipient (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 DGRs.

A64 A reasonable overtime meal allowance
Other economic affairs — Total labour and employment affairs ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
* * * * * * * *
Tax expenditure type: Deduction 2012 TES code: A66
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.

A65 Alternatives to the logbook method of substantiating car expenses
Other economic affairs — Total labour and employment affairs ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
* * * * * * * *
Tax expenditure type: Deduction 2012 TES code: A67
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).
A66 Certain travel expenses in and outside Australia
Other economic affairs — Total labour and employment affairs ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
* * * * * * * *
Tax expenditure type: Deduction 2012 TES code: A68
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 does not have to declare travel allowance for reasonable expenses on accommodation, meals and incidental costs of travel in Australia, and meals and incidental costs of travel outside Australia, as assessable income, but cannot claim related expenses as a tax deduction.

A67 Tax offset on certain payments of income received in arrears
Other economic affairs — Total labour and employment affairs ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
7 3 4 4 4 4 4 4
Tax expenditure type: Offset 2012 TES code: A69
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.

A68 Exemption for structured settlements and structured orders
Other economic affairs — Other economic affairs, nec ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
.. .. .. .. .. .. .. ..
Tax expenditure type: Exemption 2012 TES code: A70
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 rece
ive large tax free lump sum compensation payments to receive all or part of their compensation in the form of a tax free annuity or annuities.

A69 Exemption of post-judgment interest awards in personal injury compensation cases
Other economic affairs — Other economic affairs, nec ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
2 3 3 3 3 4 4 4
Tax expenditure type: Exemption 2012 TES code: A71
Estimate Reliability: Low
Commencement date: 1992 Expiry date:
Legislative reference: Section 51-57 of the Income Tax Assessment Act 1997

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

A70 Immediate deduction for low-value depreciating assets not used in business
Other economic affairs — Other economic affairs, nec ($m)
2009‑10 2010‑11 2011‑12 2012‑13 2013‑14 2014‑15 2015‑16 2016‑17
* * * * * * * *
Tax expenditure type: Deduction 2012 TES code: A72
Estimate Reliability: Not Applicable * Category 2+
Commencement date: 2001 Expiry date:
Legislative reference: Subsections 40-25(1) 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 that is not income from carrying on a business.