Income Tax Assessment Amendment Act (No. 2) 1981

No. 175 of 1981

An Act to amend the law relating to income tax

[Assented to 2 December 1981]

BE IT ENACTED by the Queen, and the Senate and the House of Representatives of the Commonwealth of Australia, as follows:

Short title, &c.

1. (1) This Act may be cited as the Income Tax Assessment Amendment Act (No. 2) 1981.

(2) The Income Tax Assessment Act 19361 is in this Act referred to as the Principal Act.

Commencement

2. This Act shall come into operation on the day on which it receives the Royal Assent.

Certain items of assessable income

3. (1) Section 26 of the Principal Act is amended by inserting after paragraph (ea) the following paragraph:

“(eb) any amount paid to the taxpayer pursuant to an agreement, arrangement or understanding (whether formal or informal,

whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings) that was entered into by any of the parties to the agreement, arrangement or understanding for the purpose, or for purposes that included the purpose, of achieving the result that the taxpayer would, or would, unless prevented by special circumstances, resume performing work for, or rendering services to, a person who is or was an employer of the taxpayer or to whom the taxpayer renders or rendered services, whether or not the amount is paid to the taxpayer by that person;”.

(2) The amendment made by sub-section (1) applies in relation to amounts paid pursuant to agreements, arrangements or understandings entered into after 11 August 1981.

(3) Nothing in section 170 of the Income Tax Assessment Act 1936 prevents the amendment of an assessment made before the commencement of this section for the purpose of giving effect to the amendment made by sub-section (1) of this section.

4. (1) After section 26aaaa of the Principal Act the following section is inserted:

Employees’ housing

“26aaab. (1) Where a taxpayer has been granted by an employer of the taxpayer a benefit in respect of or in relation to his employment, being a benefit by way of the grant of a lease or licence in respect of a unit of residential accommodation that, at any time during the year of income, was occupied by the taxpayer or by the taxpayer and his family and—

(a) the following conditions are satisfied:

(i) the unit was not at a location in, or adjacent to, an eligible urban area;

(ii) the taxpayer’s usual place of employment during the period (in this sub-section referred to as the ‘tenancy period’) in the year of income during which the lease or licence in respect of the unit subsisted was not at a location in, or adjacent to, an eligible urban area;

(iii) it is customary for employers in the industry in which the taxpayer was employed during the tenancy period to provide residential accommodation for their employees without charge or for a rent or other consideration that is less than the market value of the right to occupy the accommodation concerned;

(iv) in the opinion of the Commissioner, it was necessary for the employer of the taxpayer to provide, during the year of income, residential accommodation for employees of the employer by reason that—

(a) the nature of the employer’s business was such that employees of the employer were liable to be frequently required to change their places of residence;

(b) there was not, at or near the place or places at which the employees of the employer were employed, sufficient suitable residential accommodation for those employees (other than residential accommodation provided by or on behalf of the employer); or

(c) it is customary for employers in the industry in which the taxpayer was employed during the tenancy period to provide residential accommodation for their employees free of charge or for a rent or other consideration that is less than the market value of the right to occupy the accommodation concerned; and

(v) the lease or licence in respect of the unit was not granted to the taxpayer in pursuance of—

(a) an agreement the parties to which were not dealing with each other at arm’s length in relation to the agreement; or

(b) an agreement that was entered into by any of the parties to the agreement for the purpose, or for purposes that included the purpose, of obtaining for the taxpayer the benefit of the application of this section; or

(b) the following conditions are satisfied:

(i) it is customary for employers in the industry in which the taxpayer was employed during the period (in this sub-section also referred to as the ‘tenancy period’) in the year of income during which the lease or licence in respect of the unit subsisted to provide residential accommodation for their employees—

(a) without charge or for a rent or other consideration that is less than the market value of the right to occupy the accommodation concerned; and

(b) at or in close proximity to the place or places at which their employees are employed;

(ii) in the opinion of the Commissioner, the taxpayer had no reasonable alternative to occupying a unit of residential accommodation provided by or on behalf of the employer by reason that—

(a) suitable residential accommodation (other than accommodation provided by or on behalf of the employer) was not available on reasonable terms and conditions at or in close proximity to the place at which the taxpayer was employed; or

(b) the taxpayer was required by the employer to reside at or in close proximity to the place at which the taxpayer was employed and to be on call for duty;

(iii) in the opinion of the Commissioner, the conditions under which the taxpayer occupied the unit during the tenancy period

were onerous by reason that the unit was at or in close proximity to the place at which the taxpayer was employed;

(iv) during the tenancy period, the employer provided residential accommodation for not fewer than 5 other employees of the employer who were employed at or in association with, the place at which the taxpayer was employed; and

(v) the lease or licence in respect of the unit was not granted to the taxpayer in pursuance of —

(a) an agreement the parties to which were not dealing with each other at arm’s length in relation to the agreement; or

the value to the taxpayer of the benefit in relation to the year of income shall, for the purposes of paragraph 26 (e), be deemed to be the amount calculated in

accordance with the formula , where—

a is the annual rental value, determined in accordance with sub-section (3), in respect of the unit in relation to the year of income;

b is the number of whole days in the tenancy period;

c is the number of days in the year of income; and

d is so much of the amount of any rent or other consideration given by the taxpayer in respect of the subsistence of the lease or licence during the tenancy period as does not exceed the amount calculated in accordance with the formula .

“(2) For the purposes of paragraph (1) (a)—

(a) where a unit of residential accommodation is at a location in, or adjacent to, an eligible urban area and adjacent to, or in close proximity to, another unit of residential accommodation that is occupied and is not at a location in, or adjacent to, an eligible urban area, the Commissioner may, if he considers that it is appropriate to do so having regard to all the circumstances, treat the first-mentioned unit of residential accommodation as not being at a location in, or adjacent to, an eligible urban area; and

(b) where the usual place of employment of a taxpayer is at a location in, or adjacent to, an eligible urban area and adjacent to, or in close proximity to, another location at which persons are employed, being another location that is not in, or adjacent to, an eligible urban area, the Commissioner may, if he considers that it is appropriate to do so having regard to all the circumstances, treat that place of employment of the taxpayer as not being at a location in, or adjacent to, an eligible urban area.

“(3) For the purposes of the application of sub-section (1) in relation to a taxpayer in relation to a unit of residential accommodation in relation to a year of income (in this sub-section referred to as the ‘relevant year of income’), the annual rental value is—

(a) if the relevant year of income is a base year of income in relation to the taxpayer in relation to the unit—

(i) in a case where the lease or licence granted to the taxpayer in respect of the unit subsisted during the whole of the relevant year of income—the market value of the right to occupy the unit during the whole of the relevant year of income; and

(ii) in a case where the lease or licence granted to the taxpayer in respect of the unit subsisted during a part only of the relevant year of income—the amount ascertained in accordance with the formula , where—

a is the market value of the right to occupy the unit during that part of the relevant year of income;

b is the number of days in the relevant year of income; and

c is the number of whole days in that part of the relevant year of income; and

(b) in any other case—the amount ascertained by multiplying the annual rental value of the unit in relation to the taxpayer in relation to the year of income next preceding the relevant year of income by the indexation factor ascertained in accordance with sub-section (5) in respect of the relevant year of income in respect of the State in which the unit is situated.

“(4) For the purpose of the application of sub-section (3) in relation to a taxpayer in relation to a unit of residential accommodation in relation to a year of income (in this sub-section referred to as the ‘relevant year of income’), the relevant year of income is a base year of income if—

(a) the relevant year of income is the year of income that commenced on 1 July 1977;

(b) this section did not apply to the taxpayer in relation to the unit in relation to the year of income next preceding the relevant year of income; or

(c) the Commissioner considers that it is appropriate to treat the relevant year of income as a base year of income by reason that the market value of the right to occupy the unit was, at any time during the relevant year of income or the year of income next preceding the relevant year of income, substantially increased or reduced by reason of—

(i) additions or improvements made to, or other work carried out in relation to, the unit;

(ii) any damage to the unit; or

(iii) the addition of facilities to, or the removal of facilities from, the unit.

“(5) The factor to be ascertained for the purposes of sub-section (3) in respect of a year of income (in this sub-section referred to as the ‘relevant year of income’) in respect of a State is the number (calculated to 3 decimal places) ascertained, as at the date on which the index number in respect of the State for the March quarter immediately preceding the relevant year of income was first published, by dividing the sum of—

(a) the index number in respect of the State in respect of the March quarter immediately preceding the relevant year of income; and

(b) the index numbers in respect of the State in respect of the 3 quarters that immediately preceded that quarter,

by the sum of—

(c) the index number in respect of the State in respect of the March quarter immediately preceding the year of income that next preceded the relevant year of income; and

(d) the index numbers in respect of the State in respect of the 3 quarters that immediately preceded the last-mentioned quarter.

“(6) Subject to sub-section (7), if at any time, whether before or after the commencement of this section, the Australian Statistician has published or publishes an index number in respect of a State in respect of a quarter in substitution for an index number in respect of the State previously published by him in respect of that quarter, the publication of the later index number shall be disregarded for the purposes of this section.

“(7) If at any time, whether before or after the commencement of this section, the Australian Statistician has changed or changes the reference base for the rent sub-group of the Consumer Price Index, then, for the purposes of the application of this section after the change took place or takes place, regard shall be had only to the index numbers published in terms of the new reference base.

“(8) Where the factor ascertained in accordance with sub-section (5) in relation to a year of income would, if it were calculated to 4 decimal places, end with a number greater than 4, the factor ascertained in accordance with that sub-section in relation to that year of income shall be taken to be the factor calculated to 3 decimal places in accordance with that sub-section and increased by 0.001.

“(9) Where this section applies for the purpose of determining the value of a benefit in relation to a taxpayer in relation to a year of income, section 26aaaa does not apply for the purpose of determining the value of that benefit in relation to the taxpayer in relation to the year of income.

“(10) In this section—

(a) a reference to an eligible urban area is a reference to an area that is an urban centre with a census population of not less than 12,000;

(b) a reference to a location that is adjacent to an eligible urban area is a reference to a location that, as at the date of commencement of this section—

(i) was situated less than 40 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of less than 130,000; or

(ii) was situated less than 100 kilometres, by the shortest practicable surface route, from the centre point of an eligible urban area with a census population of not less than 130,000; and

(c) a reference to the market value of the right to occupy a unit of residential accommodation shall, if there is insufficient evidence of the market value of that right, be read as a reference to such amount as, in the opinion of the Commissioner, is fair and reasonable.

“(11) For the purposes of this section, the distance, by the shortest practicable surface route, between a unit of residential accommodation and the centre point of an eligible urban area is—

(a) where there is only one location within the eligible urban area from which distances between the eligible urban area and other places are usually measured—the distance, by the shortest practicable surface route, between the unit of residential accommodation and that location; and

(b) where there are 2 or more locations within the eligible urban area from which distances between parts of the eligible urban area and other places are usually measured—the distance, by the shortest practicable surface route, between the unit of residential accommodation and the one of those locations that is in the principal one of those parts.

“(12) In this section—

‘agreement’ means an agreement, arrangement or understanding, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings;

‘census population’, in relation to an urban centre, means the population of that urban centre specified in the results of the Census of Population and Housing taken by the Australian Statistician on 30 June 1976, being the results published by the Australian Bureau of Statistics in the documents entitled ‘Population and Dwellings in Local Government Areas and Urban Centres (Preliminary)’;

‘index number’, in relation to a quarter in relation to a State, means the index number of the rent sub-group of the Consumer Price Index published by the Australian Statistician in respect of that quarter for the capital city of that State;

‘surface route’ means a route other than an air route;

‘urban centre’ means an area that is described as an urban centre or bounded locality in the results of the Census of Population and Housing taken by the Australian Statistician on 30 June 1976, being

the results published by the Australian Bureau of Statistics in the documents entitled ‘Population and Dwellings in Local Government Areas and Urban Centres (Preliminary)’.

“(13) For the purposes of sub-section (3) and the definition of ‘index number’ in sub-section (12), the Northern Territory shall be deemed to be part of the State of South Australia and the Australian Capital Territory shall be deemed to be part of the State of New South Wales.”.

(2) The amendment made by sub-section (1) applies to assessments in respect of income of the year of income that commenced on 1 July 1977 and of all subsequent years of income.

Interpretation

5. (1) Section 221a of the Principal Act is amended by inserting “paragraph 26 (eb) or” after “amounts to which” in the definition of “salary or wages” in sub-section (1).

(2) The amendment made by sub-section (1) applies in relation to payments made after the end of the month in which this Act receives the Royal Assent.

Deductions by employer from salary or wages

6. Section 221c of the Principal Act is amended—

(a) by inserting after sub-section (1ab) the following sub-section:

“(1ac) Regulations made for the purposes of sub-section (1) may prescribe rates of deductions in respect of payments of amounts to which paragraph 26 (eb) applies that are different from the rates of deductions that are prescribed in respect of payments of other salary or wages.”; and

(b) by inserting after sub-section (2a) the following sub-section:

“(2b) For the purposes of this section and of the regulations made for the purposes of this section, where an employee receives from an employer salary or wages, being an amount to which paragraph 26 (eb) applies, the employee shall be deemed to have received the salary or wages in respect of a week.”.

NOTE

1. No. 27, 1936, as amended, For previous amendments, see No. 88, 1936; No. 5, 1937; No. 46, 1938; No. 30, 1939; Nos. 17 and 65, 1940; Nos. 58 and 69, 1941; Nos. 22 and 50, 1942; No. 10, 1943; Nos. 3 and 28, 1944; Nos. 4 and 37, 1945; No. 6, 1946; Nos. 11 and 63, 1947; No. 44, 1948; No. 66, 1949; No. 48, 1950; No. 44, 1951; Nos. 4, 28 and 90, 1952; Nos. 1, 28, 45 and 81, 1953; No. 43, 1954; Nos. 18 and 62, 1955; Nos. 25, 30 and 101, 1956; Nos. 39 and 65, 1957; No. 55, 1958; Nos. 12, 70 and 85, 1959; Nos. 17, 18, 58 and 108, 1960; Nos. 17, 27 and 94, 1961; Nos. 39 and 98, 1962; Nos. 34 and 69, 1963; Nos. 46, 68, 110 and 115, 1964; Nos. 33, 103 and 143, 1965; Nos. 50 and 83, 1966; Nos. 19, 38, 76 and 85, 1967; Nos. 4, 60, 70, 87 and 148, 1968; Nos. 18, 93 and 101, 1969; No. 87, 1970; Nos. 6, 54 and 93, 1971; Nos. 5, 46, 47, 65 and 85, 1972; Nos. 51, 52, 53, 164 and 165, 1973; No. 216, 1973 (as amended by No. 20, 1974); Nos. 26 and 126, 1974; Nos. 80 and 117, 1975; Nos. 50, 53, 56, 98, 143, 165 and 205, 1976; Nos. 57, 126 and 127, 1977; Nos. 36, 57, 87, 90, 123, 171 and 172, 1978; Nos. 12, 19, 27, 43, 62, 146, 147 and 149, 1979; Nos. 19, 24, 57, 58, 124, 133, 134 and 159, 1980; and Nos. 61, 108, 109, 110, 111 and 154, 1981.