EXPLANATORY STATEMENT

An Explanatory Statement (ES) is for circulation to senators and members when it is tabled. The statements are examined by the Senate Standing Committee on Regulations and Ordinances. An ES is a public document. It should:

·be in past tense;

·be no more than 2 pages;

·be self-contained and free from jargon;

·discuss any unusual aspects of the matter calling for special comment; and

·give reasons for any imposition of, or change in, fees.

If a more detailed explanation is necessary such as in the case of complex regulations, consideration should be given to including it as an attachment to the ES.

The regulation impact statement (RIS), if required, is a part of the ES and does not need a signature or initials of the Minister.

EXPLANATORY STATEMENT

Select Legislative Instrument 2005 No. 173

Issued by authority of the Minister for Revenue
and Assistant Treasurer

Fringe Benefits Tax Assessment Act 1986

Fringe Benefits Tax Amendment Regulations 2005 (No. 2)

Section 135 of the Fringe Benefits Tax Assessment Act 1986 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The purpose of the amending Regulations is to prescribe four funds for the purposes of paragraph 58PB(2)(a) of the Act as approved worker entitlement funds.  A worker entitlement fund is a fund that provides for the protection and portability of employee entitlements, such as unused leave or redundancy payments.

Sections 58PA and 58PB of the Act provide an exemption from fringe benefits tax (FBT) for certain payments to approved worker entitlement funds.  This exemption is designed to ensure that certain payments to approved worker entitlement funds are not taxed twice — once as a fringe benefit when paid into the fund and again when paid out of the fund to the employee.

The Regulations commenced on 1 April 2005, and apply for the 2005‑06 FBT year and later years.  Subsection 12(2) of the Legislative Instruments Act 2003 (LIA 2003) prohibits the retrospective operation of regulations, or a provision of regulations, which adversely affect the rights of, or impose liabilities on, a person other than the Commonwealth in respect of anything done or omitted to be done before the date of notification.  The retrospective commencement of the amending Regulations does not contravene subsection 12(2) of the LIA 2003.  This is because the regulations confer a benefit, in that payments which would otherwise be subject to FBT are now exempt from that tax.

Consultation was not undertaken in relation to this instrument because it is minor or machinery in nature and does not substantially change the law.