Issue
Can the taxpayer use an amount other than the taxable income shown on their assessment to calculate their entitlement to the 'aged persons savings bonus component' (APSBC) of the bonus for older Australians (BOA) under subsection 45(4) of the A New Tax System (Bonuses for Older Australians) Act 1999 (BOA Act) where their taxable income was inflated due to the receipt of amounts on retirement?
Decision
No. The taxpayer cannot use an amount other than the taxable income shown on their assessment to calculate their APSBC entitlement under subsection 45(4) of the BOA Act. There is no discretion in the BOA Act to alter the taxable income to reflect circumstances which inflates the taxable income.
Facts
The taxpayer: • is aged 60 or more on the 1 July 2000; • is an Australian resident on 1 July 2000; • has taxable income as shown on their 2000 income year assessment more than $20 000 and less than $30 000; and • has an adjusted savings and investment income exceeding $1000.
The adjusted savings and investment income comprised of • eligible termination payments; • other Australian pensions and annuities; • net interest income; and • other net foreign source income.
The taxable income shown on the taxpayer's 2000 income year assessment would be less than $20 000 if the taxpayer had not retired during the year.
Reasons for Decision
Subsection 41(1) of the BOA Act provides that a taxpayer will be entitled to the APSBC of the BOA if they satisfy the following conditions: • are aged 60 or more on 1 July 2000; • are an Australian resident on 1 July 2000; • the taxable income as shown on their assessment is less than $30 000 and they have adjusted savings and investment income for the qualifying year; and • the amount worked out under subsection 45(4) of the BOA Act is greater than nil.
'Qualifying year' is defined in section 34 of the BOA Act to be either the 1998-1999 income year or the 1999-2000 income year.
If a taxpayer's taxable income as shown on their assessment for the qualifying year is $20 000 or less, Item 1 of the Table in subsection 45(4) of the BOA Act provides that the APSBC amount will be the adjusted savings and investment income for that year up to a maximum of $1000.
If a taxpayer's taxable income as shown on their assessment for the qualifying year is more than $20 000 but less than $30 000, Item 2 of the Table in subsection 45(4) of the BOA Act provides that the APSBC amount will be the adjusted savings and investment income for that year up to a maximum of $1000 less a 'phasing out fraction' of that amount calculated in accordance with the formula in subsection 45(8) of the BOA Act.
The 'phasing out fraction' under subsection 45(8) of the BOA Act is the taxable income as shown on the taxpayer's assessment for the qualifying year reduced by $20 000 and the result divided by $10 000.
The taxpayer's taxable income as shown on the 2000 income year assessment exceeds $20 000 but is less than $30 000 and their adjusted savings and investment income exceeds $1000. For the purposes of calculating the APSBC of the BOA, subsection 45(4) of the BOA Act provides no discretion to use any other amount other than the taxable income as shown on the taxpayer's assessment for the 2000 year of income.
Accordingly, the taxpayer will only be entitled under subsection 45(4) of the BOA Act to an APSBC of the BOA of $1000 reduced by the product of the 'phasing out fraction' and $1000.