(Clauses 12, 13, 102 and 103)
Summary of proposed amendment
The amendment makes minor technical changes to the Income Tax Acts 2004 and 2007 to correct an unintended change following the rewrite of the Income Tax Act 1994. The amendment restores the rules to the original position so that payments and services provided to Members of Parliament (MPs) so they can carry out their Parliamentary duties are taxed only to the extent of any private benefit, rather than in full.
The provision will apply from 1 April 2005.
Sections CW 31 and CX 12 of the Income Tax Act 2007 relating to services for MPs and their predecessors (sections CW 25 and CX 11 of the Income Tax Act 2004) will be amended so that only the private element of any payment provided to MPs under the Civil List Act 1979 will be taxed and not the full amount.
Under the Civil List Act 1979, MPs are provided with certain services and payments so they can carry out their Parliamentary duties. However, an inadvertent consequence of the fringe benefit tax provisions being rewritten is that the full amount of any such payment is treated as a fringe benefit and taxed, not just the amount relating to any private element of the service in question. This would mean that payments and services provided to MPs would be taxed more harshly than other taxpayers.
The anomaly in the tax legislation is already being corrected prospectively through the Members of Parliament (Remuneration and Services) Bill. However, that amendment is prospective only. A retrospective amendment is also required to the Income Tax Acts 2004 and 2007 provisions relating to services for MPs under the Civil List Act 1979, effective from 1 April 2005, the date of the rewritten legislation. Without such an amendment, there would be unintended tax consequences for this earlier period.