The Issues Log

Emma Richards & Mike Morgan, PricewaterhouseCoopers

Section / Provision Income Tax Act 2004

Part Y

Date Received

The omission from Part Y of a savings provision for certain sections of the Income Tax Act 1976 results in an unintended change.

Section 156F of the Income Tax Act 1976 allowed, up to the end of the 1990 income year, export market development expenditure (EMDE) credits for expenditure incurred in developing export markets.  If the EMDE credits exceeded the taxpayer's income tax liability, a refundable excess arose, which when refunded gave rise to a debit in the company's imputation credit account ( ICA ).

Section 394L(4A) of the 1976 Act provided relief from liability to further income tax where a debit arose in a company's ICA on receipt of a refundable excess.  The debit balance was rolled over into the next imputation year.  If a debit remained at the end of the subsequent imputation year section 394L(4A) would again provide relief from further income tax.  Section YB 4(1) of the Income Tax Act 1994 provided that section 394L(4A) would continue to apply notwithstanding the repeal of the Income Tax Act 1976.

At this time, there are still taxpayers with debit ICA balances that arose on receipt of EMDE refunds.  These taxpayers rely on section YB 4(1) each year to grant relief from liability to further income tax.

Section YB 4(1)

The Panel considers an unintended legislative change arises in this instance. The Panel recommends that the 2004 Act be amended retrospectively.