Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon. John Howard, M.P.)Introductory note
The Income Tax Assessment Amendment Bill (No. 4) 1980 will give effect to certain taxation proposals announced in the 1980-81 Budget Speech. These are the superannuation proposals for self-employed and employed people in respect of whom no other person is providing superannuation benefits; the general 20 per cent increase in plant depreciation allowances; the special deduction in respect of expenditure on stockyards and fences associated with the campaign to eradicate brucellosis and tuberculosis in cattle; the extension of the scope of special provisions that permit a primary producer to offset profits from disposal of live stock against the cost of replacement stock over a 5 year period to cover live stock that die from a disease or are destroyed under a destocking order in respect of an animal disease; and the provision of deductibility in respect of gifts to certain tertiary educational institutions. Measures to provide exemption from Australian tax for remuneration of Australians working overseas on approved projects will be the subject of another Bill.
The Bill also proposes the arrangements that are to apply for the purposes of calculating provisional tax for the 1980-81 income year.
The Income Tax (Individuals) Bill 1980 and the Income Tax (Companies and Superannuation Funds) Bill 1980 will impose the rates of income tax payable for 1980-81.
Income Tax Assessment Amendment Bill (No. 4) 1980
An outline of the amendments contained in the Income Tax Assessment Amendment Bill (No. 4) 1980 is given below.
Superannuation for certain self-employed and employed persons (Clauses 3, 9, 10, 12 and 13)
It is proposed to provide a special deduction, up to a maximum of $1200 in any income year, for contributions made after 19 August 1980 by a person who is self-employed or employed or is otherwise engaged in a gainful occupation, but in respect of whom no employer or other person contributes or is to contribute towards superannuation benefits (clause 10). The special deduction will be available where the contributions are paid to a fund that meets tests of eligibility for exemption of its income under paragraph (ja) of section 23 of the Income Tax Assessment Act 1936, or that is a fund to which section 79 of that Act applies.
To the extent that a person who is allowed deductions under the new provisions receives a lump sum superannuation benefit in accordance with the approved terms and conditions of such a fund, the Bill proposes that 5 per cent of so much of the benefit as is attributable either to contributions made to the fund after 19 August 1980 or to any income of, or other accretions to, the fund attributable to those contributions, is to be included in the assessable income of the person. As an anti-avoidance measure, benefits received or obtained after that date from a paragraph 23(ja) or section 79 fund otherwise than in accordance with approved terms and conditions of the fund will be fully assessable (clause 3).
Proceeds from the death or compulsory destruction of live stock due to disease (Clause 4)
Existing provisions of the Income Tax Assessment Act allow a primary producer to elect to have any profit derived on a forced sale of live stock due to fire, drought or flood excluded from assessable income of the year in which it is derived, and applied to reduce the cost for income tax purposes of stock acquired, during that year or any of the five succeeding years, to replace the stock disposed of. It is proposed to extend the circumstances in which these provisions apply so that they will also apply where a primary producer receives compensation in consequence of the compulsory destruction of live stock for the purpose of controlling or eradicating stock diseases. The provisions are also to be available in respect of any profits arising from the death of an animal from a disease prescribed by a law that authorises the compulsory destruction of stock to control or eradicate disease.
The amendments are to apply in relation to live stock that die or are destroyed on or after 1 July 1980.
Special depreciation on plant (Clause 6)
A new section is to be inserted in the depreciation provisions of the income tax law to increase the rate at which depreciation is allowable on new and second-hand plant contracted for after 19 August 1980 (or where it is constructed by the taxpayer, the construction of which commences after that date) by 20 per cent of the rate that would otherwise apply. Excluded from the proposal are motor vehicles of the type now excluded from the investment allowance and plant for which concessional statutory depreciation rates are available. The accelerated rates will apply to eligible plant throughout the period it is used by the taxpayer in the production of assessable income, or until the cost of the plant has been fully written off for income tax purposes.
Deduction of certain expenditure on fences (Clause 7)
It is proposed to enact a new section to allow primary producers a deduction for expenditure on stockyard and sub-divisional fencing, in the year in which the expenditure is incurred, in circumstances where the Secretary to the Department of Primary Industry has certified that it is desirable to construct the fence to assist in the control or eradication of bovine brucellosis or tuberculosis. The deduction will be available in respect of expenditure incurred following the issue of such a certificate and before 1 July 1984.
This clause proposes to make tax deductible, gifts of the value of $2 or more made after 19 August 1980 to institutions certified by the Minister for Education as technical and further education institutions and to the Marcus Oldham Farm Management College, where the gifts are for certified purposes or for the provision of certified facilities (including residential accommodation) for the bodies concerned.
The clause will also authorise a deduction for gifts to an institution that is a prescribed Commonwealth institution under the Tertiary Education Commission Act 1977, and to a residential educational institution affiliated with such a prescribed institution. At present, the only prescribed Commonwealth institution is the Australian Maritime College.
The removal of the certification processes that presently apply in respect of gifts to colleges of advanced education, but which are no longer necessary, is also proposed.
Provisional tax for financial year 1980-81 (Clauses 15 and 16)
Provisional tax for 1980-81 is to be calculated, basically, by applying the 1980-81 rates of tax to 1979-80 taxable income as increased by 7.5 per cent, and by allowing dependant rebates at 1980-81 levels.
Income Tax (Individuals) Bill 1980
The second Bill, the Income Tax (Individuals) Bill 1980, will formally impose tax payable for the 1980-81 financial year by individuals and trustees, at the rates of tax, as indexed by 3.8 per cent, already declared for that year.
Income Tax (Companies and Superannuation Funds) Bill 1980
The third Bill, the Income Tax (Companies and Superannuation Funds) Bill 1980 will declare and impose the rates of income tax payable for 1980-81 by companies and trustees of superannuation funds. These rates are the same as for 1979-80 (46 per cent on the taxable income of companies), except that the rate for one category of taxable superannuation fund is reduced from 61.07 per cent to 60 per cent to reflect the reduction in the maximum rate of tax payable by an individual for 1980-81.
Detailed explanations of each clause of the Bills follow.