House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Rt. Hon. Harold Holt.)

Notes on Resolution

RESOLUTION TO DECLARE RATES OF TAX

The Resolution declares the rates of tax to be payable by individuals and companies for the financial year 1960- 1961. As in previous years, the Resolution also authorises the granting of an age allowance.

The explanations below relate primarily to those aspects of income tax rates that differ from the provisions enacted in 1959.

Discontinuance of 5% rebate to individuals.

The rates of income tax declared in the first four schedules to the Resolution apply to the taxable incomes of individuals for the current year 1960-1961.

These rates are the same as those at which tax was payable for the 1959-1960 year. For that year, however, the Resolution authorised a rebate equal to 5% of the tax otherwise payable. The present Resolution does not include a corresponding provision.

Age Allowance.

Paragraph 5 of the Resolution proposes an increase in the level of incomes to which the age allowance may apply.

The allowance is available to persons who have been residents of Australia throughout the year of income and who, at the end of the income year, have attained the age of 65 years in the case of men or 60 years in the case of women.

The objective of the allowance is to exempt from tax persons satisfying these tests and whose income does not exceed the sum of the full age pension and the maximum permissible income for age pension purposes. At present, the allowance confers freedom from tax on net incomes not exceeding Pd429 in the case of a single taxpayer. In the case of married couples, combined net incomes of up to Pd858 are exempt from tax if both husband and wife satisfy the tests mentioned and one of them contributes to the maintenance of the other.

Consistent with the proposed increase of 5/-a week in the age pension, paragraph 5 of the Resolution proposes that the present exemption limits of Pd429 and Pd858 be increased to Pd442 and Pd884 respectively.

In addition to the exemptions outlined, the age allowance also provides a measure of relief where the net income is somewhat in excess of the amounts mentioned. This relief may, at present, be effective where the net income is, in the case of a single aged person, between Pd429 and Pd485 and in the case of aged married couples, between Pd858 and Pd1,181. Paragraph 5 will increase the upper limit at which the allowance may operate from Pd485 to Pd502 and, in the case of a married taxpayer, from Pd1,181 to Pd1,236.

Where the net income of an aged person exceeds the exemption limit, but is within the upper limits referred to, the amount of tax payable is limited to nine-twentieths of the excess of the net income over the exemption point. For example, if the combined net incomes of a married couple total Pd950 the excess over the exemption point of Pd884 is Pd66. In these circumstances the tax payable by the aged person is limited to nine-twentieths of Pd66, that is, Pd29.14.0. If, however, there should be circumstances in which the normal assessment processes result in a smaller amount of tax being payable, then only that smaller amount is charged.

The revised age allowance will apply for the current year of income 1960-61.

Rates of tax payable by companies.

The Fifth Schedule to the Resolution declares rates at which income tax is to be payable by companies for the financial year 1960-1961, that is, in respect of incomes for the 1959-1960 income year.

The rates will be six pence in the Pd above those applied to taxable incomes of the preceding year 1958-1959. The rates of tax proposed are -

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Further tax at 10s. in the Pd1 payable on undistributed amount.

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Maximum income subject to this rate is Pd5,000 less mutual income.

XX

Maximum income subject to this rate is Pd5,000 less the sum of the mutual income and dividend income included in the taxable income.

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Maximum income subject to this rate is Pd5,000 less dividend income included in the taxable income.