Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon. Frank Crean, M.P.)Main Features
Capital subscribed to mining or exploration companies (Clauses 5 to 8)
Under the Principal Act, deductions are available to shareholders for calls or other share moneys paid to companies engaged in mining, or prospecting for, minerals (including oil and natural gas) in Australia or Papua New Guinea. An outright deduction for moneys paid on shares by resident share-holders is allowable under section 77D of the Act where the company concerned lodges a declaration with the Commissioner of Taxation to the effect that the moneys will be expended on eligible mining or prospecting activities. The declaring company in turn forgoes entitlement to deductions against its own income for the expenditure of declared moneys. The section also makes provision for the subscription of moneys to "interposed" companies (often these are parent or holding companies) which will subscribe the moneys as share capital of companies actively employed in mining or prospecting. Under somewhat similar procedures, moneys paid as calls to mining or exploration companies, for expenditure on prospecting activities, confer a deduction under section 77C on shareholders for one-third of the calls paid. The prospecting company is not required to forgo entitlement to deductions for expenditure on prospecting.
It is proposed by the Bill that these deductions will not be available for moneys paid after 7 May 1973 to companies engaged in mining or prospecting unless the payment is for a call made by that date. A special transitional provision will, however, enable a public listed company playing the role of an "interposed company" to subscribe for further shares in an associated mining or prospecting company out of moneys raised by that date so as to enable it to lodge a valid declaration under section 77D in favour of its resident shareholders.
The provisions are also to be amended to provide for the reduction or disallowance of deductions where -
- (a)
- after 16 July 1972 shares in a mining or prospecting company are sold to another mining company before capital that has been included in a section 77C or section 77D declaration of the first-mentioned company has been expended in accordance with the declaration; or
- (b)
- a mining or prospecting company fails to expend, in accordance with a section 77D declaration, moneys received by it after 16 July 1972 from an interposed company.
A further amendment will withdraw deductions that could become allowable to an "interposed company" in respect of expenditure by it of moneys it has received from shareholders since 16 July 1972 and included in a declaration under section 77D. In addition, it will be made clear that expenditure made by a company during the year of income ending 30 June 1973 and later years on mining development or prospecting will be regarded as having been paid firstly out of any moneys available to the company that have been specified by it in declarations under section 77D.
Remuneration of Visiting Experts (Clauses 4 and 12)
The relief from Australian tax, allowed in the form of an exemption from tax or of a rebate of tax, given to visiting experts from overseas will be withdrawn. The withdrawal will affect the special allowances for visiting industrial experts under section 23(c)(vii) and section 160ABA of the Principal Act and for visiting government experts under section 23(c)(vi). The withdrawal will be subject to transitional arrangements under which the allowances will continue to apply in relation to a visit that commences on or before 30 June 1973 or that commences after then pursuant to a contract to make the visit entered into on or before the date of announcement of the decision to withdraw the allowances.
Isolated Children (Clauses 3 and 11)
It is proposed to exempt from tax allowances payable under the Commonwealth scheme for assistance in connection with the education of isolated children and, at the same time, to make it clear that reimbursements of education expenditures under the scheme are taken into account in determining the amount allowable to a taxpayer as a concessional deduction for education expenses incurred in respect of a dependant.
Domiciliary Nursing Care Benefits (Clauses 3, 9 and 10)
It is proposed to provide an exemption from tax for benefits payable by the Commonwealth as domiciliary nursing care benefit and to ensure that the benefits are not treated as separate net income of a dependant or applied to reduce the concessional deduction for medical expenses incurred by a taxpayer in respect of a dependant.
More detailed explanations of the proposals are given in the following notes relating to the clauses of the Bill.