Explanatory Memorandum
(Circulated by authority of the Treasurer, the Rt. Hon. Harold Holt.)INCOME TAX (INTERNATIONAL AGREEMENTS) ACT 1959.
Introductory Note.
The purpose of this Bill is to effect in the Income Tax (International Agreements) Act 1953-1958 amendments consequential upon -
- A.
- the introduction of dividend withholding tax;
- B.
- the allowance of a rebate to reduce by 5 per cent the income tax payable by individuals for the 1959-60 financial year.
NOTES ON CLAUSES
Clause 1: Short Title and Citation.
This clause formally provides a short title and citation for the Amending Act and also for the Income Tax (International Agreements) Act 1953-58 as amended.
By clause 2, it is proposed that the Amending Act come into operation on the day that it receives the Royal Assent.
Clause 3: Ascertainment of Australian Tax, other than Dividend Withholding Tax, on Dividends.
Paragraph (a) of this clause proposes a drafting amendment in section 16(8.) of the Income Tax (International Agreements) Act 1953-1958. That provision relates to the ascertainment of the amount of Australian tax on dividends. In this context, "Australian tax" has meant the tax imposed under the annual Act imposing rates of tax.
The purpose of section 16(8.) has not been altered by the introduction of dividend withholding tax and it is proposed that the meaning of "Australian tax" be left undisturbed. The amendment proposed by paragraph (a) of clause 3 will accordingly provide that "Australian tax" does not include dividend withholding tax.
Paragraph (b) is another drafting amendment to ensure that the effects of the present section 16 of the Income Tax (International Agreements) Act 1953-1958 are not varied.
Sub-section (8.) of that section includes a definition of "the average rate of tax" that, in the case of individuals, is ascertained on the basis that the taxpayer is not entitled to a rebate of tax. When the provision was enacted, rebates of tax were provided under the Income Tax and Social Services Contribution Assessment Act, but no rebates for the purpose of reducing the rates of tax payable were allowable under the Act imposing rates of tax.
The reduction by 5 per cent in the income tax payable by individuals for the 1959-60 financial year is to be effected by the allowance of a rebate provided in the Act imposing rates of tax. It will, of course, be necessary for a rebate of this nature to enter into the ascertainment of "the average rate of tax" in determining the amount of Australian tax payable on dividends and the amendment proposed by paragraph (b) is designed to achieve this result.
Clause 4: Rebates of Excess Tax on Dividends Included in Assessable Income.
By this clause it is proposed to amend section 17 of the Income Tax (International Agreements) Act 1953-1958. That section allows a rebate of tax where the tax otherwise payable on dividends would exceed the maximum amount that may be charged consistent with a double taxation agreement concluded by Australia.
The rebate allowable under section 17 is designed for application in relation to tax imposed at the general rates of tax and not in respect of dividend withholding tax.
Clause 4 will effect a drafting amendment to maintain the present position in this connection.
Clause 5: Dividend Withholding Tax.
This clause proposes to insert in the Income Tax (International Agreements) Act 1953-1958 a new provision - section 17A - that is complementary to section 17 of that Act.
The new section 17A will apply where dividend withholding tax would, but for that section, be in excess of the amount to which Australia has agreed by a double taxation agreement to limit its tax on dividends. In these circumstances, the new section will allow a rebate to reduce the tax on dividends to the amount adopted in the relevant agreement.