Explanatory Memorandum.
(Circulated by authority of the Treasurer, the Rt. Hon. Harold Holt.)INCOME TAX AND SOCIAL SERVICES CONTRIBUTION BILL (No.2) 1964.
Introductory Note:
This Bill is consequential on the amendments relating to superannuation funds proposed in the Income Tax and Social Services Contribution Assessment Bill (No.3) 1964.
The purpose of this Bill is to declare the rate of tax payable for the current financial year 1964-65 on income derived after the date specified in the Assessment Bill by a superannuation fund upon which tax is to be assessed under clause 46 of the Income Tax and Social Services Contribution Assessment Bill (No.3) 1964. This is being done by way of an amendment to the Income Tax and Social Services Contribution Act 1964 (the Principal Act which declares the general rates of tax for the 1964-65 financial year).
The classes of income upon which tax is to be payable under clause 46 are shown at page 110 of this memorandum.
The rate of tax proposed to be payable for the 1964-65 financial year is 10/- in the Pd for each Pd1 of the taxable income in respect of which a trustee of a superannuation fund is, under clause 46, assessed and liable to pay tax.
Notes on Clauses
Clause 1: Short Title and Citation.
Clause 1 formally provides the short title and citation of the Amending Act and the Principal Act as amended.
By this clause, it is proposed that the Bill shall, in order to achieve consistency with the associated Bills, come into force on the day that it receives the Royal Assent.
Clause 3: Imposition of Income Tax and Social Services Contribution.
This clause will amend section 5 of the Principal Act which imposes income tax for the current financial year 1964-65 at rates declared elsewhere in that Act.
Sub-section (3.) of section 5 provides that no tax is payable where the taxable income derived by an individual, a person in the capacity of a trustee or a non-profit company does not exceed Pd208.
The amendment proposed by clause 3 is designed to exclude from the application of that sub-section income of a superannuation fund that is to be taxed at the rate of 10/- in the Pd.
Clause 4: Rates of Tax Payable by Persons Other Than Companies.
By this clause, section 6 of the Principal Act will be amended by omitting sub-sections (4.) and (5.) and inserting three new sub-sections in their stead.
The existing sub-section (4.) provides that the rate of tax payable by a trustee, other than a trustee of a superannuation fund, is as set out in the Fourth Schedule to the Principal Act. The proposed new sub-section (4.) does not vary the substance of the provision but merely provides that the rates set out in the Fourth Schedule shall apply to all trustees except as provided by the two succeeding sub-sections, each of which refers to a trustee of a superannuation fund.
The present sub-section (5.) states that the rates of tax payable by a trustee of a superannuation fund are as set out in the Fifth Schedule. The rates declared in that Schedule are applied to investment income of a superannuation fund that does not comply with the "30/20 rule" for the investment of assets in Commonwealth and public securities. Because of the amendments to be made by the Income Tax and Social Services Contribution Assessment Bill (No. 3) 1964, it will be necessary to declare also the rate of tax payable on the taxable income of a superannuation fund.
In order to meet this situation the proposed sub-section (5.) provides that the rates of tax payable by the trustee of a superannuation fund on investment income are as set out in Part I of the Fifth Schedule.
The proposed sub-section (5A.) provides that the rate of tax payable by a trustee of a provident, benefit, superannuation or retirement fund in respect of taxable income is as set out in Part II of the Fifth Schedule.
This clause proposes the repeal of the existing Fourth and Fifth Schedules and, in their place, will insert two new schedules.
The proposed new Fourth Schedule declares the rate of tax payable by a trustee, other than a trustee of a superannuation fund. No change will be made from the present rate which, stated broadly, is the same as would be payable by an individual upon an amount of taxable income equal to the taxable income of the trustee.
The new Fifth Schedule is divided into two Parts. Part I re-enacts the existing rates of tax payable on the investment income of a trustee of a superannuation fund that does not comply with the "30/20 rule". The rates are 5/6 in the Pd on the first Pd5,000 of investment income on which tax is to be assessed and 7/6 in the Pd on the balance of that investment income.
Part II of the Fifth Schedule declares a new rate. It is a rate of 10/- in the Pd and will be payable on the taxable income of a provident, benefit, superannuation or retirement fund. The rate is, of course, required because, as explained in the Introductory Note to this Bill, tax is to be payable on certain income derived by these funds as from the date specified in clause 46.