House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. P.J. Keating, MP)

GENERAL OUTLINE

TAXATION LAWS AMENDMENT (RATES AND REBATES) BILL 1989

This Bill will amend various taxation Acts to give effect to a number of proposals announced in the 12 April 1989 Economic Statement:

•

the Income Tax Rates Act 1986:

Personal rates of tax

• .

to declare the rates of tax payable by individuals, and by trustees generally, to give effect to the announcement to reduce personal income tax rates in two stages -

the first with effect from 1 July 1989, by -

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increasing the top of the first rate step from $12,600 to $17,650, and introducing a new rate of 21 per cent to apply in the income range $5,001 to $17,650;

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increasing the top of the second rate step from $19,500 to $20,600, so that the existing 29 per cent rate applies in the new income range $17,651 to $20,600;

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reducing the 40 per cent rate to 39 per cent, to apply in the income range $20,601 to $35,000;

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introducing a new rate of 47 per cent, to apply in the income range $35,000 to $50,000; and

the second with effect from 1 January 1990, by -

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reducing the 49 per cent rate to 47 per cent for incomes over $50,000.

A table comparing the proposed rates (including changes to the income ranges at which the proposed rates apply) with existing rates is set out below -

For parts of taxable income

Exceeding	but not exceeding	Proposed rate	Existing rate	$	$	%	%
0	5,100	Nil	Nil
5,100	12,600	21	24
12,600	17,650	21	29
17,650	19,500	29	29
19,500	20,600	29	40
20,600	35,000	39	40
35,000	50,000	47	49
50,000	-	49*	49
* This 49 per cent rate is to be reduced to 47 per cent from 1 January 1990.

Unearned income of minors

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to declare new rates of tax payable by individuals, and by trustees, on the unearned income of minors for 1989-90 and 1990-91 and subsequent years (subject to shading-in arrangements);

Undistributed trust income

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to declare new rates of tax payable by trustees on undistributed income of certain trust estates (section 99A) for 1989-90 and 1990-91 and subsequent years.

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the Fringe Benefits Tax Act 1986

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to declare a new rate of fringe benefits tax of 47 per cent for the year of tax that commences on 1 April 1990 and for subsequent years of tax.

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the Income Tax (Bearer Debentures) Act 1971

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to reduce to 47 per cent the basic rate of tax payable under section 126 of the Income Tax Assessment Act 1936 on interest paid or credited on or after 1 January 1990 by a company on bearer debentures.

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the Trust Recoupment Tax Act 1985 and the Trust Recoupment Tax Assessment Act 1985

• .

to reduce the rates of tax payable on a primary taxable amount or a secondary taxable amount.

•

the Income Tax Assessment Act 1936

Concessional rebates

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to increase to $1,000 each the rebates of tax for a spouse, daughter-housekeeper or housekeeper, and to $1200 where there is a dependent child or student;

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to increase to $940 the sole parent rebate;

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to increase to $450 and $900, respectively, the rebates of tax for an invalid relative and a parent or parent-in-law; and

• .

to index these rebate levels for the 1990-91 and subsequent income years on the basis of movements in the All Groups Consumer Price Index number.

Quarterly provisional tax

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to permit the Commissioner of Taxation to reduce the amount of quarterly provisional tax instalments otherwise payable in circumstances where an expected reduction in tax makes that appropriate, with effect from the commencement of the 1989-90 income year.