Explanatory Memorandum
(Circulated by authority of the Treasurer,the Hon. John Dawkins, M.P.)General Outline and Financial Impact
This Bill will amend the following taxation Acts to give effect to the following measures :
Reductions in the Rate of Income Tax
. The Income Tax Rates Act 1986 to declare the rates of tax payable by both residents and non residents for the 1994/95 and subsequent income years.
Date of effect: 1 July 1994
Proposal announced: One Nation Statement on 26/2/1992
| Financial impact: | 94/95 | 95/96 |
| $m3,200 | $m5,200 |
Clauses involved in the proposed amendments
Clause 2: contains the commencement dates for the provisions of the Bill.
Clauses 4 to 6: provides details of the personal rates of tax to apply for the 1994-95 to 1996-97 and subsequent income years respectively.
Reductions in the rate of income tax
Summary of proposed amendments
Purpose of amendment: to declare the rates of tax payable by both residents and non residents for the 1994/95 and subsequent years of income.
Date of Effect: 1 July 1994
The current and proposed future personal income tax scales for residents from 1 July 1994 and 1 January 1996 respectively are as shown in the Table below -
Current and Future Income Tax Rate Scales
| Current | From 1 July 1994 | From 1 January 1996 | Income($pa) | Marginal Rate(%) | Income($pa) | Marginal Rate(%) | Income($pa) | Marginal Rate(%) | |||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 0- 5400 | 0 | 0- 5400 | 0 | 0- 5400 | 0 | ||||||
| 5400-20700 | 20 | 5400-20700 | 20 | 5400-20700 | 20 | ||||||
| 20700-36000 | 38 | 20700-38000 | 34 | 20700-40000 | 30 | ||||||
| 36000-50000 | 46 | 38000-50000 | 43 | 40000-50000 | 40 | ||||||
| Over 50000 | 47 | Over 50000 | 47 | Over 50000 | 47 | ||||||
The current and proposed future rates of tax for non residents are as in the above Table with the exception that a tax rate of 29% applies to income in the range $0 - 20,700.
Because the subsequent reductions to personal tax rates will apply from 1 January 1996, the Bill will also declare composite rates to apply, for both residents and non residents, on assessment in respect of income for the 1995-96 year of income. The composite rates for residents are as follows -
Composite Income Tax Rate Scales for 1995-96
| Income($pa) | Marginal Rate(%) |
|---|---|
| 0- 5400 | 0 |
| 5400-20700 | 20 |
| 20700-38000 | 32 |
| 38000-40000 | 36.5 |
| 40000-50000 | 41.5 |
| Over 50000 | 47 |
The proposed rates of tax for non residents for the 1995/96 income year are as in the above Table with the exception that a tax rate of 29% will apply to income which is currently free of tax and income which is subject to tax at the 20% rate.
Explanation of proposed amendments
Part 2 of the Bill will amend the Income Tax Rates Act 1986 to give effect to the proposal announced by the Prime Minister in the One Nation Statement on 26 February 1992. The income tax rate reductions affect the marginal rates of personal income tax that now apply in the income range of $20700 to $50000.
With effect from 1 July 1994, the Bill will declare the rates of personal income tax which will apply, to both residents and non residents, for assessments in respect of -
- •
- the 1994-95 year of income [Clause 4] ;
- •
- for the 1995-96 year of income [Clause 5] ; and
- •
- for the 1996-97 and later years of income [Clause 6] .