Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon. John Howard, M.P.)Introductory note
The purpose of this memorandum is to explain the provisions of the above Bills. The provisions are designed principally to introduce a system of withholding tax in respect of mining payments made to Aboriginal groups. The Assessment Bill will also effect two technical amendments.
The provisions of the Assessment Bill and the associated rating Bill introducing a comprehensive withholding tax system in respect of mining payments made to Aboriginal groups were foreshadowed in a joint statement on 20 July 1978 by the Treasurer and the Minister for Aboriginal Affairs.
Income Tax Assessment Amendment Bill (NO.2) 1979
Mining payments to Aboriginal groups (Clauses 3, 4, 7 and 8 of first Bill)
These clauses will introduce into the income tax law provisions to enable the calculation, and collection by way of a withholding tax, of income tax on mining payments made on or after 1 July 1979 to Aboriginals and Aboriginal groups and bodies in respect of mining and exploration activities on Aboriginal land. The tax, to be formally declared by the second Bill, will be at the rate of 6.4 per cent of the payments, which represents tax of 32 per cent applied to 20 per cent of the gross revenues concerned.
To achieve this it is necessary to create a liability for the tax (clause 7) and to provide a system of collection (clause 8). While liability for the tax will rest with the Aboriginals or bodies receiving defined mining payments in the first instance, actual collection of the tax will be by the withholding system. Under this system, a mining company, Government or other person that makes a mining payment will have a responsibility to deduct from the payment the amount of tax payable and forward this to the Commissioner of Taxation in settlement of the tax.
Technical changes (Clauses 2, 5 and 6 of first Bill)
Section 73A of the Principal Act, which provides for special deductions in respect of payments to an approved research institute, includes in a definition of "approved research institute" a reference to the Secretary, Department of Employment and Industrial Relations as an approving authority. As a consequence of the abolition of that Department on 5 December 1978, the reference is to be replaced with effect from that date by a reference to the Department of Industrial Relations.
Section 78 provides for the allowance of deductions for gifts to, among other things, the Duke of Edinburgh's Study Conference Account maintained by the Department of Labour and National Service. The redundant reference to that Department is to be replaced, with effect from 23 June 1977, by a reference to the Department of Productivity which has maintained the Account from that date.
The following notes explain each of the clauses of the Bill.