House of Representatives

Explanatory Memorandum

(Circulated by the Treasurer, the Right Honourable J.B. Chifley.)

Ed. Note

Notes on Clauses

CLAUSE 1.-SHORT TITLE AND CITATION

CLAUSE 2.-COMMENCEMENT.

Section 5(1A.) of the Acts Interpretation Act 1901-1941 provides that every Act shall come into operation on the twenty-eighth day after the day on which that Act receives the Royal Assent, unless the contrary intention appears in the Act.

It is proposed that the Income Tax Assessment Act (No.2) 1947 shall come into operation on the day on which it receives the Royal Assent. This action is necessary in order that the altered provisions relating to the collection of income tax and social services contribution by instalments (clause 13) may be made operative without delay.

CLAUSE 3.-PARTS.

Section 5 of the Principal Act enumerates the Parts and Divisions into which the Act is divided.

The amendments proposed are drafting provisions necessitated by-

(a)

the insertion in the Principal Act of a new Division which provides for the taxation of certain income derived by friendly society dispensaries; and

(b)

the extension of Division 2 of Part VI. of the Act to embrace the collection of social services contribution by instalments.

CLAUSE 4.-EXEMPTIONS.

PARAGRAPH (a)-INCOME OF CERTAIN SOCIETIES AND ASSOCIATIONS.

Under section 23(g) of the Principal Act, an exemption is at present allowed in respect of all income derived by friendly societies, including dispensaries conducted by friendly societies.

By the new Division 9A of Part III, of the Act, it is proposed to modify the exemption to the extent of bringing within the taxable field a proportion of income derived by such dispensaries.

The proposed amendment to paragraph (g) of section 23 is in the nature of a drafting provision, and will have the effect of modifying the exemption to the extent that taxability arises under Division 9A.

PARAGRAPH (b)-PAY AND ALLOWANCES OF MEMBERS OF THE DEFENCE FORCE.

Section 23(s) provided certain exemptions in respect of pay and allowances earned by members of the Defence Force prior to 1st July, 1947. As the paragraph does not apply to pay and allowances earned after 30th June, 1947, its retention in the Act is unnecessary. The omission of paragraph (s) from section 23 will not affect any exemption to which a member of the Defence Force is entitled in respect of pay and allowances earned prior to 1st July, 1947.

PARAGRAPH (c)-EXCHANGE ALLOWANCES PAYABLE TO MEMBERS OF THE DEFENCE FORCE.

By this amendment it is proposed to exempt from income tax exchange allowances received by members of the Defence Force while serving overseas.

The exchange allowance is paid in order to alleviate any disability which may arise as a consequence of the conversion of portion of the member's pay from Australian currency to the currency of the country in which he is serving.

In the circumstances, it is considered inappropriate that the exchange allowance should be diminished by taxation as that would tend to defeat the purpose for which it is paid.

The proposed exemption will apply to assessments based on income derived during the year ending 30th June, 1948, and subsequent years.

CLAUSE 5.-ASSESSABLE INCOME-MEMBERS OF THE DEFENCE FORCE-VALUE OF RATIONS AND QUARTERS.

The object of this amendment, considered in conjunction with the amendment proposed by clause 6 of the Bill, is to eliminate differences in the amounts on which members of the Defence Force are taxed in respect of rations and quarters provided by the Services or the cash allowances granted in lieu of rations and quarters.

Section 26(ea) has the effect of including in the assessable income of a member of the Defence Force the value of rations and quarters provided for him by the Services. Where, however, the member of the Defence Force receives a cash allowance in lieu of the provision of rations and quarters, the amount of the cash allowance is included in his assessable income.

Under section 51A, which it is proposed to amend by clause 6 of the Bill, a member of the Forces who is obliged to live away from his home for the purposes of performing his Service duties is entitled to a deduction of the excess over 15s. per week of the value of rations and quarters provided in kind, or the cash allowances paid in lieu thereof.

The combined effect of section 26(ea) and section 51A is that a member of the Forces who is living away from home is required to pay tax on only 15s. per week in respect of rations and quarters, whether provided in kind or by way of cash allowances. On the other hand, a member who is not living away from home is required to pay tax on the full amount of the allowances paid to him in lieu of rations and quarters. The amount of those allowances exceeds 15s. per week in all cases.

The effect of taxation on these allowances was considered by the Special Committee appointed by the Government to report on the pay and conditions of service of the post-war permanent Defence Forces. That Committee expressed the view that a member of the Forces living in camp and in receipt of rations and quarters in kind should not, on being required to live out of camp, become subject to heavier taxation as a result of the receipt of a living-out allowance payable solely to compensate him for non-receipt of free rations and quarters.

The Special Committee considered that it was most desirable to achieve uniformity as between members of the Forces in this regard and recommended that all members be assessed for taxation purposes on a fixed uniform amount of 20s. per week as the value of rations and quarters provided by the Services and that that amount be adopted also as the value of living-out allowances and provision allowances, payable where rations and quarters are not provided, irrespective of the actual cash amounts paid and irrespective of whether the member of the Forces is or is not living away from home.

It is considered that the desired uniformity of treatment would be achieved if the assessable value of rations and quarters, or the substitute cash allowances, were fixed at a sum per week which does not vary according to the circumstances in which the member of the Forces is serving.

Accordingly, the Government has adopted the recommendation of the Special Committee and the amendment proposed by this clause is designed to provide that the value of rations and quarters supplied to a member of the Forces, or the cash allowances paid in lieu, shall be deemed, for taxation purposes, to be an amount calculated at the rate of 20s. per week. This rate is in conformity with the general taxation practice followed in the case of civilian employees for whom the employer provides food and accommodation, the value of which is not prescribed by an Industrial Award.

The adoption of 20s. per week as the value of rations and quarters (or the cash allowances in lieu thereof) substantially replaces the deduction provided by section 51A in respect of living-away-from home allowances. It is accordingly unnecessary to apply section 51A to members of the Defence Force. The necessary amendment of section 51A will be effected by clause 6.

The amendment proposed by clause 5 will apply in respect of assessments based on income derived during the year ending 30th June, 1948, and subsequent years.

CLAUSE 6.-DEDUCTION IN RESPECT OF LIVING-AWAY-FROM-HOME ALLOWANCE.

This clause is complementary to clause 5. As explained in the note to that clause the adoption of a rate of 20s. per week as the value of rations and quarters provided for members of the Defence Force substantially replaces the deduction allowed by section 51A and it is unnecessary to apply that section to members of the Defence Force. It is accordingly proposed by this clause to effect the necessary amendment to section 51A.

The amendment will apply in respect of all assessments based upon income derived during the year ending 30th June, 1948, and subsequent years.

CLAUSE 7.-GIFTS AND CONTRIBUTIONS.

Section 78 of the Principal Act provides for the allowance of a deduction in respect of pensions and retiring allowances paid by the taxpayer to certain of his employees and their dependants. In the case of companies, the section provides a deduction in respect of certain gifts.

Section 79 allows the deduction of voluntary contributions made by the taxpayer to employees' pension and superannuation funds and section 79A provides for the allowance of a special deduction to taxpayers residing in the remote areas of the Commonwealth.

The effect of sub-section (3.) of section 78 is that the aggregate of the deductions allowable under sections 78, 79 and 79A shall not exceed the amount of income remaining after deducting from the assessable income all other allowable deductions, except the deduction of losses of previous years and any deduction allowable under Division 10 of Part III. of the Act. Under Division 10, taxpayers carrying on mining operations in Australia are allowed deductions in respect of capital expenditure on plant or development, or expenditure on exploration or prospecting.

By clause 8 it is proposed to insert in the Principal Act a new section, section 79B, providing for the allowance of a special deduction to members of the Defence Force serving in certain localities outside Australia.

The purpose of clause 7 is to limit the aggregate of the deductions that may be allowable under the new section 79B and also under section 78, 79 and 79A of the Principal Act to the amount remaining after deducting from the assessable income all other allowable deductions except the losses of previous years and any deduction allowable under Division 10.

As the deduction to be provided by section 79B is in the nature of a concessional allowance, it is considered that such a limitation is justifiable. If this limitation were not specified it would be permissible for members of the Forces whose allowable deductions exceeded their assessable income to carry forward and deduct from the income of future years the whole or part of the special deduction allowable to them under the new section 79B.

The amendment will apply in respect of assessments based on income derived during the year ending 30th June, 1948, and subsequent years.

CLAUSE 8.-DEDUCTION FOR MEMBERS OF DEFENCE FORCE SERVING OVERSEAS.

By clause 8, it is proposed to insert in the Principal Act a new section, section 79B, to give effect to a recommendation of the Committee appointed to report on the pay and conditions of service of the post-war permanent Defence Force. The Committee recommended that a special deduction of Pd120 be allowed to those members of the Australian Forces who serve with the British Commonwealth Occupation Forces in Japan for at least six months during the year of income.

The proposed deduction is comparable with the deduction allowed to members of the Forces serving in the northern parts of the Commonwealth, and in the Territories of New Guinea and Papua, for at least six months during the year of income. These members of the Defence Force are entitled, as from the 1st July, 1947, in common with civilian taxpayers residing in those areas, to a deduction under section 79A of the Principal Act of Pd120 by way of zone allowance. This taxation concession was granted in recognition of the disadvantages of uncongenial climatic conditions, isolation and high cost of living.

At least two of those factors, uncongenial climatic conditions and isolation, apply to Japan and certain other localities in the Pacific area and it would be anomalous to require members serving in those localities to pay any greater measure of taxation in respect of comparable pay and allowances than members of the Forces serving in the northern parts of the Commonwealth, in New Guinea and in Papua. The enactment of section 79B will obviate an anomaly of this nature.

A member of the Defence Force serving with British Commonwealth Occupation Forces in Japan, or at certain other overseas localities, for a period of six months or more during the year of income will be entitled to the full deduction of Pd120. A member serving for less than six months during the year of income, in Japan, or at certain overseas localities, will be entitled to a proportionate deduction.

If, however, a member has also served during the year of income at an establishment within the zone areas of the Commonwealth, that service will be taken into account in conjunction with the member's service in Japan or other overseas locality in calculating the deduction to be allowed. The aggregate of the deductions which may be allowed under section 79A and the proposed section 79B, however, shall not in any case exceed Pd120.

Sub-section (1.) of the proposed section 79B will allow a deduction to a member of the Defence Force who has served during the year of income at an overseas locality. As indicated in the note to clause 7 of the Bill, however, the aggregate of the deductions that may be allowable under sections 78, 79, 79A and 79B will be limited to the amount remaining after deducting from the assessable income all other allowable deductions except the losses of previous years.

Sub-section (2.) will prescribe the amount of the deduction to be allowed. Paragraph (a) of that sub-section will provide that where the total periods of service at overseas localities is more than one half of the year of income, the deduction allowable will be Pd120. A deduction of Pd120 will also be allowed in the case of any member of the Forces who dies during the year of income at an overseas locality at which he has been serving during that year. The purpose of paragraph (b) is to allow a proportionate deduction in other cases where the period of service at the overseas locality is less than one half of the year of income. As already mentioned, it is proposed that service in the prescribed area in Australia, if less than six months, is to be brought into account. The proposed sub-section (3.) provides accordingly.

Sub-section (4.) provides that the deduction allowable under section 79A and that to be allowed under the proposed section 79B shall not aggregate more than Pd120.

Under sub-section (5.) the Treasurer may, in writing, declare to the Commissioner that any particular locality outside Australia, the Territory of New Guinea or the Territory of Papua, is one to which, by reason of its isolation and the uncongenial nature of service in that locality, the section shall apply. In his declaration, the Treasurer may specify the date from which, or the period for which, the section is to apply to the particular overseas locality.

An "overseas locality" is defined by sub-section (6.) as one to which, during the relevant period, the section applies. Sub-section (6.) also provides that "the prescribed area" shall have the same meaning as in section 79A. In that section, "the prescribed area" is defined as the area comprised in Zone A and Zone B. Zone A and Zone B comprise substantially the northern and central parts of Australia, and include the Territories of New Guinea, Papua and Norfolk Island.

The proposed new provision will apply in assessments based on income derived during the year ending 30th June, 1948, and subsequent years.

CLAUSE 9.-DEDUCTION FOR MEMBER OF DEFENCE FORCE, ETC.

Section 81 allows a special diminishing deduction of up to Pd250 from assessable income derived prior to the 1st July, 1947, by members of the Defence Force, by certain civilian personnel attached to the forces and by merchant seamen. As the section does not apply in respect of income derived after the 30th June, 1947, its retention in the Act is unnecessary. The repeal of section 81 will not deprive any taxpayer of a deduction to which he was entitled under the section in assessments on income derived prior to the 1st July, 1947.

CLAUSE 10.-FRIENDLY SOCIETY DISPENSARIES.

Division 9A is being enacted for the purpose of levying income tax on certain receipts of friendly society dispensaries, the income of which is at present wholly exempt from tax under section 23(g) of the Principal Act.

The proposal to levy tax on a portion of the income of friendly society dispensaries is designed to eliminate the competitive trading advantage that total exemption from income tax would confer on the dispensaries as compared with other pharmacists when the Pharmaceutical Benefits Act 1947 becomes fully operative.

Under that Act, friendly society dispensaries, in common with other pharmacists, will be authorized to supply pharmaceutical benefits to both members and non-members of friendly societies. Payments for the benefits so supplied will be made to the dispensaries by the Commonwealth.

Concurrently with this extension of the activities of friendly society dispensaries, it is anticipated that the States of New South Wales and Tasmania will authorize certain friendly society dispensaries in those States to trade in pharmaceutical goods with customers who are not members of a friendly society. General trading by friendly society dispensaries has been permitted for some years in the States of Queensland and South Australia. Friendly society dispensaries in Victoria and Western Australia are not permitted by the laws of those States to trade with persons who are not members of a friendly society. Accordingly, in Victoria and Western Australia, trading by the friendly society dispensaries with the general public will be limited to the supply of benefits under the Pharmaceutical Benefits Act 1947.

The expansion of the business operations of friendly society dispensaries in all States in competition with other pharmacists justifies taxation of the friendly society dispensaries on portion of their trading profits. However, the ascertainment of the taxable income of a friendly society dispensary in accordance with the general provisions of the Income Tax Assessment Act would present serious practical difficulties. Accordingly, it is proposed, in the interests of simplicity, to adopt a percentage of certain gross income as being the taxable income of the dispensary.

Section 121A is designed to give effect to the proposed basis of assessment. It will apply to all friendly society dispensaries, as defined in the Pharmaceutical Benefits Act, which are granted approval to supply benefits under that Act. Friendly society dispensaries, as so defined, comprise:-

(a)

friendly societies carrying on business as pharmaceutical chemists, and

(b)

bodies, whether corporate or unincorporate, carrying on such business for the benefit of members of one or more friendly societies.

The taxable income of a friendly society dispensary, calculated in terms of section 121A, will be 15 per cent. of the following gross income:-

(i)

amounts received by the dispensary from the Commonwealth under the Pharmaceutical Benefits Act for the supply of benefits under that Act to members and non-members of friendly societies;

(ii)

the gross proceeds from the sale or supply, to members as well as non-members, of medicines and other goods sold or supplied by the dispensary in the ordinary course of business; and

(iii)

any amounts which, under the Pharmaceutical Benefits Act, are specially charged by the dispensaries to customers for the supply of benefits under that Act.

The taxable income will not include amounts that may be received by a dispensary from its constituent friendly societies for the supply of benefits for members, e.g. per capita payments for the dispensing of prescriptions outside the formulary prescribed under the Pharmaceutical Benefits Act.

Under the proposed section 121B, a friendly society dispensary will be treated as a non-private company for income tax purposes. The effect of section 121B is that the taxable income, as calculated on the above basis, will bear tax at the company rate of 6s. in the Pd1. Super tax at the rate of 1s. in the Pd1 will become payable only where the taxable income of a friendly society dispensary exceeds Pd5,000. In that event, the super tax will be payable on the excess of the taxable income over Pd5,000.

The effect of section 121C is that the new provisions will apply to income derived by any such friendly society dispensary from the date when its approval to supply benefits under the Pharmaceutical Benefits Act becomes operative.

Friendly society dispensaries will not be required to pay undistributed profits tax, as a special provision conferring freedom from that tax is included in the present Bill-Clause 11.

CLAUSE 11.-APPLICATION OF PART IIIA.

Part IIIA. of the Principal Act provides for the imposition of a further tax on the undistributed income of companies, but section 160E excludes certain companies from the operation of that Part. It is proposed by this clause to amend section 160E so as to exclude friendly society dispensaries from the operation of Part IIIA.

Clause 10 of the present Bill provides for the insertion of a new Division 9A in Part III. of the Principal Act. The effect of the inclusion of this new Division in the Act will be to cause friendly society dispensaries to pay income tax on a taxable income equal to 15 per cent. of certain income derived by the dispensaries.

Section 121B in the new Division provides that such friendly society dispensaries shall be deemed, for the purposes of income tax, to be non-private companies. Consequently, in the absence of any express statutory provision to the contrary, friendly society dispensaries would become subject to the further tax which is imposed by Part IIIA. on the undistributed profits of non-private companies, other than those specified in section 160E. In principle, friendly society dispensaries cannot be distinguished from those organisations which have been excepted by section 160E(c) from the further tax on undistributed profits.

Accordingly, it is proposed to include friendly society dispensaries with those organisations that are exempted from the further tax on undistributed profits.

CLAUSE 12.-REMUNERATION OF MEMBERS OF BOARDS OF REVIEW.

By this clause it is proposed to increase the maximum appropriation for the remuneration and travelling allowances of members of Boards of Review from Pd10,000 to Pd20,000 per annum.

Since 1922 there has been an independent Board constituted under the Income Tax Assessment Act to which taxpayers may refer matters in dispute. The present Board of Review has power to review such decisions of the Commissioner of Taxation on objections duly lodged by taxpayers against assessments as are referred to it by the Commissioner at the taxpayer's request.

The functions of the Board of Review, although primarily associated with income tax have, from time to time, been extended to include matters arising under Sales Tax, Pay-roll Tax, War-time (Company) Tax and Entertainments Tax, as well as Estate and Gift Duties.

Apart from this enlargement of the duties of the Board of Review, the expansion of the field of taxation during the war years and, more particularly, heavier rates of tax have resulted in greatly increased numbers of taxpayers who are prepared to contest their assessments before the Board. As a consequence, considerable arrears of cases to be heard by the Board have accumulated, and the rectification of this position is beyond the capacity of a single Board.

In order to correct the position, the Government has decided to constitute an additional Board of Review by conferring upon the Board of Referees established under the War-time (Company) Tax Assessment Act, the powers and functions of a taxation Board of Review. At the same time, the powers and functions of a Board of Referees are being conferred upon the existing Board of Review.

The result of this re-organization will be that each Board will discharge the combined functions of a Board of Review and a Board of Referees.

A Board of Referees was constituted in 1941 under the War-time (Company) Tax Assessment Act for the purpose of determining issues arising under that Act. The functions of that Board were subsequently enlarged by the inclusion of a number of additional matters arising out of certain sections of the Income Tax Assessment Act. In view of the proposed discontinuance of the War-time(Company) Tax, however, the number of cases to be referred to the Board of Referees under that Act will progressively diminish during the next few years.

Section 182 of the Principal Act provides that the sum of Pd10,000 per annum shall be the maximum amount appropriated from the Consolidated Revenue Fund for payment of the remuneration and travelling expenses of the chairman and other members of a Board of Review. The amount of Pd10,000 will be insufficient to meet this expenditure when an additional Board of Review is established.

It is proposed, therefore, by the amendment to be effected by clause 12 of the Bill, to increase the maximum appropriation for the purposes mentioned from the sum of Pd10,000 per annum to the sum of Pd20,000 per annum.

The amendment will apply to the financial year 1947-1948, and subsequent financial years.

CLAUSE 13.-COLLECTION OF INCOME TAX AND SOCIAL SERVICES CONTRIBUTION BY INSTALMENTS.

SUB-CLAUSE (1.).-REPEAL OF DIVISION 2 OF PART VI. AND INSERTION OF NEW DIVISION.

This sub-clause proposes to insert in the Principal Act a new Division dealing with the collection of income tax and social services contribution by instalments in lieu of the existing Division. The necessity for a reconstruction of the Division arises from several causes.

Firstly, it is necessary to provide for a new procedure under which employees will be allowed credit for instalment deductions prior to the issue of a notice of assessment. Secondly, certain sections of the existing Division which became inoperative at the time of the introduction of the system of pay-as-you-earn taxation on 1st July, 1944, are no longer required in the Division. Thirdly, many of the provisions relating to employers, who are not group employers, are at present contained in the Income Tax Regulations and it is felt that they should be included in the Division so that the Division will then contain all the provisions relating to the collection of tax and contribution by instalments. Furthermore, it will simplify the law for employers and the administration if the Division provides for the deduction of instalments for the purposes of the Social Services Contribution Assessment Act as well as the Income Tax Assessment Act. Under the law at present, it is necessary for separate instalment tables to be prescribed for social services contribution and income tax although the table which is published for the use of employers represents a combination of the two tables which are prescribed.

The provisions of the new Division are to a very considerable extent the same as those of the Division being replaced. The opportunity has been taken, however, to effect a number of drafting amendments for the purpose of clarification.

The proposed Division will not involve employers in any further duties or responsibilities as compared with the existing Division.

Division 2.-Collection of Income Tax and Social Services Contribution by Instalments.

NEW SECTION 221A.-DEFINITIONS.

The majority of the definitions of the existing section 221A have been repeated in this section. Certain definitions have been varied, however, consequent on the extension of the Division to provide for the deduction of instalments for the purposes of the Social Services Contribution Assessment Act. Certain definitions at present appearing in the Regulations and some new definitions relating to the procedure under the system of prior application of credit have been included in the section.

NEW SECTION 221B.-ARRANGEMENTS FOR DEDUCTIONS BY STATES.

This section repeats the provisions of section 221B of the existing Division.

NEW SECTION 221C.-DEDUCTIONS BY EMPLOYER FROM SALARY OR WAGES.

The provisions of section 221C of the existing Division are extended in this section to enable the deduction of instalments for the purposes of the Social Services Contribution Assessment Act.

NEW SECTION 221D.-VARIATION OF DEDUCTIONS.

This section repeats the provisions of section 221D of the existing Division.

NEW SECTION 221E.-CERTIFICATES OF EXEMPTION.

This section repeats the provisions of section 221L of the existing Division.

NEW SECTION 221F.-GROUP EMPLOYERS.

This section relates to the duties of group employers and the provisions of sections 221K and 221KA of the existing Division are repeated in this section. In addition, a provision at present contained in the Income Tax Regulations has been included in the section.

NEW SECTION 221G-EMPLOYERS OTHER THAN GROUP EMPLOYERS.

This section relates to the duties of employers, other than group employers, and replaces obsolete sections of the existing Division. The provisions of this section are at present set out in the Income Tax Regulations.

NEW SECTION 221H.-APPLICATION OF DEDUCTIONS IN PAYMENT OF TAX.

This section refers to the proposed new procedure relating to the allowance of credit in respect of instalment deductions prior to the issue of a notice of assessment.

Section 221H of the existing Division requires that, on receipt of a notice of assessment, an employee should forward to the Commissioner the instalment tokens issued to him in respect of deductions made from his earnings in the year to which the notice of assessment relates. The section further requires that the Commissioner shall allow credit to the employee in respect of the value of the tokens so forwarded to him. Under this arrangement it is necessary that an employee should retain instalment tokens issued to him by his employer until he receives his notice of assessment.

The procedure which has been introduced and which is provided for in this new section requires an employee to forward instalment tokens to the Commissioner attached to the return of income to which they relate. Where the value of the tokens exceeds the tax payable the procedure provides that a refund cheque will accompany the notice of assessment. In cases where the tax payable exceeds the value of the tokens, the notice of assessment will set out the balance payable.

The proposed procedure will enable the expeditious payment to employees of refunds of excess instalment deductions. It will also reduce the possibility of loss by employees of instalment tokens, which loss involves employees and their employers in considerable inconvenience.

NEW SECTION 221J.-INTERIM STAMPS RECEIPTS.

This section repeats the provisions of section 221HA of the existing Division.

NEW SECTION 221K.-USE OF TAX STAMPS BY PERSONS OTHER THAN EMPLOYEES.

This section repeats in substance the provisions of section 221M of the existing Division.

NEW SECTION 221L.-STAMPS OR CERTIFICATES STOLEN, LOST OR DESTROYED.

This section provides for the allowance of credit to employees in respect of stamps which have been lost, stolen or destroyed. Such a provision is at present contained in the Regulations where it was inserted upon the introduction of the pay-as-you-earn system. The section also provides for the allowance of credit in respect of group certificates which have been lost, stolen or destroyed.

NEW SECTION 221M.-POWERS OF COMMISSIONER IN RELATION TO STAMPS, ETC.

This section empowers the Commissioner to impound instalment tokens where he is in doubt regarding the ownership of those tokens.

NEW SECTION 221N.-RECOVERY OF AMOUNTS NOT DEDUCTED.

This section repeats the provisions of section 221E of the existing Division.

NEW SECTION 221P.-EMPLOYER NOT ACCOUNTING FOR DEDUCTIONS.

Where a group employer has made deductions from the earnings of his employees, section 221K of the existing Division requires him to pay the amounts deducted to the Commissioner. Section 221KF of the existing Division requires that an employer, other than a group employer, who has made deductions from the earnings of his employees and who has failed to purchase tax stamps in respect of the deductions, shall be liable to pay the amounts deducted to the Commissioner. These provisions are repeated in sub-section (1.) of the new section.

Amounts deducted by any employer from the earnings of his employees are regarded as being held in trust for the Commissioner. For that reason, sub-section (2.) of the new section proposes that the payment of those amounts should take priority over claims against the estate in the event of an employer becoming bankrupt.

NEW SECTION 221Q.-EMPLOYER FAILING TO ISSUE GROUP CERTIFICATE OR DELIVER TAX STAMPS SHEET.

This section repeats the provisions of section 221KE of the existing Division. In addition, the provisions have been expanded to ensure that, in the event of the subsequent production of an instalment token in respect of deductions for which credit has already been allowed under this section, no further credit shall be allowed.

NEW SECTION 221R.-RECOVERY OF AMOUNTS BY COMMISSIONER.

This section re-expresses the provisions of section 221KC of the existing Division. In addition, the section has been expanded to incorporate a provision at present contained in the Income Tax Regulations.

NEW SECTION 221S.-ARRANGEMENTS WITH AUTHORITIES OF OTHER COUNTRIES.

This section repeats the provisions of section 221KD of the existing Division. It has not been necessary to refer to arrangements with State Governments as such arrangements are provided for in new section 221B. The section has further been expanded to empower the Commissioner to make an arrangement with prescribed organisations.

NEW SECTION 221T.-SALE OF TAX STAMPS.

This section repeats the provisions of sections 221N and 221R of the existing Division.

NEW SECTION 221U.-PAYMENTS TO AND FROM CONSOLIDATED REVENUE FUND.

This section repeats the provisions of section 221Q of the existing Division but excludes references to the joint stamp agreements between the Commonwealth and State Governments which ceased to operate when uniform taxation was introduced on the 1st July, 1942.

NEW SECTION 221V.-OFFENCES.

This section repeats the provisions of section 221V of the existing Division.

NEW SECTION 221W.-JOINDER OF CHARGES UNDER THIS DIVISION.

This section repeats the provisions of section 221W of the existing Division.

NEW SECTION 221X.-OFFENCES BY PARTNERS.

This section repeats the provisions of section 221X of the existing Division.

NEW SECTION 221Y.-FORGING STAMPS OR DIES.

This section repeats the provisions of section 221Y of the existing Division.

PROVISIONS OF THE EXISTING DIVISION WHICH HAVE NOT BEEN INCORPORATED IN THE PROPOSED NEW DIVISION.

Sections 221F and 221G

Sections 221F and 221G of the existing Division relate to the procedure to be followed in connexion with tax stamps in use prior to 1st July, 1944. Upon the introduction of the pay-as-you-earn system at that date, a new procedure relating to tax stamps was brought into operation and the sections referred to thereby became inoperative. The new procedure was laid down in the Income Tax Regulations and section 221KD was inserted to provide that that procedure should supersede the procedure laid down in sections 221F and 221G.

As the existing procedure relating to tax stamps will be followed under the proposed new Division' the provisions of sections 221F, 221G and 221KD are accordingly no longer required.

Section 221P

This section relates to arrangements entered into between the Commonwealth and the States for the use of joint stamps for the collection of Commonwealth and State taxes. Upon the introduction of uniform taxation on 1st July, 1942, these arrangements ceased to have effect and the provisions of the section are, therefore, no longer required.

Section 221U

This section relates to tax stamps of the type in use prior to 1st July, 1944, and provides that credit may be allowed where an employee satisfies the Commissioner that stamps which have been issued to him by his employer have been destroyed.

It is anticipated that, owing to the effluxion of time, few claims, if any, for credit under this section will arise in the future. It is accordingly considered that the inclusion of the section in the new Division is not warranted. At the same time, however, provision has been made in sub-clause (8.) of clause 13 to ensure that the Commissioner will be empowered to allow credit in the event of any claim in this regard being made by an employee.

SUB-CLAUSES (2.) TO (8.).-SAVING.

The provisions contained in these sub-clauses are designed to ensure that, notwithstanding the repeal of the existing Division 2 of Part VI., the matters specified will continue in force. This course is necessary in order that anything done, or required to be done, under the existing Division will not be invalidated because of the repeal of that Division.

CLAUSE 14.-CONSEQUENTIAL AMENDMENTS OF SOCIAL SERVICES CONTRIBUTION ASSESSMENT ACT 1945-1946.

This clause proposes to delete from the Social Services Contribution Assessment Act the provisions of that Act relating to the collection of contribution by instalments.

This course is necessary to accord with the proposed extension of Division 2 of Part VI. of the Income Tax Assessment Act to embrace the collection of social services contribution by instalments (see clause 13).