House of Representatives

Explanatory Memorandum

(Circulated by the Treasurer, the Rt. Hon. Sir Arthur Fadden.)

Ed. Note

Main Features

INTRODUCTORY NOTE:-

The main features of the Resolution and the Bill are-

Rates of Tax: Individual Taxpayers-

(1)

That the special levy of ten per centum of income tax and social services contribution imposed for the last financial year shall not be reimposed for the current financial year;

(2)

That, subject to the discontinuance of the special levy, the rates applicable for the last financial year 1951-1952 (based on income of the year ended 30th June, 1952) shall continue to apply for the current financial year 1952-1953 (based on income of the year ending 30th June, 1953).

Rates of Tax: Companies-

(3)

That the primary rate to be imposed on taxable incomes derived by both public and private companies during the year ended 30th June, 1952, shall be-

On the first Pd5,000-5s. in the Pd1.

On the balance of taxable income-7s. in the Pd1.

(NOTE.-This represents a reduction, compared with rates applicable for the last financial year, of 2s. in the Pd1 on the first Pd5,000 of taxable incomes derived by public companies);

(4)

That, subject to specified exceptions, the special levy at the rate of 2s. in the Pd1 imposed last financial year shall continue to be imposed on taxable incomes derived by public companies during the year ended 30th June, 1952;

(5)

That the system of advance payments by companies instituted in the last financial year shall be discontinued. Advance payments imposed for the financial year 1951-1952 will be credited in payment of tax to be assessed for the current financial year 1952-1953;

(6)

That the amount of distributable income of the year 1951-1952, in excess of Pd6,000 which a private company may retain free from undistributed income tax shall be increased;

(7)

That the undistributed income tax shall be levied on private companies at the flat rate of 10s. in the Pd1 in lieu of the shareholders' graduated rates;

(8)

That no rebate shall be allowed to shareholders on dividends paid out of income which has borne undistributed income tax at the flat rate of 10s. in the Pd1.

Education Expenses-

(9)

That a concessional deduction shall be allowed for the cost of full-time education of dependent children under 21 years of age, subject to a maximum of Pd50 for each child.

Age Allowance-

(10)

That persons of pensionable age-i.e., men over 65 years, women over 60 years-shall not be required to pay tax on income derived during the current year ending 30th June, 1953, unless the net income, in the case of a single person, exceeds Pd254, or, in the case of a married couple, the aggregate of their net incomes exceeds Pd507. For the last financial year these exemption points were Pd234 and Pd468 respectively.

Leases: Goodwill-

(11)

That consideration paid and received under agreements made after 31st December, 1952, for goodwill associated with businesses on leasehold premises shall be taxable income of the recipient and an allowable deduction to the payer only where the parties so agree and notify the Commissioner of Taxation of their agreement.

Non-Profit Clubs and Organizations-

(12)

That the income of a club established for the promotion of sports in which human beings are the sole participants shall be exempt from tax so long as the club is not carried on 'or the profit of individuals;

(13)

That any other organization not carried on for the profit of individuals shall not be required to pay tax unless its net income exceeds Pd104.

Live Stock-

(14)

That a concessional basis of assessment shall be provided in respect of profits arising from forced sales of live-stock consequent upon loss of pastures or fodder due to the ravages of fire, drought or flood. A primary producer, if he so desires, may include one-fifth of the profit in his return for the year of sale and one-fifth in the return for each of the succeeding four years.

Trading Stock-

(15)

That, where trading stock, including live-stock, is disposed of by way of gift, the donee shall be entitled to the same deduction as a purchaser and the donor shall be taxed in the same manner as a seller of that stock;

(16)

That, where interests in trading stock are transferred-as for example, on the formation, variation or dissolution of a partnership-the parties may, upon unanimous agreement, elect whether tax should be payable on the profit deemed to arise from that transfer or whether the tax liability should be deferred until the trading stock is actually sold.

Northern Territory-

(17)

That primary producers in the Northern Territory shall be allowed to deduct, by way of depreciation over a period of five years, the cost of plant and structural improvements used by them, or, alternatively, in the case of structural improvements, to deduct the whole cost in the year of completion;

(18)

That deductions shall be allowed in respect of live-stock, plant and structural improvements owned by primary producers in the Northern Territory on 1st July, 1952, and in respect of capital expenditure on mining plant and the development of mining properties in the Territory up to that date.

(NOTE.-The exemption previously granted to residents of the Northern Territory in respect of income derived from primary production, mining and fisheries in the Territory expired on 30th June, 1952.)

Pension Funds-

(19)

That the maximum deduction allowable in respect of contributions by employers to employees' pension funds shall be increased from Pd100 to Pd200 for each employee, subject, as at present, to a higher allowance if the Commissioner of Taxation is satisfied that the special circumstances of any case warrant a higher allowance;

(20)

That the income of funds established bona fide for the provision of retirement and other benefits for self-employed persons shall be exempt from tax.

Retiring Allowances-

(21)

That limitations shall be placed on the operation of section 26(d) of the Assessment Act which provides, broadly, that the assessable income of a taxpayer shall include five per centum of a retiring allowance paid in a lump sum.