Explanatory Memorandum
(Circulated by the Treasurer, the Hon. B.M. Snedden, Q.C.,M.P.)Notes on Clauses
Clause 1: Short title and citation.
This clause formally provides for the short title and citation of the Amending Act and of the Income Tax Assessment Act 1936, as amended.
Clause 2: Commencement.
Section 5(1A.) of the Acts Interpretation Act 1901-1966 provides that every Act shall come into operation on the twenty-eighth day after the day on which the Act receives the Royal Assent, unless the contrary intention appears in the Act.
By this clause it is proposed that the Income Tax Assessment Act (No. 2) 1972 shall come into operation on the day on which it receives the Royal Assent.
Clause 3: Special deduction for investment in manufacturing plant.
By clause 3 it is proposed to amend sub-section (13.) of section 62AA of the Income Tax Assessment Act. The amendment will limit the operation of sub-section (13.) which specifies that the investment allowance deduction does not apply to expenditure incurred on or after 4 February 1971, except where it is incurred in pursuance of contracts made prior to that date.
Subject to sub-section (13.), section 62AA provides for the deduction of 20 per cent of capital expenditure (including costs of installation) on new plant which is manufacturing plant within the meaning of the section. It is a prerequisite of the allowance that the plant be owned by the manufacturer and used by him in Australia for the production of assessable income or installed ready for use for that purpose. The deduction is allowable in the first year in which the plant is used or installed ready for use.
The proposed amendment to sub-section (13.) will limit its application to expenditure incurred before 14 February 1972. The effect of the amendment will be to restore the allowance in respect of eligible capital expenditure incurred on or after 14 February 1972 irrespective of the date of the making of the contract under which the expenditure was incurred. As a result, the only expenditure otherwise eligible for the allowance that will have been affected by the suspension - and therefore placed outside the scope of the allowance - will be expenditure that was incurred during the period 4 February 1971 to 13 February 1972, and was not incurred in pursuance of a contract entered into before 4 February 1971 with the supplier of the goods or services concerned.
Clause 4: Amendment of assessments
This clause will authorise the amendment of assessments where this is necessary to give effect to the restoration of the investment allowance. Where expenditure on the acquisition of eligible plant is incurred by a taxpayer on or after 14 February 1972, the assessment for the year of income in which the plant was first used or installed ready for use may be amended to allow a deduction equal to 20 per cent of that expenditure.
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