House of Representatives

Explanatory Memorandum

(Circulated by the Treasurer, the Rt. Hon. J. B. Chifley.)

SOCIAL SERVICES CONTRIBUTION ASSESSMENT BILL 1946.

The introduction of a separate graduated scale of rates of social services contribution will necessitate the making of an amendment of a complementary nature to the Social Services Contribution Assessment Act 1945. This amendment is included in the Social Services Contribution Assessment Bill 1946.

The following is a statement explaining the provision of the Social Services Contribution Assessment bill 1946:-

The words printed in black type are words proposed to be inserted in the Principal Act.

CLAUSE 1.-SHORT TITLE AND CITATION.

CLAUSE 2.-COMMENCEMENT.

As explained in the Note to paragraph 4 of the Social Services Contribution Resolution, it is proposed that the amending legislation shall be made retrospective to the 11th October, 1945, i.e., the date on which the original social services contribution enactments came into operation. The amendment to the Social Services Contribution Assessment Act 1945 proposed by this Bill will accordingly have similar retrospective application. The effect will be that the further rebate of contribution proposed by Clause 3 of this Bill will apply in social services contribution assessments based on income derived during the year of income ended 30th June, 1946, and subsequent years.

CLAUSE 3.-FURTHER REBATE IN CERTAIN CASES.

The Uniform Income Tax legislation, which was implemented in 1942, made special provision, by section 160AB of the Income Tax Assessment Act, for the allowance of a rebate of tax at the rate of 2s. for each pound of interest on certain issues of Government and semi-government securities included in the taxable income of the taxpayer. The purpose of the rebate was to preserve the freedom from State Income Tax previously enjoyed by the holders of such securities.

Under the existing law imposing a social services contribution, this rebate is either allowed in the taxpayer's income tax assessment or it is taken into account in ascertaining the rate of social services contribution payable by him. The rate of contribution in the latter case is ascertained by reference to the amount of income tax the contributor would be liable to pay, after the allowance of all rebates, if tax were imposed at peak war-time rates reduced by 12 1/2 per cent. In this calculation, the section 160AB rebate is deducted from the income tax that would otherwise be payable. Now that the rate of contribution is to be calculated without reference to the amount of income tax that would be payable, it is necessary to make special provision in the Social Services Contribution Assessment Act so as to preserve to persons in the lower income groups the benefit of the special rebate of 2s. in the Pd1 on interest on such securities. The effect of the proposed amendment will be that where a person does not obtain the full benefit of the rebate in his income tax assessment, the whole, or relevant part of the rebate will, as the case requires, be allowable from the social services contribution otherwise payable by him.