House of Representatives

Notes for Treasurer's Second Reading Speech

Principal among the proposals in this Bill is a provision to extend the period in which a special income tax allowance is available for expenditure incurred on the development of overseas markets for Australian products. The Bill is, in this respect, complementary to the Pay-roll Tax Assessment Bill on which I have already spoken.

The special income tax allowance for export market development expenditure is additional to any other deduction authorised by the general provisions of the income tax law for that type of expenditure. Like the pay-roll tax measures of which I have already spoken, the special allowance was initiated in 1961. As honourable members are aware it is one of the steps taken by the Government to encourage and assist the entry of firms into new overseas markets.

When introducing the measure in 1961 I informed the House that the allowance would operate for an experimental period and earlier this year the Government felt that the time had arrived to re-examine the position. This review established that extension of the special allowance was justified in the light of the great importance to Australia of achieving increased exports. I have already stated in my speech on the Pay-roll Tax Assessment Bill the general view taken by the Government on this matter.

The decision to extend the income tax export incentives will be implemented by a provision of this Bill under which the special allowance will remain available for export market development expenditure incurred up to 30th June, 1968. As in the case of the pay-roll tax rebate, established exporters and other firms contemplating entry into the export trade will, in developing their overseas promotion programmes, be able to plan ahead with the knowledge that the income tax incentive provided by the special allowance will remain available to them for a further period of five years.

The House will observe that the Bill contains a number of other proposals for amendment of the income tax law. A memorandum explanatory of each provision of the Bill will be circulated for the information of honourable members. I do not, therefore, propose to undertake a detailed explanation of the measures but I would like to refer to them briefly.

Firstly, I mention a provision relating to the payment of fines imposed by courts for breaches of the income tax law. Under existing provisions a court is not entitled to allow time for the payment of such a fine and a person unable to meet forthwith a pecuniary penalty imposed on him may find himself faced with immediate imprisonment although, in practice, the Courts have frequently found means of avoiding that result. The Government considers that the law should empower the Courts to allow time for the payment of such fines or to permit payment by instalments. The Bill will give to the courts such a power.

Also included in the Bill are provisions concerning dividends. For many years, exemption from tax has been authorised in respect of certain classes of income derived from mining operations. Exemption has also been available in respect of dividends paid wholly and exclusively out of those exempt profits. Where the recipient of such a dividend is a company, the dividend which it, in turn, distributes may also qualify for exemption. The exemption is, however, lost if the dividend passes through the hands of more than one company interposed between the mining company and the recipient of the dividend.

This arbitrary termination of the exemption cannot be justified on any logical grounds and the Bill contains a provision enabling existing exemptions of mining profits to be retained when successive companies distribute dividends having their origin in exempt mining income.

Effect is also to be given to an announcement I made last December concerning dividends paid out of certain profits that have borne the undistributed income tax payable by private companies. The exemption of these dividends expired on the 31st December last but the companies will now be given an additional period of two years in which they may distribute free of tax dividends paid out of profits that have borne undistributed income tax at rates attributable to the incomes of individuals.

The Bill also includes a provision enabling the basis of taxation that applied to the short-term seasonal securities issued by the Commonwealth to be continued in the case of the Treasury Notes which last year replaced the seasonal securities. The same provisions will also operate in relation to the non-interest-bearing Inscribed Stock that it is proposed to issue under legislation recently considered by the House.

A further proposal that honourable members will, I feel sure, approve concerns gifts to the Australian National Committee for the Freedom from Hunger Campaign. The existing provisions of the law authorise the allowance of income tax deductions for gifts of Pd1 and upwards made to the organization not later than 30th June, 1963. The Bill will permit deductions to be allowed for gifts made up to 30th June, 1964 and the Government believes that this amendment will provide material assistance for an appeal now being organized in Australia on behalf of the Freedom from Hunger Campaign.

In the case of the Australian National Committee for World Refugee Year it is proposed that income tax deductions for gifts be continued only where they are made not later than 30th June, 1963.

The final matter to which I should refer is a proposal o exempt from tax educational allowances paid by the Commonwealth to a person who is in Australia solely for the purpose of pursuing a course of study or training. The provision will apply in the case of certain students and trainees in Australia in connection with the Colombo Plan or a Commonwealth Aid Programme. If the students or trainees are receiving full-time education at a school, college or university, the allowances by way of scholarships, etc. are already exempt from tax. The proposed exemption will apply in the case of part-time students and trainees who in the past have been required to pay tax on the allowances granted by the Commonwealth. The proposed exemption will relate only to educational allowances paid by the Commonwealth and will not disturb the present basis of taxing any remuneration that the students and trainees may derive.

I commend the Bill to honourable members.