House of Representatives

Second Reading Speech

By the Minister assisting the Treasurer, the Hon Clyde Holding, M.P.

I move that this Bill be now read a second time

This Bill will amend the Income Tax Act 1986 to formally impose the rates of income tax payable by individuals and trustees generally for the 1987-88 and all subsequent financial years

It will also impose the rates for 1987-88 and subsequent years payable by companies, registered organizations and unit trusts treated as companies on incomes for 1986-87 and subsequent years

In addition, it will impose rates of tax on superannuation funds, ineligible approved deposit funds and certain other trusts

The rates to be imposed by the measures in this Bill are those declared in the Income Tax Rates Act 1986

The personal rates for 1987-88 reflect the significant cuts in income tax from the second and final phase of the reform of the rate scales which the Treasurer announced in the September 1985 tax reform package to apply from 1 July 1987

A four step tax scale now applies

At the lower end of the scale for resident taxpayers, no tax is payable on taxable incomes up to $5,100, an increase in the tax-free threshold from the 1986-87 level of $4,890. On taxable incomes in the range $5,101 to $12,600 the rate is 24 per cent. In the range of $12,601 to $19,500 the rate is 29 per cent

From 1 July 1987 the marginal rates applying to income in the ranges $19,501 to $28,000 and $28,001 to $35,000 are both reduced from 43 per cent and 46 per cent respectively to 40 per cent, and the top marginal rate has dropped from 55 per cent to 49 per cent

These general rates also apply to non-residents who receive Australian Social Security and repatriation pensions that are taxable in Australia, or who were residents at any time during the income year.

For all other non-resident taxpayers, the rate of 29 per cent applies to incomes up to $19,500 and the general rates apply to income above that level

For 1987-88 and subsequent years a rate of 49 per cent applies to all unearned income of resident minors, subject to shading-in arrangements for such income just over $416

The rate of tax on trustees assessed under section 99a of the income tax assessment act, and on other categories of income subject to anti-avoidance provisions of that act, is 49 per cent in 1987-88 and subsequent years

The company tax rate will be 49 per cent

This increased rate was announced in the September 1985 tax tax reform statement to help defray the cost of the new imputation system which commenced on 1 July 1987

The 49 per cent rate also applies for unit trusts treated as companies

Registered organizations are to continue to pay at a rate of 20 per cent

Finally, Madam Speaker, the opportunity is being taken to impose income tax as a standing measure, under the Income Tax Act 1986 as proposed to be amended by this Bill, rather than by means of an annual imposition Bill.

Of course, if there are changes in tax rates, legislation amending the Income Tax Rates Act 1986 which declares the various income tax rates that I have just outlined for 1987-88 and subsequent years, will be put before the Parliament

As part of this process of reducing the volume of legislation brought before the Parliament, and as there is no legal requirement for the practice, the Bill will also repeal the provisions of the Income Tax Act 1986 that impose a liability to pay provisonal tax or instalments of company tax

The provisions of the Bill are explained in detail in the Explanatory Memorandum that accompanied the Taxation Laws Amendment Bill (No. 3) 1987 I have just introduced

I commend the Bill to the House.