Explanatory Memorandum(Circulated by the Treasurer, the Rt. Hon. A. W. Fadden.)
INCOME TAX AND SOCIAL SERVICES CONTRIBUTION RESOLUTION 1950.
Consequent on the merging of the income tax and social services contribution, the imposition of the contribution at separate rates will no longer be necessary. The last year of income to which social services contribution will apply as a separate charge will be the year of income ended 30th June, 1950. The rates of contribution will continue to apply, however, for all purposes in connexion with social services contribution payable on income derived during the years ended 30th June, 1946, to 30th June, 1950, both inclusive.
This paragraph, which is comprised of six Divisions, declares the rates at which income tax and social services contribution will be payable for the financial year 1950-1951.
Division A declares the basic rates at which tax and contribution are to be imposed on taxable incomes other than the taxable incomes of companies.
The proposed table introduces a new system of rates progressing in steps of taxable income of Pd50, Pd100, Pd200, Pd400, Pd600, Pd1,000 and Pd2,000. This system will replace the present system of rates which increase by a small fraction of one penny for every Pd1 of increase in the taxable income.
The proposed rate commences at one penny in the Pd1 on the first Pd100 of taxable income. It is not proposed, however, that income tax and social services contribution should be payable by individuals deriving a taxable income less than Pd105. The declaration of a rate of tax on taxable incomes of Pd1 to Pd104 is being made for application in those cases where the taxable income exceeds Pd104, and it will apply also in the case of a primary producer whose taxable income is greater than Pd104 but whose average income is less than Pd105.
The maximum rate declared in the table is 180 pence in the Pd1 on that part of the taxable income which exceeds Pd10,000. This rate coincides with the total of the present maximum income tax rate of 162 pence in the Pd and the maximum social services contribution rate of 18 pence in the Pd1.
The rates intervening between the minimum and maximum rates are declared in pence, thus avoiding the complications of fractions and decimals.
Although the rates are expressed in steps of Pd50, or multiples of Pd50, and in pence without recourse to fractions or decimals of one penny, those rates approximate very closely to the present rates of social services contribution and to the present rates of income tax combined with the maximum rate of contribution. In all ranges of income from personal exertion, the application of the stepped rates will not result in any material difference in the present liabilities of income recipients.
The basic rates of tax and contribution shown in the table are applicable to the total taxable income derived by the taxpayer from (a) personal exertion; (b) property; and (c) both personal exertion and property. Taxable income in excess of Pd100 derived from property is subject, in certain cases, to further tax and contribution as specified in Division E. of this paragraph.
It will be observed that the rates of tax and contribution shown in the table apply to specified parts of a taxpayer's total taxable income. For example, all taxpayers other than those whose taxable incomes are less than the minimum taxable amount of Pd105 will be required to pay 1d. in the Pd1 on the first Pd100 of their income, i.e. 8s. 4d. In the same way, all persons whose taxable incomes exceed Pd150 will pay in addition to the 8s. 4d. on the first Pd100 of their income, 6d. on every Pd1 of income between Pd100 and Pd150, i.e.
Pd50 at 6d. = Pd1 5s.
This feature of the system allows a table to be prepared showing the amount of tax and contribution payable on each of the incomes at which the various steps commence, e.g. Pd100, Pd150, Pd200, etc. rising to Pd10,000.
The following is the table which will be printed on the reverse of all Notices of Assessment so as to enable most taxpayers to calculate and check their liability:-
|Total Taxable Income||Column 1||Column 2||Column 3||Column 4||Not less than-||Not more than-||Tax and Contribution on amount set out in Column 1||Tax and Contribution on Remainder of Taxable Income||Pd||Pd||Pd||s.||d.|
|Nil||100||Nil||+ 1d. on each Pd1|
|100||150||0||8||4||+ 6d. on each Pd1 in excess of Pd100|
|150||200||1||13||4||+ 11d. on each Pd1 in excess of Pd150|
|200||250||3||19||2||+ 16d. on each Pd1 in excess of Pd200|
|250||300||7||5||10||+ 21d. on each Pd1 in excess of Pd250|
|300||400||11||13||4||+ 26d. on each Pd1 in excess of Pd300|
|400||500||22||10||0||+ 32d. on each Pd1 in excess of Pd400|
|500||600||35||16||8||+ 38d. on each Pd1 in excess of Pd500|
|600||700||51||13||4||+ 44d. on each Pd1 in excess of Pd600|
|700||800||70||0||0||+ 48d. on each Pd1 in excess of Pd700|
|800||900||90||0||0||+ 52d. on each Pd1 in excess of Pd800|
|900||1,000||111||13||4||+ 56d. on each Pd1 in excess of Pd900|
|1,000||1,200||135||0||0||+ 64d. on each Pd1 in excess of Pd1,000|
|1,200||1,400||188||6||8||+ 72d. on each Pd1 in excess of Pd1,200|
|1,400||1,600||248||6||8||+ 80d. on each Pd1 in excess of Pd1,400|
|1,600||1,800||315||0||0||+ 88d. on each Pd1 in excess of Pd1,600|
|1,800||2,000||388||6||8||+ 96d. on each Pd1 in excess of Pd1,800|
|2,000||2,400||468||6||8||+ 104d. on each Pd1 in excess of Pd2,000|
|2,400||2,800||641||13||4||+ 112d. on each Pd1 in excess of Pd2,400|
|2,800||3,200||828||6||8||+ 120d. on each Pd1 in excess of Pd2,800|
|3,200||3,600||1,028||6||8||+ 128d. on each Pd1 in excess of Pd3,200|
|3,600||4,000||1,241||13||4||+ 136d. on each Pd1 in excess of Pd3,600|
|4,000||4,400||1,468||6||8||+ 144d. on each Pd1 in excess of Pd4,000|
|4,400||5,000||1,708||6||8||+ 152d. on each Pd1 in excess of Pd4,400|
|5,000||6,000||2,088||6||8||+ 160d. on each Pd1 in excess of Pd5,000|
|6,000||8,000||2,755||0||0||+ 168d. on each Pd1 in excess of Pd6,000|
|8,000||10,000||4,155||0||0||+ 176d. on each Pd1 in excess of Pd8,000|
|10,000||..||5,621||13||4||+ 180d. on each Pd1 in excess of Pd10,000|
A taxpayer whose income coincides with one of the amounts shown in Column 1 can read off from Column 3 of the table the amount of his liability.
If his income lies between any of the amounts shown in Columns 1 and 2 it is only necessary in order to ascertain the amount payable to add to the amount shown in Column 3 against the appropriate range of income an amount calculated by multiplying the excess of his income over the amount shown in Column 1 by the rate of tax and contribution shown in Column 4.
The following is an example of the application of this table to a taxable income of Pd630. The tax and contribution would be calculated as follows:-
|Tax and Contribution-|
|on Pd600 (see Column 3)||51||13||4|
|on Pd30 at 44d. in the Pd1 (see Column 4)||5||10||0|
|on Pd630 (to nearest shilling)||57||3||0|
This Division is operative only in the assessments of those taxpayers who carry on a business of primary production in Australia. For the purposes of these assessments, Division 16 of Part III. of the Assessment Act provides the method by which the average taxable income of the primary producer is to be ascertained. As a general rule, this average taxable income is the average of the taxable incomes of the year of assessment and the taxable incomes of the preceding four assessment years.
The process of ascertainment of the rate of tax and contribution to be applied in the assessment of a primary producer is to calculate, firstly, the amount of tax and contribution that would be payable on the average taxable income at the rates shown in Division A. The tax so calculated is then divided by the average taxable income to determine the rate. This rate is then applied to the actual taxable income of the assessment year to determine the tax and contribution payable by the primary producer on that taxable income.
|Year Ended.||Taxable Income.||Pd|
|30th June, 1947||300|
|30th June, 1948||500|
|30th June, 1949||800|
|30th June, 1950||1,000|
|30th June, 1951||1,500|
Divide Pd4,100 by 5 to obtain an average taxable income of Pd820.
Ascertain the amount payable by applying to a taxable income of Pd820 the rates set forth in Division A as those rates are to be shown on the assessment notices.
|Tax and Contribution-|
|on Pd20 at 52d. in the Pd1||4||6||8|
Divide Pd94 6s. 8d. by Pd820 to obtain a rate of 27.6098d. in the Pd1.
The tax and contribution payable on a Taxable Income of Pd1,500 at 27.6098d. is Pd172 11s. (to nearest shilling).
If the taxpayer were assessed on a taxable income of Pd1,500 without reference to an average income, the tax and contribution would be calculated as follows:-
|Tax and Contribution-|
|on Pd100 at 80d. in the Pd1||33||6||8|
|on Pd1,500 (to nearest shilling)||281||13||0|
This Division applies in the assessment of any taxpayer whose assessable income includes any consideration in the nature of a premium for the grant or assignment of a lease or for the goodwill or licence attached to or connected with the leasehold premises.
The inclusion of lease premiums in assessable income is based on the principle that the premiums are, in substance, rent received in advance or commuted rent.
Where, however, the premium is received for the grant of a lease for a term of over two years or for the assignment of a lease having an unexpired term of more than two years, the premium represents income that would otherwise have been received in two or more years.
Apart from any special provision, the premium would be taxed at the rate of tax and contribution appropriate to the total taxable income derived by the taxpayer in the year in which the premium is received. This would cause the taxpayer, however, to pay a greater amount of tax and contribution than he would have been required to pay if he received the amount of the lease premium in the form of rent spread over the years of the lease term.
Sub-section (1.) of section 86 of the Assessment Act accordingly provides a special basis for the ascertainment of a rate of tax where a lease premium is included in the assessable income and the term of the lease granted or the unexpired term of the lease assigned is more than twenty-five months.
The special basis provided by the sub-section is to the effect that the net premium, i.e. the gross premium less expenses, shall be divided by one-half of the number of years of the lease term. The result of this division when added to any other taxable income derived by the taxpayer provides a notional income by reference to which the rate of tax and contribution is determined.
|Taxable Income from business||3,000|
|Net Premium for lease of six years||6,000|
|Total Taxable Income||9,000|
The notional income is ascertained by dividing the net premium of Pd6,000 by 3 = Pd2,000 and adding that result to the other taxable income Pd3,000, providing a notional income of Pd5,000.
Apply to a notional income of Pd5,000 the rates set forth in Division A as those rates will be shown on the assessment notice.
Pd5,000-Tax and Contribution-Pd2,088 6. 8d.
Divide Pd2,088 6s. 8d. by Pd5,000 to obtain a rate of 100.24d. in the Pd1.
|Basic Tax and Contribution on a Taxable Income of Pd9,000 at 100.24d.||3,759||0||0|
|Further Tax and Contribution on Pd6,000 property income||296||13||4|
|Total (to nearest shilling)||4,055||13||0|
If the taxpayer were assessed on a taxable income of Pd9,000 without reference to a notional income, the tax and contribution would be calculated as follows:-
|Tax and Contribution-|
|on Pd1,000 at 176d. in the Pd1||733||6||8|
|Basic Tax and Contribution||4,888||6||8|
|Further Tax and Contribution on Pd6,000 property income||296||13||4|
|Total (to nearest shilling)||5,185||0||0|
This Division prescribes the rate at which income tax and social services contribution shall be payable by a trustee in those cases where a trustee becomes liable to pay tax and contribution under either section 98 or 99 of the Assessment Act.
Ordinarily, a trustee is not assessed and liable to pay tax and contribution as the beneficiaries are required to pay the tax and contribution on their respective shares of the trust income, if they are presently entitled to the income and are not precluded from receiving that income by reason of some legal disability.
Where, however, there is a legal disability preventing a beneficiary from receiving his share of the trust income or where there is trust income to which no beneficiary is presently entitled, the trustee is assessed and liable to pay the tax and contribution. The income is assessed as if it were derived by an individual taxpayer. In these assessments, the rates declared in Division A are applied and, if the income is derived from a business of primary production, the rate appropriate to an average income as prescribed by Division B are applied. Correspondingly, if the trust income includes a premium for a lease, the provisions of Division C operate in the assessment of the trustee and the rate of tax and contribution is ascertained by reference to a notional income.
Under the present law, separate graduated rates of tax are prescribed for personal exertion and property incomes. In cases where the taxable income is derived from personal exertion and property sources, the rates appropriate to the total taxable income are applied to the personal exertion and property components of that income. The rate prescribed for income from property is higher than that for income from personal exertion.
The principle underlying the proposed rates in Division E is to levy in accordance with long continued practice, but by a simplified method, an additional impost on income from property. This impost is additional to the tax and contribution imposed at the basic rates prescribed by Division A, B, C or D. These basic rates apply to the total taxable income derived from personal exertion or from property, or from both personal exertion and property.
The further rates of tax and contribution proposed by Division E. are designed in the form of stepped rates to conform to the pattern of the basic stepped rates proposed by Division A. The following table sets out in a simplified form the proposed further rates of tax and contribution:-
|Taxable Income from Property||Column 1||Column 2||Column 3||Column 4||Not less than-||Not more than-||Further Tax and Contribution taxable income set out in Column 1||Further Tax and Contribution on Remainder of Taxable Income from Property||Pd||Pd||Pd||s.||d.|
|100||1,000||Nil||+ 8d. on each Pd1 in excess of Pd100|
|1,000||4,000||30||0||0||+ 16d. on each Pd1 in excess of Pd1,000|
|4,000||6,000||230||0||0||+ 8d. on each Pd1 in excess of Pd4,000|
|6,000||10,000||296||13||4||+ 4d. on each Pd1 in excess of Pd6,000|
|10,000||upwards||363||6||8||+ (no rate on excess over Pd10,000)|
A further rate of tax and contribution is not being declared on taxable incomes from property of Pd100 or less. If the taxable income is comprised wholly of property income or partly of property income and partly of personal exertion income, neither the basic tax and contribution nor the further tax and contribution will become payable unless the taxable income exceeds Pd104.
Where the basic tax and contribution is payable and the taxable income from property is less than Pd100, no further tax and contribution will be payable on the property income, irrespective of the amount of the total taxable income. The adoption of this proposal will simplify the processes of assessment by removing thousands of cases from the field of further tax and contribution. In many of these cases, the relatively small amount of property income is, as a general rule, derived from the investment of savings from earnings.
The further rate of tax and contribution in the range to Pd1,000 is 8d. in the Pd1 on the excess of the property income over Pd100. Further tax and contribution will not be payable, however, unless the taxable income from property or from both personal exertion and property exceeds Pd400. Provision to this effect is contained in paragraph 4 of the Resolution.
In the range of property income to Pd1,000, no further tax and contribution is payable on the first Pd100. On the excess of property income over Pd100, further tax and contribution is payable at the rate of 8d. in the Pd1.
Similarly in the range of property income to Pd4,000 the further tax and contribution is to be calculated as follows:-
|Pd100||free from further tax and contribution||..|
|Pd900||at 8d. in the Pd1||30||0||0|
|Pd3,000||at 16d. in the Pd1||200||0||0|
In the range to Pd6,000 the further tax and contribution on Pd4,000 will be Pd230 and the further tax and contribution on the balance of Pd2,000 will be calculated at the rate of 8d. in the Pd1, i.e. Pd66 13s. 4d., making a total liability of Pd296 13s. 4d.
It will be noted that the rate of further tax and contribution on taxable incomes from property in excess of Pd4,000 declines in steps from 16d. to 8d. and to 4d. in the Pd1 until no further tax and contribution is payable on the excess over Pd10,000 of taxable income from property. This diminution of the rate conforms broadly to the present differentiation in the rates of income tax on personal exertion and property incomes.
The decline in the rate of the proposed further tax and contribution from the point at which the taxable income from property is Pd4,000, while broadly following the pattern of the present differentiation in the rates, is to be considered together with the advance that is made in the basic rates of tax and contribution. The further tax and contribution on property income is blended with the basic rates on the total taxable income in such a manner as to achieve an equitable levy having regard to the amount and nature of the taxable income.
In the field of taxable income from property, there is no further tax and contribution additional to the basic tax at the rate of 15s. in the Pd1. In this respect the proposed system of further tax and contribution accords with the present system which does not differentiate between the value of tax on personal exertion and property incomes in excess of Pd10,000. Apart from the already high rate of 15s. in the Pd1, there is a distinct element of property entering into the derivation of incomes in excess of Pd10,000 from personal exertion and there is no substantial justification for an added levy on property income as compared with personal exertion income.
Statements are appended to this memorandum comparing-
- the total contribution and tax at present; and
- the total of the proposed basic tax and contribution and further tax and contribution,
This Division prescribes the rate of tax and contribution to be payable by companies for the financial year 1950-1951-that is, the year of income ended 30th June, 1950. The proposed rates are the same as the rates at which income tax was payable by companies for the last financial year.
Paragraph (a) provides that the general rate of tax and contribution applicable to companies will be 5s. in the Pd1 on the first Pd5,000 of the taxable income and 6s. in the Pd1 on the remainder.
Paragraph (b) prescribes the rates of tax and contribution for mutual life assurance companies. The rates applicable to these companies will be 4s. in the Pd1 on the first Pd5,000 and 5s. in the Pd1 on the balance. A mutual life assurance company is a life assurance company, the profits of which are divisible only among its policy holders. In the assessment of a mutual life assurance company, premiums on life assurance policies and expenditure related thereto are excluded. The company, generally speaking is taxed only on its net income from investments. It is this income which is taxed at the reduced rates.
Paragraph (c) prescribes the rates of tax and contribution payable by a non-mutual life assurance company. A non-mutual life assurance company is also exempt from income tax and social services contribution in respect of premiums on life assurance policies. The taxable income of such a company is divided into (a) mutual income and (b) other income. The mutual income represents the same proportion of the taxable income derived by the company from its life assurance business, e.g., investment income, as the profits divided among life assurance policy holders bear to the total life assurance profits divided among shareholders and policy holders. The mutual income derived by such companies is taxed at the rate of 4s. in the Pd1 on the first Pd5,000 of mutual income and 5s. in the Pd1 on the balance of the mutual income. The non-mutual income of such companies is taxed, as to that part which is equal to the amount by which the mutual income is less than Pd5,000, at the rate of 5s. in the Pd1, and the balance at the rate of 6s. in the Pd1.
Paragraph (d) specifies the rate of further tax and contribution payable on the undistributed income of public companies. The amount of undistributed income is arrived at by deducting from taxable income the dividends paid out of that taxable income, certain ex-Australian losses incurred during the year of income, and liabilities for Commonwealth income taxes. The rate of further tax and contribution specified is 2s. for each Pd1 of undistributed income. The mutual income of a life assurance company is not subject to the further tax and contribution.
Paragraph (e) declares the rate of tax and contribution to be paid by a company on interest paid or credited by it to a non-resident. The rate specified is 6s. in the Pd1. If the non-resident is a company, the tax and contribution is payable on every Pd1 of such interest. If, however, the non-resident is an individual, the tax and contribution is payable only on so much of the interest as exceeds Pd104. The company paying the tax and contribution is empowered to deduct the relevant amount from the interest otherwise payable to the non-resident and the non-resident is entitled to have the amount paid by the company set off against the total income tax and social services contribution assessed to him.
It is here observed that paragraph 7 of this Resolution also proposes the retention of the super tax on companies. This is imposed on each Pd1 of taxable income in excess of Pd5,000. The rate of super tax is 1s.
This paragraph declares, in effect, that taxable incomes of Pd104 and less derived by individuals shall not be subject to income tax and social services contribution.
By "taxable income" is meant the amount remaining after deducting from the assessable income all allowable deductions.
In the Income Tax and Social Services Contribution Assessment Bill it is proposed to substitute concessional deductions for concessional rebates of tax. The concessional deductions will accordingly be allowable in ascertaining a taxpayer's taxable income.
It will be seen from the following table that, having regard to the concessional deductions, the effective exemption points under the proposed basis for various classes of taxpayers with dependants has been increased, as compared with the present basis of concessional rebates:-
|Wife, one child||283||286||3|
|Wife, two children||317||338||21|
|Wife, three children||350||390||40|
|Wife, four children||400||442||42|
|Wife, five children||450||494||44|
|No wife, one child||156||182||26|
|No wife, two children||200||234||34|
The minimum taxable income of Pd105 applies also where a trustee derives income to which no beneficiary is presently entitled, or in respect of which the beneficiary is under a legal disability. If any such income is less than Pd105, neither the trustee nor a beneficiary is subject to tax on that income.
A company, other than a company in the capacity of a trustee, is liable to tax and contribution on taxable income of Pd1 and upwards.
This paragraph imposes the further rates of tax and contribution on taxable incomes derived from property.
Where the total taxable income exceeds Pd400 and the taxable income from property exceeds Pd100, tax and contribution are imposed under-
- sub-paragraph (a) on the total taxable income at the appropriate basic rates specified in Division A., B., C. or D. of paragraph (2) of the resolution; and
- sub-paragraph (b) on the taxable income from property in the range from Pd100 to Pd10,000 at the further rates specified in Division E.
The further rates of tax and contribution on taxable incomes from property have been explained in the note to Division E.
This paragraph places a limitation on the liability to further tax and contribution payable on taxable income from property in the range of total taxable income from Pd401 to Pd1,000.
The purpose of this limitation is to ensure that, in the range of taxable income between Pd401 and Pd1,000, the further tax and contribution shall not exceed an amount calculated at the rate of 12d. in the Pd1 on the excess of the taxable income over Pd400.
Without this provision, some taxpayers in the range from Pd401 to Pd1,000 would be required to pay considerably more under the combined basic rates and further rates of tax and contribution than they are paying at present.
The application of the limiting provision is illustrated by the following examples based on incomes derived wholly from property:-
|Pd600-||applying scale rate Pd500 at 8d. in the Pd1||16||13||4|
|applying limiting proviso Pd200 at 1s. in the Pd1||10||0||0|
|Pd800-||applying scale rate Pd700 at 8d. in the Pd1||23||6||8|
|applying limiting proviso Pd400 at 1s. in the Pd1||20||0||0|
|Pd1,000-||applying scale rate Pd900 at 8d. in the Pd1||30||0||0|
|applying limiting proviso Pd600 at 1s. in the Pd1||30||0||0|
This limiting provision will also have the effect of ensuring a gradual increase in the liability corresponding with the increase in the taxable income.
This paragraph provides, in effect, that if a liability for income tax and social services contribution arises and that liability is calculated at less than 10s., the minimum amount payable, except in the case of a company, shall be 10s. This paragraph repeats a provision that has been included in Rating Resolutions since 1928. It has long been recognised as uneconomical to prepare and issue assessments if the amount payable is less than 10s.
Paragraph 7 continues the imposition of a super tax at the rate of 12d. in the Pd1 on the excess over Pd5,000 of the taxable income of certain companies. This super tax was first imposed in 1940 and has been annually re-imposed since that year.
Paragraph 8 provides, in effect, that super tax shall not be payable by a company in the capacity of a trustee, a private company, a co-operative company, a mutual life assurance company or on the mutual income of a partly mutual life assurance company.
The purpose of this paragraph is to eliminate pence from the amount of income tax and social services contribution payable. Amounts of sixpence and less are disregarded, and pence in excess of sixpence are regarded as one shilling.
These paragraphs are designed for application in those cases where the value of instalments deducted from earnings closely approximate the amount of income tax and social services contribution payable on those earnings. If the difference between the value of the instalments and the tax and contribution which would be payable is 2s. or less, the taxpayer is not required to pay the additional small amount involved and, alternatively, the Taxation Department is not required to make small refunds.
These paragraphs were originally introduced into the law as part of the scheme of applying tax instalment tokens to assessments before issue of the latter to the taxpayer. The scheme was primarily directed towards eliminating unnecessary accounting in the case of employees, and accordingly persons liable to pay provisional tax and contribution in respect of income other than salary or wages were excluded from the operation of the paragraph.
There are cases also where the value of instalments deducted from earnings exceed the minimum tax and contribution of 10s. imposed by Paragraph 6 of the Resolution. Small refunds of 2s. or less are made in these cases as the withholding of the refund would have the effect of raising the minimum amount of tax and contribution payable.
This paragraph declares that income tax and social services contribution imposed in accordance with the above-mentioned provisions shall be levied and paid for the current financial year 1950-1951. The tax and contribution is imposed upon the taxable income derived during the year of income as defined in section 6 of the Assessment Act. The application of the definition of year of income means, in effect, that the tax and contribution for the current financial year shall taxable income derived-
- by a company during the year ended 30th June, 1950, or the accounting period substituted for that year of income; and
- by individual taxpayers during the current year ending 30th June, 1951, or the substituted accounting period.
This paragraph provides authority for the application of the above described provisions in assessments for the next financial year 1951-1952 until the commencement of the Act declaring the rates of tax and contribution for that financial year. This authority is involved only in a relatively small number of cases, e.g., where it is necessary to collect income tax and social services contribution from a taxpayer leaving Australia before the rates of tax and contribution for the next financial year are enacted.
This paragraph authorises the imposition of provisional income tax and social services contribution in respect of income of the current income year ending 30th June, 1951.
The payment of provisional tax and contribution is an essential feature of the pay-as-you-earn system of taxation. Under this system, taxpayers are required to pay each year a provisional tax and contribution in respect of the year's income, other than salaries and wages. After the return of income of the year is lodged with the Taxation Department, the correct amount of tax and contribution is assessed and credit is given to the taxpayer for the provisional amount paid.
Under section 221YB(3.) of the Assessment Act, provisional tax and contribution is not payable unless its imposition is specifically authorized by a provision in the Act imposing the rates of tax and contribution on income of the particular financial year.
The amount of provisional tax and contribution payable in the current financial year will be determined on the basis of the taxable income derived during the year ended 30th June, 1950. In calculating the provisional amount, due allowance will be made for the adjustments to the rates of tax and contribution and to the reversion to a system of concessional deductions from income instead of rebates of tax.
This paragraph is a drafting provision for the more convenient and abbreviated reference to the Assessment Act instead of the long reference set out in the paragraph.