Explanatory Memorandum(Circulated by authority of the Treasurer, the Rt. Hon. Harold Holt.)
RESOLUTION TO DECLARE RATES OF TAX
The Resolution declares the rates at which tax is to be payable for the financial year 1961-62. As in previous years, the Resolution also authorizes the granting of an age allowance.
The following explanations relate to those provisions of the Resolution that differ in substance from those enacted in 1960.
Amendments to the income tax law enacted earlier this year provide that, as from the commencement of the 1961- 62 income year, the complete exemption from income tax, which has hitherto been available to superannuation funds under section 23(j) or (ja) of the Assessment Act, will be authorised only for funds that hold specified proportions of their assets in public securities.
Where, in consequence of these amendments, exemption from tax is not available to a fund, tax is payable on so much of the fund's investment income as exceeds the investment income derived by the fund during the 1960-61 income year. In some circumstances, tax may be payable on the whole of the investment income of a superannuation fund.
Sub-paragraph (5.) of paragraph 4 of the Resolution, read in conjunction with the Fifth Schedule, declares the rates at which tax will be payable by a superannuation fund on investment income that is not exempt.
The rates proposed to be payable for the 1961-62 financial year (in respect of the income of the year ending 30th June, 1962) are 5/-in the Pd1 on the first Pd5,000 of investment income that bears tax, and 7/- in the Pd1 on the balance of that income.
Paragraph 5 of the Resolution proposes an increase in the level of incomes to which the age allowance may apply.
The allowance is available to persons who have been residents of Australia throughout the year of income and who, at the end of the year of income have attained, if men, the age of 65 years or, if women, the age of 60 years.
The primary purpose of the allowance is to exempt from tax persons who meet the age and residential qualifications and whose net income does not exceed the sum of the full age pension and the maximum amount of other permissible income for age pension purposes. At present, the age allowance frees from tax a single person whose net income does not exceed Pd442. For married couples, combined net income of up to Pd884 is exempt from tax if both husband and wife meet the age and residential qualifications and one of them contributes to the maintenance of the other.
In consonance with the increase of 5/-a week in the age pension, paragraph 5 of the Resolution proposes that the present exemption limits of Pd442 and Pd884 be increased to Pd455 and Pd910 respectively.
The age allowance also provides a measure of relief where the net income is somewhat in excess of the amounts already mentioned. This relief may, at present, be effective where the net income of a single aged person is between Pd442 and Pd502, or the combined net income of aged married couples is between Pd884 and Pd1,236. The upper limits at which the allowance may operate are increased by paragraph 5 to Pd520 and Pd1,293 respectively.
If the net income exceeds the exemption limit, but is within the upper limits referred to, the amount of tax payable may be no more than nine-twentieths of the excess of the net income over the exemption point. For example, if the combined net income of a married couple amounts to Pd950 the excess over the exemption point of Pd910 is Pd40 and the tax payable by the aged person is limited to nine-twentieths of Pd40, that is, Pd18. 0. 0. If, however, there should be circumstances in which the normal assessment processes result in a smaller amount of tax being payable, then only that smaller amount is payable.
It is proposed by sub-paragraph (5.) of paragraph 5 of the Resolution that, for the purposes of the age allowance, persons who are residents of Norfolk Island, the Territory of Cocos (Keeling) Islands, the Territory of Christmas Island or of the Island of Nauru, be regarded as residents of Australia. Residents of the Territory of Papua and New Guinea have been so regarded in the past and the provision now proposed will remove a discrimination that has existed hitherto.
A person residing in one of the Territories and deriving income from Australia is deemed by the income tax law to be a resident of Australia for the purposes of assessment and payment of income tax. The spouse of such a person is not similarly treated as a resident of Australia unless also in receipt of income from Australian sources. The purpose of sub-paragraph (5.) is to ensure that in these circumstances the age allowance applicable to married couples is not lost to a married couple residing in one of the Territories merely because one of the couple does not derive income from Australia.