Explanatory Memorandum
(Circulated by the Treasurer, the Hon. Leslie Bury).NOTES ON CLAUSES
Clause 1: Short title and citation.
This clause formally provides for the short title and citation of the Amending Act and of the Income Tax Assessment Act 1936-1970, as amended.
Clause 2: Commencement.
Section 5(1A.) of the Acts Interpretation Act 1901-1966 provides that every Act shall come into operation on the twenty-eighth day after the day on which that Act receives the Royal Assent, unless the contrary intention appears in the Act.
By this clause it is proposed that the Income Tax Assessment Act 1971 shall come into operation on the day on which it receives the Royal Assent.
Clause 3: Special deduction for investment allowance.
By clause 3 it is proposed to add a new sub-section - sub-section (13.) - to section 62AA of the Income Tax Assessment Act 1936-1970. Section 62AA provides for the deduction of 20 per cent of capital expenditure (including costs of installation) on new plant which is manufacturing plant within the meaning of the section. It is a prerequisite of the allowance that the plant be owned by the manufacturer and used by him in Australia for the production of assessable income, or installed ready for use for that purpose. The deduction is allowable in the first year in which the plant is used or installed ready for use.
The new sub-section provides that a deduction under section 62AA will be allowable in respect of capital expenditure incurred after 3 February 1971 only where the expenditure is incurred under a contract made on or before that date for the acquisition by a taxpayer of new manufacturing plant or for the performance of work in relation to such plant.
The proposed amendment to section 62AA will not affect entitlements to deductions in respect of any expenditure incurred on or before 3 February 1971. It will not, for example, operate to deny a deduction in respect of expenditure incurred on or before 3 February 1971 in acquiring plant that has not been received by that date and is plant to which section 62AA applies. Such expenditure will continue to qualify for the allowance at the time the plant is first used or installed ready for use.
Neither will the amendment affect entitlement to a deduction in respect of expenditure incurred after 3 February 1971 in acquiring or installing plant pursuant to a contract for its acquisition or installation entered into on or before that date.
The amendment will, however, suspend the operation of section 62AA so as to withdraw the investment allowance deduction for capital expenditure on plant incurred after 3 February 1971 where the contract under which the expenditure was made was entered into after that date.