Explanatory Memorandum
(Circulated by the Minister representing the Treasurer, Senator the Hon. Sir Kenneth Anderson, K.B.E.)INCOME TAX (INTERNATIONAL AGREEMENTS) BILL 1972
Introductory Note.
The amendments proposed in this Bill are consequential on the proposal to amend the Income Tax Assessment Act to include a new section - section 46A - to govern the allowance of rebates on dividends arising from dividend-stripping operations.
It is a principle of Australia's double taxation arrangements that the credit for foreign tax on income from overseas to be given by Australia to a resident of Australia does not exceed the Australian tax against which credit is to be allowed. Section 15 of the Income Tax (International Agreements) Act specifies for this purpose how the amount of Australian tax on income from abroad is to be calculated.
Sub-section (4.) of section 15 provides that, subject to sub-section (5.), there shall be deemed to be no amount of Australian tax payable on a part of a company's income consisting of dividends to which it is entitled to a rebate under section 46 of the Income Tax Assessment Act.
By this Bill it is proposed to amend sub-section (4.) so that it will apply in the same manner where a part of a company's income consists of dividends in respect of which it is entitled to a rebate under the proposed section 46A.
Sub-section (5.) of section 15 applies, in part, where a private company's taxable income includes private company dividends in relation to which the company is not allowed a further rebate under sub-section (3.) of section 46 of the Income Tax Assessment Act. In this situation, sub-section (5.) provides that the amount of Australian tax payable in respect of any part of the income of the company shall be so much of the tax payable by the company for the year of income as, in the opinion of the Commissioner, is reasonably attributable to that income.
The Bill proposes an amendment of sub-section (5.) so that it will operate in the same way where a private company's taxable income includes private company dividends in relation to which the company is not allowed a further rebate under sub-section (6.) of the proposed section 46A.
The various clauses in the amending Bill are explained in the notes that follow.
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 (International Agreements) Act as amended.
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 the Act receives the Royal Assent unless the contrary intention appears in the Act.
Clause 2 provides that the Amending Act shall come into operation on the day on which it receives the Royal Assent.
Clause 3: Ascertainment of Australian tax.
This clause provides for the amendment of section 15 of the Income Tax (International Agreements) Act to include in sub-sections (4.) and (5.) reference to the proposed section 46A of the Income Tax Assessment Act.