House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. John Howard, M.P.)

Notes on Clauses

INCOME TAX LAWS AMENDMENT BILL 1979

Clause 1: Short title, etc.

This clause provides formally for the citation of the amending Act as the Income Tax Laws Amendment Act 1979. This title is to be explained by the fact that the amendments contained in Part II of the amending Act are amendments of the Income Tax Assessment Act 1936 while the amendments contained in Part III will amend the Income Tax (Arrangements with the States) Act 1978.

Clause 2: Commencement

By section 5(1A) of the Acts Interpretation Act 1901, every Act is to 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.

Under sub-clause (1), but subject to sub-clause (2), the amending Act is to come into operation on the day on which it receives the Royal Assent.

By sub-clause (2), clause 24 of the amending Act will come into operation on 2I July 1979. Clause 24 proposes that the present statutory penalty that applies in omitted income and over-stated expenditure cases will also apply in cases where false claims are made for certain rebates that are not based on expenditure incurred. The commencing date of 21 July for this amendment follows the announcement made on 20 July 1979 that false rebate claims made after that date would be brought within the statutory penalty provisions.

Clause 3: Interpretation

This clause provides formally for the Income Tax Assessment Act 1936 to be referred to as the Principal Act in Part II of the amending Bill.

Clause 4: Amounts received on retirement or termination of employment in lieu of long service leave

This clause will remedy a minor defect in section 26AD of the Principal Act.

Under section 26AD, so much of a long service leave lump sum payment on retirement as is attributable to a period of qualifying service after 15 August 1978 is included in the recipient taxpayer's assessable income. A rebate of tax is allowed under section 160AA where necessary to ensure that the amount so included will not bear tax at a rate in excess of the standard rate for the year of income. So much of a lump sum, as is attributable to a period of service up to 15 August 1978, is assessable only as to 5 per cent of that amount.

Sub-section 26AD(3) relates to the case where an eligible service period, in respect of which a payment for unused long service leave is received, commenced on or before 15 August 1978 and ended after that date. The sub-section provides a formula to be used in ascertaining the part of the payment attributable to the period of eligible service after 15 August 1978.

The formula is the basis on which the number of days of long service leave deemed to have accrued after 15 August 1978 is calculated. That number of days is then reduced by the number of days of any leave actually used after 15 August 1978. If the number of days accrued exceeds the number of days used, the excess is multiplied by the daily rate of the long service payment received. The amount resulting from that calculation is the amount which is assessable in full as attributable to long service leave accrued after 15 August 1978.

The present application of the formula, in the component represented by

(((C * (B + D))/(E)) - F)


, results in a number, which can be a whole number and a fraction and which, in effect, represents the number of remaining unused long service leave days deemed to have accrued after 15 August 1978.

By new sub-section (3A), to be inserted in section 26AD by this clause, it is proposed to specify that, as was intended, the number so calculated be expressed as a whole number, disregarding any fraction. The amendment to the operation of the formula is also to apply in relation to sub-section (4) which contains a basis for determining the amount of a payment which is to be assessable in full where the payment relates to a number of days leave accrued for employment or service some of which was on a full-time basis and some on a part-time basis.

Clause 5: Divisible deductions

This clause proposes amendments to section 50G, one of the provisions of Subdivision B of Division 2A of the Principal Act which, in the special circumstances in which that Subdivision applies, govern the deduction of losses or out-goings ("current year losses") incurred by a company during a year of income. These amendments are principally consequential upon the amendments proposed by clause 7 to authorise a special rate of depreciation in respect of on-farm structural improvements for the storage of grain, hay or fodder in the course of carrying on a business of primary production.

In broad terms, the "current year loss" provisions divide an income year into "relevant periods" that are separated by a disqualifying event. A disqualifying event occurs during an income year with the occurrence of a 50 per cent or greater change in shareholders' dividend, voting or capital rights (the "continuing ownership" test), or of one of a number of circumstances designed to avoid the continuing ownership test. A net loss incurred in one such relevant period is not to be off-set against a net income derived during another relevant period of the same year unless the company satisfies the continuing ownership test or, where there has been a disqualifying change in ownership, the alternative "same business" test.

Sub-section 50G(1) of the Principal Act specifies the allowable deductions that are treated as "divisible deductions" for the purposes of the "current year loss" provisions. Broadly, divisible deductions are those allowable deductions of a year of income which are to be allocated to the relevant periods comprising a company's year of income for the purpose of determining the "notional taxable income" (net income) or the "notional loss" (net loss), as the case may be, of a company in relation to each of those relevant periods. Sub-section 50G(2) specifies the manner in which those divisible deductions are to be allocated into one or more of the relevant periods of a year of income.

Paragraph (a) of sub-clause 5(1) will amend paragraph (1)(a) of section 50G of the Principal Act to extend its operation to include amongst the divisible deductions specified therein, the special depreciation deduction being provided in respect of eligible on-farm storage facilities for grain, hay or fodder by the insertion of section 57AE in the Principal Act by clause 7. The amendment also more clearly reflects the fact that special depreciation deductions calculated in accordance with sections 57AA and 57AB of the Principal Act, and the new section 57AE, are deductions that are allowable under section 54 of the Act.

Paragraph (b) of sub-clause 5(1) will ensure that the special depreciation deduction to be allowable under section 54 of the Principal Act in accordance with the new section 57AE is excluded from the operation of paragraph (2)(a) of section 50G of the Principal Act in the same way as the special depreciation deductions allowable in accordance with sections 57AA and 57AB of the Principal Act are so excluded. This is because the deductions allowable in accordance with sections 57AA and 57AB are dealt with for the purposes of the "current year loss" provisions under paragraph (2)(b) of section 50G, and para-graph (d) of sub-clause 5(1) will insert new paragraphs (ba) and (bb) into sub-section 50G(2) of the Principal Act to deal appropriately with the deduction allowable in accordance with the new section 57AE.

Paragraph (c) of sub-clause 5(1) is a technical measure which will amend paragraph (2)(b) of section 50G of the Principal Act, also to more clearly reflect the fact that the depreciation allowable in accordance with sections 57AA and 57AB of the Principal Act is deductible under section 54 of the Principal Act.

Paragraph (d) of sub-clause 5(1) will insert two new paragraphs in sub-section 50G(2) of the Principal Act - paragraphs (ba) and (bb) - to specify the manner in which the special depreciation deductions for eligible grain, hay or fodder storage facilities are to be taken into account under the "current year loss" provisions.

Paragraph (ba) will ensure that, where an item of eligible property is owned and used for the purpose of producing assessable income, or is installed ready for use for that purpose and held in reserve, for part only of an income year, the depreciation deduction allowable in respect of that first year of income in relation to that eligible property will be pro-rated into the relevant periods occurring during that part of the first income year during which it was so owned and used, or installed ready for use and held in reserve.

Paragraph (bb) will ensure that, in relation to the second, third, fourth and fifth years of the special depreciation deduction available in accordance with the new section 57AE in respect of eligible on-farm grain, hay or fodder storage facilities, that depreciation deduction will be pro-rated over the relevant periods in the respective years of income.

By sub-clause (2) of clause 5, the amendments made by sub-clause (1) will apply to income tax assessments of a company for a year of income in which 22 August 1979 occurred, and in respect of assessments of the company for all subsequent income years.

Clause 6: Calculation of depreciation

This clause deals with two substantial matters. It concerns the deduction allowable for depreciation of plant and will, firstly, allow a pro-rata deduction for depreciation of plant owned and used for business purposes for part only of an income year. Secondly, it will insert into the Principal Act measures to counteract schemes of tax avoidance that seek to exploit the depreciation provisions of the income tax law. Related anti-avoidance provisions to counter exploitation of the depreciation provisions are contained in clauses 8, 9, 10 and 11.

Sections 54 to 62 of the Principal Act provide the basis upon which depreciation deductions are allowable in respect of property owned and used by a taxpayer in the production of assessable income. A depreciation deduction is allowable in the assessment of an income year in respect of the cost of an item of plant which, during that year, is owned and used to produce assessable income or which is installed ready for use for that purpose and is held in reserve. The amount of depreciation in relation to an income year is, at the option of the taxpayer, calculated under the prime cost (or straight line) method, i.e., the depreciation allowable is based on a fixed percentage of the cost of the property, or under the diminishing value method, i.e., the depreciation allowance is based on the depreciated value of the relevant item of plant at the beginning of the relevant income year.

A decision of Taxation Board of Review No. 2 on 20 April 1979 has overturned a long-standing practice of allowing depreciation deductions on a pro-rata basis in circumstances where the relevant plant is owned and used for the purpose of producing assessable income, or is owned and installed ready for use for that purpose and held in reserve, during a part only of an income year.

In the particular case the Board allowed a full year's depreciation deduction calculated under the prime cost method in respect of an item of plant which was acquired on 30 June and used for business purposes for one day only during the income year. The decision, which also cast doubt on the deduction to be allowed in respect of the first year of use of plant under the diminishing value method of depreciation, is the subject of an appeal by the Commissioner to the Supreme Court of Western Australia. However, irrespective of the out-come of the appeal, the amendment proposed by paragraph (a) of sub-clause 6(1), which was announced on 25 June 1979, will ensure that the pro-rata basis of depreciation allowances applies for part-year use of depreciable plant under both the prime cost and the diminishing value methods of depreciation, where the plant is acquired after 25 June 1979.

Paragraph (a) of sub-clause (1) will insert three new sub-sections - sub-sections (1A), (1B) and (1C) - in section 56 of the Principal Act to ensure that, in cases of part-year use, depreciation deductions are allowable on a pro-rata basis.

Sub-section 56(1) provides for the calculation of the amount of depreciation allowable for a year of income in respect of a unit of property under both the prime cost and the diminishing value methods of depreciation. The new sub-section (1A) which will supplement sub-section (1) proposes that, where a unit of property is used in the "prescribed manner" (new sub-section (1C)) for part only of a year of income, then the depreciation otherwise allowable in accordance with sub-section (1) is to be reduced proportionately to the period of the year of income during which the unit was not used in the prescribed manner.

The new sub-section (1B) will apply in the calculation of depreciation allowances under the diminishing value method of depreciation (paragraph (1)(a) of section 56) where the unit of property is first used in the "prescribed manner" other than on the first day of the income year. Paragraph (1)(a) itself refers to the situation where a unit of property is on hand at the beginning of the year of income. Sub-section (1B) will mean that in calculating the amount of the depreciation allowance for the year of income, the reference in paragraph (1)(a) to the depreciated value of the property at the beginning of the year of income is to be read as a reference to its depreciated value at the time when it is first dealt with in the "prescribed manner". ("Depreciated value" is a term used throughout the depreciation provisions and is defined in section 62 of the Principal Act as the cost of the relevant item of plant less the depreciation allowed or allowable in the assessments of income of the taxpayer.)

The new sub-section (1C) will give a meaning to the expression "prescribed manner" as used in sub-sections (1A) and (1B). A unit of depreciable property is to be taken to have been dealt with by a taxpayer in the prescribed manner at a particular time if, at that time, it is used by the taxpayer for the purpose of producing assessable income or is at that time installed ready for use for that purpose and is held in reserve by the taxpayer. That is, sub-section (1C) refers to the conditions as to the use of plant that give rise to an entitlement to depreciation deductions.

The amendments to the Principal Act that are proposed by paragraph (a) of sub-clause (1) are to apply, in accordance with sub-clauses (2) and (3) of clause 6, to property acquired by a taxpayer after 25 June 1979 otherwise than under a contract entered into on or before that date, and to property constructed by the taxpayer if the construction commenced after that date.

Paragraph (b) of sub-clause (1) of clause 6 will insert a new sub-section - sub-section (4) - in section 56 of the Principal Act as part of measures necessary to counter depreciation schemes used to manufacture deductions for large "paper" losses. These schemes rely on an excessive amount being paid for depreciable plant and on a view that there is no provision in the Act which, in the circumstances, allows a lower amount to be taken as the cost base of the plant. Section 60 of the Act does specify a limit where a person acquires property in respect of which depreciation has been allowed or is allowable but, for example, this does not apply where the plant is new and has not previously been used.

Depreciation deductions allowable under the prime cost or diminishing value methods of depreciation are designed to write-off the cost of plant over its estimated effective life. Where plant is disposed of, lost or destroyed, depreciation balancing adjustments provided under section 59 of the Principal Act ensure that the total depreciation allowance reflects the depreciation that has occurred while the plant is used by the taxpayer concerned. To this end, a balancing adjustment by way of a further deduction is available to the taxpayer, for example, where the unit of property is disposed of for a price below its income tax depreciated value, and an amount is written-back into the taxpayer's assessable income where the unit is disposed of for a price in excess of that depreciated value.

In manufacturing "paper" losses by exploitation of these provisions, a taxpayer may acquire previously unused plant for an inflated cost price, which is disposed of after a short period of business use for its true value, thereby creating a large depreciation balancing adjustment deduction represented by the difference between the inflated cost and its disposal at its true value. (The loss so suffered is a loss "on paper" because the excess purchase price, less the scheme promoter's fee, is not in substance borne by the taxpayer, for example, it might be financed by way of a loan from the promoter that, effectively, does not have to be repaid).

The amendment proposed by paragraph (b) of sub-clause (1) is one of the measures necessary to ensure that in such situations, where existing limiting provisions do not apply, the cost of a unit of plant for depreciation purposes cannot exceed the true value of the plant.

The new sub-section (4) being inserted in section 56 of the Principal Act will apply for purposes of calculating depreciation under the prime cost method of depreciation in accordance with paragraph (1)(b) of section 56 of the Principal Act, i.e., in relation each year to the cost of the relevant item of plant. To guard against the scheme being effective through a balancing deduction on disposal, amendments proposed to section 62 by clause 11 will correspondingly limit deductions to those calculated on the basis of a cost figure equal to the true value of the plant.

For cases in which depreciation is calculated under the diminishing value method of depreciation in accordance with paragraph (1)(a) of section 56, i.e., in relation each year to the depreciated value of the item of plant, the amendments to section 62 will control both the annual deductions for depreciation and the balancing adjustments on disposal.

The new sub-section (4) will not apply in respect of previously depreciated property for which section 60 of the Principal Act controls the amount in relation to which a purchaser's depreciation allowance may be calculated. Accordingly paragraph (a) of the new sub-section 56(4) specifies that sub-section (4) will apply only in a case where section 60 of the Principal Act does not apply.

Paragraphs (b), (c) and (d) of the new sub-section (4) set out the conditions under which that sub-section will apply for the calculation of depreciation under the prime cost method of depreciation.

Paragraph (b) requires the amount that would be the cost to the taxpayer for depreciation purposes under the prime cost method of depreciation, apart from the operation of the new sub-section (4), to be wholly or partly attributable to a transaction to which the taxpayer was a party.

Paragraph (c) requires the Commissioner of Taxation to be satisfied that parties to the transaction were not dealing with each other at arm's length. For this purpose, the Commissioner is to have regard to the connection between any two or more of those parties and to any other relevant circumstances.

Paragraph (d) will (where the tests of paragraphs (a) to (c) are also met) mean that, if the Commissioner is satisfied that the amount that would otherwise be the cost of the relevant unit of property for depreciation purposes (the inflated cost of the plant under the depreciation avoidance scheme) is greater than the amount that would have been its cost if acquired by the taxpayer in an arm's length transaction (i.e., its true value at the time of that acquisition), then that arm's length cost is to be deemed to be the cost of that unit to the tax-payer for the purpose of calculating his depreciation deductions. As noted earlier, corresponding amendments being made by clause 11 will limit the balancing deduction (if any) on disposal of the unit.

Under sub-clauses (4) and (5) of clause 6, the new sub-section 56(4) proposed by paragraph (b) will apply in relation to the cost of a unit of property acquired after 12 June 1979 (otherwise than under a contract entered into on or before that date) and, if the unit is constructed by the taxpayer, where the construction commenced after that date.

Clause 7: Special depreciation on property used for the storage of grain, hay or fodder

This clause proposes to amend the Principal Act to insert a new section - section 57AE - to authorise a special depreciation allowance for on-farm structural improvements for the storage of grain, hay or fodder in the course of carrying on a business of primary production. The new section 57AE will enable primary producers to write-off the cost of such improvements in equal instalments over a period of five income years.

This special depreciation allowance is to apply to structural improvements acquired under a contract entered into after 21 August 1979 and to improvements constructed by the tax-payer in respect of which construction commenced after that date.

Depreciation under the new section 57AE will be allowable in the income year in which the improvements are first used for the purpose of producing assessable income, or are installed ready for use for that purpose and held in reserve, and in each of the four succeeding income years. A taxpayer's entitlement to the income tax investment allowance in respect of eligible storage facilities to which the new depreciation allowance applies will not be affected.

Sub-section (1) of the new section 57AE sets out the conditions under which the special depreciation allowance will be available to a taxpayer in respect of a year of income.

Paragraph (a) of the new sub-section 57AE(1) requires that the relevant storage facility be a unit of property in respect of which the taxpayer is entitled to a depreciation allowance under section 54 of the Principal Act. Depreciation is allowable under section 54 in respect of plant which is owned by the taxpayer and which, during the relevant income year, is either used by him for the purpose of producing assess-able income or is installed ready for use for that purpose and held in reserve. Plant in respect of which depreciation is allowable under section 54 includes structural improvements on land used for the purposes of agricultural or pastoral pursuits.

Paragraph (b) of the proposed sub-section 57AE(1) requires that the relevant storage facility be situated on land on which a business of primary production was carried on during the year of income.

Paragraph (c) of the proposed sub-section 57AE(1) requires that for a unit of property to be eligible for the special depreciation allowance it be a structural improvement that was used or installed ready for use during the year of income for the purpose of the storage of grain, hay or fodder in the course of carrying on a business of primary production.

Under paragraph (d) of the proposed sub-section 57AE(1), the special depreciation allowance is to apply to a unit of property that is acquired by the taxpayer under a contract entered into after 21 August 1979 or, if the unit is constructed by the taxpayer, the construction of which commenced after 21 August 1979.

Sub-section (2) of the proposed section 57AE contains the special basis for allowing depreciation under section 54 on the structures to which the new provision is to apply, in lieu of the basis for depreciation deductions otherwise available under section 54 in accordance with sections 55, 56, 56A and 57 of the Principal Act. Those deductions are based on the estimated effective life of the particular unit of property and are generally at rates of 2 per cent or 3 per cent (prime cost) and 3 per cent or 41/2 per cent (diminishing value).

Under paragraph (a) of sub-section 57AE(2) the annual depreciation allowance in respect of such storage facilities will be 20 per cent of their cost. By reason of paragraph (b), the special 20 per cent depreciation will first be allowed in the year of income during which the eligible storage facility first qualifies for it. There will be no pro-rating of the special allowance, so that the full 20 per cent allowance will be available in respect of a year of income even where the facility is first used half-way through that year.

Correspondingly, paragraph (c) of sub-section 57AE(2) will not permit the special 20 per cent rate of allowance to be available after the succeeding four income years. By then the facility will have been fully depreciated.

Sub-section (3) of the proposed section 57AE contains anti-avoidance provisions designed to prevent misuse of the special rate of depreciation through inflation of the cost of an eligible storage facility. Corresponding provisions in the form of a new sub-section (4) are being inserted in section 56 of the Principal Act by sub-clause (b) of clause 6.

Clause 8: Disposal, loss or destruction of depreciated property

This clause is another in the series of amendments necessary to give effect to the Ministerial announcement of 12 June 1979 of measures to counter tax avoidance schemes that seek to exploit the depreciation provisions of the income tax law.

Section 59 of the Principal Act, which clause 8 will amend, provides for an appropriate depreciation adjustment on disposal, loss or destruction of depreciable property. The depreciated value of a unit of property is ascertained under section 62 of the Act and is its cost price less the depreciation allowed or allowable. Where the "consideration receivable" on the disposal, loss or destruction of a unit of depreciable property exceeds its depreciated value, the amount of the excess is, by section 59, added-back by way of a balancing adjustment into the assessable income of the taxpayer, but only up to the extent of the depreciation deductions that have been allowed to the taxpayer. Where the depreciated value exceeds the consideration receivable, a further deduction is available to the taxpayer in respect of that excess.

Clause 8 will vary the effect of the definition of "consideration receivable" in sub-section 59(3) of the Principal Act to counter a variation of the type of scheme out-lined in the notes on the amendments proposed by clause 9 to section 59AA of the Act. Instead of, say, a partnership that has bought plant at its true value being re-constituted and the plant being transferred for taxation purposes from the old to the new partners at a nominal value (a clause 9 scheme), the partnership might simply sell the plant for the nominal amount thus "manufacturing" a large balancing adjustment deduction based on that actual (but nominal) sale price. (Of course, the partnership would be recouped in a non-taxable way for its apparent "loss".) To counter this kind of scheme, the amendments proposed by clause 8 will have the effect that, if depreciable plant is sold at a price lower than both its depreciated value and its market value, in a situation in which the parties are not dealing at arm's length, the vendors will be treated as having sold the plant at the lower of depreciated value or market value.

Paragraph (a) of sub-clause (1) of clause 8 is a drafting measure by which the definition of "consideration receivable" in sub-section 59(3) of the Principal Act is to be made subject to the operation of the proposed new sub-section 59(4).

Paragraph (b) of sub-clause (1) of clause 8 will insert two new sub-sections - sub-sections (4) and (5) - in section 59 of the Principal Act.

The new sub-section (4) will fix a different amount of "consideration receivable" (i.e., to that established in sub-section 59(3)) where property is in a non-arm's length dealing disposed of by a taxpayer by sale for an under-value. Where property is disposed of otherwise than by sale the law (paragraph (d) of sub-section 59(3)) already fixes the "consideration receivable" as the value of the property at the date of disposal.

The two prerequisites for the application of the new sub-section (4) in relation to a sale of depreciated property are that, first, the Commissioner of Taxation be satisfied that the taxpayer and the purchaser were not dealing with each other at arm's length in relation to the sale of the relevant property. In reaching this conclusion the Commissioner is required to have regard to any connection between the taxpayer and the purchaser and to any other relevant circumstances. Secondly, the amount receivable by the taxpayer in respect of the sale must be less than the market value of the property immediately before the sale and also less than its depreciated value (cost price less depreciation allowed) at that time.

If the transaction between the taxpayer and the purchaser of the property is one that fits this description then the new sub-section 59(4) will deem the consideration receivable by the taxpayer in respect of the sale to be the market value of the property immediately before the sale, or its depreciated value at that time, whichever is the less.

New sub-section 59(4) will have the effect of entitling the vendor to a balancing adjustment deduction only in circumstances where immediately before the time of the sale, the market value of the relevant property is less than its depreciated value.

The proposed new sub-section 59(5) will complement the operation of the new sub-section (4).

Paragraph (5)(a) of section 59 will define the "amount receivable" by a taxpayer in respect of a disposal by sale of property to which sub-section (4) applies as the sale price of the property less the expenses of sale or, in a case where the property is sold with other assets and no separate value is allocated to that property, an amount determined by the Commissioner. This matches the provisions of existing sub-section 59(3) .

Paragraph (5)(b) of section 59 provides a basis for determining the market value at a particular time of property in relation to which the new sub-section 59(4) will apply in a case where there is insufficient evidence of market value at that time. In these circumstances, that market value will be such amount as the Commissioner considers is fair and reasonable.

Under sub-clause (2) of clause 8, the amendments made by sub-clause (1) will apply to property disposed of after 12 June 1979, otherwise than under a contract entered into on or before that date.

Clause 9: Disposal of depreciated property on change of ownership or interest

This clause proposes an amendment of an anti-avoidance nature to section 59AA of the Principal Act.

Section 59AA applies where there are changes in the ownership of depreciable property or of interests therein for any reason, including the formation or dissolution of a partnership or a variation in the partnership's constitution or in the interests of the partners, and one or more of the persons who owned the property before the change has or have an interest in the property after the change.

In these circumstances, the depreciation provisions of the Principal Act apply as if the person or persons who owned the property before the change had disposed of the whole of the property to the person or to all of the persons by whom the property is owned after the change for a consideration equal to the amount specified in the relevant agreement between the parties concerned as being the transfer value of that depreciable property. This consideration must be accepted by the Commissioner for the purposes of any balancing adjustment relating to the disposal of that unit of depreciable property. If there is no such agreement or no amount is specified in such an agreement, the transfer value of the property for depreciation purposes is an amount as determined by the Commissioner.

Complex arrangements have been set up with the aim of exploiting the ability of the parties to set their own transfer value. Under one such scheme, a partnership may purchase plant for, say, $600,000 of which $5,000 is provided by the partners from their own resources and $595,000 by way of a loan from the promoter. The plant is used for business purposes to qualify the partnership for depreciation deductions. The partnership is then formally reconstituted to admit as a partner a company controlled by the promoter of the scheme. The new partnership agreement may specify $6,000 as the transfer value of the depreciable property, ostensibly reflecting the fact that the plant is subject to a charge as security for the loan by the promoter, and seek to rely on section 59AA as establishing the agreed amount of $6,000 as the disposal value by the first partnership.

That partnership then claims the resultant "manufactured" depreciation balancing deduction, of $594,000 to be shared by the partners. The new partnership takes over the liability for repayment of the loan when it acquires ownership of the plant. It in turn sells the plant, subject to the charge, for a nominal amount to the promoter's company which in turn sells the plant back to the original owners for $600,000, and uses the proceeds to repay to the promoter the loan of $595,000. Throughout the various formal changes of ownership of the plant under the scheme, it may never leave the possession of its original owners, who continue to use it for business purposes.

Against this background, clause 9 will amend section 59AA of the Principal Act so that, should parties to such a scheme specify in their agreement a value for depreciable plant that is less than both the market value and the depreciated value of the plant, the lower of those two values will apply for the purpose of calculating depreciation balancing adjustments applicable to the transferors. A corresponding amendment in relation to sales of plant at an under-value is proposed by clause 8.

Paragraph (a) of sub-clause (1) of clause 9 is consequential upon the amendment proposed by paragraph (b), and will make the existing provisions of section 59AA subject to a new sub-section (2).

Paragraph (b) of sub-clause (1) of clause 9 will insert two new sub-sections - sub-sections (2) and (3) - in section 59AA of the Principal Act.

By virtue of paragraphs (a), (b) and (c), the new sub-section (2) will qualify the operation of section 59AA where an amount specified in an agreement as the transfer value of a unit of depreciable property for the purposes of that section is less than both the market value of that property immediately before the relevant change in the interests of persons in that property, and its depreciated value at that time.

In these circumstances, paragraph (d) of the new sub-section (2) will require the depreciation provisions of the income tax law to be applied as if the person or persons who owned the property before the change had, at the time the change occurred, disposed of the property for the lesser of its market value or its depreciated value at that time.

By virtue of paragraph (e) of the new sub-section (2), the depreciation provisions of the law are to apply to the person or persons who owned the property after the change as if they had, at the time the change occurred, acquired the property at a cost equal to the amount they have specified in the relevant agreement.

The proposed new sub-section (3) complements the new sub-section (2). It provides the basis for determining the market value of the relevant property in situations where there is insufficient evidence of that value at that time. In these circumstances, the value is to be the amount that the Commissioner of Taxation considers to be fair and reasonable.

Under sub-clause (2) of clause 9, the amendments made by sub-clause (2) are to apply in relation to a change in the ownership of, or in interests of persons in, property after 12 June 1979, other than a change occurring in consequence of an agreement entered into on or before that date.

Clause 10: Acquisition of depreciated property

Clause 10, which will amend section 60 of the Principal Act, is related to the protective provisions being inserted in the Act by clauses 6 and 11.

Sub-section 60(1) has the basic effect that a person who acquires property in respect of which depreciation has been allowed or is allowable for income tax purposes will be allowed depreciation based on no more than the depreciated value of the property in the hands of the former owner. Where, however, a balancing charge is under section 59 of the Act included in the assessable income of the vendor because the vendor has disposed of the property for more than its depreciated value, depreciation is allowable to the purchaser on the basis of the sum of that depreciated value and the amount so included in the vendor's assessable income.

Sub-section 60(2) qualifies this rule. By reason of it, the limit under sub-section (1) is not to apply if the Commissioner of Taxation is of the opinion that depreciation based on the actual consideration given by the purchaser should be allowed. Use of the actual consideration might, for example, be appropriate where the parties are dealing at arm's length and agree on a purchase price greater in amount than the amount that would result under sub-section (1).

It is necessary that sub-section 60(2) be amended to reflect the position as it will be following the insertion into the Act, by clauses 6 and 11, of new sub-sections 56(4) and 62(3). At present, in a case where it is appropriate for the Commissioner to act under sub-section 60(2), depreciation to a purchaser of depreciated property must be based on the actual consideration, e.g., the actual purchase price. This is in a setting where, basically, sections 56 and 62 operate on the basis of the actual cost of property. However, new sub-sections 56(4) and 62(3) will mean that in the circumstances in which they apply an amount lower than actual cost is to be taken as the basis.

Accordingly, the new sub-section 60(2) being inserted by sub-clause (1) of clause 10 will not restrict, to the actual consideration given, the amount resulting from an application of sub-section 60(2), but will be expressed in more general terms that will allow depreciation to be calculated on the basis of whatever is the base amount under appropriate other provisions.

By sub-clause (2) of clause 10 the new sub-section 60(2) is to apply in relation to property acquired after 12 June 1979 otherwise than under a contract entered into on or before that date.

Clause 11: Definition of depreciated value

This clause is related to paragraph (b) of sub-clause 6(1) and, like it, is designed to provide a counter to exploitation of the depreciation provisions of the income tax law through payment of an excessive price for plant on which depreciation is allowable.

Sub-section 62(1) of the Principal Act defines "depreciated value", a term used throughout the depreciation provisions, as the actual cost of a unit of property to the person owning it, less the total amount of depreciation allowed or allowable in respect of that unit to that person. However, by reason of sub-section 62(2), where section 60 has applied to allow a purchaser of previously depreciated property depreciation in respect of that property that is based on the depreciated value of the property in the hands of the vendor, that amount is to be deemed to be the cost of the property to the purchaser for the purposes of sub-section 62(1).

The "depreciated value" of a unit of property established by section 62 is used, where the property is depreciated on the prime cost method, in the calculation of balancing adjustments on disposal. The amount of annual depreciation allowable in respect of such property is, by section 56, based on the cost of the property. Where, however, property is depreciated on the diminishing balance method, the definition of "depreciated value" in section 62 serves both for purposes of balancing adjustments on disposal and in determining annual depreciation allowances.

As explained earlier, section 56 is being amended - by the insertion of a new sub-section (4) - to guard against exploitation of the depreciation provisions through payment under tax avoidance schemes of an inflated price for depreciable property. In short, if an inflated price is paid in a situation where the purchase is not on arm's length terms, the amount that would have been paid in a purchase on such terms (i.e., the true value of the property) is to be taken as the cost of the property for purposes of section 56.

It is necessary, given the related functions of sections 56 and 62 in respect of annual depreciation allowances and balancing adjustments on disposal (noted above), to similarly amend section 62. Accordingly, sub-clause 1 will insert in section 62 a new sub-section (3) that will, in the same way as new sub-section 56(4), treat the "arm's length" cost of property as the cost of the property for purposes of section 62.

Under sub-clauses (2) and (3) of clause 11, the new sub-section 62(3) proposed by sub-clause (1) will, like new sub-section 56(4), apply in relation to property acquired after 12 June 1979 (otherwise than under a contract entered into on or before that date) or, if the unit is constructed by the taxpayer, the construction of which commenced after that date.

Clause 12: Gifts, calls on afforestation shares, pensions etc.

Paragraph (a) of sub-section 78(1) of the Principal Act authorises an income tax deduction for gifts of the value of $2 and upwards of money, or of property other than money that was purchased by the taxpayer within the twelve months preceding the making of the gift, to any of the funds, authorities or institutions specified in that paragraph. The deduction in respect of property other than money is limited to the lesser of the value of the property at the time the gift was made and the amount paid by the donor for the property.

By sub-clause (1) of clause 12, a new sub-paragraph - sub-paragraph (x1ix) - is to be inserted in paragraph (a) of sub-section 78(1) to authorise an income tax deduction for gifts made to public funds established and maintained by Roman Catholic archdiocesan or diocesan authorities exclusively to provide religious instruction in Government schools in Australia.

By sub-clause (2) the deduction being authorised by sub-clause (1) will be available for gifts made on or after 1 July 1979.

Clause 13: Losses of previous years

Clause 13 proposes an amendment to sub-section 80(5) (which is being inserted in the Principal Act by the Income Tax Assessment Amendment Bill (No. 5) 1979) to insert five new paragraphs - paragraphs (ha), (hb), (hc), (hd) and (n) - so as to deny deductions for carry-forward losses generated by depreciation-type tax avoidance schemes that were entered into prior to the general operative date of the amendments proposed by this Bill.

Under section 80 of the Principal Act, a taxpayer who incurs a loss in a year of income may, subject to certain stipulations, carry that loss forward as an allowable deduction against income of any of the next seven succeeding years of income. A loss incurred in engaging in primary production may, by virtue of section 80AA, be carried forward indefinitely. A loss is deemed to be incurred by a taxpayer in a year of income when the allowable deductions for that year exceed the sum of any assessable income and net exempt income derived in that year. In calculating a loss from engaging in primary production, only primary production income and related allowable deductions are taken into account.

By virtue of new sub-section 80(5), the amount of any deduction allowable in respect of a loss incurred in a previous year, other than from engaging in primary production, is to be determined for the 1978-79 and subsequent years of income as if certain anti-avoidance measures specified therein were taken to be applicable throughout the year of income in which the loss was incurred. Clause 13 will extend the operation of that sub-section to ensure that the amount of any deduction allowable in respect of a carry-forward loss is also determined as if the amendments proposed by clauses 6, 8, 9, 10, 11, 16, 17 and 18 to counter the depreciation-type schemes had been so applicable, i.e., as if those amendments applied irrespective of the date on which the relevant property was acquired or constructed.

The effect of the amendments will be that losses created under depreciation schemes of the kind at which the amendments proposed by this Bill are directed, but which were implemented before the operative date, 13 June 1979, will be disregarded in determining for 1978-79 and subsequent income years the amount of any deduction allowable under section 80. The amendments will also ensure that deductions under section 80AA for losses incurred in engaging in primary production are similarly restricted. This is because, by virtue of new sub-section 80AA(9) (being inserted in the Principal Act by the Income Tax Assessment Amendment Bill (No. 5) 1979), deductions in respect of primary production losses are to be determined on the same basis as that provided by sub-section 80(5) in respect of non-primary production losses.

Clause 14: Arrangements to avoid the operation of clause 13

Clause 14 which will not amend the Principal Act, contains safeguarding provisions corresponding with those contained in the Income Tax Assessment Amendment Bill (No. 5) 1979, in relation to new sub-section 80(5) and which are designed to ensure that the amendments proposed by clause 13 are not frustrated by arrangements designed to convert tax avoidance losses generated by depreciation-type schemes into other losses or outgoings that, formally, have a different character.

One such arrangement, for example, could involve an amount of income, equal to the loss created under a depreciation scheme, being paid by an associate, before the end of the 1978-79 income year, to the individual or partnership that had created the loss. At that point the individual or partnership would, in 1978-79, have matched the loss against the diverted or manufactured income, the object also having been to give the income payment the character of a deductible expense in the hands of the associated entity. That expense, not being formally a loss from a depreciation scheme could then be sought to be applied against income of the associate. In other words, the arrangement would be designed so as to formally transfer to the associated entity the tax benefit that would otherwise have been denied by the operation of the "no carry-forward loss" amendments being made by clause 13.

Clause 5 of the Income Tax Assessment Amendment Bill (No. 5) 1979 contains safeguarding provisions designed to protect against this kind of arrangement, when employed in relation to the "no carry-forward" measures in proposed sub-section 80(5). Clause 14 is, with necessary adaptations, in the same terms as clause 5 of the (No. 5) Bill and has a corresponding purpose. The explanations in the explanatory memorandum dealing with the (No. 5) Bill may therefore be referred to for an explanation of clause 14.

Clause 15: Retention allowance

This clause will increase from 60 per cent to 70 per cent the retention allowance for private companies in respect of trading income.

A company that is classified as a private company for income tax purposes has a period of 12 months commencing 2 months before the end of the income year (the "prescribed period" in relation to that income year) within which to make a prescribed level of distribution to its shareholders (a "sufficient distribution") in respect of its taxable income of that year if it is to avoid liability to pay undistributed income tax.

A private company's taxable income less company tax on that income is its "distributable income". The balance of distributable income after deducting the "retention allowance" (the amount of distributable income that a private company may retain free of undistributed income tax) is its "sufficient distribution" for the relevant income year.

Distributable income less any income from property (i.e., trading or business income) is the private company's "reduced distributable income" and the present rate of retention allowance in respect of the reduced distributable income is 60 per cent of that income. There is no retention allowance for distributable income that is property income consisting of private company dividends and a 10 per cent retention allowance for other distributable income from property such as rent, interest and public company dividends.

It is proposed by sub-clause (1) of clause 15 to amend section 105B of the Principal Act to increase the present rate of retention allowance for trading or business income from 60 to 70 per cent of the private company's reduced distributable income. There is to be no change in the rate of retention allowance available for property income.

Under sub-clause (2), the increased retention allowance will apply in determining whether a private company has made a sufficient distribution in respect of income of the 1978-79 income year and subsequent income years.

Clause 16: Change in interests in property

Section 122R of the Principal Act is modelled on section 59AA of the Act. That section is, by clause 9, being amended to counter tax avoidance exploitation of it, and as the same kind of exploitation could be made of section 122R, corresponding amendments to section 122R are being proposed by this clause.

Section 122R is one of the provisions of Division 10 of the Principal Act which authorises deductions for certain capital expenditure incurred by a mining enterprise in connection with the carrying on of a mining operation on a mining property (other than for petroleum). Section 122R applies where a change occurs in the ownership of the property in respect of which deductions have been allowed under Division 10, or of interests therein, for any reason including the formation or dissolution of a partnership or a variation in the partnership's constitution or in the interests of the partners and one or more of the persons who owned the property before the change has or have an interest in the property after the change.

Section 122R requires in such circumstances that the provisions of the Principal Act relating to the disposal of property in respect of which deductions have been allowed or are allowable under Division 10 are to apply as if the property had been disposed of by the person or persons who owned it before the change to the person or persons who own it after the change for a price equal to any amount specified as the value of the property in a written agreement between those parties. This specified amount is required to be treated as the consideration receivable on disposal of the property and thus is the amount to be taken into account in calculating any balancing adjustments to be made in respect of the vendors as a consequence of such a disposal.

Clause 16 will, in a way corresponding with the amendments to section 59AA proposed by clause 9, amend section 122R of the Principal Act so that in any cases where an attempt is made to misuse the provision, further deductions for capital expenditure on disposal of the relevant property will be avail-able only where the market value of that property at the disposal date is less than the amount of unclaimed capital expenditure in relation to that property.

Paragraph (a) of sub-clause (1) of clause 16 will formally make the existing section subject to the new provisions being inserted by paragraph (b).

Paragraph (b) of sub-clause (1) will insert two new sub-sections - sub-sections (2) and (3) - in section 122R of the Principal Act.

By virtue of paragraphs (a), (b) and (c), the new sub-section (2) will qualify the operation of section 122R where the amount specified in the relevant agreement, following a change in interests in the property, as the value of the property is less than both the market value of the property immediately before the change and the amount ascertained by deducting from the total capital expenditure in respect of the property, the sum of the deductions allowed under Division 10 of the Principal Act in respect of that expenditure.

Paragraph (d) of the new sub-section (2) will require Division 10 to be applied as if the person or persons who owned the property before the change had sold it for a price equal to the lesser of these two reference amounts.

Paragraph (e) of the new sub-section (2) provides for the person or persons who owned the property after the change to be deemed to have incurred capital expenditure in acquiring it at that time for an amount equal to the amount agreed by the parties and specified in the agreement.

The new sub-section (3) complements sub-section (2). It provides the basis for determining the market value of the relevant property immediately before the time when the change in interests in it occurred, if there is insufficient evidence of that value at that time. In these circumstances, the market value is to be the amount that the Commissioner of Taxation considers to be fair and reasonable.

Sub-clause (2) of clause 16 proposes that the amendments made by sub-clause (1) are to apply in relation to a relevant change in the ownership of property, or in interests of persons in property, after 12 June 1979, other than a change occurring in consequence of an agreement entered into on or before that date.

Clause 17: Change in interests in property

Section 123F is one of the provisions of Division 10AAA of the Principal Act and applies in respect of changes in interests of persons in property used to transport minerals and products of minerals.

Section 123F is in similar terms to section 122R of the Principal Act and serves a corresponding purpose. Likewise, the amendments proposed by clause 17 will apply on a corresponding basis to that explained in the notes relating to the amendments being made to section 122R by clause 16.

Clause 18: Change in interests in property

Section 124AO is one of the provisions of Division 10AA of the Principal Act and applies in respect of changes in interests of persons in property used in prospecting or mining for petroleum.

Again, section 124AO is in similar terms to section 122R of the Principal Act and serves a corresponding purpose. The amendments proposed by clause 18 will also apply on a corresponding basis to that explained in the notes relating to the amendments being made to section 122R by clause 16.

Clause 19: Rebate of tax for certain primary producers

Paragraphs (a), (b) and (c) propose minor technical amendments to sub-sections 156(4) and (5) of the Principal Act so that they will have their intended effect. The amendments concern the averaging provisions of the income tax law applicable to a primary producer and the rebate of tax by which averaging benefits are conferred on people who qualify as primary producers.

As the law is at present expressed it may occur that where the amount of the benefits an amount of dollars and cents, only the amount of dollars is allowable as a rebate. The amendments will ensure the intended result that the primary producer is allowed the whole of the benefit, including cents.

Clause 20: Indexation

This clause, which is related to the amendment proposed by clause 10 of the Income Tax (Rates) Amendment Bill 1979, is one of the measures necessary to reflect the Government's decisions that personal tax indexation is not to be restored for 1979-80 and that indexation can in future be implemented by an Act declaring that it is to apply for the particular year.

Existing sub-section 159Z(2) of the Principal Act provides for indexation of various amounts of concessional rebates (for dependants, as a sole parent, and for a housekeeper) and of the level of separate net income beyond which rebates for dependants start to diminish. Indexation of the personal income tax rate scale is covered by section 9 of the Income Tax (Rates) Act 1976.

Clause 20 will omit sub-section 159Z(2) and insert new sub-sections (2), (2A), (2B), (2C) and (2D) in its place. Sub-sections (2) and (2A) will cover the 1979-80 and earlier years and, for future years, the remaining new sub-sections will perform the function of appropriately indexing the amounts that are subject to rebate, where an Act declares the year to be a year to which indexation applies.

New sub-section (2) is to the same effect, in relation to the 1977-78 and 1978-79 years of income as existing sub-section (2). It establishes, in broad terms, that the amounts of rebates for 1977-78 and 1978-79 income years are the amounts ascertained by applying to the relevant basic amounts the indexation factors that had been prescribed for those years.

New sub-section (2A) reflects the decision that indexation is not to apply for the 1979-80 year, by proposing that the rebatable amounts which applied in 1978-79 will also apply for 1979-80.

New sub-section (2B) will have effect where an assessment is made in respect of the 1980-81 or a subsequent year of income and, at the time of making the assessment, the relevant year has not been prescribed by an Act as a year in which indexation is to apply. In such circumstances, the amounts of rebates for the previous income year will be retained. This provision will have effect in respect of assessments for a year of income in which -

(a)

indexation is not prescribed;

(b)

the indexation factor is not greater than l; or

(c)

the assessment is made before an Act authorising indexation for the year enters into force. Such an assessment could be made, for example, in cases where a taxpayer early in the year ceased to be a permanent resident of Australia and wished to finalise his or her tax affairs before leaving the country.

Under sub-section (2C), where an Act declares that indexation is to apply to a particular year of income and the indexation factor is greater than 1, the amounts of the rebates concerned (as previously indexed) are to be adjusted by the indexation factor determined in accordance with sub-section 9(3) of the Income Tax (Rates) Act 1976, or where a lesser factor is prescribed by regulations made under sub-section 9(4) of that Act, by that lesser factor.

Sub-section (2D) will apply where a year is declared to be a prescribed year after the commencement of the year, so that, under sub-section (2B), the amounts of the rebates are deemed, for assessments made in the first part of the year, to be the same as those of the preceding year and the amounts of the rebates are, under sub-section (2C), subsequently adjusted by the indexation factor for the year. In such a case the (higher) indexed amounts are the appropriate amounts to be used as the base for the application of sub-sections (2B) and (2C) in the next succeeding year.

Clause 21: Rebate in respect of payments received in lieu of annual leave or long service leave

A rebate of tax is allowed under section 160AA of the Principal Act to ensure that no more than the standard rate of tax is payable on any amount included in the assessable income of a taxpayer because of the operation of section 26AC of the Principal Act (that is, a payment in respect of unused annual leave), or because of the operation of sub-section (2), (3) or (4) of section 26AD (that is, a payment in respect of unused long service leave attributable to eligible service after 15 August 1978).

For this purpose the section contains references to the 32 per cent standard rate and to the income levels of $3,893 and $16,608 above, and up to which, respectively, the standard rate applies, and existing sub-section 160AA(3) provides for these amounts to be adjusted by the indexation factor each year where the factor is greater than 1.

The amendments proposed by clause 21 reflect the non-application of indexation for 1979-80, and the proposal that indexation is to apply in subsequent years where an Act declares a year to be a year to which indexation applies. They are to the same effect in relation to the rebate under section 160AA as the amendments to section 159Z relating to the indexation of concessional rebates - see the notes on clause 20 above.

Paragraph (a) of clause 21 omits existing sub-section 160AA(3) and inserts in its place new sub-sections (3), (3A) and (3B). These sub-sections set out how the indexation adjustments are to be made in cases where an assessment is made after a year has been declared to be a year to which indexation applies, when a year has not been so declared, and where a year is so declared after the commencement of the year concerned. They correspond in effect with new sub-sections 159Z(2B), (2C) and (2D) to be inserted by clause 20.

Paragraph (b) of clause 21 will amend sub-section 160AA(5) of the Principal Act to give effect to the proposal that indexation not apply for 1979-80 by providing in effect that the relevant amounts are not to be indexed before the 1980-81 income year.

Clause 22: Powers of the Board

This clause proposes an amendment to paragraph (2)(b) of section 193 of the Principal Act that is complementary to the amendment of sub-section 226(2) proposed by clause 24. The latter amendment will authorise the imposition of additional tax by way of penalty on taxpayers who make false claims for certain rebates of income tax.

In broad terms, section 193 provides for a Taxation Board of Review to have all the powers and functions of the Commissioner in making assessments, determinations and decisions under the Principal Act for the purpose of reviewing a decision of the Commissioner, a Second Commissioner or a Deputy Commissioner.

By reason of paragraph (2)(b) of the section, the Board does not, however, have the power to review decisions relating to the remission of additional tax imposed under sub-section 226(2) for omitted income or for a deduction or rebate claimed in respect of expenditure in excess of expenditure actually incurred, unless the additional tax payable, after remission, exceeds 10 per cent per annum of the tax so avoided.

The amendment proposed by clause 22 will extend the operation of paragraph (2)(b) to cover those cases of false rebate claims in which additional tax under sub-section 226(2) is imposed as a result of the amendment proposed by clause 24.

Clause 23: Amount of provisional tax

This clause proposes to omit from the Principal Act sub-sections 221YC(1B), (1C) and (1D). Those sub-sections, which relate to the determination of provisional tax in circumstances where the person is liable for health insurance levy, are redundant following the abolition of the levy from 1 November 1978.

Clause 24: Additional tax in certain cases

This clause proposes amendments to sub-section 226(2) of the Principal Act so that statutory additional tax will be imposed where a taxpayer includes in his or her income tax return, false information in relation to a claim for certain kinds of income tax rebate. These are rebate claims not based on specific amounts of expenditure incurred and in relation to which penalties may at present be applied under the Principal Act only as a result of prosecution action.

Sub-section 226(2) of the Principal Act imposes additional tax of double the amount of tax sought to be evaded or an amount of $2, whichever is the greater, where income is omitted from a taxpayer's income tax return or a taxpayer claims a deduction or rebate in respect of expenditure that is in excess of the expenditure actually incurred.

The proposed amendment will authorise the imposition of penalties under sub-section 226(2), as an alternative to prosecution action, for the kinds of false rebate claims affected by the amendment, viz., for a spouse, a daughter-housekeeper, a parent or parent-in-law or an invalid relative, (section 159J of the Principal Act) as a sole parent (section 159K), the zone rebate (section 79A) and the rebate for over-seas service of members of the defence force (section 79B) or for service with a United Nations armed force (section 23AB).

The power of the Commissioner of Taxation under sub-section 226(3) to remit all or a part of the additional tax imposed by section 226 will apply in relation to the additional tax that results from the proposed amendment. Moreover, the amendment will operate in the context of sub-section 226(4) which is to the effect that where a liability to pay additional tax arises under sub-section 226(2) and a taxation prosecution for the particular delinquency is instituted, the additional tax is not payable unless and until the prosecution is withdrawn.

The Government's intention that the law be amended in this way was announced on 20 July 1979. By virtue of sub-clause 2(2), the amendment proposed by clause 24 will come into operation on 21 July 1979, i.e., it will apply to cases where false rebate claims are made in income tax returns lodged on or after 20 July 1979.

Clause 25: General concessional rebates for financial year 1979-80

Under section 159N of the Principal Act, a rebate is allowed against income tax otherwise payable, for specified expenditures (on medical and education expenses, life assurance premiums, superannuation contributions, municipal rates, etc.), to the extent to which they exceed $1,590, at a rate equal to the 32 per cent standard rate of tax. This clause, which will not amend the Principal Act, will have the result that for 1979-80 the rebate will be calculated at a rate of 33.07 per cent rather than 32 per cent.

Clause 26: Rebate in respect of payments received in lieu of annual leave or long service leave - financial year 1979-80

A rebate of tax allowed under section 160AA of the Principal Act has the effect that the maximum rate of tax payable on the amount of any payment included in the assessable income of a taxpayer because of the operation of section 26AC of the Principal Act (that is, a payment in respect of unused annual leave) or because of the operation of sub-section (2), (3) or (4) of section 26AD (that is, a payment in respect of unused long service leave attributable to eligible service after 15 August 1978), will be the 32 per cent standard rate of tax. This clause proposes that, in the calculation of the rebate for the 1979-80 income year, the percentage figure of 33.07 - the standard rate of tax for 1979-80 - is to be used rather than the figure of 32 in sub-section (1) of section 160AA.

Clause 27: Provisional tax for financial year 1979-80

The purpose of sub-clause (1) of this clause, which does not amend the Principal Act, is to achieve the result that 1979-80 provisional tax of taxpayers who do not "self assess" is to be calculated on 1978-79 taxable income (adjusted to reflect the termination of the trading stock valuation adjustment (TSVA) as from the beginning of the 1979-80 financial year) at 1979-80 rates of tax plus a loading of 3 percentage points on each 1979-80 rate applicable to taxable income above the tax-free slice of income. Broadly, this will mean that for tax-payers other than primary producers (see below), provisional tax calculated in this manner will be equal to 1978-79 tax assessed (excluding any health insurance levy included in the assessment), plus 2.57 per cent of the amount of the taxable income in excess of $3,893.

Where a taxpayer chooses to self-assess, i.e., to have 1979-80 provisional tax based on estimated 1979-80 income, the rates of tax to be applied to that income are the actual rates to apply on assessment of 1979-80 income. And, of course, if a taxpayer derives salary or wage income in addition to income on which provisional tax is payable, sub-section 221YC(1A) of the Principal Act enables the provisional tax otherwise payable to be appropriately adjusted.

Sub-clause (1) will have two effects so far as taxpayers generally are concerned. It provides for any TSVA deduction allowed in the 1978-79 assessment to be disregarded for 1979-80 provisional tax purposes, and for the standard rate of tax to be taken as 36.07 per cent (i.e., the 1979-80 standard rate plus 3 percentage points) rather than the rate of 33.5 per cent that applied for 1978-79.

For primary producers, the clause will require two additional adjustments to be made in the calculation of provisional tax based on 1978-79 income. These are, first, that the effect of any income equalisation deposits or withdrawals on 1978-79 tax is to be disregarded in calculating 1979-80 provisional tax (that is in accordance with existing sub-section 221YA(5) of the Principal Act). Secondly, for provisional tax purposes, any averaging rebate to which the "primary producer is entitled is to be recalculated using the adjusted taxable income (after any adjustments needed for a TSVA deduction and for any income equalisation deposits or withdrawals) and taking account of the fact that the provisional tax is to be calculated at higher rates than those that applied in the calculation of the averaging rebate allowed in the 1978-79 assessment.

Sub-clause (2) will effect a technical adjustment consequential upon the abolition of the health insurance levy, which was taken to be income tax for purposes of the Income Tax Assessment Act. This clause will have the effect that when a person's only "tax" liability for 1978-79 was health insurance levy, the person is not to be liable for provisional tax for 1979-80.

PART III - INCOME TAX (ARRANGEMENTS WITH THE STATES) ACT 1978

Clause 28: Interpretation

This clause provides for the Income Tax (Arrangements with the States) Act 1978 to be referred to in Part III of the "amending Act as the "Principal Act".

Clause 29: Tax instalment deductions

This clause proposes a technical amendment of section 10 of the Principal Act. The broad object of that section is that if a State is to impose an income tax surcharge on its residents on the basis for which enabling provision is made by the Act, the relevant State tax laws must make provision for the State tax on salaries and wages to be collected, to the maximum practical extent, by way of PAYE deductions from those salaries and wages.

It is proposed to omit the existing sub-section 10(7) of the Principal Act (which lists the employers potentially liable to make State PAYE deductions) and insert a new sub-section 10(7). The new sub-section is basically the same as the existing sub-section. However, the new sub-section specifically adds the Commonwealth and authorities of the Commonwealth, the Territories and authorities of the Territories, and employers in the Territories, to those at present specified in sub-section 10(7) of the Act. The extra references in the sub-section are required to more clearly establish the necessary link between any State legislation and the Commonwealth law, that would empower the Commonwealth to make PAYE deductions on account of a State tax from the pay of its employees and to enable the Commonwealth to require the other employers concerned to make such deductions from the pay of their employees.

Clause 30: Tax instalment deductions by certain employers

This clause will make a technical amendment to section 78 of the Principal Act. This amendment follows from the Northern Territory becoming a self-governing Territory. It will replace the now redundant reference to the 'Administration' of a Territory.

INCOME TAX (RATES) AMENDMENT BILL 1979

This Bill will amend the Income Tax (Rates) Act 1976 (in this section of these notes referred to as "the Principal Act"), which declares the rates of tax in respect of the income of individuals and trusts, and includes provision for the indexation of the rates of personal income tax by reference to increases in the consumer price index.

The Bill will give effect to the proposal that tax indexation is not to be restored for 1979-80 and that, in future, indexation will apply for a particular year where provision is made in an Act for it to do so.

The rates of tax applicable for any financial year in accordance with the Income Tax (Rates) Act are imposed for that financial year by an annual Income Tax (Individuals) Act.

In the absence of the changes to the income tax law that this Bill proposes, the rates of tax declared by Part IVA of the Principal Act - that is, those set out in Schedules 13 to 16 of that Act as affected by the indexation provisions of that Act - would apply for 1979-80 and subsequent years.

Under the Budget proposals, for the 1979-80 year as a whole, the standard rate of tax for assessment purposes is to be reduced from 33.5 per cent to 33.07 per cent. That rate is derived as a weighted average of the 34.57 per cent standard rate scale on which PAYE deductions to apply up to 30 November 1979 are based (weighted as to 5/12) and the 32 per cent standard rate scale on which the PAYE scales to apply from 1 December 1979 are to be based (weighted as to 7/12). The standard rate of 33.07 per cent will apply on assessment to taxable income in the range $3,894 to $16,608. With the usual surcharges of 14 per cent and 28 per cent applying to income in the two ranges above $16,608 and $33,216 respectively, the rates for 1979-80 on income in those ranges will be 47.07 per cent and 61.07 per cent respectively.

Notes on the clauses of the Bill are set out below.

Clause 1: Short title, etc.

This clause provides for the amending Act to be cited as the Income Tax (Rates) Amendment Act 1979 and for the Income Tax (Rates) Act 1976 as previously amended to be referred to in the amending Act as the Principal Act.

Clause 2: Commencement

Sub-section 5(1A) of the Acts Interpretation Act 1901 provides that every Act shall come into operation on the 28th day after the day on which the Act receives the Royal Assent, unless the contrary intention appears. By this clause, it is proposed that, like the related Income Tax Laws Amendment Act 1979, the amending Act will come into operation on the day on which it receives the Royal Assent.

Clause 3: Interpretation

This clause will amend the definition of "tax" in section 3 of the Principal Act which specifies that, in that Act, "tax" does not include tax the rates of which are declared by other Acts, that is, tax payable by a company, a superannuation fund, the withholding tax payable in pursuance of section 128B on dividends and interest paid to non-residents, the additional tax payable by non-resident companies pursuant to section 128T, or tax payable, in respect of film and video tape royalties paid abroad, in pursuance of section 136A. The proposed amendment will make it clear that the term does not include withholding tax payable in pursuance of section 128V on mining payments to Aboriginal groups, the rate of which is declared by the Income Tax (Mining Withholding Tax) Act 1979.

Clause 4: Heading to Part IVA

Clause 5: Application of Part IVA

Clause 4 will amend the heading to Part IVA of the Principal Act as a consequence of the amendment proposed by clause 5 of the Bill. Clause 5 proposes that section 6G of the Principal Act, under which the rates of tax declared by Part IVA of that Act apply for the 1979-80 financial year and all subsequent financial years, be amended so that the rates declared by that Part will apply for the 1979-80 financial year only.

One effect of these amendments when read in conjunction with existing section 6H of the Principal Act, is that the general rates of tax applicable to most individuals for 1979-80, will be those declared by sub-section 6H(1) of the Principal Act, and set out in Schedule 13 (which is proposed to be amended by clause 12 to reflect the proposed standard rate for 1979-80 of 33.07 per cent).

The rates specified in Schedule 13 as proposed to be amended by clause 12 are as follows:

The tax payable at the rates shown in Schedule 13 as amended may be calculated from the following table.

Another effect of the amendments proposed by clauses 4 and 5 is that the notional rates of tax declared by sub-section 6H(2) of the Principal Act, for the purpose of calculating any averaging benefit under section 156 of the Assessment Act, will also apply only for the financial year 1979-80. Notional rates are used to determine the averaging benefit of a primary producer whose taxable income exceeds his or her average income .

Basically, averaging benefit is the difference between tax payable on the taxable income at general rates and tax payable on that income at the notional rate, which in other words is the rate of tax applicable to the average income.

The calculation of the averaging benefit is necessary for purposes of determining the rebate that is allowable to the taxpayer under section 156 of the Assessment Act. The full amount of the benefit is allowed if all of the taxpayer's income is taken to be derived from primary production and a proportion of the benefit is available where a part only of the taxpayer's income is taken to be from primary production.

The notional rates for 1979-80 are those set out in Schedule 14, which it is proposed to amend by clauses 13 and 14. The amendment proposed by clause 13 will have the effect that Schedule 14 will apply for the 1979-80 financial year only. The adjustment to the standard rate for 1979-80 is reflected in Schedule 14 by the reference in that Schedule to the rates set out in Schedule 13 and by the substitution, by paragraph (b) of clause 14, of the 1979-80 standard rate of 33.07 per cent for the standard rate of 32 per cent wherever that rate is shown in the existing schedule. The other amendments which clause 14 proposes be made to Schedule 14 are drafting measures consequent upon the proposal that that Schedule now apply only for the 1979-80 financial year.

A further effect of the amendments proposed by clauses 4 and 5, when those amendments are read in conjunction with sub-sections 6H(3) and 6H(4) of the Principal Act, is that the amendment that is being made to the standard rate in Schedule 13 will be reflected in the tax payable by two other kinds of taxpayers. First are those taxpayers deriving a notional income as specified by section 59AB (depreciation recouped), section 86 (lease premium) or section 158D (abnormal income of authors or inventors) of the Assessment Act. In these cases the rate of tax payable is ascertained under Schedule 15 by dividing by the notional income, an amount equal to the tax that would be payable at the general rates specified in Schedule 13 on a taxable income equal to the notional income. Accordingly, the change in the standard rate provided for in Schedule 13 will be reflected in the tax payable by these taxpayers in accordance with Schedule 15. The heading to Schedule 15 is being amended by clause 15 to restrict the operation of that Schedule to the 1979-80 financial year.

The other kind of taxpayers concerned are trustees who, under existing law, are liable to pay tax in pursuance of section 98 or 99 of the Assessment Act. The change in standard rate for 1979-80 will here be reflected through the reference in Schedule 16 to the rates of tax payable under Schedules 13 or 15. The heading to Schedule 16 is being amended by clause 16 to restrict the operation of that schedule to the 1979-80 financial year.

Clause 6: Rates of tax and notional rates

Clause 6 of the Bill proposes to amend sub-section 6H(7) which declares the rate of tax payable for the 1979-80 financial year by a trustee liable to tax pursuant to section 99A of the Assessment Act. The rate of tax declared on such income will by this amendment be 61.07 per cent, which is equal to the maximum rate of tax payable by an individual - the standard rate and surcharge combined - for 1979-80.

Clause 7: Limitation on tax payable by certain trustees

Clause 7 will amend section 6J of the Principal Act. Section 6J will formally apply for the 1979-80 income year to a trustee of a trust estate who is liable to be assessed and to pay tax under existing provisions - section 98 or 99 - of the Assessment Act where the trustee is not entitled to the zero rate of tax on the first slice of trust income. In those circumstances, section 6J frees the trustee from tax if the net income on which the trustee is liable to pay tax is less than $1,041 (section 98 cases) or $417 (section 99 cases). Above the tax-free point tax is limited to 50 per cent of the excess of the net income over $1,040 or $416, respectively. Under the existing provisions for rates of tax, the "shading-in" rate of 50 per cent over $1,040 or $416 applies in the range of income $1,041 to $2,888 (section 98 cases) and $417 to $1,155 (section 99 cases). Consequent on the alteration in the standard rate of tax it is necessary, and clause 7 so proposes, that the shading-in ranges be extended from $2,888 to $3,071 (section 98 cases) and from $1,155 to $1,228 (section 99 cases).

Clause 8: Rates of tax for 1980-81 and subsequent financial years

This clause will insert a new Part, Part IVB, in the Principal Act, comprising new sections 6K, 6L and 6M which, in conjunction with Schedules 17 to 20 will formally declare the rates of tax, and the notional rates for the purposes of the primary producer averaging provisions of the Assessment Act, for the 1980-81 financial year and subsequent financial years.

Proposed section 6K states formally that the rates of tax and the notional rates declared by Part IVB are to apply for the 1980-81 financial year and all subsequent financial years.

Proposed section 6L declares the rates of tax payable by individuals and trustees (but not trustees of superannuation funds), and the notional rates for purposes of the primary producer averaging provisions, for the 1980-81 financial year and all subsequent financial years. The rates are set out in Schedules 17 to 20 which are to be inserted in the Principal Act by clause 17 of the Bill. The rates are to apply to resident and non-resident taxpayers.

The rates of tax formally declared in section 6L will, as is usual, be generally applicable once the Income Tax (Individuals) Act for 1980-81 imposes tax at those rates. The declared rates are, of course, also subject to any changes in those rates that may result from subsequent legislation.

The general rates of tax applicable to individuals generally for 1980-81 and subsequent years are those declared by proposed sub-section 6L(1) and set out in Schedule 17. These rates vary from those of the 1979-80 year in that the standard rate is 32 per cent instead of the 33.07 per cent that is to apply for 1979-80. The effective rates specified in Schedule 17 are as follows -

Sub-sections (2) to (7) of section 6L correspond with sub-sections (2) to (7) of existing section 6H (now to apply for 1979-80 only) and will vary from them so as to reflect the changed standard rate provided for by sub-section 6L(1). New section 6M, which similarly corresponds with existing section 6J, is in the same category.

Clause 9: Operation of sections 6C, 6F, 6J and 6M

This clause will effect a formal drafting amendment of section 7A of the Principal Act consequential on the insertion of new section 6M into the Act.

Clause 10: Indexation

This clause amends section 9 of the Principal Act which provides for indexation of the general rate scale set out in Schedule 13, and of certain amounts set out in Schedule 14. Related provisions dealing with personal income tax indexation are contained in clause 20 of the Income Tax Laws Amendment Bill 1979.

Paragraphs (a) and (b) of clause 10 will amend the definition of "relevant amount" in sub-section 9(1) of the Principal Act. This definition, at present, means any of the amounts that constitute the income steps in the general scale of rates set out in Schedule 13, and the amount of $3,893 specified in paragraph 3(a) and in paragraph 3(b) of Part II of Schedule 14. Schedules 13 and 14 are being amended by this Bill to apply for the financial year 1979-80 only, and accordingly, it will be necessary for future indexation adjustments to apply to the rates declared for 1980-81 and subsequent years.

In the amended definition of "relevant amount", the reference to Schedule 13 is, by paragraph (a) of clause 10, to be replaced by a reference to Schedule 17, which sets out the general rates that, subject to any indexation change, are to apply for 1980-81 and subsequent years. The reference to Schedule 14 is, by paragraph (b) of clause 10, to be replaced by a reference to Schedule 18, i.e., the schedule for 1980-81 and subsequent years corresponding with 1979-80 Schedule 14.

Paragraph (c) of clause 10 will amend the definition of "relevant year of income" in section 9 of the Principal Act. Consistent with the amendments proposed by paragraphs (a) and (b) above, "relevant year of income" will mean the 1980-81 year of income or a subsequent year of income, rather than 1979-80 or a subsequent year of income.

Paragraph (d) of clause 10 omits from the Principal Act existing sub-section 9(2) and substitutes new sub-sections 9(2), (2A) and (2B).

Existing sub-section 9(2) of the Principal Act basically provides for the relevant amounts (see notes on paragraphs (a) and (b) above) to be adjusted by the indexation factor each year in which the factor is greater than 1.

Sub-section 9(2) as restated, is to the effect that the relevant amounts will be adjusted by the indexation factor, if greater than 1, in years that are declared in an Act to be a prescribed year to which indexation applies. Following the declaration of a year as a prescribed year, the income steps in the rate scale as adjusted by the indexation factor will become the income steps in the general rate scale for the year concerned.

Once new sub-section 9(2) has operated to adjust the income steps and should indexation not apply to a later year, either because the indexation factor is less than 1 or the year is not declared to be a prescribed year, new sub-section 9(2A) of the Principal Act will have the effect that the income steps for the later year will be the same as those for the previous year.

New sub-section 9(2A) may also apply for part only of a year. For example, legislation prescribing a year as one to which indexation applies may be enacted after the year has commenced and in those circumstances any assessment issued before that legislation came into effect - for instance, where a person, early in the income year, left Australia permanently for overseas - would be made in accordance with the general rate scale as affected by sub-section 9(2A). Once a year is prescribed, however, the indexation adjustment that will be made by sub-section 9(2) will apply in relation to subsequent assessments made in respect of the whole of that year's income and not only in respect of that part of the income derived following the year being declared to be a prescribed year.

New sub-section 9(2B) covers the situation where the year before the current income year was not declared to be a prescribed year until after its commencement. In those circumstances, as explained in the notes on new sub-section 9(2A), up until such time as the year was declared to be a prescribed year the income ranges of the general rates scale for that year would have been determined in accordance with new sub-section 9(2A). Following the year being declared to be a prescribed year, new sub-section 9(2) would have operated to index the income ranges for that year. Where that situation occurs new sub-section 9(2B) makes it clear that the reference in new sub-section 9(2) or 9(2A) to the income ranges that applied in the previous year is to be taken as being a reference to the ranges as indexed to the previous year by sub-section 9(2).

Paragraph (e) of clause 10 omits sub-paragraphs (c)(i) and (c)(ii) of sub-section 9(5) of the Principal Act. Sub-section 9(5) requires that, in prescribing an indexation factor by regulation, regard is to be had to the extent to which certain specified matters may have affected the Consumer Price Index. Two of these matters - the imposition of the health insurance levy from 1 October 1976 and the increase in that quarter of the cost of health insurance, and the devaluation of the Australian dollar on 28 November 1976 and subsequent exchange rate changes made up to 31 December 1976 - which were specified in sub-paragraphs (c)(i) and (c)(ii), have ceased to further affect the Consumer Price Index and those sub-paragraphs accordingly are being omitted.

Paragraph (f) substitutes a new sub-section 9(6) for existing sub-section 9(6) of the Principal Act.

Under existing sub-section 9(6) where an indexation factor for a financial year has not been prescribed by regulation, the Treasurer is required, before the commencement of the year, to have the indexation factor for that year that was ascertained in accordance with sub-section 9(3) of the Principal Act published in the Gazette. Since, under other amendments to be effected by clause 10 as explained above, a year may be declared to be a prescribed year after the commencement of the year, it would not be appropriate to require that the indexation factor be gazetted before the commencement of the year. Accordingly, sub-section 9(6) is being amended to require the Treasurer to publish the factor for the year in the Gazette only where the income year has been declared in a provision of an Act to be a prescribed year, and a regulation has not been made prescribing the factor for that year before the provision concerned comes into operation.

Clause 11: Heading to Schedule 13

This clause amends the heading to Schedule 13 by omitting from that heading the words "AND SUBSEQUENT FINANCIAL YEARS". Amendments explained earlier will have the effect that Schedule 13 will now apply for the 1979-80 financial year only, and not also for years subsequent to that financial year, as is presently provided.

Clause 12: Schedule 13

This clause amends Schedule 13 to the Principal Act (which sets out the general rates of tax applicable to individuals generally in 1979-80) by substituting the proposed 1979-80 standard rate of 33.07 per cent for the standard rate presently provided. The effect of the proposed amendment has been explained earlier in the notes on clause 5.

Clause 13: Heading to Schedule 14

This clause amends the heading to Schedule 14 by omitting from the heading the words "AND SUBSEQUENT FINANCIAL YEARS" so that, like Schedule 13, it will apply only to the 1979-80 financial year.

Clause 14: Schedule 14

This clause will amend Schedule 14 to the Principal Act, which sets out the 1979-80 notional rates for purposes of the primary producer averaging provisions of the Income Tax Assessment Act. The effect of the proposed amendments has been explained earlier in the notes on clause 5.

Clause 15: Heading to Schedule 15

Clause 16: Heading to Schedule 16

These clauses will amend the headings to Schedules 15 and 16 by omitting from the headings the words "AND SUBSEQUENT FINANCIAL YEARS". Amendments explained earlier - see notes on clause 5 - will have the effect that Schedules 15 and 16 will now apply only for the 1979-80 financial year, and not also for the years subsequent to that financial year.

Clause 17: Schedules 17, 18, 19 and 20

This clause will insert new Schedules 17 to 20 in the Principal Act. These Schedules specify the rates of tax for the purposes of Section 6K for the 1980-81 financial year and all subsequent financial years. The effect of these Schedules has been explained earlier in the notes on clause 8.

INCOME TAX (INDIVIDUALS) BILL 1979

This Bill will formally impose the tax payable in respect of income derived by individuals, and by trustees generally, during the 1979-80 income year. It is complementary to the Income Tax (Rates) Act 1976 - as proposed to be amended by the Income Tax (Rates) Amendment Bill 1979 - which declares the rates of tax to apply to such taxpayers. As the Bill is similar to the Income Tax (Individuals) Act 1978, the following notes are confined to those clauses of the Bill which differ in practical effect from the provisions of that Act.

Clause 5: Imposition of income tax

Sub-clauses (1) and (2) have the effect, when read with clause 6, of formally imposing income tax payable by individuals and trustees for the 1979-80 financial year at the rates declared by the Income Tax (Rates) Act 1976 (as amended).

Sub-clause (3) excludes from the scope of the Act certain taxes payable under various sections of the Income Tax Assessment Act which are imposed by other Income Tax Acts. They are withholding tax payable in pursuance of section 128B on dividends and interest paid to non-residents, additional tax payable by non-resident companies under section 128T, with-holding tax payable under section 128V on mining payments to Aboriginal groups and tax payable in respect of film and video tape royalties paid abroad under section 136A.

Clause 6: Levy of tax

This clause operates to formally levy the tax imposed by clause 5 of the Bill in respect of the 1979-80 financial year and, until the Parliament otherwise provides, for the 1980-81 financial year.

INCOME TAX (COMPANIES AND SUPERANNUATION FUNDS) BILL 1979

The main purpose of this Bill is to impose income tax for the 1979-80 financial year, at the rates declared in the Bill, on the 1978-79 incomes of companies and the 1979- 80 incomes of superannuation funds.

Other rates of income tax payable for the 1979-80 financial year - by individuals and by trustees generally - are to be declared by the Income Tax (Rates) Act 1976, as proposed to be amended by the Income Tax (Rates) Amendment Bill 1979, and are to be imposed by the Income Tax (Individuals) Bill 1979. The '!branch profits" tax that is payable by non-resident companies is imposed by the Income Tax (Non-Resident Companies) Act 1978.

Apart from one rate change for superannuation funds to which section 121DA of the Assessment Act applies - referred to below - the practical effect of the present Bill will be the same as the Income Tax (Companies and Superannuation Funds) Act 1978 which declared and imposed the rates of income tax payable by companies and superannuation funds for the 1978-79 financial year.

The rates of income tax declared by this Bill for the 1979-80 financial year are as follows:

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by clause 6, the general rate of tax on taxable income of companies is to remain at 46 per cent;

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by clause 6, the rate of tax payable by a friendly society dispensary on its taxable income is to remain at 41 per cent;

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by clause 6, the rate of additional tax payable by a private company on the amount by which dividends paid fall short of a sufficient distribution remains at 50 per cent;

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by clause 7, the rate of tax payable on investment income of a superannuation fund that does not, under the "30/20" rule, invest a sufficient proportion of its assets in public securities remains at 46 per cent;

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by clause 7, the rate of tax on certain taxable income of superannuation funds to which section 121CA or 121CB of the Assessment Act applies is to remain at 50 per cent;

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by clause 7, the rate of tax on income of trusts qualifying as superannuation funds to which section 121DA of the Assessment Act applies is to be 61.07 per cent instead of the rate of 61.5 per cent applicable to 1978-79 income.

By sub-clause (3) of clause 9, the rate of tax applicable under section 121DA for the 1980-81 financial year is to be 60 per cent.

Clause 11 of the Bill relates to instalments of company tax. Clause 11 will authorise the collection of instalments in the 1980-81 financial year in accordance with relevant provisions of the Assessment Act. The first of 3 instalments is to be due not earlier than 15 August 1980.