Explanatory Memorandum
(Circulated by the Treasurer, the Hon. B.M. Snedden, Q.C., M.P.)Introductory Note
The main purpose of this Bill is to amend the Income Tax Act 1971 so as to reduce the additional tax levy payable by individuals for the 1971-72 financial year from 5 per cent to 4.375 per cent of the income tax otherwise payable. The Bill also proposes an amendment to the provisions in the Income Tax Act 1971 under which the rates of tax imposed for 1971-72 also apply in "part year" 1972-73 financial year assessments made before the commencement of the Act imposing tax for 1972-73. The following notes relate to each clause of the Bill.
Notes on Clauses
Clause 1: Short title and citation.
This clause formally provides for the short title and citation of the Amending Act and of the Income Tax Act 1971 as amended.
Clause 2: Commencement.
Section 5(1A.) of the Acts Interpretation Act 1901-1966 provides that every Act shall come into operation on the twenty-eighth day after the day on which the Act receives the Royal Assent, unless the contrary intention appears in the Act.
By this clause it is proposed that the Amending Act shall come into operation on the day on which it receives the Royal Assent. This will facilitate early adjustment of provisional tax for 1971-72 to take account of the new rate of additional tax.
Clause 3: Additional tax payable by certain persons other than companies
By this clause it is proposed to amend section 8 of the Income Tax Act 1971. That section imposes additional tax for the 1971-72 financial year at the rate of 5 per cent of the income tax otherwise payable by individuals and by trustees who are taxed at individual rates of tax. The additional tax applies where tax is calculated under the averaging provisions applicable to primary producers as well as to tax calculated under the scale applicable to taxpayers generally. It is not imposed where a reduced amount of tax is payable under the age allowance provisions of section 9 of the Income Tax Act 1971. In accordance with this clause, the rate of additional tax will be reduced to 4.375 per cent. The proposed rate reflects a notional reduction for one-quarter of the year of a proposed continuing reduction in the rate of additional tax from 5 per cent to 2.5 per cent.
Clause 4: Levy of tax.
Clause 4 proposes an amendment to section 12 of the Income Tax Act 1971. That section provides, broadly, that the rates of tax imposed for the 1971-72 financial year also apply in the small number of "part year" assessments which will be made before the date of commencement of the Act imposing tax for the 1972-73 financial year, e.g., where people leave Australia and are assessed on income derived in 1972-73 prior to their departure.
But for the amendment proposed by this clause, additional tax at the 1971-72 rate of 4.375 per cent would be imposed in these cases, instead of the 2.5 per cent rate which is to apply until any further decision to change it is made. The rates of tax to be applied generally in assessments for the 1972-73 financial year will, of course, be set out in the usual Bill to be introduced following the presentation of the 1972-73 Budget.