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House of Representatives

Resolution to Declare the Rates of Income Tax for the Financial Year 1946-1947

Resolution to Declare the Rates of Income Tax for the Financial Year 1946-1947

Resolution to Amend the Rates of Social Services Contribution Imposed By The Social Services Contribution Act 1945

Resolution to Amend the Rates of Social Services Contribution Imposed By The Social Services Contribution Act 1945

The Social Services Contribution Assessment Bill 1946

Social Services Contribution Act 1946

Explanatory Memorandum

MEMORANDUM SETTING OUT THE PROPOSED RATES OF INCOME TAX FOR THE FINANCIAL YEAR 1946-1947, THE AMENDMENTS PROPOSED TO BE MADE TO THE SOCIAL SERVICES CONTRIBUTION ACT 1945 AND THE SOCIAL SERVICES CONTRIBUTION ASSESSMENT ACT 1945. TOGETHER WITH NOTES EXPLANATORY OF THE PARAGRAPHS OF THE RESOLUTIONS AND THE CLAUSES OF THE BILL

(Circulated by the Treasurer, the Rt. Hon. J. B. Chifley.)

INCOME TAX RESOLUTION 1946.

INTRODUCTORY NOTE:-

The purpose of this Resolution is to declare the rates of income tax payable for the financial year 1946-1947. It will also effect a reduction in the income tax rates payable by individuals.

In the case of companies, the rates will be applied in assessments based on income derived during the year of income ended the 30th June, 1946. In the case of other persons, however, they will be applied in assessments based on income derived during the year of income ending on the 30th June, 1947.

The Resolution to amend the rates of social services contribution, although intended primarily to simplify the method of calculation of the contribution, will also have the effect of reducing the rate of contribution payable on the lowest incomes.

Compared with peak war-time rates of income tax, the new rates of tax and contribution represent an overall reduction of approximately 22 per cent. The reduction will be more than 47 per cent. on the lowest incomes, and will taper off to something under 20 per cent. on incomes of Pd1,500 and over. Compared with existing rates, the new rates of tax and contribution will represent an overall reduction of about 11 per cent.

The new income tax rates will have the effect of raising the limits of income which may be derived by persons with dependants without incurring any liability to income tax. These persons, however, will be liable for social services contribution. By way of comparison with the limits under the income tax scale adopted last year, the position will be as follows:-

  Personal Exertion Income   Present Proposed   Pd Pd
Person with dependent wife 266 280
Person with dependent wife and one child 318 345
Person with dependent wife and two children 347 378
Person with dependent wife and three children 380 412
Person with dependent wife and four children 413 447

Except for a few minor alterations, the provisions of the Income Tax Resolution, other than Divisions A and B of paragraph 1, correspond to those contained in the Income Tax Rating measure which is introduced annually to Parliament.

Notes explanatory of the provisions of the Income Tax Resolution are set out hereunder:-

PARAGRAPH 1.-RATES OF INCOME TAX.

Division A.-Rate of tax in Respect of a Taxable Income Derived from Personal Exertion.

This Division prescribes the rate of tax payable in respect of a taxable income derived from personal exertion by a person other than a company.

As income tax will not be levied on taxable incomes of Pd200 and less, no rate of income tax is specified for such amounts. Where the taxable income does not exceed Pd300 the rate of tax is prescribed only for the amount in excess of Pd200. The rate on the excess commences at 3s. in the Pd1 and increases gradually to 3s. 6d. in the Pd1 at Pd300. Spread over the whole of the taxable income, the tax payable represents an average rate of a fraction of a penny in the Pd1 on an income of Pd201 and 14d. in the Pd1 on an income of Pd300. The rate then increases progressively until a maximum of 123.32 pence is reached at Pd5,000. Where the taxable income exceeds Pd5,000 the rate will be 123.32 pence in the Pd1 on the first Pd5,000 and 14s. 6d. on every Pd1 in excess of Pd5,000.

Income taxpayers will also be liable to social services contribution. The maximum rate of contribution is 1s. 6d. in the Pd1.

Division B.-Rate of Tax in Respect of a Taxable Income Derived from Property

This Division prescribes the rate of tax to be applied to a taxable income derived from property by a person other than a company.

The rate of tax applicable to a taxable income of Pd201 from property is slightly in excess of the rate applicable to a taxable income of Pd201 from personal exertion. Taking into account the combined rates of income tax and social services contribution, the excess of the rates on property income over the rates on personal exertion income rises to approximately 25 per cent. on incomes of Pd1,000. The difference in the rates then gradually diminishes until the rate of tax on that part of the taxable income in excess of Pd5,000 is the same for both property income and personal exertion income, i.e., 1s. 6d. in the Pd1. In addition, 1s. 6d. in the Pd1 social services contribution is payable.

Division C.-Rates of Tax in Respect of a Taxable Income Derived Partly from Personal Exertion and Partly from Property.

This Division prescribes the rates to be applied in those cases where taxpayers derive taxable income from personal exertion and from property.

In these cases of composite income from personal exertion and from property, the rate of tax on the separate amounts of each class of taxable income is ascertained as if the total income were derived wholly from personal exertion and wholly from property, respectively. The effect of the application of Division C is that the taxpayer pays tax on his taxable income from personal exertion and property at the rate attributable to his total taxable income. For example, if the total composite income were Pd5,000 made up of Pd3,000 personal exertion income and Pd2,000 property income, the rate to be applied to both the Pd3,000 and the Pd2,000 is the rate applicable to Pd5,000.

Division D.-Rates of Tax by Reference to an Average Income.

This Division is operative where the averaging provisions of Division 16 of Part III. of the Income Tax Assessment Act are applied in the assessments of taxpayers. The application of the averaging provisions is limited to the assessments of primary producers. The rate of tax on the primary producer's taxable income is ascertained by averaging his taxable income over the year of income and the preceding four years. The rate that is attributable to the amount of the taxpayer's average income over the five-year period is the rate of tax prescribed by Division D. This rate is to be applied to the taxpayer's taxable income of the year of income.

Division E.-Rates of Tax by Reference to a Notional Income.

By this Division, a special basis is provided for the calculation of the tax payable by a taxpayer who receives a premium upon the grant or assignment of a lease. These lease premiums have the income character of commuted rent and, accordingly, the premiums are included in assessable income under the provisions of Division 4 of Part III. of the Income Tax Assessment Act. As the net premium, i.e., the total premium less expenses, is included in the taxable income of the year in which the premium is received, the graduated rate of tax would cause a taxpayer to pay a greater amount of tax than he would be required to pay if he received the amount of the lease premium in the form of rent spread over the years of the lease term.

Sub-section (1.) of section 86 of the Income Tax Assessment Act provides that, in these cases, the net premium shall be divided by one-half of the number of years of the lease term in order to ascertain what is described as a notional income for rating purposes. Any taxable income which may be derived by the taxpayer in addition to the lease premium is aggregated with the lease notional income to determine the rate of tax payable on the total taxable income. The application of a rate in accordance with this formula is authorized by Division E.

Division F. - Rates of Tax Payable by a Trustee.

This Division, which prescribes the basis upon which a trustee shall pay income tax, will operate only in isolated cases. Ordinarily, a beneficiary will be required to pay income tax on his share of the trust income. In those cases, however, where there is no person presently entitled to the trust income, or part thereof, the trustee will be required to pay income tax as if the share of the income to which no person is presently entitled were the income of one individual. Liability to pay income tax will also rest on the trustee in respect of a beneficiary's share where the beneficiary is under some legal disability.

Division G. - Rates of Tax Payable by a Company other than a Company in the Capacity of Trustee.

This Division prescribes the rates of tax to be payable by companies for the financial year 1946-1947. The proposed rates are the same as those payable for the last financial year.

Paragraph (a) provides that the rate of normal tax for companies other than life assurance companies shall be 6s. in the Pd1.

For mutual life assurance companies the rate, however, is only 5s. in the Pd1. A mutual life assurance company is a life assurance company, the profits of which are divisible only among its policy holders. It might be mentioned that in the assessment of a mutual life assurance company, premiums on life assurance policies and expenditure related thereto are excluded. The company, generally speaking, is taxed only on its new income from investments. It is this income which is taxed at the rate of 5s. in the Pd1. A non-mutual life assurance company is also exempt from income tax in respect of premiums on life assurance policies. The taxable income of such a company is divided into (a) mutual income and (b) other income. The mutual income represents the same proportion of the taxable income derived by the company from its life assurance business, eg., investment income, as the profits divided among life assurance policy holders bear to the total life assurance profits divided among shareholders and policy holders. The mutual income derived by such companies is taxed at the concessional rate of 5s. in the Pd1. The balance of taxable income, however, bears tax at the ordinary company rate of 6s. in the Pd1.

Paragraph (b) specifies the rate of further tax payable on the undistributed income of public companies. The amount of undistributed income is arrived at by deducting from taxable income, the dividends paid out of that taxable income, certain ex-Australian losses incurred during the year of income, and Commonwealth income taxes paid during, or payable in respect of the income of the year of income. The rate of further tax specified is 2s. for each Pd1 of undistributed income. The mutual income of a life assurance company is not subject to the further tax.

Division H. - Tax Payable where Amount would otherwise include Odd Pence.

The purpose of this Division is to authorize the elimination of pence in determining the amount of tax. Amounts of sixpence and less are disregarded and pence in excess of sixpence are regarded as one shilling.

PARAGRAPH 2. - SUPER TAX ON COMPANIES.

As already stated, this paragraph imposes a super tax of 1s. in the Pd1 on certain companies. The tax is imposed only on amount of taxable income in excess of Pd5,000.

The imposition of super tax is complementary to the imposition of war-time (company) tax. It is payable only by companies which come within the provisions of the War-time (Company) Tax Assessment Act 1940-1946. It accordingly does not apply to private companies, mutual life assurance companies, co-operative companies, small public companies, and certain commission, etc., companies in which little or no capital is required.

Where a company is assessed to war-time (company) tax, the amount of war-time (company) tax otherwise payable is reduced by the amount of super tax charged in the company's income tax assessment. The result, therefore, is that in addition to ordinary company tax the company, in effect, pays super tax or war-time (company) tax, whichever is the higher amount.

Super tax is not levied on the mutual income of a non-mutual life assurance company.

PARAGRAPH 3. - LEVY OF INCOME TAX.

This paragraph provides that income tax rates proposed in the Resolution shall be levied and paid for the financial year 1946-1947. They will apply to the assessments of both companies and individuals. as already indicated, these assessments, in the case of companies, will be based on taxable income derived during the year ended 30th June, 1946, or the accounting period adopted in lieu thereof. In the case of individuals, however, under the pay-as-you-earn system of taxation, they will be based on taxable income derived during the year ending 30th June, 1947, or the accounting period adopted in lieu thereof.

PARAGRAPH 4. - APPLICATION OF RATES OF TAX IN SUBSEQUENT ASSESSMENTS.

This paragraph will provide authority for the application of rates of tax in assessments for the next financial year commencing 1st July, 1947, until the rates imposed for that financial year are enacted. A provision of this nature is necessary in order that assessments may be made in special cases, e.g., a taxpayer leaving Australia before the rates applicable for the next financial year are enacted. The rates that will be applied in these assessments will be the rates shown in the scales set out in Divisions A. and B. of paragraph 1 of this Resolution.

PARAGRAPH 5. - PROVISIONAL TAX.

Under section 221YB (3.) of the Income Tax Assessment Act, provisional tax is not payable unless its imposition is specifically authorized by a provision in the Act imposing the rates of tax on income of the particular financial year.

Paragraph 5 of the Resolution corresponds to the provision included in the Annual Income Tax Rating Measure authorising the imposition of provisional tax in respect of income of the relevant year of income. It will accordingly authorize the imposition of provisional tax in respect of income derived during the year of income ending on the 30th June, 1947.

The amounts of provisional tax payable in the financial year 1946-1947 will be determined on the basis of the taxable income derived during the year ended 30th June, 1946. The rates that will be applied to the taxable income of that year for provisional tax purposes, will take into account the reductions already explained. The Social Services Contribution Resolution proposes that provisional contribution be separately determined.

SOCIAL SERVICES CONTRIBUTION RESOLUTION 1946.

INTRODUCTORY NOTE :-

The Social Services Contribution Act 1945 imposed social services contribution at graduated rates. The maximum rate prescribed is 18d. in the Pd1. The Schedule of rates, in effect, provides that in cases where the maximum rate of 18d. did not apply, the amount of contribution payable for a complete assessment year shall equal the amount if income tax which the contributor would be liable to pay (after deducting all rebates for dependants, life assurance, medical expenses,etc.) if income tax were imposed on his taxable income at peak war-time rates of income tax reduced by 12 1/2 per cent.

For the financial year 1945-1946, however, only half rates applied as it was intended that social services contribution should be imposed as from 1st January, 1946.

If the rate of contribution is the maximum of 18d. in the Pd1, concessional rebates for dependants, life assurance premiums, medical expenses,etc., are not allowed in the social services contribution assessment. The full benefit of these concessions is allowed, however, in ascertaining the amount of income tax (if any) payable by the contributor. For income tax purposes, concessional rebates in respect of dependants,etc., were previously ascertained at the personal exertion rate appropriate to the total taxable income of the taxpayer. This rate for rebate purposes has, however, been increased by 18d.

The practical effect of the addition of 18d. to the rate for rebate purposes is that, where a person is liable to pay both income tax and social services contribution, the rebate is allowed at the combined rates of the two separate levies and the rebate so calculated is allowed in the income tax assessment.

It has been found that the practical application of the formula prescribed for the ascertainment of the rate of social services contribution has given rise to administrative difficulties which it is desirable to overcome. A new scale of rates has accordingly been devised. This scale, while simplifying the work of the Taxation Department, will also have the effect of reducing the amount of contribution payable by the contributors in the low fields of income. The maximum rate of 18d. is, however, retained. Previously, in the case of a taxpayer not entitled to any concessional allowances for income tax purposes, the maximum rate was reached at an income of Pd170. Under the new scale, the maximum does not apply until an income of Pd220 is reached.

The Resolution proposes that social services contribution be levied at a separate graduated basic rate commencing at 3d. in the Pd1 and increasing by one-eighth of one penny for every Pd1 of income in excess of Pd100, till the maximum of 18d. is reached.

Provision is made for the variation of the basic rate in order to preserve the concessions at present allowed to contributors for dependants, life assurance, superannuation, medical expenses,etc. The basic rate will also be varied in the case of primary producers coming within the averaging provisions of the Income Tax Assessment Act.

The amounts of income which may be earned by the various classes of persons without incurring liability for either social services contribution or income tax, will be the same as at present, viz.:-

  Pd
Person without dependants 104
Person with dependent wife 156
Person with dependent wife and one child 175
Person with dependent wife and two children 211
Person with dependent wife and three children 257
Person with dependent wife and four children 277

It is also proposed that the amended provisions shall apply in assessments based on income derived during the year ended 30th June, 1946. In such assessments, social services contribution will be calculated at half the new rates.

PARAGRAPH 1. - SCHEDULE OF RATES OF CONTRIBUTION.

This paragraph incorporates the Schedule of rates of social services contribution that will be payable in respect of the contributable income of a contributor other than a trustee.

Paragraph (1) of the Schedule sets out the basic rate of contribution. This rate will be payable by a contributor who is not entitled, for income tax purposes, to any concessions in respect of dependants, life assurance, medical expenses,etc., or who is not a primary producer whose income would be subject to the averaging provisions of the Income Tax Assessment Act. The basic rate commences at threepence and increases by one-eighth of one penny for each Pd1 of income in excess of Pd100 until a maximum of 18d. is reached at a contributable income of Pd220.

Paragraph (2) of the Schedule sets out the concessional rate of contribution. This will be payable by a contributor who would be entitled to rebates of tax in respect of dependants,etc., if he were being assessed for income tax purposes. If, however, the contributor is a primary producer to whose income the averaging provisions of the Income Tax Assessment Act would apply, the rate payable will be the concessional average rate set out in paragraph (4) of the Schedule. In the graduation of the concessional rate to 18d. in the Pd1, the basic rate is varied according to the amount by which the contributable income exceeds the sum of the concessional or rebatable amounts as calculated for income tax purposes. The effect of the formula prescribed in paragraph (2) of the Schedule is that, in appropriate cases, the basic rate is reduced to an amount which bears the same proportion to the basic rate as the excess bears to the contributable income or Pd180, whichever is the less. If the excess is Pd180, or more, the concessional rate will be the same as the basic rate. In such cases, allowance for dependants and other income tax concessional items will be made in the contributor's income tax assessment.

It is emphasised that in no case will the concessional rate exceed 18d. in the Pd1. The maximum rate of 18d. is reached at the following amounts of contributable income:-

  Pd
For person with dependent wife 287
For person with dependent wife and one child 355
For person with dependent wife and two children 385
For person with dependent wife and three children 415
For person with dependent wife and four children 445

The following example illustrates the method of ascertainment of the concessional rate:-

  Pd
Contributable income 300
Rebatable amounts for income tax purposes-
Pd
Wife 100
Child under sixteen 75
Medical expenses 25
                    Total 200

(Basic rate on Pd300) = 18d.

(Concessional rate) = 18d. x (Pd300 - Pd200)/Pd180 = 10d.

(Contribution on Pd300) at 10d. = (Pd12 10s.)

Paragraph (3) of the Schedule sets out the average rate of contribution. This will be payable by a primary producer who would be subject to the averaging provisions of the Income Tax Assessment Act but who would not be entitled to any concessional allowances for dependants,etc., for income tax purposes. The average rate of contribution will be the rate that would be the basic rate, if the contributable income were equal to the average income as that would be ascertained for income tax purposes. The average rate cannot exceed the maximum basic rate, viz., 18d. in the Pd1. Where the contributor is a person subject to the averaging provisions for income tax purposes and also entitled to concessional rebates for dependants,etc., the concessional average rate set out in paragraph (4) of the Schedule will apply.

Paragraph (4) of the Schedule sets out the concessional average rate of contribution. This will be payable by a primary producer who comes within the averaging provisions of the Income Tax Assessment Act and who would also be entitled to rebates of income tax in respect of dependants,etc.

The concessional average rate will be calculated on a similar basis to the concessional rate (see the above explanation of the application of paragraph (2) of the proposed Schedule). In the calculation of the concessional average rate, however, the average rate is to be used in place of the basic rate and the average income in place of the contributable income. In addition, the rebatable amount is to be adjusted to an amount which bears the same proportion to the average income, as the rebatable amount bears to the contributable income. If, therefore, the rebatable amount were one-half of the contributable income, it would be adjusted to an amount equal to one-half of the average income.

These special provisions are necessary to avoid an increase in the amount of social services contribution payable in cases where the average income is less than the contributable income. The concessional average rate cannot exceed either the average rate or 18d. in the Pd1.

The following examples illustrate the method of ascertainment of the concessional average rate:-

EXAMPLE A - Pd
Contributable income 300
Average income 150
Rebatable amounts for income tax purposes - Pd
Wife 100
Child under sixteen 75
Medical expenses 25
200

(Average rate) = (Basic rate on Pd150) = 9.25d.

(Adjusted rebatable amount) = Pd200 x (150)/(300) = Pd100.

(Concessional average rate) = 9.25d. x (150-100)/(150) = 3.08d.

Contribution = Pd300 at 3.08d. = (Pd3 17s.)

EXAMPLE B - Pd
Contributable income 150
Average income 200
Rebatable amount for income tax purposes 40

(Average rate) = (Basic rate on Pd200) = 15.5d.

(Adjusted rebatable amount) = Pd40 x (200)/(150) = Pd53.

(Concessional average rate) = 15.5d x (200 - 53)/(180) = 12.66d.

Contribution = Pd150 at 12.66d. = (Pd7 18s.)

PARAGRAPH 2. - RATE OF CONTRIBUTION PAYABLE.

The purpose of this paragraph is to authorize the substitution of the proposed rates of contribution for those at present specified in the Social Services Contribution Act 1945.

Sub-paragraph (a) of Paragraph 2 of the Resolution proposes that the basic rate of contribution shall be imposed in cases other than those to which sub-paragraphs (b), (c) and (d) apply. Those sub-paragraphs apply to persons entitled to concessional allowances for income tax purposes and to primary producers subject to the averaging provisions for income tax purposes and to primary producers subject to the averaging provisions of the Income Tax Assessment Act. The method of ascertainment of the basic rate is explained in the Note to Paragraph 1. of the Resolution.

Sub-paragraph (b) provides that where a person, other than a primary producer who is subject to the averaging provisions of the Income Tax Assessment Act, would be entitled to concessional rebates for income tax purposes, the rate of contribution payable shall be the concessional rate. The method of ascertainment of the concessional rate is explained in the Note to Paragraph 1. of the Resolution.

Sub-paragraph (c) provides that in the case of a primary producer who would be subject to the averaging provisions of the Income Tax Assessment Act but who would not be entitled to concessional rebates for income tax purposes, the rate of contribution payable shall be the average rate calculated in the manner set out in the Note to Paragraph 1. of the Resolution.

sub-paragraph (d) provides that the rate of contribution payable by a primary producer who would be subject to the income tax averaging provisions and who would also be entitled to concessional rebates for income tax purposes, shall be the concessional average rate. The method of ascertainment of this rate is explained in the Note to Paragraph 1. of the Resolution.

Sub-paragraph (e) provides that a trustee shall pay social service contribution at the rates prescribed in the Second Schedule to the Social Services Contribution Act. This provision, however, will operate only in isolated cases. Ordinarily, a beneficiary will be required to pay the contribution on his share of the trust income. In those cases, however, where there is no person presently entitled to the trust income, or part thereof, the trustee will be required to pay the contribution as if the share of the income to which no person is presently entitled were the income of one individual. Liability to pay the social services contribution will also rest on the trustee in respect of a beneficiary's share where the beneficiary is under some legal disability.

Sub-paragraph (f) of this paragraph repeats substantially the provisions of section 5 (3.) of the Social Services Contribution Act 1945. It applies-

(a)
where the contributor would be entitled to an income tax rebate in respect of a dependant and his income exceeds Pd156; and
(b)
where the contributor has no dependant and his income exceeds Pd104.

This provision ensures that the contribution payable shall not be greater than one-half of the excess of the contributable income over Pd156 in Class (a) nor more than one-half of the excess of the contributable income over Pd104 in Class (b).

PARAGRAPH 3.-DEFINITIONS.

This paragraph contains a number of definitions which it is proposed to insert in the Social Services Contribution Act. Such definitions are designed to facilitate the drafting of the necessary amending legislation. As most of the definitions have been referred to and explained in the Notes to previous paragraphs of this Resolution, further explanations are unnecessary. The definitions of "contribution" and "rate of contribution" are self-explanatory.

PARAGRAPH 4.-APPLICATION OF PROPOSED RATES TO 1945-1946 ASSESSMENTS.

The purpose of this paragraph is to authorize the retrospective application of the new rates of contribution. It is proposed that the amending provisions shall have the same force and effect as if they had been included in the original Social Services Contribution Act. The effect will be that the rates of contribution to be applied in assessments based on income derived during the year ended 30th June, 1946, will be one-half of the proposed rates.

SOCIAL SERVICES CONTRIBUTION ASSESSMENT BILL 1946.

The introduction of a separate graduated scale of rates of social services contribution will necessitate the making of an amendment of a complementary nature to the Social Services Contribution Assessment Act 1945. This amendment is included in the Social Services Contribution Assessment Bill 1946.

The following is a statement explaining the provision of the Social Services Contribution Assessment bill 1946:-

The words printed in black type are words proposed to be inserted in the Principal Act.

CLAUSE 1.-SHORT TITLE AND CITATION.

CLAUSE 2.-COMMENCEMENT.

As explained in the Note to paragraph 4 of the Social Services Contribution Resolution, it is proposed that the amending legislation shall be made retrospective to the 11th October, 1945, i.e., the date on which the original social services contribution enactments came into operation. The amendment to the Social Services Contribution Assessment Act 1945 proposed by this Bill will accordingly have similar retrospective application. The effect will be that the further rebate of contribution proposed by Clause 3 of this Bill will apply in social services contribution assessments based on income derived during the year of income ended 30th June, 1946, and subsequent years.

CLAUSE 3.-FURTHER REBATE IN CERTAIN CASES.

The Uniform Income Tax legislation, which was implemented in 1942, made special provision, by section 160AB of the Income Tax Assessment Act, for the allowance of a rebate of tax at the rate of 2s. for each pound of interest on certain issues of Government and semi-government securities included in the taxable income of the taxpayer. The purpose of the rebate was to preserve the freedom from State Income Tax previously enjoyed by the holders of such securities.

Under the existing law imposing a social services contribution, this rebate is either allowed in the taxpayer's income tax assessment or it is taken into account in ascertaining the rate of social services contribution payable by him. The rate of contribution in the latter case is ascertained by reference to the amount of income tax the contributor would be liable to pay, after the allowance of all rebates, if tax were imposed at peak war-time rates reduced by 12 1/2 per cent. In this calculation, the section 160AB rebate is deducted from the income tax that would otherwise be payable. Now that the rate of contribution is to be calculated without reference to the amount of income tax that would be payable, it is necessary to make special provision in the Social Services Contribution Assessment Act so as to preserve to persons in the lower income groups the benefit of the special rebate of 2s. in the Pd1 on interest on such securities. The effect of the proposed amendment will be that where a person does not obtain the full benefit of the rebate in his income tax assessment, the whole, or relevant part of the rebate will, as the case requires, be allowable from the social services contribution otherwise payable by him.


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