Explanatory Memorandum
(Circulated by the Treasurer, the Hon. B.M. Snedden, Q.C., M.P.)Introductory Note.
The purpose of this memorandum is to explain the provisions of four Bills amending taxation laws administered by the Commissioner of Taxation.
The main purpose of each of these Bills is to repeal provisions which will become redundant upon the Vienna Convention on Consular Relations being given the force of law in Australia by the proposed Consular Privileges and Immunities Bill 1972. The provisions which are to be repealed correspond in practical effect with the terms of the Consular Convention. They were inserted in the taxation Acts to achieve this correspondence and in order to preserve appropriate relationships between consular and diplomatic exemptions (the latter being derived from the Diplomatic Privileges and Immunities Act 1967 which gives the force of law in Australia to the Vienna Convention on Diplomatic Relations). For example, section 23AAA of the Income Tax Assessment Act, which it is proposed to repeal, was inserted in 1967 to authorise income tax exemptions for consular personnel that correspond with those required by the Consular Convention.
So far as income tax, sales tax, Territory pay-roll tax and A.C.T. stamp duty are concerned, the giving of the force of law to the Vienna Convention by the Consular Privileges and Immunities Bill 1972 will, in broad terms, have the following effects in relation to consular posts in Australia:
Income Tax.
The various categories of consular personnel will continue to be entitled to the following exemptions -
| Category of person | Exemption |
|---|---|
| . Consular officers, including heads of consular posts, other than honorary consular officers. | Exempt from Australian tax, except on private income having its source in Australia. No exemption if the person is an Australian citizen or permanently resident here. (Articles 49 and 71 of the Convention.) |
| . Families of consular officers (other than honorary consular officers) forming part of their household. | Exempt from Australian tax, except on private income having its source in Australia. No exemption if the person is an Australian citizen or permanently resident here, or is engaged in any private gainful occupation in Australia. Exemption is also unavailable if the family head is an Australian citizen or permanently resident here. (Articles 49, 57 and 71.) |
| . Honorary consular officers. | Exempt from Australian tax on remuneration and emoluments received in respect of the exercise of consular functions. No exemption if an Australian citizen or permanently resident here. (Articles 66 and 71.) |
| . Families of honorary consuls. | No exemption. (Article 58(3.).) |
| . Administrative and technical staff. | Exempt from Australian tax, except on private income having its source in Australia. No exemption if the person is carrying on any private gainful occupation in Australia or is an Australian citizen or permanently resident here. (Articles 49, 57 and 71.) |
| . Families of administrative and technical staff forming part of their household. | Same as for families of consular officers. No exemption if the family head is engaged in any private gainful occupation in Australia. No exemption to families of staff serving at a post headed by an honorary consular officers. (Articles 49, 57, 58(3.) and 71.) |
| . Domestic servants of a consular post. | Exempt from Australian tax on remuneration received for services rendered. No exemption if the person is carrying on any private gainful occupation in Australia or is an Australian citizen or permanently resident here. (Articles 49, 57 and 71.) |
| . Private servants. | No exemption. |
The exemptions will operate for the purposes of assessments based on income derived during the 1972-73 income year and subsequent years of income (clause 5(4.) of the Consular Privileges and Immunities Bill). Because, however, existing exemptions from income tax are, for all practical purposes, the same as those required by the Consular Convention, it is not anticipated that the income tax position of any person already employed in the consular field will be altered by the changeover to the new legislation.
Pay-roll Tax.
Salaries and wages paid to his staff by a consular officer who is not an Australian citizen or permanently resident here will continue to be exempt from pay-roll tax (Article 49). Pay-roll tax is levied by the Commonwealth only in the Australian Capital Territory and the Northern Territory.
Sales Tax.
Consular posts, consular officers together with members of their families and members of the staff of consular posts will continue to be entitled to the following exemptions from sales tax -
- (a)
- a consular post headed by a person who is not an honorary consul - exemption of goods imported for its official use (Article 50); a consular post headed by a person who is not an Australian citizen, not ordinarily resident here and not otherwise engaged in a profession, business or occupation - exemption of excisable goods purchased in Australia and cleared from bond for its official use (clause 8 of the Consular Privileges and Immunities Bill 1972);
- (b)
- a consular officer and, generally, member of his family forming part of his household - exemption of goods imported for personal use (Article 50), and excisable goods purchased in Australia for this purpose and cleared from bond (clause 8 of the Consular Privileges and Immunities Bill 1972);
- (c)
- a member of the administrative and technical staff of a consular post - exemption of goods for his personal use imported at the time of first entry to take up duty (Article 50);
- (d)
- a consular post headed by an honorary consular officer - exemption of certain classes of goods imported for its official use (Article 62), and of some excisable goods purchased in Australia and cleared from bond for its official use (clause 8(2.) of the Consular Privileges and Immunities Bill 1972).
The exemptions specified in (b) and (c) are not available to persons who are Australian citizens or permanently resident here or are otherwise engaged in a profession, business or occupation.
Quantitative restrictions may be imposed by Ministerial direction in any particular case where it is considered that exemption is claimed for goods in excess of the claimant's requirements.
Australian Capital Territory Stamp Duty.
A.C.T. stamp duty will, as now, not be payable on a conveyance of land or premises to be used as consular premises or, where the consular post is not headed by an honorary consul, as the residence of the head of the post (Articles 32 and 60).
The clauses of each of the four taxation Bills are explained below.
NOTES ON CLAUSES
INCOME TAX ASSESSMENT BILL (NO. 4) 1972
Clause 1: Short title and citation.
This clause formally declares the short title and citation of the amending Act, and of the Principal Act as amended.
Section 5(1A.) of the Acts Interpretation Act 1901-1966 provides that every Act shall come into operation on the twenty-eighth day after the day on which the Act receives the Royal Assent, unless the contrary intention appears in the Act.
Clause 2 proposes that the amending Act, like the Consular Privileges and Immunities Act, will come into operation on the day on which it receives the Royal Assent. It is to be noted, however, that clause 5 proposes that the amending Act will first apply to assessments in respect of income of the year of income commencing on 1 July 1972.
This clause proposes a formal amendment to section 23 of the Principal Act which declares certain categories of income to be exempt from income tax.
Sub-paragraph (ii) of paragraph (a) of section 23 exempts from income tax the official salary and income derived from sources out of Australia by a person who is a representative in Australia of the government of another country or by a person who is a member of the official staff of such a representative. This provision specifically excludes from its operation, however, any persons in the diplomatic or consular fields who are entitled to exemption from income tax under the Diplomatic Privileges and Immunities Act 1967 or section 23AAA of the Principal Act, respectively.
By clause 3, it is proposed to omit from section 23(a)(ii) the reference to section 23AAA, which is now to be repealed, and to insert in its stead, a reference to the Consular Privileges and Immunities Bill 1972 which will in future confer the exemptions now available under section 23AAA.
Clause 4: Income of consular representatives and of their staffs and families.
This clause proposes the repeal of section 23AAA of the Principal Act which will become redundant upon the enactment of the Consular Privileges and Immunities Bill 1972.
As mentioned in the introductory notes, section 23AAA was inserted in the income tax law in 1967 to accord with the terms of the Consular Convention. The exemptions provided by section 23AAA are thus in line with those required by the Consular Convention and it is not expected that, in its practical effect, the repeal of section 23AAA will alter the present income tax position of any persons already employed in the consular field.
Section 23AAA will cease to apply from the end of the 1971-72 income year.
Clause 5: Application of amendments.
This clause specifies the commencing date for the application of the amendments proposed by this Bill. The practical effect of this clause has beer stated in the notes on clause 4.
PAY-ROLL TAX (TERRITORIES) ASSESSMENT BILL 1972
Clause 1: Short title and citation.
This clause formally provides the short title and citation of the amending Act, and of the Principal Act as amended.
By this clause it is proposed that the amending Act shall, as in the case of the other measures, come into operation on the day on which it receives the Royal Assent.
This clause will amend section 13 of the Pay-roll Tax (Territories) Assessment Act 1971 which exempts from territorial pay-roll tax the salaries and wages paid by various persons, including those paid to his official staff by a consular representative.
The exemption from the tax for salaries and wages paid by consular representatives who are not Australian citizens or permanently resident here is in future to be provided under the Consular Privileges and Immunities Bill 1972. Consequently, the exemption provided in section 13 for salaries and wages paid by those persons will not be necessary.
SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) BILL 1972
This Bill will repeal provisions in the Principal Act that will no longer be needed because of the proposed privileges to be accorded to consular personal under the Consular Privileges and Immunities Bill 1972. It will also effect certain changes in relation to the sales tax concessions for Trade Commissioners of other countries.
Clause 1: Short title and citation.
This clause formally provides for the short title and citation of the amending Act, and of the Principal Act as amended.
By this clause it is proposed that the amending Act will come into operation on the day on which it receives the Royal Assent.
Clause 3: Limitation on exemption from sales tax on imported goods for use by Trade Commissioners.
This clause will effect certain amendments to section 5A of the Principal Act which provides for the imposition, by Ministerial direction, of quantitative limitations on the exemption provided by item 71 in the First Schedule to the Principal Act for goods imported by consular personnel and certain other representatives of other countries. The Minister may impose limitations if he considers that excessive quantities of goods are being imported. The principal purpose of the amendments is to delete any references to consular posts and consular personnel. Provisions similar to section 5A, so far as they affect consular posts and consular personnel, are included in the Consular Privileges and Immunities Bill 1972. Section 5A, as amended, will apply only in relation to Trade Commissioners.
Paragraph (a) of clause 3 will substitute a new sub-section in place of sub-section (1.) in the Principal Act. The effect of the amendment is merely to delete the references to consular posts.
By paragraph (b) of clause 3 it is proposed to insert in sub-section (2.) a new paragraph (a) in place of existing paragraph (a). Under this paragraph the exemption from sales tax for imported goods provided by item 71 in the First Schedule to the Principal Act for consular representatives and certain other representatives of other countries is made conditional on the representative agreeing to pay the tax involved, unless released by the Minister, if he should dispose of the goods in Australia within two years of their entry for home consumption.
Any references to consular posts or consular representatives have been omitted and the new paragraph will apply only in relation to Trade Commissioners. The agreement required by the new paragraph will apply to a disposal in any Australian external Territory as well as in the Commonwealth.
The amendment will also bring about a change in the requirement that the person pay the whole of the tax that would have been payable but for the exemption, in the event that he should dispose of the goods within two years. Under the new paragraph, the Minister will be able to determine that some lesser amount than the full tax should be paid.
Clause 4: Limitation on exemption from sales tax on excisable goods for use by Trade Commissioners.
This clause will amend section 5B of the Principal Act which is the counterpart of section 5A in relation to the exemption provided by item 72 in the First Schedule to the Principal Act for excisable goods cleared from bond for use by consular posts, consular representatives and Trade Commissioners.
Section 5B enables the Minister to apply quantitative limitations where he considers it necessary, and requires the person claiming exemption to agree to pay the sales tax involved, unless released by the Minister, if he disposes of the goods within two years of the date of their entry for home consumption.
The principal purpose of the amendments proposed by this clause is to delete any references to consular posts and consular representatives. Section 5B as proposed to be amended will have effect only in relation to Trade Commissioners.
The amendment to be effected by paragraph (a) to sub-section (1.) will merely omit any references to consular posts and consular representatives.
By paragraph (b) of clause 4 any references in sub-section (2.) to consular posts and consular representatives will be deleted.
The amendment will also affect the obligation on a Trade Commissioner to pay an amount equal to the sales tax that would have been payable but for the exemption if he should dispose of the goods within two years of the date of clearance for home consumption. Currently the obligation arises where the disposal takes place in Australia but under the amendment it will arise also if the disposal occurs in an Australian external Territory.
This clause will amend items 71 and 72 in the First Schedule to the Principal Act.
These items at present provide for the exemption from sales tax of imported goods (item 71) and excisable goods (item 72) that are entered for home consumption for the official use of a consular post or Trade Commissioner in Australia of any country or for the personal use of consular officers and members of their immediate families and for certain members of the staffs of consular posts.
All references to consular posts and to persons other than Trade Commissioners will be deleted from the items, as amended. Exemptions corresponding to those at present in items 71 and 72 for consular posts, consular personnel and members of their families are being provided in the Consular Privileges and Immunities Bill 1972.
The exemptions provided by items 71 and 72, as proposed to be amended, will be complementary to exemptions from duty to be provided for Trade Commissioners under proposed amendments to the Customs and Excise Tariffs.
Item 71 will exempt from sales tax imported goods that, at the time they are entered for home consumption, are for the official use of a Trade Commissioner and are exempt from customs duty under complementary provisions in the Customs Tariff because they are for his use. Exemption from sales tax will apply likewise to goods of a class not subject to duty provided that they would have been admissible duty-free to a Trade Commissioner.
Because of limitations in the Customs Tariff provision, the exemption from sales tax will only be available if the Trade Commissioner is not an Australian citizen, not ordinarily resident in Australia or its Territories and not otherwise engaged in a profession, business or occupation.
Item 72 will exempt excisable goods that are, at the time they are entered for home consumption, for the official use of a Trade Commissioner and are exempt from excise duty under complementary provisions in the Excise Tariff because they are for his use. Under provisions in the Excise Tariff the exemption will only be available to a Trade Commissioner who is not an Australian citizen, not ordinarily resident in Australia or its Territories and not otherwise engaged in a profession, business or occupation.
AUSTRALIAN CAPITAL TERRITORY STAMP DUTY BILL 1972
The only purpose of this Bill is to delete from the Principal Act a provision that exempts from stamp duty conveyances of land for use as a consular post or as the residence of the head of a consular post. A corresponding exemption will be provided in the Consular Privileges and Immunities Bill 1972.
Clause 1: Short title and citation.
This clause formally provides for the short title and citation of the amending Act, and of the Principal Act as amended.
This clause provides that the amending Act will come into operation on the day on which it receives the Royal Assent.
This clause will repeal item 18 in the Second Schedule to the Principal Act. That item at present exempts from Australian Capital Territory stamp duty a conveyance of land in the Territory to a representative of the government of another country where the land is to be used as premises for the purposes of a consular post or as the residence of the head of a consular post.