Explanatory Memorandum(Circulated by authority of the Treasurer, the Hon. W.G. Hayden, M.P.)
The purpose of this memorandum is to provide explanations of the provisions of three income tax measures.
The first Bill - the Income Tax Bill 1975 - will declare the rates of income tax payable by individuals and companies for the current financial year, 1975-76. The main features of the Bill are:
General rates of tax payable by individuals (Clause 6(1))
- The general rates of tax payable by individuals for the 1975-76 financial year, in respect of income of the 1975-76 income year, are, as a consequence of a new rates schedule, to be varied from those applicable for the 1974-75 financial year.
Rates of tax payable by companies (Clause 8)
- The rate at which company tax is generally payable for the 1975-76 financial year (on taxable income of 1974-75) is to be reduced from 45 per cent to 42 1/2 per cent. The new rate of 42 1/2 per cent will apply to the taxable incomes of all companies with the exception of friendly society dispensaries in respect of which the rate will continue to be 37 1/2 per cent. The rate of additional tax payable on undistributed profits of a private company is to remain at 50 per cent.
Surcharge of tax on property income
- The surcharge of tax in respect of income from property, which was imposed for the 1974-75 financial year by section 8 of the Income Tax Act 1974, is not being imposed for the 1975-76 financial year.
- The rebate of tax allowed to aged persons (i.e. men aged 65 or more and women aged 60 or more) and the wives of aged persons pursuant to section 7 of the Income Tax Act 1974, is not being continued for the 1975-76 financial year.
The second Bill - the Income Tax Assessment Bill (No. 2) 1975 - is designed principally to give effect to the new system of rebates of tax announced in the Budget Speech. The main features of this Bill are :
Concessional rebates (for dependants) (Clause 17)
- Rebates for dependants : The following direct rebates of tax are to replace the existing income tax allowances provided by way of concessional deductions in respect of the maintenance of dependants :-
Maximum Rebate Spouse, daughter-housekeeper, parent or parent-in-law, housekeeper $400 Student $200 Child under 16, not being a student $200 (in respect of 1 such child) $150 (in respectof each other such child) Invalid relative $200
- Except for the category "student", each class of dependant will remain defined as under the existing law. The student rebate will, however, be available in respect of any dependant under the age of 25 receiving full-time education at a school, college or university (under the present law, a concessional deduction for a student is limited to students aged 16 to 25 years).
- Sole parent rebate : This is a new allowance. It will provide a rebate, up to a maximum of $200, to a person who is a parent without a partner and is maintaining dependants who qualify for rebate purposes as children under 16 or as students.
General concessional rebate (Clause 17)
- With two exceptions to be mentioned, all expenses at present allowable as concessional deductions, including private rates and land taxes, medical expenses, life insurance premiums and superannuation payments, contributions to medical and hospital benefit funds, education expenses, etc., are to be allowed by way of a rebate of tax. The rebate allowable for these expenses will be calculated at 40 cents in the dollar of the amount qualifying for rebate or $540, whichever is the greater. At least, the minimum rebate of $540 will accordingly be allowable in the assessment of each resident individual taxpayer, except in unusual circumstances where further tax is payable in pursuance of section 94 of the Principal Act (see proposed section 159N). It will be allowable in addition to any dependant, sole parent or housekeeper rebate to which the taxpayer may be entitled.
- Generally, the present statutory limit on expenditure subject to concessional deduction will apply in determining the amount subject to rebate. However, the existing limit of $150 per student that applies in respect of education expenses and self-education expenses is to be raised to $250. The scope of the concession for expenses of self-education is to be broadened to include all expenses necessarily incurred in connexion with a prescribed course of education, thus removing the present restriction to expenditure on fees, books and equipment. Amounts allowable by way of this rebate will not be deductible under any other provision of the law. As a result, claims for outright deductions for self-education expenses will be confined to amounts in excess of $250 per taxpayer incurred in any year commencing with the 1975-76 income year.
- The two deductions of a concessional nature that are to continue to be allowable by way of deductions are-
- housing loan interest payments.
- gifts to charities, school building funds, etc.
Zone Allowances (Clauses 5, 10 and 11)
- Zone allowances are to become separate rebates of tax, additional to any rebates for dependants or in respect of expenditure subject to rebate.
Accelerated depreciation allowances (Clause 7)
- A new provision is to be inserted in the Income Tax Assessment Act 1936-1975 to double the effective rates at which depreciation is allowable on most new plant and equipment - not including certain motor vehicles - where the depreciable property is first used or installed ready for use on or after 1 July 1975. The accelerated rates will continue to apply to eligible plant throughout the period it is used by the taxpayer in the production of assessable income, or until the cost of the plant has been fully written off for income tax purposes. A taxpayer has the right to elect to forgo double depreciation.
The third Bill - the Income Tax (International Agreements) Bill 1975 - will amend the Income Tax (International Agreements) Act 1953-1974 mainly to effect certain amendments consequential on proposals contained in the first and second Bills.