House of Representatives

Income Tax and Social Services Contribution Assessment Bill (NO. 3) 1959

Income Tax and Social Services Contribution Assessment Act (No. 3) 1959

Resolution to Declare the Rate of Dividend (Withholding) Tax

Resolution to Declare the Rate of Dividend (Withholding) Tax

Income Tax and Social Services Contribution Bill (NO. 2) 1959

Income Tax and Social Services Contribution Act (No. 2) 1959

Income Tax (International Agreements) Bill 1959

Income Tax (International Agreements) Act 1959

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Rt. Hon. Harold Holt.)

INCOME TAX AND SOCIAL SERVICES CONTRIBUTION ASSESSMENT BILL (NO. 3) 1959.

Introductory Note.

The main features of this Bill are -

(1)
The introduction of a dividend withholding tax to be deducted from dividends paid by Australian companies to shareholders not residing in Australia;
(2)
Exemption from tax of premiums paid by the Commonwealth on redemption of Commonwealth Government Special Bonds;
(3)
The establishment of a basis for taxing income arising from Seasonal Securities to be issued by the Commonwealth.

In addition to these main features, a number of minor technical amendments are proposed.

Explanations relating to these technical amendments and to the provisions concerning the Special Bonds and Seasonal Securities will be found under the various clauses relating to those matters. As provisions relating to the proposed dividend withholding tax are included in a number of different clauses, it will be convenient, before considering each clause of the Bill, to indicate broadly the nature of the proposed dividend withholding tax.

Dividend Withholding Tax.

The principal features of the proposed dividend withholding tax are -

(1)
the levying of a flat rate of tax on dividends paid by Australian companies to shareholders not resident in this country;
(2)
the withholding from the dividends of the tax payable, so enabling the tax to be collected almost concurrently with the payment of the dividends.

The withholding tax is designed to replace the existing procedure under which dividends paid by Australian companies are included in annual assessments and taxed at the rate applicable to the taxable income of the taxpayer concerned.

Under the existing procedure, overseas residents deriving income from sources in Australia furnish an annual return of income. The amount of tax to be paid is not, however, known by the non-resident until the rates of tax for the relevant financial year are declared and a notice of assessment is received from the Commissioner of Taxation.

In a number of countries, including the United States of America, Canada and South Africa, a flat rate of tax is levied on various forms of investment income derived by a non-resident of the country concerned. The person paying the income to the non-resident investor retains the appropriate amount of tax out of the income. The amount retained is subsequently remitted to the taxation authorities.

This procedure is the basis of the provisions proposed in the present Bill. However, a flat rate withholding tax may result in a greater liability for tax than arises under the present assessment procedure. For example, no Australian tax is at present payable by a non-resident individual unless his income from sources in Australia exceeds Pd104. Under a withholding tax system, a flat rate of tax applies to each Pd of dividend.

In order to meet this situation the provisions of the Bill will entitle a non-resident shareholder from whose dividends the proposed withholding tax has been retained to elect that the present assessment procedure be continued. If this election is made, the Bill provides for the dividends to be included in an assessment, as at present. It also authorises a refund to be made of any excess of the withholding tax over the tax payable on the dividends under the assessment basis.

Where no election is made, the withholding tax will become the final liability of the non-resident shareholder in respect of dividends paid by Australian companies.

It is proposed to apply the withholding tax to dividends paid on and after 1st July, 1960.

The general rate of withholding tax will be 6/-in the Pd. Australia has, however, concluded agreements with the United Kingdom, the United States of America and Canada for the relief of double taxation. Where appropriate in accordance with these agreements, a withholding rate of 3/-in the Pd will apply to dividends paid to residents of those countries.

The withholding tax is not the only amount of Australian tax which will be collected on profits earned by Australian companies and distributed to overseas shareholders. The profits of the companies are subject to Australian company tax, which, for practical purposes, is 7/6 in the Pd in the case of public companies. The withholding tax payable by non-resident shareholders will be additional to the company tax. Furthermore, dividends paid to overseas shareholders are in most instances subject to tax in the country in which the investor resides.

For convenience of reading, it is mentioned that provisions relating to the levying of dividend withholding tax will be found in clause 18 while clause 36 proposes the main machinery provisions enabling the tax to be collected by deductions at the source. Various technical amendments made necessary by the introduction of the withholding tax are proposed in clauses 4, 8, 11, 16, 17, 21, 22, 27, 29 and 32.

NOTES ON CLAUSES

Clause 1: Short Title and Citation.

Sub-clauses (1.) to (4.) of this clause formally provide for the short title and citation of the Amending Act and of the Principal Act as amended.

The amendments proposed by sub-clause (5.) are drafting adjustments. They are necessary because the Income Tax and Social Services Contribution Assessment Act (No. 1) 1959, although assented to on 23rd April, 1959, will not become operative until the day on which the Reserve Bank Act 1959, with which it is associated, comes into operation.

Clause 2: Commencement.

Section 5(1A.) of the Acts Interpretation Act 1901-1957 provides that every Act shall come into operation on the twenty-eighth day after the day on which it receives the Royal Assent, unless the contrary intention appears in the Act.

It is proposed by this clause that the Income Tax and Social Services Contribution Assessment Act (No. 3) 1959 shall, with the exception of one provision, come into operation on the day on which it receives the Royal Assent. This will enable immediate effect to be given to the provisions of clause 7 relating to Commonwealth Seasonal Securities.

The excepted provision is sub-clause (5.) of clause 1, which, as already mentioned, is a drafting provision. That sub-clause will not apply until the Income Tax and Social Services Contribution Assessment Act (No. 1) 1959 comes into operation.

Clause 3: Parts.

Section 5 of the Principal Act lists the Parts and Divisions of the Act. Clause 3 will insert in the list the two new Divisions that it is proposed by clauses 18 and 36 to include in the Principal Act in relation to dividend withholding tax. Two Divisions that it is proposed by clauses 19 and 20 to repeal will be omitted from the list while drafting amendments to the titles of two other Divisions will be made consequent upon amendments proposed in clauses 12 and 25.

Clause 4: Definitions.

It is proposed by this clause to amend section 6 of the Principal Act that contains definitions designed to facilitate the interpretation of the Act.

Consequent upon the introduction of the withholding tax on dividends, it is proposed for drafting reasons to include in section 6 definitions of "dividend (withholding) tax" and "non-resident dividend income".

The withholding tax will be payable under the provisions of a proposed new section of the Principal Act, namely section 128B. "Dividend (withholding) tax" will accordingly mean the tax payable under that section.

"Non-resident dividend income" will mean the income upon which dividend (withholding) tax is payable.

Clause 5: Exemptions.

It is proposed by this clause to repeal section 23(w) of the Principal Act.

This provision was enacted as a war-time measure to exempt from tax the Australian earnings of sea-going members of the mercantile marine of British and allied countries.

The circumstances that prompted the granting of the exemption do not now apply.

Clause 6: Redemption of Special Bonds.

The purpose of this clause is to insert in the Principal Act a new section - section 23E - providing exemption from tax for premiums paid on the redemption of Special Bonds issued by the Commonwealth. The exemption of the premiums will not apply to premiums paid to a person whose business activities extend to trading in the Special Bonds.

Holders of the Special Bonds are entitled to interest, which is subject to tax. In addition, a premium is payable on the redemption of Special Bonds held for a specified period. The new provision relates only to this premium.

The first of the premiums will not be payable before 1st January, 1962, and the new section will not have practical application before that date.

Sub-section (1.) of the new section provides that an amount, other than accrued interest, received on the redemption of Special Bonds shall not be treated, for income tax purposes, as income. In consequence, tax will not be payable on the premiums paid on redemption of the Bonds unless the facts of a particular case call for the application of sub-section (2.).

Sub-section (2.) is designed to ensure that sub-section (1.) does not prohibit the taxing of the premium in the case of a person dealing in Special Bonds. Under the existing provisions of the law, profit from dealing in the Bonds, including any premium received, will be brought to account in ascertaining the taxable income of such a taxpayer. This position will not be disturbed by the proposed new section.

Sub-section (3.) is a formal definition to ensure that "Special Bond" means only securities of the Commonwealth bearing the endorsement "Special Bond".

Clause 7: Disposal of Seasonal Securities.

It is proposed by this clause to insert in the Principal Act a new section 26C clarifying the taxation position in relation to earnings on seasonal securities to be issued by the Commonwealth under the Loan (Short-term Borrowings) Act 1959.

The securities will not carry interest, as such, but will be issued at a discount and redeemed at par. The difference between the issue price and the redemption value will represent earnings that may arise from the securities.

The proposed section will ensure that earnings on the securities are subject to tax. It will also entitle a person taxed on those earnings to an income tax rebate of 2/-for each Pd of the earnings included in his taxable income. This rebate will correspond with the rebate allowed in relation to interest on other Commonwealth securities.

Sub-section (1.) of the new section 26C provides that the assessable income of a person who disposes, whether by sale, gift, conversion or otherwise, of a seasonal security shall include any excess of the value of the security on the day of disposal over the cost to that person of the security.

A corresponding position will apply where a person holds a seasonal security until maturity and then receives the par value of the security. The excess of the amount received on redemption over the cost to the person of the security will be assessable income.

The levying of tax on the basis mentioned will apply whether the person concerned acquired the securities by original subscription or by purchase or gift during the currency of the securities. If, for example, seasonal securities are taken up on issue at a cost of Pd8,000 and are sold during their currency for, say, Pd8,050, the difference between those amounts will be assessable income. Should other seasonal securities acquired after issue for, say, Pd5,950 be subsequently redeemed at Pd6,000, the difference of Pd50 between cost and redemption will similarly be subject to tax.

Sub-section (2.) provides in paragraph (a) that a person who acquires a seasonal security shall be deemed to have purchased it at a cost equal to its value on the day of acquisition. The amount that may be deducted by the new owner from the value of the security when it is ultimately redeemed or disposed of by him will accordingly be the same as the amount taken to account in arriving at the taxation liability of the person from whom the security was acquired.

Paragraph (b) of the sub-section will apply where an owner of a seasonal security dies. In these circumstances that person is deemed to have sold the security on the day of his death. Any excess of the value of the security at that time over the cost to him of that security will be regarded as assessable income derived by him during his lifetime.

The value at the date of the testator's death will be treated as the cost of the security to the person upon whom it devolves. That person will then bring to account for taxation purposes only the difference between that value and the value of the security when it is redeemed or disposed of by him.

Sub-section (3.) will deem amounts included in assessable income under the proposed new section to be interest to which section 160AB of the Principal Act.

That section relates to interest paid on Commonwealth loans and certain other public loans. It entitles the recipient of the interest to a rebate of 2/-for each Pd of the interest included in his taxable income. The rebate will be available on a similar basis in respect of amounts taxed under the new section 26C.

Sub-section (4.) formally provides that "seasonal security" has the same meaning as it has in the Loan (Short-term Borrowings) Act 1959.

The sub-section will also enable an interest in a seasonal security to be treated, for the purposes of the new section 26C, as a seasonal security. On a change of ownership in an interest in a seasonal security, the section will have effect along the same general lines as apply when the whole of the rights in a seasonal security change hands.

Clause 8: Dividends.

This clause proposes a drafting amendment to section 44(1.) of the Principal Act.

Under that provision, dividends paid to non-resident shareholders out of profits having a source in Australia are assessable income, except where the dividends are exempt from tax by reason of succeeding provisions of the section.

With the adoption of a dividend withholding tax it will be necessary to exclude from assessable income those dividends that bear withholding tax. This result will be achieved by a proposed new provision - section 128D - in the Principal Act (see clause 18). In order to avoid any inconsistency between the new provision and section 44(1.), clause 8 will ensure that section 44(1.) operates to treat dividends as assessable income only if this is not in conflict with the new section 128D.

The practical effect will be that dividends subject to withholding tax will not also be taxed as assessable income unless the shareholder elects to have that course followed and claim a credit to remove the double taxation.

Clause 9: Rates and Taxes.

Sub-section (1A.) of section 72 of the Principal Act provides for the allowance of deductions for State income tax paid between 1st July, 1941 and 30th June, 1944.

The sub-section is now redundant and it is proposed by this clause that it be repealed.

Clause 10: Expenditure for Enemy Raids Precautions.

It is proposed by this clause to repeal section 72B of the Principal Act.

This section was enacted in 1942 as a war-time measure and provided for the allowance of expenditure incurred on income-producing property in providing protection against enemy raids.

The section now has no practical application.

Clause 11: Losses of Previous Years.

By this clause it is proposed to effect in section 80 of the Principal Act an amendment made necessary by the introduction of withholding tax on dividends.

Under section 80, a loss incurred by a taxpayer may, within limits, be allowed as a deduction against income derived in a subsequent year. The loss is, however, recouped in the first place out of exempt income.

Unless an overseas shareholder elects to include the dividends in his assessable income, dividends subject to withholding tax will technically qualify as exempt income even though they have borne tax. The offsetting against a loss of dividends that have borne tax would not provide an effective recoupment of the loss. Clause 11 will ensure that the deductions allowable against assessable income in respect of losses are not reduced by dividends subject to withholding tax.

Clause 12: Payments to Fund Providing Benefits to Persons on War Service.

Clause 12 proposes the repeal of section 102AA of the Principal Act.

That section was a war-time measure entitling persons engaged in business to deductions for certain contributions to funds established for the benefit of other persons who normally carried on a similar business but who were engaged on war service.

The section now has no practical application and its retention in the law is unnecessary.

Clause 13: Distributable Income of a Private Company.

By this clause it is proposed to amend section 103(1.) of the Principal Act by omitting from the definition of "the distributable income" a reference to section 221YE of the Principal Act.

The reference to section 221YE was included in the definition in 1952 when provisions relating to advance payments by companies had practical effect. Those provisions do not now apply and the reference to section 221YE is accordingly unnecessary. Its omission from the law will have no practical effect upon the tax liabilities of companies.

Clause 14: Companies Which are Private Companies.

In section 105(5.) of the Principal Act the words "of the year" have been inadvertently duplicated.

Clause 14 will delete the unnecessary words.

Clause 15: Election to Have Taxes Paid Deducted in Ascertaining Distributable Income.

This clause proposes drafting amendments to delete from section 105C of the Principal Act references to redundant provisions relating to advance payments by companies. Those provisions have had no practical effect since the 1951-52 income year.

Clauses 16 and 17: Loans to Shareholders and Payments to Shareholders and Directors.

Sections 108 and 109 of the Principal Act may apply where a private company lends money to its shareholders or pays to shareholders or directors amounts purporting to be remuneration or retiring allowance. In the circumstances prescribed in the sections, the Commissioner may determine that a payment shall be treated for all purposes of the Principal Act as a dividend.

Since the Commissioner's determination is necessarily made after the payment has been effected, it would not be practicable for a company to withhold tax at the time a payment is made. The amendments proposed by these clauses will accordingly exclude such payments from the operation of the withholding tax provisions. The payments will, as at present, be treated as assessable income and taxed under the general provisions of the Act.

Clause 18: Dividends Paid to Non-residents.

It is proposed by clause 18 to insert a new Division - Division 11A - in Part III. of the Principal Act. Broadly stated, this Division, comprising sections 128A to 128E, relates to the levying of dividend withholding tax.

Section 128A: Interpretation.

Sub-section (1.) is a drafting measure to ensure that Division 11A applies to a part of a dividend in the same way as it applies to the whole of a dividend.

Sub-section (2.) applies where a beneficiary in a trust estate is presently entitled to a dividend included in the income of the estate.

Beneficiaries in estates are, under the general provisions of the Principal Act, subject to tax on the share of the net trust income to which they are presently entitled.

The purpose of sub-section (2.) of the new section 128A is to ensure that a corresponding principle applies in relation to the withholding tax on dividends paid to non-resident beneficiaries. The effect of the sub-section will be to render a non-resident beneficiary liable to withholding tax on the proportion of an estate's dividend income to which he is presently entitled.

Sub-section (3.) is a drafting amendment relating to the expressions "income tax" and "tax", that are defined in section 6 of the Principal Act. For practical purposes, these expressions mean income tax and social services contribution as assessed under the Principal Act.

The expressions are found in numerous provisions of the Principal Act and in the generality of cases the satisfactory application of the law will require that the dividend withholding tax shall not fall within the meaning of "income tax" or "tax". This is because the general provisions for the assessment of tax will not govern the withholding tax provisions.

It is, however, proposed that a number of provisions relating to the collection of tax, the omission of income from returns, arrangements to avoid tax and the granting of relief from payment of tax in cases of serious hardship should apply to withholding tax as well as to other income tax and social services contribution. Sub-section (3.) enumerates the sections concerned and provides that in applying those provisions "income tax" or "tax" includes dividend withholding tax.

In all sections of the Principal Act not listed in sub-section (3.), the terms "income tax" and "tax" will not include the withholding tax on dividends.

Sub-sections (4.) and (5.) determine the circumstances in which a non-resident of Australia will be deemed to be engaged in business through a permanent establishment in Australia.

The provisions are required because it is not proposed to apply the withholding tax to dividends received by shareholders carrying on business through a permanent establishment in Australia.

The substance of sub-sections (4.) and (5.) corresponds closely with definitions of "permanent establishment" found in double taxation agreements entered into by Australia.

A "permanent establishment" includes not only a branch, but also an office, place of management, workshop, factory, mine, quarry, oilwell, agricultural, pastoral or forestry property, construction project, certain agencies or any other places of business. The carrying on of business through any such establishment will place a person within the scope of sub-section (4.).

A non-resident will also be deemed to be engaged in business through a permanent establishment if he has substantial equipment or machinery in Australia, if he is using or installing such property in Australia, or if he sells goods that are manufactured, assembled, processed, packed or distributed in Australia by an associated enterprise for him or at or to his order.

Activities that will not be regarded as the carrying on of a business through a permanent establishment include -

(a)
the conduct of business transactions in Australia through a commission agent or broker who receives commission at the rate customary in relation to the class of business conducted;
(b)
the maintenance of a place of business solely for the purchase of goods or merchandise;
(c)
the conduct of business through an agent who does not regularly fill orders from a stock of goods in Australia or who does not habitually exercise authority to negotiate and conclude contracts on behalf of a non-resident; or
(d)
the existence of a subsidiary company.

Section 128B: Liability to Dividend Withholding Tax.

This proposed new section is designed to establish liability for dividend withholding tax.

Sub-section (1.) provides the basis for determining the dividends to which the section applies and in respect of which the withholding tax is to be payable. In addition, the sub-section indicates dividends to which the section will have no application.

Apart from the exceptions to be mentioned, the new section 128B will apply to dividends paid to non-residents of Australia on or after 1st July, 1960, by companies that are residents of this country.

The section will not, however, extend to dividends paid to a person, whether individual or company, engaged in business through a permanent establishment in Australia. Double taxation agreements entered into by Australia do not provide for a special rate of tax on such dividends. The existing method of treating those dividends as assessable income subject to tax on the present assessment basis will not be disturbed.

The new section 128B will not apply to dividends paid to a number of institutions, associations etc. whose income is not at present subject to income tax. These organisations include religious, scientific, charitable and public educational institutions, public hospitals, non-profit organisations such as friendly societies and societies established to encourage music, art, science, literature or the promotion of athletic games and sports in which human beings are the sole participants. Dividends will also be outside the scope of the section when received by a superannuation fund established for the benefit of employees and, in some circumstances, for the benefit of self-employed persons.

Other dividends to which the new section will have no application include -

Dividends paid wholly and exclusively out of mining profits which are not themselves liable to tax, e.g., dividends paid out of exempt gold-mining profits.
Dividends in the form of bonus shares distributed wholly and exclusively out of profits arising on the revaluation of certain assets or on the issue of shares at a premium.
Dividends received in certain circumstances by trust estates, if the trustee is liable to pay tax on the income of the trust estate.

The withholding tax will apply to dividends distributed out of profits having a source outside Australia. It will, however, be open to non-resident shareholders to exercise an election to have the assessment basis applied and, in this event, dividends received by a non-resident out of profits having their source outside Australia will, as at present, be treated in the assessment as exempt income.

Sub-section (2.) provides that income tax and social services contribution is payable on all dividends to which the new section 128B applies. As mentioned previously, an amendment to section 6 of the Principal Act provides that the term "dividend (withholding) tax" means the tax payable under section 128B.

Sub-section (3.) will ensure that the operation of subsection (2.) does not affect the liability of a person to pay tax under other provisions of the Principal Act.

Section 128C: Payment of Dividend Withholding Tax.

Sub-section (1.) of the proposed section 128C provides that dividend withholding tax in respect of a dividend shall be due and payable twenty-one days after the end of the month in which the dividend is paid. This will be the same date as that on which amounts withheld from dividends are due for payment to the Commissioner of Taxation.

The Commissioner will have power, in special circumstances, to extend the time for payment of the withholding tax.

Sub-section (2.) formally provides that withholding tax is a debt due to the Crown on behalf of the Commonwealth and that it is payable to the Commissioner of Taxation.

Sub-section (3.) applies where withholding tax is not paid within a period of sixty days after the due date for payment. In these circumstances, additional tax at the rate of ten per cent per annum from the end of that period will be payable on the unpaid amount.

As the tax is to be deducted from dividends at the time the dividends are paid, this provision is likely to apply only in isolated circumstances, e.g., where an insufficient amount is deducted from a dividend.

Sub-section (4.) will empower the Commissioner to remit, wholly or in part, the additional tax imposed by sub-section (3.).

Sub-section (5.) will enable legal action to be taken by the Commissioner or a Deputy Commissioner for the recovery of unpaid withholding tax.

Sub-section (6.) ensures that the ascertainment of an amount of withholding tax payable is not treated as an assessment for the purposes of the Principal Act.

Where an assessment is made, the Commissioner is required by the law to issue a notice of assessment. An important feature of a withholding tax is, however, that notices of assessment are unnecessary. The proposed sub-section (6.) will remove the need to issue notices of assessment in relation to withholding tax.

Although a non-resident shareholder will not receive a notice of assessment, he will be entitled under the proposed new section 221YS (clause 36) to a credit for the tax withheld from dividends. If he considers the amount withheld to be in excess of the withholding tax imposed by the law, it will be open to him under proposed section 221YT (clause 36) to take action, if necessary, in the courts for the allowance of the appropriate credit and the making of a refund.

The overseas shareholder will be further protected by his right to have his liability determined under the present assessment basis. Adoption of this course, which will not increase the amount of tax payable on the dividends, will result in the issue of a notice of assessment. The usual rights of objection and appeal under the income tax law will be available to the shareholder in relation to the assessment.

Sub-sections (7.) and (8.) are machinery provisions to facilitate the collection of unpaid withholding tax. In the generality of cases, this tax will be collected at the time a dividend is paid. There may, however, be isolated instances in which an appropriate deduction from a dividend is not made.

Where withholding tax is unpaid, sub-section (7.) will authorize the Commissioner to issue a notice stating the amount of withholding tax payable and the date on which that amount became due and payable. Should it become necessary for the Commissioner to take legal action for the recovery of the tax, sub-section (8.) will permit this notice, or a certified copy of it, to be produced as evidence that the amount shown became due on the date stated in the notice.

The production of the notice, or a certified copy of it, will not, of course, be conclusive evidence of liability.

Section 128D: Inclusion of Non-resident Dividend Income in Assessable Income.

In the first place, this section provides that dividends subject to withholding tax are to be excluded from assessable income.

Broadly stated, the second step is to provide that non-resident shareholders may elect to have the dividends restored to the assessable income. If the shareholder so elects, the present procedure of including the dividends in an assessment is followed and the dividends bear tax on the same basis as at present applies. The shareholder will then be entitled under section 128E to a credit of the withholding tax on the dividends.

Sub-section (1.) provides that non-resident dividend income, that is, dividends subject to withholding tax, shall not be included in the assessable income of a taxpayer. Whilst this position applies, the dividends will not be included in an assessment and will bear only withholding tax.

The operation of the sub-section is, however, subject to other provisions of this section, under which a non-resident shareholder may elect for the inclusion of the dividends in his assessable income.

Sub-section (2.) entitles a person who has received dividends subject to withholding tax to elect in writing that this sub-section shall apply. Where this election is made, tax is levied on the dividends in the same way as under the present law. At this point, the dividends are liable to both withholding tax and the ordinary income tax as ascertained by the usual assessment process. As already mentioned, a credit is allowed under section 128E to relieve what would otherwise be dual taxation of the dividends.

A written election to have the section applied may be furnished to the Commissioner of Taxation at any time up to one year after the income year in which the dividends are derived. The Commissioner is authorised in special circumstances to extend for one additional year the period in which an election may be made.

Sub-section (3.) provides for an election to be accompanied by a statement setting out the additional information that it will be necessary for the Commissioner to obtain before the dividends may be included in an assessment and the appropriate deductions allowed.

The statement, signed by the non-resident shareholder or a person authorised to sign on his behalf, will set out full details of -

A.
Dividends derived by the shareholder and subject to withholding tax.
B.
All other Australian income not included in an annual return of income furnished by the shareholder.
C.
Any amounts claimed by the shareholder to be allowable deductions relating to income shown in the statement.

The information to be set out in the statement accompanying the election represents the minimum details necessary to enable the Commissioner to make a correct assessment and allow the appropriate credit to which the shareholder will be entitled under section 128E.

Sub-section (4.) applies where an election has been made under sub-section (3.) and provides that all dividends derived by the shareholder and subject to withholding tax shall be included in his assessable income. The only exception is that dividends exempt from tax, e.g., dividends wholly and exclusively paid out of exempt mining profits, are not treated as assessable income. This exception ensures that specific exemptions provided by special provisions of the law will be maintained for the purposes of any assessment made by the Commissioner.

Sub-section (5.) is a machinery provision under which a statement supplied for the purposes of this section will, for the purposes of the Principal Act, be regarded as a return of income.

Sub-section (6.) applies in an income year in which a non-resident shareholder does not derive a dividend from an Australian company but has incurred expenses which normally would be allowable deductions.

It is relevant to observe that when dividends are derived, an election made under this section results in those dividends being treated as assessable income. In consequence, expenses incurred in the gaining of the dividends are allowable deductions, except to the extent that they are expenses of a private, domestic or capital nature.

If, however, no dividend is derived it is not practicable for the shareholder to make an election. In these circumstances, he would, but for sub-section (6.), be denied deductions for the expenses. On the other hand, the receipt of even the smallest dividend would entitle the shareholder to make an election and obtain a deduction for the expenses.

Where no dividend is derived, sub-section (6.) will authorize the allowance of deductions on the same basis as would have applied if the shareholder had derived a dividend and had made an election under this section.

Section 128E: Credits and Rebates where Election Made.

The proposed new section 128E will apply where a non-resident shareholder, who has derived a dividend subject to withholding tax, elects to have the dividend treated as assessable income.

The inclusion of the dividend in assessable income will result in the dividend that has already borne withholding tax being taxed under the present assessment procedure. In order to relieve the double taxation, it is proposed in these circumstances to allow a credit for the withholding tax paid.

The primary purpose of the section is to authorize the allowance of this credit. The section also provides for the allowance of a rebate to ensure that the ultimate liability of the shareholder for Australian tax will not exceed the amount that would have been payable if no election had been made.

The section also includes a number of machinery provisions relating to the application of the credits.

Sub-section (1.) provides in paragraph (a) for the allowance of a credit equal to the amount of withholding tax paid or payable by a non-resident shareholder on dividends that, consequent upon an election under section 128D(2.), have been included in assessable income and taxed accordingly.

The practical effect of the credit will be to cancel out the amount of the withholding tax, leaving as the net tax payable on the dividends the amount that would have been due had withholding tax not been imposed.

Paragraph (b) of sub-section (1.) applies where the making of an election would, but for this paragraph, operate to the disadvantage of the shareholder concerned. This situation may arise where the inclusion of dividends in the assessable income increases the tax ascertained in an assessment by an amount greater than the withholding tax.

It is unlikely that a shareholder would make an election if he were aware that the election would increase his overall liability for Australian tax. It may not, however, be practicable for a non-resident shareholder to ascertain in advance the precise effect that the making of an election will have upon his liability for tax.

Paragraph (b) is accordingly designed to obviate any disadvantage in this respect by providing for the allowance in appropriate cases of a rebate in the assessment of the shareholder.

The rebate will be allowed where the tax assessed on the non-resident shareholder's total Australian income exceeds the sum of the withholding tax on his dividends and the tax, if any, that would have been payable on other classes of income if an election had not been made. This excess will be the amount of rebate to which the shareholder is entitled under paragraph (b) of sub-section (1.). Thus, any disadvantage that would otherwise have arisen from the election will be avoided.

Sub-section (2.) formally provides that the amount of a credit allowable under paragraph (a) of sub-section (1.) shall be a debt due by the Commonwealth to the shareholder.

Sub-section (3.) will enable the Commissioner to apply a credit, either wholly or in part, against any liability for tax under a law of which the Commissioner has the general administration.

Sub-section (4.) is a machinery provision ensuring that tax, against which a credit has been applied, is deemed to have been paid at the time the credit was applied in liquidation of that tax.

Sub-section (5.) will grant to the Commissioner a right of recovery from the taxpayer where, for any reason, an amount credited to him exceeds the amount of credit to which he was actually entitled.

Sub-section (6.) is a formal provision appropriating from Consolidated Revenue the amounts that the Commissioner is required to pay to shareholders in accordance with this section.

Clause 19: Partial Liability to Tax on Income of a Certain Period.

It is proposed by clause 19 to repeal Division 18 of Part III. of the Principal Act.

This Division contains transitional provisions relating to the introduction of the pay-as-you-earn system of taxation.

As Division 18 had application only to the income year ended 30th June, 1944, its retention in the law is no longer necessary.

The repeal will not affect the rights of a taxpayer should it be necessary in the future to make an assessment in respect of his income of the 1943-1944 income year.

Clause 20: Tax Credit in Relation to Certain Plant and Machinery used in Connexion with the War.

By this clause it is proposed to repeal Division 19 of Part III. of the Principal Act that allowed credits in respect of expenditure incurred during the years ended 30th June, 1946 and 1947, in reconverting plant and machinery from war-time production purposes to normal usage.

The provisions of the Division now have no practical application and their repeal will not affect the rights of a taxpayer to a credit should an assessment be made on his income of a year to which Division 19 applied.

Clause 21: Annual Returns.

This clause effects a drafting amendment in section 161 of the Principal Act.

Under that section, taxpayers are required to furnish annual returns of their total income. The amendment will make it unnecessary to include in these returns dividends that are subject to withholding tax.

Clause 22: Amendments of Assessments.

It is proposed by this clause to amend section 170 of the Principal Act. That section governs the powers of the Commissioner of Taxation to amend income tax assessments.

As previously explained, the plan of the withholding tax is that a non-resident shareholder will be entitled to elect under the proposed new section 128D (clause 18) to have dividends included in his assessable income. In some instances, an election in relation to an income year may not be given to the Commissioner until after the income tax assessment for that year has been made. In these circumstances the Commissioner would not be permitted under present law to amend the assessment to give effect to the election.

The proposed amendment of sub-section (10.) of section 170 is designed to allow the Commissioner to amend an assessment at any time in order to give effect to a taxpayer's election that dividends be included in his assessable income.

Section 170(10.) will also be amended by deleting a reference to section 72(1A.) made redundant by the repeal of that latter provision (clause 9).

Clause 23: Payment of Tax to have Priority over all other Taxes.

Section 221(1.)(a) of the Principal Act provides that Commonwealth income tax and social services contribution shall be paid before any liability for State income tax is met.

The High Court has held that the provision is outside the powers of the Commonwealth and its repeal is accordingly proposed.

Clause 24: Employer not Accounting for Tax Instalment Deductions.

By this clause, it is proposed to amend section 221P of the Principal Act.

That section provides for the recovery by the Commissioner of Taxation of tax instalments deducted from salary or wages by an employer whose property has become vested in a trustee or has fallen under the control of a trustee. For this purpose "trustee" includes a trustee in bankruptcy and the liquidator of a company.

The section provides that the amount of the tax instalments shall be paid to the Commissioner of Taxation by the trustee in priority over all other debts.

One result of this provision is that the Commissioner may recover the amount due in priority to payment of the expenses and fees of the trustee. Should the property of the employer be insufficient to meet the Commissioner's claim, the trustee is unable to recoup himself the expenses he has incurred in realising assets for the purpose of meeting that claim. Similarly, he is unable to obtain payment of the fees due to him for the services he has rendered in realising those assets.

Clause 24 will include in section 221P a further sub-section enabling a trustee in the circumstances described to receive payment of his expenses and fees before the claim of the Commissioner is satisfied. In the event of a State or other creditor having a right to be paid in priority to the claim of a liquidator for his expenses or charges, the right of the Commonwealth to claim in priority to all other creditors will not be surrendered unless the State or other creditor waives its right to priority over the expenses and charges of the liquidator.

This provision will not adversely affect the employees from whose remuneration the instalments were deducted. They are allowed credit for the instalments deducted from their salary or wages whether or not the amount due by the employer is paid to the Commissioner.

Clauses 25, 26, 28, 30, 31 and 33-35: Advance Payments by Companies.

By these clauses it is proposed to omit from Division 3 of Part VI. of the Principal Act a number of references to advance payments by companies.

Advance payments were due by companies in respect of income of the year ended 30th June, 1952. The provisions relating to advance payments have not applied in any subsequent year and the various references to them are now redundant.

Clause 27: Provisional Tax and Contribution not Payable in Respect of Non-resident Dividend Income.

By sub-clause (1.) of this clause, it is proposed to insert in the Principal Act a machinery provision - section 221YAB - that relates to provisional tax and is consequential upon the introduction of dividend withholding tax.

Provisional tax is at present payable in respect of dividends distributed to non-residents out of profits having an Australian source. From 1st July, 1960, withholding tax will be deducted from those dividends as they are paid. Since the tax will be collected at the source, it is not proposed, in addition, to require the payment of provisional tax on those dividends. Provisional tax is not, of course, payable on salary and wages from which tax instalments are deducted at the source.

The new section 221YAB will accordingly ensure that dividends subject to withholding tax do not enter into the calculation of provisional tax payable. A taxpayer who chooses to self-assess his provisional tax will be entitled to disregard those dividends.

Sub-clause (2.), which will not amend the Principal Act, is a drafting provision relating to the transition from the present assessment basis of taxing dividends received by non-residents to the proposed withholding tax basis.

The purpose of the sub-clause is to authorize the ascertainment of provisional tax for the 1960-61 income year without regard to dividends paid by Australian companies to non-residents during the year ending 30th June, 1960. Those dividends will, however, remain liable for income tax as assessable income of that year.

Clause 29: Amount of Provisional Tax.

This clause proposes a drafting amendment of section 221YC(5.) of the Principal Act and is complementary to clause 27.

The amendment is consequential upon the introduction of dividend withholding tax and enables dividends subject to that tax to be disregarded in the ascertainment of provisional tax.

Clause 32: Provisional Tax or Advance Payment to be Credited against Tax Assessed.

The purposes of this clause are twofold, namely -

A.
To delete from section 221YE of the Principal Act obsolete references to advance payments by companies.
B.
To effect a drafting amendment in that section consequent upon the introduction of dividend withholding tax.

To achieve these results it is proposed to repeal the present section 221YE and to insert in its place a new section 221YE that excludes all references to advance payments by companies. Those references are redundant and have had no effect in assessments for income years after 1951-52.

Sub-section (2.) of the present section 221YE is not being re-enacted, since its purpose related only to advance payments.

The reference to dividend withholding tax in paragraph (c) of the new section 221YE will ensure that any excess of provisional tax paid over tax assessed may be set-off against a liability for withholding tax. This provision will have practical effect only where, for any reason, the full amount of that tax has not been met by deductions at the source.

Clause 36: Collection of Dividend Withholding Tax.

By clause 36, it is proposed to insert in the Principal Act a new Division relating to dividend withholding tax.

Provisions for the levying of that tax have been examined in relation to clause 18. The Division now proposed by clause 36 will provide machinery for the collection of the withholding tax levied under earlier provisions.

It is proposed that the tax be collected by means of deductions made from dividends at the time they are paid. These deductions will be made by Australian companies paying dividends to non-residents on or after 1st July, 1960. Where a dividend is paid by an Australian company to an Australian resident on behalf of a non-resident, the Australian resident will make a deduction from the dividend, if it is paid to him on or after 1st July, 1960.

The amounts deducted from dividends will be remitted to the Commissioner of Taxation in payment of the dividend withholding tax due on the dividends.

Section 221YJ: Object of Division.

This section is a formal provision stating the object of the proposed new Division, namely, to facilitate the collection of dividend withholding tax.

Section 221YK: Definitions.

Sub-section (1.) is a drafting measure to ensure that Division 4 applies to a part of a dividend in the same way as it applies to the whole of a dividend.

Sub-section (2.) is also a drafting measure ensuring that provisions under which Australian companies deduct tax from dividends paid to non-residents have like effect in the case of a liquidator who distributes amounts deemed by section 47 of the Principal Act to be dividends.

Section 221YL: Deductions from Dividends.

Sub-section (1.) specifies the circumstances in which deductions are to be made by a company paying dividends to non-residents shareholders or to persons outside Australia. There are, however, provisions in sub-sections (3.) and (4.) and in section 221YM that modify the effects of sub-section (1.).

Liability to make deductions will fall upon a company that is a resident of Australia if dividends declared by it are paid to a shareholder whose address is shown in the share register of the company as being outside Australia. If shares or stock are registered in the names of two or more persons, it will be necessary for the company to make deductions if the address of one or more of the holders of the shares or stock is outside Australia.

An obligation to make deductions will also fall on the company where a shareholder directs that a dividend be paid to him, or to some other person, at an address outside Australia.

It is provided that the deductions be made at or before the time that a dividend is paid and the amount of the deductions will, like tax instalments deducted from salary and wages, be prescribed by regulation.

The maximum penalty for failure to make deductions required by the sub-section will be Pd100.

Sub-section (2.) will apply where a dividend is paid to a person in Australia who receives the dividend, either wholly or in part, on behalf of a non-resident. In these circumstances, the liability to make the prescribed deduction will fall upon the person in Australia who receives the dividend.

The person so liable will be required to make the deduction as soon as the dividend is paid to him. The obligation to make the deduction will exist whether the person in Australia retains the dividend at the direction of the non-resident or remits it to him.

As in the case of sub-section (1.), a penalty of Pd100 is provided for non-compliance with the sub-section.

Sub-sections (3.) and (4.) will operate to relieve a company or person from the obligation to deduct withholding tax in certain circumstances.

Paragraph (a) of sub-section (3.) will remove this obligation in relation to dividends which are exempted from withholding tax under section 128B.

As explained in relation to section 128B - see page 10 of this memorandum - dividends paid prior to 1st July, 1960, will not be subject to dividend withholding tax. There will accordingly be no obligation to make a deduction from a dividend paid by an Australian company before that date.

A trustee, attorney, sharebroker or other Australian resident who receives a dividend on behalf of a non-resident, will not be required to make a deduction from a dividend paid to him before that date, even though it is paid by him to the non-resident after 30th June, 1960.

Deductions will not be necessary from dividends paid after that date if the dividends are exempt from withholding tax. An outline of the dividends exempt from the tax has been given in relation to section 128B - see page 10 of this memorandum.

In order to avoid a duplication of deductions, paragraph (b) will also remove the obligation where the correct amount of withholding tax has already been deducted by a company or person through whose hands a dividend has previously passed.

Under sub-section (4.), there will also be no obligation to deduct withholding tax in relation to a dividend that is not paid in money, or is not actually credited to a person. In these circumstances - for example, where a dividend is satisfied by the issue of shares - the company or person concerned may hold no funds from which a deduction is practicable. The procedure to be followed in these cases is set out in section 221YP which is considered on page 21 of this memorandum.

Sub-section (5.) is a drafting measure to define the meaning of the term "money" as used in sub-section (4.). "Money" will include not only legal tender but also postal notes, money orders, bills of exchange, promissory notes, drafts and letters of credit. Deductions will be necessary from dividends paid in any of those forms.

Section 221YM: Exemptions and Variations.

This section will empower the Commissioner, in special circumstances, to grant exemption from liability to make deductions from dividends, or to vary the amounts otherwise deductible. For example, cases might arise in which a dividend is paid to a trustee resident overseas although the beneficiary actually entitled to the dividend is resident in Australia. There may also be cases in which an Australian resident temporarily outside Australia arranges for a dividend to be paid to him at an overseas address. In such circumstances the Australian recipient of the dividend will be liable for tax under the general provisions of the law. As the withholding tax provisions will be inapplicable, the Commissioner may grant exemptions from the need to make deductions.

This provision corresponds with section 221D of the Principal Act that grants the Commissioner a similar discretion in relation to the deduction of tax instalments from salaries and wages.

Section 221YN: Deductions to be Forwarded to Commissioner.

Sub-section (1.) of this section proposes to place upon a company or person making a deduction from a dividend an obligation to remit the amount of the deduction to the Commissioner and to furnish a statement showing details of the deduction.

Under paragraph (a) the amount deducted is to be remitted to the Commissioner within twenty-one days after the end of the calendar month in which the deduction is made.

In order that credit may be allowed to the individual shareholders for the amounts deducted from their dividends, it will be necessary for the Commissioner to have particulars of the deductions. Paragraph (b) accordingly provides for a statement in an authorised form to be furnished to the Commissioner in respect of the deductions made. The statement, which is to be signed by or on behalf of the person who made the deductions, may be forwarded to the Commissioner at any time not later than two months after the end of the financial year in which the deductions were made from the dividends. The Commissioner will be authorised to extend the time for lodging the statement.

Sub-sections (2.) and (3.) prescribe penalties for failure to remit deductions or supply information to the Commissioner in accordance with sub-section (1.). The penalties correspond with those applicable where a group employer fails to comply with the law in relation to deductions made from salary or wages.

Sub-section (4.) provides for a late payment penalty at the rate of 10 per cent per annum in respect of deductions not remitted to the Commissioner by the due date. Sub-section (5.), however, will empower the Commissioner to remit this charge, either wholly or in part, where the circumstances are considered to warrant that course.

Section 221YP: Dividends not in Money not to be Paid until Payment made to Commissioner on Account of Tax.

Since it would not be practicable for a person to make a deduction from a dividend not paid in money or a dividend not credited to a shareholder, section 221YL, that has already been considered, does not provide for the making of deductions in those cases. In this connection, it is mentioned that a liability for withholding tax may arise where a dividend is distributed in the form of bonus shares rather than in money.

In order that the tax may be collected, section 221YP will operate to defer the payment or transfer to the shareholder of such a dividend until an amount equal to the withholding tax has been lodged with the Commissioner.

A penalty of Pd100 is provided for failure to comply with this condition.

Where the required amount has been lodged with the Commissioner, provision is made in sub-section (3.) for the Commissioner at the request of the person paying the amount, to notify the company or person holding the dividend so that the dividend may be released to the shareholder.

Section 221YQ: Liability of Person who Fails to make Deductions, etc.

This section proposes to place certain liabilities upon a company or other person who fails to make an appropriate deduction from a dividend. The proposals follow, in broad outline, the provisions applying where an employer fails to deduct tax instalments from salary or wages.

Sub-section (1.) will apply where a prescribed deduction has not been made from a dividend paid in money. It will also apply where a person has allowed a dividend not in money or not credited to a non-resident to be distributed to a non-resident before an appropriate amount has been paid to the Commissioner.

In these circumstances, the company or person who contravened the provisions concerned will be liable to pay to the Commissioner an amount equal to the withholding tax due on the dividend from which the appropriate deduction was not made. A corresponding liability will arise if, in relation to a dividend not paid in money or credited to a shareholder, the amount of the withholding tax is not paid to the Commissioner before the dividend is passed on to the non-resident shareholder entitled to it.

A company or person liable to pay an amount to the Commissioner in those circumstances is also liable to pay any late payment penalty that may have been incurred under section 128C(3.) which has been considered on page 11 of this memorandum.

Sub-section (2.) relates to a company or other person who has failed to make a deduction from a dividend paid in money and who has actually made a payment to the Commissioner in accordance with sub-section (1.). Under sub-section (2.), that company or person may take action to recover from the non-resident to whom the dividend was paid the amount that has been paid to the Commissioner.

Under sub-section (3.), an amount actually paid to the Commissioner under sub-section (1.) of this section will be allowed as a credit against the withholding tax due in the same way as if deductions had been made or payment of the withholding tax had been effected at the appropriate time.

Sub-section (4.) will operate where additional tax in the nature of late payment penalty has been remitted by the Commissioner under section 128C(4.) - see page 11 of this memorandum.

In these circumstances, the credit otherwise allowable under sub-section (3.) of section 221YQ to the person liable to pay withholding tax will be reduced by the amount of the remission. In place of that credit the Commissioner will pay to the person who bore the additional tax an amount equal to the additional tax remitted.

Section 221YR: Recovery of Amounts by Commissioner.

Sub-section (1.) of this section provides authority for the Commissioner of Taxation or a Deputy Commissioner to sue for recovery of deductions made from dividends but not passed on to the Commissioner.

Sub-section (2.) adopts, for the purposes of such actions, the provisions of section 243 of the Principal Act so far as they apply at present to the recovery of pecuniary penalties under the Act. That section provides that every averment of the prosecutor or plaintiff contained in the relevant information, complaint, declaration or claim shall be prima facie evidence of the matter averred.

Sub-section (3.) similarly adopts the provisions of section 249 of the Principal Act relating to the enforcement of court orders.

Under section 249, an order made by a court of summary jurisdiction for the payment of an amount due to the Commissioner may, in prescribed conditions, be registered in a court having jurisdiction in civil proceedings. Upon registration of that order, proceedings for the recovery of the amount may be taken in the same way as if the order had been made by the court having civil jurisdiction.

Sub-section (3.) will enable this procedure to be followed in relation to the recovery of amounts deducted from dividends.

Section 221YS: Credits for Deductions Made from Dividends and Amounts Paid to Commissioner.

This section provides for the allowance of credit where deductions have been made from dividends paid to a non-resident or amounts have been paid to the Commissioner in relation to dividends not paid in money or credited to a non-resident.

Sub-section (1.) applies where a deduction is made by a company paying a dividend, or by an agent who receives the dividend on behalf of the non-resident, in accordance with section 221YL. The sub-section provides for credit for the amount of the deduction to be allowed to the non-resident who is entitled to the dividend and is thus liable for payment of the actual withholding tax. In the generality of cases, the deduction made will be equal to the liability for the withholding tax and the allowance of credit for the deduction will accordingly extinguish that liability.

Sub-section (2.) makes corresponding provision for the allowance of credit to the non-resident where a direct payment of the withholding tax is made under section 221YP in respect of a dividend not paid in money or credited to a non-resident.

Section 221YT: Application of Credits.

This section provides the machinery for the application of credits to which a person may become entitled under this Division.

Sub-section (1.) formally provides that a credit is a debt payable by the Commissioner of Taxation on behalf of the Commonwealth.

Sub-section (2.) will enable the Commissioner to apply credits allowed under the Division against any other outstanding taxes arising under laws of which the Commissioner has the general administration, e.g., unpaid income tax on income other than dividends. If the credits exceed the total tax due, a refund will be made.

Sub-section (3.) will ensure that tax against which a credit has been applied shall be deemed to be paid. It will also deem that tax to have been paid at the time the Commissioner applied the credit or at some earlier time, if the Commissioner so determines.

In the generality of cases, the Commissioner will apply credits against withholding tax and will do this as at the date on which deductions made from dividends are paid to him. If, however, the person who made the deduction does not remit the amount to the Commissioner by the due date, the application of the credit will be delayed. This may be to the disadvantage of the non-resident shareholder e.g., additional tax for late payment of the withholding tax may accrue. In order that such a result may be avoided, the Commissioner may determine a date before application of the credit as the date on which the tax is deemed to have been paid.

Sub-section (4.) will grant to the Commissioner a right of recovery from the taxpayer where, for any reason, an amount credited to him exceeds the amount of credit to which he was actually entitled.

Section 221YU: Priority of Amounts Payable under this Division over other Debts.

By section 221YR, which has been considered on page 22 of this memorandum, the Commissioner is enabled to take action for the recovery of deductions made from dividends.

Section 221YU will have application where the property of a person who has made deductions from dividends has been vested in or come under the control of a trustee, including a liquidator of a company. For example, where a person has become bankrupt or a company is in liquidation, the Commissioner's right of recovery lies against the trustee or liquidator. The provisions proposed correspond with section 221P of the Principal Act relating to the recovery of instalments deducted by employers from salary or wages.

Sub-section (1.) provides that in the circumstances described the trustee or liquidator shall pay to the Commissioner the deduction made from the dividends.

Sub-section (2.) will authorise the Commissioner to collect amounts deducted from dividends in priority to other claims against the trustee or liquidator. This proposal recognises that amounts deducted from dividends are, in effect, moneys held in trust for the Commissioner.

Sub-section (3.) will, however, enable a trustee, including a liquidator, to obtain payment of his expenses and of his fees in priority to a claim by the Commissioner. The principle underlying this proposal is the same as applies in section 221P of the Principal Act and has been considered in this memorandum in relation to clause 24.

Section 221YV: Persons Discharged from Liability in Respect of Deductions made from Dividends.

It is usual for a company declaring a dividend to specify a date on which payment is to be made and the dividend becomes a debt due by the company on that date.

Since the income tax law will require deductions to be made from dividends paid to non-residents, only the balance then remaining will be available for payment to the shareholder. Section 221YV is accordingly designed to protect a company or person making a deduction from a dividend against legal action by a non-resident for payment to him of the full amount of the dividend.

Section 221YW: Payments to and from Consolidated Revenue Fund.

This is a machinery clause that provides for the payment into the Consolidated Revenue Fund of moneys received on account of deductions made from dividends.

It also provides the requisite authority for the appropriation of any amount that the Commissioner is liable to pay to a person under the Division.

Section 221YX: Time for Prosecutions.

The penalties prescribed for offences against the proposed Division 4 of Part VI. of the Principal Act are of a pecuniary nature or impose a term of imprisonment not exceeding six months. Accordingly, in the absence of a specific enactment to the contrary, the provisions of the Crimes Act would require a prosecution for an offence against this Division to be commenced within one year after the offence had been committed.

In relation to certain other offences, the Principal Act already enables prosecutions to be commenced at any time, e.g., offences in relation to instalments deducted from salary or wages. As a breach of the provisions concerning the collection of withholding tax may not be detected within one year after its commission, it is proposed that the institution of prosecutions for such offences be also permitted without a time limitation.

Section 221YY: Joinder of Charges under this Division.

This section is designed to expedite prosecution proceedings where a person commits a number of similar offences against the provisions covering the collection of withholding tax. In its terms, it is identical with provisions already contained in the Principal Act in relation to the collection of tax instalment deductions made from wages and salaries.

More than one charge may be included in the same complaint and charges so joined shall be tried together unless the court orders that any charge shall be tried separately.

The court may impose a single penalty in respect of all charges joined in the one complaint, subject to the proviso that the penalty shall not be greater than the sum of the maximum penalties that could be imposed if each charge was tried separately.


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