Explanatory Memorandum(Circulated by authority of the Treasurer, the Rt. Hon. Harold Holt.)
The purpose of this Bill is to amend the Income Tax and Social Services Contribution Assessment Act 1936-1960 (referred to in these notes as the Principal Act) so as to alter the basis of assessment prescribed in relation to life assurance companies and to modify the conditions under which superannuation funds are exempted from liability to income tax.
The main features of the Bill are -
- In relation to life assurance companies -
- Exemption from tax of that part of the income of a life assurance company that is referable to policies issued in connection with superannuation schemes eligible for tax exemption, provided that the company invests specified proportions of its assets in Commonwealth and other public securities;
- Provision for the amount of certain deductions and rebates allowable to a life assurance company to vary according to the proportion of public securities in its assets;
- Extension to all companies engaged in life assurance of the special basis of assessment that has hitherto applied only to companies the sole or principal business of which is life assurance;
- In relation to superannuation funds -
- Continuation of the present exemption of the income of a provident, benefit, superannuation or retirement fund, conditional upon the fund investing specified proportions of its new moneys in public securities;
- Provision of a special basis of assessment under which tax will be levied on such funds if the specified ratios are not maintained.
The amendments will have effect for the first time in assessments based on the 1961-1962 income year. The exemption of the income of life assurance companies referable to superannuation business will apply in respect of income derived on or after 1st July, 1961.
The operation of a number of the proposed provisions will be dependent upon whether a life assurance company or a superannuation fund holds public securities amounting to not less than 30% of its total assets (including Commonwealth securities amounting to not less than 20% of total assets). For convenience of reference, these proportions will be referred to throughout these notes as the "30%-20% ratio of public securities".