Explanatory Memorandum(Circulated by the Treasurer, the Rt. Hon. William McMahon).
The purpose of this memorandum is to give explanations of three Bills by which, in broad terms, it is proposed to -
- Authorise the creation of Commonwealth stock, to be known as "drought bonds", and to prescribe the terms and conditions under which drought bonds may be issued and redeemed (Loan (Drought Bonds) Bill 1969).
- Amend the income tax law to provide, in specified circumstances, for the allowance of income tax deductions for the cost of drought bonds purchased and for adjustments when the bonds are redeemed, either by inclusion of an appropriate amount in assessable income of the year of redemption or by reducing, in effect, the proceeds payable on redemption by the amount of tax saved by the deduction allowed for the cost of the bonds. (Income Tax (Drought Bonds) Bill 1969 and the Income Tax Assessment Bill (No. 3) 1969).
The first Bill - The Loan (Drought Bonds) Bill 1969 - provides for the creation and issue of drought bonds and for the redemption of those bonds. Features of the Bill are:-
- The Governor-General may create stock, called "drought bonds" and authorize the Treasurer to issue the stock so created (Clause 5).
- . Drought bonds are to be issued and sold on such terms and conditions as the Treasurer determines (Clause 6).
- Drought bonds are not to be transferable from one person to another (Clause 13).
- Drought bonds are to be issued only as inscribed stock and generally to be subject to the laws concerned with inscribed stock (Clauses 5 and 14).
- Drought bonds are to be redeemable -
- upon maturity (Clause 15),
- where a grazing property of the bondholder is in a drought declared area or where the bondholder has suffered substantial damage to or loss of pastures or livestock by fire or flood (Clause 19),
- where the bondholder is suffering serious financial hardship (Clause 19),
- in certain circumstances, where the bondholder sells the whole or part of grazing business (Clause 20),
- where the bondholder has permanently ceased to carry on business as a grazier (Clause 21),
- upon death, bankruptcy or winding-up of the bondholder (Clause 22), or
- where deductions for income tax purposes are not allowable in relation to the purchase of drought bonds (Clause 23).
- The maximum holding of bonds by any one person or company is to be $50,000 (Clause 24).
- The Commissioner of Taxation is, in certain circumstances, authorised to declare that drought bonds have become redeemable.
- Where the Commissioner does not declare that drought bonds have become redeemable, his decision may be reviewed by a Taxation Board of Review, with right of appeal to the Court on a question of law.
- More detailed explanations appear on pages 5 to 20 of this memorandum.
The second Bill - the Income Tax (Drought Bonds) Bill 1969 - proposes the imposition of a special income tax in relation to certain redemptions of drought bonds. The special income tax will be payable by the bond holder where bonds for which income tax deductions have been allowed become redeemable for reasons other than drought, fire or flood. The income tax payable will be equal in amount to the tax saved by the bondholder as a result of his having been allowed income tax deductions for the cost of the bonds.
More detailed explanations will be found at pages 21 and 22 of this memorandum.
The third Bill - the Income Tax Assessment Bill (No. 3) 1969 - proposes a number of amendments to the income tax law, relating to the introduction of the drought bond scheme. Under the proposed scheme -
- a grazier who, in a year of income, derives not less than ninety per cent of his gross farm receipts from sheep and beef cattle, may claim a deduction for income tax purposes in respect of his purchases of drought bonds in that year of income (Clause 5);
- the deduction allowable in respect of any one year of income is to be limited to twenty per cent of the taxpayer's gross receipts from grazing sheep and beef cattle in that year (Clause 5);
- the deduction may be available to individuals (including partners) and to companies but not to partnerships or trustees (Clause 5);
- the total of the deductions allowed or allowable to any one taxpayer, in respect of drought bonds held by him at any one time is not to exceed $50,000 (Clause 5);
- upon a redemption of bonds because of drought or substantial loss of stock or pastures through fire or flood, there is to be included in the bond holder's assessable income of the year of redemption an amount equal to the amount of the income tax deductions allowed for those bonds; and
- upon a redemption of bonds for any other reason, a special income tax will become payable by the holder of the bonds that will be equal in amount to the tax saved by the bond holder as a result of income tax deductions allowed for the purchase of those bonds.
More detailed explanations appear on pages 23 to 43 of this memorandum.