House of Representatives

Income Tax and Social Services Contribution Assessment Bill 1951

Income Tax and Social Services Contribution Assessment Act 1951

Supplementary Explanatory Memorandum

Proposed to be Moved by the Treasurer, the Rt. Hon. Sir Arthur Fadden.
Notes Explaining Amendment to Clause 6 of the Bill, and Insertion of New Clause 9a



The purpose of this amendment is to exempt from taxation income derived by Australian gold producers from sales of gold on overseas markets for industrial purposes.

In the light of developments overseas and of the difficulties being experienced by Australian gold producers as a result of increasing production costs, the Government has decided to permit the sale by the producers of newly mined gold on overseas markets for industrial purposes.

This decision follows an announcement by the International Monetary Fund of a new policy which in effect gave members freedom to determine their own policy in relation to these sales. Since the announcement a number of countries which had not previously permitted such sales have announced that their producers will in future be permitted to sell gold for industrial use on markets where premium prices are obtainable. The countries concerned include Canada, Southern Rhodesia and the gold-producing British colonies. South African gold producers had for some time previously been selling a portion of their gold output on premium markets.

Under the existing provisions of the income tax law, income derived from the working of a mining property principally for the purpose of obtaining gold is exempt from income tax and social services contribution. The exemption also applies in some circumstances where both gold and copper are produced. A taxpayer entitled to this exemption would not be liable to taxation on income derived from sales of gold made on a premium market.

However, the amount of gold which will be saleable at a premium on overseas markets during any given period cannot be accurately foreseen, and the proposal of the industry, which the Government has approved, is to form an association open to all producers for the purpose of arranging sales of gold overseas. The procedure proposed is that individual producers should as at present sell their output to the Commonwealth Bank at the official price. The producers' association will then purchase gold from the Bank from time to time and arrange for its sale abroad in an approved form. The income derived from these premium sales will be distributed periodically among the association members in such a way as to ensure that all producers receive an equitable share of the proceeds.

As the association would not in itself be engaged in the working of a mining property the income derived from premium sales would, under the existing law, be liable to taxation.

It is considered appropriate to grant to gold producers deriving income as a result of sales made by the association on premium markets, the same exemption as they would have enjoyed if the gold had been sold directly by them on those markets.

The amendments now proposed will give effect to this principle and will extend to shareholders of gold mining companies the exemption which would have applied in respect of dividends received by them had the gold mining companies sold the gold on a premium market. No extension of the principle underlying the existing exemptions is proposed.

The amendments will apply for the income year ending on the 30th June, 1952 and subsequent years.


Sub-section (1.)

This provision will exempt from income tax and social services contribution profits made, in certain circumstances, from the buying and selling of gold.

The sub-section requires that the trading operations be conducted by a company in respect of gold produced in Australia (which includes Papua) or New Guinea. This test accords with the existing provision exempting the profits derived from gold-mining in Australia and New Guinea.

The exemption proposed is intended to benefit the producers of gold and will not apply unless all the shareholders in the company conducting the trading operations have carried on mining operations in Australia. The exemption will be granted only to companies approved by the Treasurer. Furthermore the profits must arise from the sale of gold purchased from the Commonwealth Bank and for export from Australia.

Sub-section (2.)

The operation of this provision will enable gold producers to enjoy the same freedom from tax as would be provided for them if the gold had been sold by them direct on premium markets. In order to achieve this result the sub-section will cause dividends paid by a company out of profits exempt under sub-section (1.) of the section to be treated as the proceeds of gold sales for the purposes of section 23(o) of the present law.

Section 23(o) exempts income derived from the working of a mine principally for the purpose of producing gold or, in certain circumstances, gold and copper.

Dividends deemed to be the proceeds of gold sales will enjoy the same freedom from tax as if they had, in fact, been receipts from the sale of gold produced by the mine owner.


The present section 44(2.)(c) exempts from tax dividends paid by gold-mining companies wholly and exclusively out of the net exempt income derived by those companies from the working of a gold-mining property in Australia or New Guinea. Where such a dividend is paid to another company, a dividend paid by that other company wholly and exclusively out of the exempt dividend is also exempt.

The purpose of the proposed provision is to extend the same measure of exemption to dividends which have as their origin the profits of a company which are exempt under the new section 23C.

The new sub-section will deem these exempt dividends to be income from mining operations in Australia or New Guinea. The requirements of section 44(2.)(c) will then be satisfied and exemption of the dividends will be authorised by that provision.