House of Representatives

Income Tax and Social Services Contribution Assessment Bill 1955

Income Tax and Social Services Contribution Assessment Act 1955

Notes for the Minister's Second Reading Speech

In the course of my recent Budget speech, I explained that, because of prevailing economic conditions, there would be no scope for taxation concessions which would involve a reduction of revenue in this financial year.

Whilst the passing weeks confirm the wisdom of that decision, it is necessary to introduce some amendments of the Income Tax Assessment Act in order to give effect to decisions reached by the Government either before or after this year's Budget was framed. Such are the purposes of the Bill now before this House,

Primary Producers - Depreciation

Amongst the proposed amendments is a provision to extend, by one year, the special 20% depreciation allowance to primary producers.

Honourable members will recall that this allowance was introduced by the Government in 1952, as one of a number of measures designed to assist in the drive for increased production in the primary industries. Under the present law, a deduction is allowed in each of five years of one-fifth of the cost of -

(a) structural improvements situated on land used for agricultural or pastoral purposes if constructed between 1st July, 1951 and 30th June, 1955 or, in the case of improvements commenced before 30th June, 1955, if completed by 30th June, 1956; and

(b) plant, machinery and equipment (other than passenger motor vehicles) used wholly and exclusively for agricultural or pastoral purposes, if installed between 1st July, 1951 and 30th June, 1955.

By clause 7 of the Bill, it is proposed to extend the period of operation of this special allowance to 30th June, 1956. Structural improvements which are commenced before 30th June, 1956 and completed by 30th June, 1957 will also qualify for the special allowance.

When I announced extensions of the primary producers' depreciation allowances some months ago, I made it clear that the Government's decision should be regarded as an interim one. Final consideration of the question would necessarily have to await a comprehensive examination of the Hulme Committee's report on depreciation rates generally.

As Honourable Members know, the recommendations of that Committee have been very carefully considered by the Government, but, for reasons explained in the Budget Speech, the conclusion was reached that the wisest course, for the present, would be to defer action on the general issues of depreciation allowances.

Primary Producers - Sales of Live Stock

Another amendment proposed in this Bill which will be of assistance to some primary producers is one relating to the taxation of profits arising from live stock sales necessitated by the Tick Eradication Campaign. That campaign, which will enter an active phase in January next, is designed to eradicate cattle tick from two important dairying and beef cattle districts on the North Coast of New South Wales.

It will not be necessary for me to traverse in detail the various stages in the Campaign. Suffice it to say that, for the purposes of the Campaign, some stockowners will be obliged to dispose of substantial numbers of cattle, and to refrain from re-stocking for at least sixteen months.

Under the present law the profits from these abnormal sales would require to be included in the stockowner's income tax assessment of the year of sale. As a result, his liability to income tax might be so increased as to make it difficult for him to purchase cattle for re-stocking at the conclusion of the Campaign.

As a means of minimizing these financial difficulties, it is proposed by Clause 5 of the Bill to give the stockowners concerned a right of election to be taxed on one-fifth of the profit in each of five years commencing with the year in which the stock is sold. By so electing the stockowner will be able to defer the greater part of his tax liability on the profit arising from these sales and thus obtain material assistance in providing for re-stocking at the conclusion of the Campaign.

Although not directly related to income tax, I should mention, by way of illustrating this Government's practical interest in the Tick Eradication Campaign, that the total contributions by the Commonwealth towards its cost will, by the end of the current financial year, exceed three-quarters of a million pounds. This expenditure, in conjunction with the taxation measures proposed, should encourage all concerned to give the fullest support to this concerted effort to rid the cattle industry of one of its most costly and intractable pests.

Residents of Isolated Areas

I turn now to Clauses 3 and 11, which are designed to provide exemptions and deductions for residents of Macquarie and Heard Islands, the Australian Antarctic Territory and Cocos or Keeling Islands.

As Honourable Members know, the Assessment Act has provided, for some years now, for a Zone allowance to residents of isolated areas. In the case of residents of the more isolatdl area - known as Zone A - a deduction of Pd120 per annum is allowed. The disadvantages suffered by residents of the places I have named are as great as those encountered by those resident in the present Zone A.

In anticipation of these amendments, the deduction of Pd120 has, since 1st July, 1952, been taken into account in fixing the amount of tax instalments deducted from salaries and wages of residents of those areas. The present Bill will bring the assessments of the people concerned into line with the tax instalments deducted from their earnings.

So far as residents of Cocos or Keeling Islands are concerned, an even wider concession is proposed. As these Islands will shortly become one of the external territories of the Commonwealth, it is appropriate that residents of the Islands should receive the same exemptions as those applying to our other external territories - Papua, New Guinea and Norfolk Island.

It is proposed by Clause 3 that residents of Cocos or Keeling Islands shall be wholly free from Commonwealth tax on income derived by them from sources within those Islands. This exemption will operate on and from 1st July, 1953.


By Clause 8 it is proposed to allow the deduction of gifts to the Duke of Edinburgh's Study Conference Account maintained by the Department of Labour and National Service as well as gifts to the Australian and New Zealand Association for the Advancement of Science and the Australian Administrative Staff College.

As Honourable Members know, His Royal Highness the Duke of Edinburgh has sponsored a Study Conference to be held at Oxford next July for the purpose of considering the human problems of industrial communities within the British Commonwealth and Empire. It is intended that Australia shall be represented at the Conference by 25 delegates chosen from various sections and levels of industry. For the purpose of paying the travelling expenses of these delegates (which are estimated to cost about Pd15,000), a fund will be established by the Commonwealth Department of Labour and National Service. Part of the fund moneys has been contributed by the Commonwealth but, to the extent of about Pd10,000, contributions will be sought from organizations of employers and employees, as well as from professional bodies and industrialists.

The Study Conference will be of undoubted value to Australian industry and it is thought appropriate that contributions should be allowed as income tax deductions.

Under existing provisions of the Assessment Act, gifts to the Australian Academy of Science are allowed as deductions. It is now proposed to extend a similar allowance to gifts to the Australian and New Zealand Association for the Advancement of Science.

A more recently established institution which is proposed to be included within the scope of the allowance is the Australian Administrative Staff College. The primary objects of this College are the instruction of men and women in leadership, administration and cognate subjects, and the carrying out of research into the best methods of administration. In many respects, its objects and functions are comparable with those of a public university, gifts to which are already allowed as deductions.

Profits from Uranium Mining.

By clause 4 of the Bill it is proposed to repeal the existing section 23D and to insert a new Section 23D in the Principal Act.

The existing Section 23D exempts the income derived until the end of the income year 1959-60 from the working of a mining property in Australia, Papua or New Guinea for the purpose of obtaining uranium-bearing ore.

The conditions attached to the exemption are that the taxpayers deriving the income shall be residents of Australia and that the Commissioner of Taxation shall be satisfied that the uranium recoverable has or will become the property of the Commonwealth or has been or will be sold or disposed of to a person approved by the Commonwealth.

In the case of a company, it is provided that not less than three-quarters of the voting power shall be controlled directly or indirectly by individuals who are residents of Australia.

Under the new Section 23D it is proposed to remove the qualification that not less than three-quarters of the voting power shall be controlled by resident individuals so that the exemption will apply to all companies resident in Australia.

It is also proposed to extend the exemption to income derived from the treatment in Australia, Papua or New Guinea of uranium ore for the purpose of recovering uranium concentrates. It will be necessary, however, that the treatment shall be carried out by the company or individual who mined the ore. It will not be essential that the treatment shall be carried out on the mining property, or in the course of working the mining property.

By Clause 6 of the Bill it is proposed to extend the exemptions to those dividends paid wholly and exclusively out of exempt income from the treatment of uranium bearing ore. This exemption already applies to dividends paid out of exempt income from the working of a mining property.

Friendly Society Dispensaries

There remains for consideration one other provision in this Bill - clause 10 which provides for the taxation of income derived by Friendly Society dispensaries.

At present, income tax is not paid by Friendly Societies or by Friendly Society dispensaries. However, many Friendly Society dispensaries have been granted the right to dispense benefits under the National Health Services Scheme to members of the public, whether they are members of Friendly Societies or not. In addition, practically all dispensaries may sell patent medicines, toilet preparations and other goods to members of the public.

In these circumstances, complete freedom from income tax has conferred a considerable trading advantage on the dispensaries over other pharmacists operating in competition.

The Chifley Government sought to remedy this situation in 1947 by amending the Assessment Act to impose tax on 15% of amounts received from the Commonwealth by the Friendly Society dispensaries under the Pharmaceutical Benefits Act 1947 and on the gross proceesr of the sales of medicines and other goods as well as special charges for the supply of pharmaceutical benefits. As the Chifley scheme was virtually inoperative, the tax was not actually levied.

The National Health Services have now been established by the present Government on a sound basis, and the businesses of Friendly Society dispensaries have expanded. It has become necessary, therefore, to look at the problem again in order that the dispensaries and other pharmacists shall be placed as nearly as possible on an equal footing so far as income tax is concerned.

After an exhaustive examination the Government proposes that the dispensaries shall in future pay tax on 10% of the gross income they receive from the Commonwealth under the National Health Services Scheme and from trading with the general public, including members of Friendly Societies. However, amounts received by Friendly Society dispensaries in the form of per capita payments from their constituent Friendly Societies for the provision of benefits to members of those societies will continue to be free from income tax.

Effect will be given to this proposal in the present Bill. The liability to tax will arise only in respect of amounts received by Friendly Society dispensaries, from the sources mentioned, on and after the day on which the Bill receives the Royal Assent.

At the same time the inoperative provisions introduced by the Chifley Government in 1947 will be repealed. Although the basis of taxation to be imposed in future will be similar to that which was proposed in 1947, the proportion of gross receipts subject to tax will be 10% instead of 15%.

The new provisions will remove the taxation discrimination between various classes of pharmacists without imposing an unfair burden upon Friendly Society dispensaries.

I commend the Bill to Honourable Members.