House of Representatives

Explanatory Memorandum

(Circulated by the Treasurer, the Rt. Hon. William McMahon).

Notes on Clauses

Clause 1: Short Title and Citation.

This clause formally provides for the short title and citation of the Amending Act and the Principal Act as amended.

Clause 2: Commencement.

Section 5(1A.) of the Acts Interpretation Act 1901-1966 provides that every Act shall come into operation on the twenty-eighth day after the day on which the Act receives the Royal Assent, unless the contrary intention appears in the Act. By this clause it is proposed that the Amending Act shall come into operation on the day on which it receives the Royal Assent. This will facilitate administrative arrangements in connection with the proposed November Commonwealth Loan.

Clause 3: Disposal of Certain Securities.

Clause 3 will amend section 26C of the Principal Act which applies to stock and other securities issued by the Commonwealth that do not bear interest as such, but are redeemed at an amount above their issue price. Section 26C provides that, where such a security is disposed of or redeemed, the excess of the value of the security on the day of disposal, or of the amount received by the taxpayer on redemption, over the cost to him of the security is to be included in his assessable income.

Sub-sections (3.) and (3A.) of section 26C provide for amounts as included in assessable income, other than amounts in respect of Treasury Notes issued after 13 February 1966, to be deemed to be interest of a kind to which section 160AB of the Principal Act applies. Consequently where such amounts are included in the taxable income of a taxpayer, a rebate of ten cents in the dollar on the amount so included (corresponding with the rebate on interest on Government loans) is available.

As it is proposed by clause 4 to discontinue the rebate under section 160AB in respect of interest from securities issued on or after 1 November 1968, sub-sections (3.) and (3A.) of section 26C will be redundant in relation to such securities to which section 26C applies. Accordingly, it is proposed by sub-clause (1.) of clause 3 to amend section 26C to omit sub-sections (3.) and (3A.).

Sub-clause (2.) of clause 3 will ensure that the rebate under section 160AB will continue to be available in respect of income resulting from the disposal or redemption of securities of the classes concerned that were issued before 1 November 1968.

Clause 4: Rebate in Respect of Loan Interest.

By this clause it is proposed to amend section 160AB of the Principal Act to discontinue, in respect of interest from securities issued on or after 1 November 1968, the rebate that, but for the proposed amendment, would have been available under that section.

Section 160AB relates to interest paid on Commonwealth loans and certain other public loans. It entitles the recipient of the interest to a rebate of ten cents for every dollar of that interest included in his taxable income.

By the amendment of section 160AB it is proposed to withdraw this rebate in respect of interest from securities issued on or after 1 November 1968. As already mentioned, the rebate will, however, continue to be available in respect of interest on securities issued before that date.

To give effect to this proposal, paragraph (a) of clause 4 will amend section 160AB to make the application of that section subject to the provisions of a new sub-section to be inserted by paragraph (b).

The new sub-section being inserted by paragraph (b) of clause 4 provides that the rebate under section 160AB will not be available in respect of interest from securities issued after 31 October 1968.