House of Representatives

Explanatory Memorandum

(Circulated by the Treasurer, the Rt. Hon. B.M. Snedden, Q.C., M.P.)

Introductory Note

The purpose of this memorandum is to explain the provisions of two income tax Bills.

INCOME TAX BILL 1972

The first Bill - the Income Tax Bill 1972 - will declare the rates of income tax payable by individuals and companies for the current financial year 1972-73. The main features of the Bill in so far as changes in the practical effect of the law are involved are:-

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Minimum taxable income (clauses 5(3.) and 7). The minimum amount of taxable income of an individual taxpayer that is subject to tax will be increased from $417 to $1,041, with related changes in the "shading-in" arrangements which limit the tax payable on the minimum taxable income and incomes marginally above it.

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Rates of tax, individuals (clause 6). The rates of tax are to be revised for the 1972-73 financial year so that reduced tax will be payable by individuals and by trustees who are taxed on income taxed at individual rates of tax. The additional tax imposed at the rate of 5 per cent for the first nine months of the 1971-72 financial year and reduced to 2 1/2 per cent for the last three months of that year is not to be imposed for the 1972-73 financial year.

INCOME TAX ASSESSMENT BILL (NO. 4) 1972

The second Bill - the Income Tax Assessment Bill (No. 4) 1972 - will give effect to proposals announced in the Budget Speech to increase the maximum amounts of the concessional deductions allowable in respect of the maintenance of dependants and to provide an income tax deduction in respect of certain expenses paid by a taxpayer in obtaining educational qualifications related to his employment or career, where the expenses are not deductible under the present law.

The amendments to the dependants' allowances will have the effect of increasing the deductions available for each dependant and for a housekeeper by $52. A list of the present allowances and the new allowances proposed is given in the notes on the second Bill.

The new concession for expenses of self-education will, in broad terms, be available for expenditure incurred by a taxpayer on fees, books and equipment for a course of education undertaken to gain qualifications for use in his employment or career (to the extent that the expenditure is not recouped by an employer or under a Commonwealth secondary or technical scholarship).

Unlike the concession provided by section 82J of the Principal Act for payments made by a person in respect of the full-time education of a student under 25 years of age, the new concession will not be subject to an age qualification and will be available in respect of a course undertaken by the taxpayer on a full-time or part-time basis or by correspondence.

The maximum deduction allowable in respect of a year of income will be $400. Where a deduction has been allowed under section 82J to any person, in respect of expenses incurred for the taxpayer's education, the maximum allowance of $400 will be reduced by the amount of the section 82J deduction allowed to the other person.

The increased deductions for the maintenance of dependants and the special deduction for expenses of self-education are to apply in assessments based on income of the 1972-73 income year and subsequent income years.

Provisional tax for 1972-73 will be calculated on the basis of the rates of tax proposed for 1972-73. No provisional tax will be imposed where the provisional income of an individual is less than $1,041.