House of Representatives

Income Tax and Social Services Contribution Assessment Bill 1960.

Income Tax and Social Services Contribution Assessment Act 1960.

Notes for Treasurer's Second Reading Speech

This Bill is the first of three measures having as their main purpose the correlation of the Australian income tax laws with the Income Tax Ordinance of the Territory of Papua and New Guinea.

The provisions of the Bill will be of particular interest to Australian residents deriving income from Territorial sources on the one hand and, on the other, to residents of the Territory who derive income from sources in Australia.

Australian residents have for many years been liable for Australian tax on their Territorial income. With the introduction of Territorial tax it is proposed to relieve the Australian residents of the effects of double taxation.

Stated broadly, the relief proposed will ensure that Australian residents are not called upon to pay by way of Australian tax and Territorial tax a greater amount than would have been due as Australian tax if there were no liability for tax in the Territory. It is proposed to achieve this result by allowing, against Australian tax on Territorial income, a credit in respect of the tax paid under the Income Tax Ordinance of the Territory.

Turning to residents of the Territory, the Bill gives effect to the principle that the measure of Australian tax imposed on Territory residents who derive Australian income should be no greater than in the past. Allowances that have been available to Territorial residents - notably for the maintenance of dependants, medical expenses, educational expenses, life assurance premiums, superannuation contributions etc. - will be continued.

For many years, Territorial residents have been exempt from Australian tax on income having its source in the Territory. That exemption is not being disturbed.

The opportunity is being taken to remove from the Australian law discriminations that exist between the Territory of Papua and the Territory of New Guinea.

Perhaps the most important of these discriminations arises from the fact that the Territory of Papua has been treated as being part of Australia for income tax purposes. In consequence, an overseas resident who received income from Papua would be liable for both Australian and Territorial tax. If, on the other hand, he had derived this income from the Territory of New Guinea, there would be no liability for Australian tax. With the introduction of Territorial tax, the Government feels that the time has come when Australia should withdraw from this field of taxation. Territory income will therefore be exempted from Australian tax except where the recipient is a resident of Australia.

The Bill will also remove discriminations between the Territories in the allowance of concessional deductions for dependants. Under the present law, the allowances for the maintenance of dependants, and for medical expenses incurred on behalf of dependants, are not available unless the dependants reside in Australia or Papua. It is proposed that these allowances should in future extend to dependants residing anywhere in the Territory of New Guinea, or in Norfolk Island, Cocos (Keeling) Islands, Christmas Island or the Island of Nauru.

Other provisions that have previously applied in relation to Australia and Papua only will now have their operation extended to the Territory of New Guinea. Included in those provisions are the rights of primary producers to have their tax liability ascertained by reference to their average income over a period of years, to bring certain abnormal income to account by instalments over five years, and to obtain deductions for capital expenditure on the improvement of rural land.

In giving effect to the principles I have outlined, it has been found necessary to amend a considerable number of the sections of the Income Tax and Social Services Contribution Assessment Act. All of the proposed alterations are described in detail in an explanatory memorandum which is being made available for the information of Honourable Members. I do not propose, at this stage, to comment on the individual amendments. What I have said will, I think, suffice to explain to Members the broad objectives by reference to which the Bill has been prepared.

The various amendments affecting assessments will apply from the beginning of the 1959-1960 income year and their operation will accordingly coincide with the introduction of the Territory income tax from the 1st July, 1959.

Honourable Members will observe that two other minor amendments, not directly related to the introduction of Territory tax, are proposed in the Bill. One of these is designed to clarify the operation of the provision that governs the allowance of deductions for capital expenditure on mining or prospecting for petroleum, while the other makes a formal alteration in the secrecy provisions, which is needed as a result of amendments to the Education Act, which were approved by this Parliament last year. These amendments are, of course, described in detail in the explanatory memorandum.

I commend the Bill to Honourable Members.

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