Notes for the Treasurer's Second Reading Speech
The primary purpose of this Bill is to give effect to income tax proposals outlined in my Budget Speech for 1961-62.
Among the proposals are two measures of interest to primary producers.
The first of these relates to pipes that are to be placed underground and used to convey water required in a business of primary production. It is proposed that an income tax deduction for both the purchase price of the pipes and the cost of placing them underground be allowed in full in the year of income in which the expenditure is incurred.
The second proposal will apply where live stock owned by a primary producer is destroyed in order to control or eradicate disease. It will also have application if live stock dies of a disease in relation to which the Commonwealth, a State or a Territory of the Commonwealth has passed a law relating to the compulsory destruction of live stock.
Compensation received by a primary producer as a consequence of the death or destruction of such live stock and the proceeds from the sale of the hides etc. of the animals are assessable income. Any excess of that income over the cost of the live stock, or over its taxation value at the beginning of the income year in which the stock dies or is destroyed, is, in effect, regarded by the income tax law as profit subject to tax in the year in which it is derived. A primary producer who has received compensation for the death or destruction of live stock suffering from a disease may accordingly find that, after paying tax on the profit, he has insufficient funds left to finance the replacement of the live stock.
Under the proposals contained in the Bill a primary producer will be entitled to elect that only one-fifth of any profit arising on the death or destruction of the live stock be taxed in the year in which the stock dies or is destroyed. The balance of the profit will then be included in equal instalmensv in the primary producer's assessable income for each of the four succeeding income years.
The right to adopt this basis will be available for the 1960-61 income year and succeeding years. It will accordingly have application in relation to stock destroyed in consequence of the recent outbreak of swine fever as well as to other stock that died or was destroyed during the 1960-61 income year.
I turn now to a proposal relating to calls paid to companies engaged principally in mining, prospecting or afforestatic in Australia or the Territory of Papua and New Guinea.
As honourable members will be aware, the existing law authorises an income tax deduction for one-third of the calls paid to such companies. If, however, a company subscribes capital to another company that, in turn, pays calls to a mining, prospecting or afforestation company, the deduction is not available to the company subscribing the capital and may not result in an effective allowance to the interposed company.
It is proposed to amend the law so that the interposed company may forgo its deduction in favour of the company that subscribed the capital out of which the calls were paid. The new provisions will apply where the interposed company owns all the shares in the mining, prospecting or afforestation company and the shareholder company to which the deduction is transferred owns not less than one-half of the paid-up capital of the interposed company.
As announced in the Budget Speech it is proposed to remove from the law a provision limiting the deduction available for dental expenses to Pd30 in respect of a taxpayer and each of his dependants. The general limit of Pd150 for a taxpayer and each dependant placed upon the deduction for medical, including dental, expenses will not be disturbed.
A still further proposal foreshadowed in the Budget Speech is that income tax deductions be allowed for gifts of Pd1 or more made to the Ian Clunies Ross Memorial Foundation.
The Bill also provides for minor changes in provisions of the income tax law governing the allowance of credits to an Australian resident deriving income from the Territory of Papua and New Guinea. Under the present law, these taxpayers lodge separate income tax returns for Australian and Territory purposes. Separate payments of tax are made to the taxing authorities in Australia and the Territory, but double taxation is relieved by the allowance against Australian tax of a credit equal to the lesser of the Territory tax or the Australian tax on the Territory income.
Honourable members will recall that, when the Australinb income tax law was amended last year in consequence of the introduction of Territory income tax, I informed the House that an examination would be made to see whether it would be practicable to relieve such taxpayers of the need to deal with two separate taxing authorities. The Government recognizes that it is inconvenient for taxpayers who have no direct connection with the Territory - such as Australian shareholders in Territory companies - to have to make special arrangements simply because some small part of their income happens to have its source in the Territory.
It is now anticipated that it will be practicable to put into effect arrangements under which Australian residents, who are not also residents of the Territory, will no longer be required to lodge Territory income tax returns if their only Territory income consists of dividends, debenture interest or pensions on account of service with the Territory Administration. In these cases, the amount of Territory tax payable will be determined from information contained in the Australian income tax returns.
It is also proposed to amend the present law so that, in cases where the new procedures apply, the taxpayer will be able to make a single tax payment to the Commissioner of Taxation in Australia, part of which will be used to meet the Territory liability.
Under the existing law an Australian resident with income from Territory sources pays tax to the Territory Administration and is then entitled to claim against the Australian tax payable by him a credit for the Territory tax. The amendments now proposed will authorise the Commissioner of Taxation to calculate the credit before the Territory tax is paid and to apply the credit in extinguishing the taxpayer's liability for Territory tax.
The arrangements contemplated will enable the taxpayers concerned to satisfy their taxation obligations in Australia and the Territory simply by lodging an Australian return of income and paying their Australian tax in full. The assessment and payment of Territory tax will be a matter of internal arrangements between the Commissioner of Taxation and the Chief Collector of Taxes in the Territory.
I do not propose at this stage to embark upon a detailed examination of the Bill but I have arranged for a memorandum explaining its various clauses to be circulated for the information of honourable members.
I commend the Bill to honourable members.
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