1980—81—82

THE PARLIAMENT OF THE COMMONWEALTHOF AUSTRALIA

HOUSE OF REPRESENTATIVES

INCOME TAX ASSESSMENTAMENDMENTBILL (NO.5) 1982

INCOME TAX (RATES) AMENDMENTBILL 1982

INCOME TAX (RATES) BILL 1982

INCOME TAX (INDIVIDUALS) BILL 1982

INCOME TAX (COMPANIES, CORPORATEUNIT TRUSTS ANDSUPERANNUATIONFUNDS) BILL 1982

INCOME TAX (MINING WITHHOLDING TAX) AMENDMENTBILL 1982

EXPLANATORYMEMORANDUM

(Circulated by authority of the Treasurer,the Hon. John Howard, M.P.)

14285/82 Cat.No.82 5013 3—Recommendedretail price $2.25

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General outline

Income Tax Assessment Amendment Bill (No. 5) 1982

This Bill will amend the income tax law to:

allow a rebate of tax at the standard ratefor home loan interest payments made on orafter 1 July 1982 by a resident taxpayer thatare attributable to such part of the interestrate as exceeds 10 per cent per annum, inrespect of the first $60,000 of a loan (orloans) on the taxpayer’s sole or principalresidence in Australia (proposal announced inthe Budget);

• provide a rebate at the standard rate of taxon up to $1,000 of dividends, with someexceptions, received by resident individualsfrom resident and certain non-residentcompanies (Budget proposal); I

• increase by $200 per year the rebate of taxfor a spouse, daughter-housekeeper orhousekeeper, where there is a dependent childor student, and the sole parent rebate(Budget proposal);

• introduce a rebate of tax of $250 per annum,shading-out above a specified income level,for taxpayers wholly or mainly dependent ontaxable Australian social security orrepatriation pensions (Budget proposal);

• grant income tax deductions for gifts of thevalue of $2 or more:

- made during the 1981—82 and 1982—83financial years to a public fundestablished and maintained exclusively forthe relief of civilian victims of theconflict in Lebanon arising out of theinvasion of that country by Israel(proposal announced on 31 August 1982);

- made after 17 August 1982 to a number ofconservation organisations (Budgetproposal - as extended by the inclusion ofthe National Parks Foundation of SouthAustralia - details announced on 17 August1982);

- made after 26 August 1982 to the Centrefor Independent Studies, the PlayfordMemorial Trust, the Boy Scouts and the

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Girl Guides Associations in Australia andAmnesty International in Australia(proposal announced on 26 August 1982);

increase the retention allowance of a privatecompany in respect of its trading or businessincome from 70 to 80 per cent (Budgetproposal);

• give effect to the Budget announcement that arehabilitation allowance, payable from thefirst pension payday in March 1983 to personsundergoing treatment or training with theCommonwealth Rehabilitation Service, is to beexempt from tax;

• amend the rate, based on the standard rate oftax, used to calculate various rebates andthe rate of withholding tax on payments madeby mining companies to Aboriginal councils,in consequence of the reduction in thestandard rate of tax to be declared by theIncome Tax (Rates) Bill 1982;

• provide the method of calculating provisionaltax for the 1982-83 income year; and

• make formal amendments as a consequence ofrecent changes of a formal kind to the SocialServices Act 1947.

Income Tax (Rates) Amendment Bill 1982

This Bill will amend the Income Tax (Rates) Act1976 so that the rates of tax declared by that Act forindividuals and trustees generally for the 1981-82 andsubsequent financial years will apply for the 1981-82 yearonly - rates for later years will be declared by theaccompanying Income Tax (Rates) Bill 1982.

Income Tax (Rates) Bill 1982

This Bill will declare the rates of tax payable byindividuals and trustees generally for the 1982-83financial year and for the 1983-84 and subsequent financialyears. In so doing, the Bill will give effect to theBudget proposals to alter the personal income tax ratescale, with effect from 1 November 1982, to -

• increase the zero rate step from $4,195 to$4,595;

• increase the top of the standard rate stepfrom $17,894 to $19,500; and

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• reduce the standard rate of tax from 32 percent to 30 per cent,

and, with effect from 17 August 1982 (Budget day), towithdraw the benefit of the zero rate step in the ratescale from non-resident individuals, other than those inreceipt of Australian social security and repatriationpayments that are taxable in Australia.

Income Tax (Individuals) Bill 1982

This Bill will:

• formally impose tax payable for the 1982-83financial year by individuals, and bytrustees generally, at the rates that will bedeclared by the Income Tax (Rates) Bill 1982;and

• formally impose provisional tax for the1982-83 year of income.

Income Tax (Companies, Corporate Unit Trusts andSuperannuation Funds) Bill 1982

This Bill will declare and impose the rates of taxpayable for 1982-83 by companies, trustees of corporateunit trusts and trustees of superannuation funds.

Income Tax (Mining withholding Tax) Amendment Bill 1982

This Bill will amend the Income Tax (MiningWithholding Tax) Act 1979 to reduce from 6.4 per cent to 6per cent the rate of tax imposed on mining payments made toaboriginal councils on or after 1 November 1982.

Main features

The main features of the Bills are as follows: 4Income Tax Assessment Amendment Bill (No. 5) 1982

Rebates forspouse, daughter-housekeeper, housekeeper and

!ole ~irent -

(Clauses 9 to 11)

The Bill will implement the Budget proposal toincrease the spouse, daughter-housekeeper and housekeeperrebates, where there is a dependent child under 16 orstudent child under 25 in respect of whom a rebate of tax

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would have been allowable but for the replacement of suchrebates by family allowances, and to increase the soleparent rebate.

The amendments proposed will increase the soleparent rebate by $200 from $580 to $780 for the 1983-84 andsubsequent years and, where appropriate, the other rebatesby $200 from $830 to $1,030 for those years. Reflectingthe date of effect of the proposal - 1 November 1982 - theincrease for 1982-83 will be $133, being two-thirds of thefull increase.

Rebate of tax in respect of home loan interest(Clauses 14 to 21) -- -~

The Bill also gives effect to the proposalannounced in the Budget to allow an individual residenttaxpayer a rebate of tax for home loan interest paymentsmade on or after 1 July 1982 in respect of a dwelling in

~ Australia occupied by the taxpayer as his or her sole orprincipal residence. The rebate will be available inrespect of such part of the qualifying interest on a loanas is attributable to the portion of the interest ratewhich exceeds 10 per cent per annum.

The rebate will be at the standard rate of tax(30.67 cents in 1982-83) for qualifying interest but willnot exceed the tax otherwise payable on assessment and willnot be available unless the taxpayer owns or partly ownsthe dwelling and the interest accrues while the taxpayer isan occupier of the dwelling. Where the balance of a loanor loans on a dwelling at the end of a year of income (orat the time when a taxpayer ceased to occupy a dwelling in

~ a year) is in excess of $60,000, only the interest payableon $60,000 - and being interest attributable to theinterest rate portion in excess of 10 per cent per annum -

will attract the rebate.

Interest will qualify for the rebate if it is paidon moneys lent to a taxpayer and applied by the taxpayer‘ for certain specified purposes connected with a dwellingused by the taxpayer as his or her sole or principalresidence. Those purposes include the acquisition of landon which a dwelling is subsequently constructed, theconstruction of a dwelling or the acquisition of land onwhich there is already a dwelling. Interest on moneys usedto extend a dwelling by adding additional living space willalso qualify but not where the moneys are used to buildimprovements such as swimming pools, garages or fences.

Where moneys are borrowed partly for the purposeof acquiring a dwelling and partly for other purposes, somuch only of the interest as is attributable to that partof the moneys appliedto acquire the dwelling will qualifyfor the rebate. Where a dwelling is used partly as a soleor principal residence and partly for other purposes the

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Commissioner will be empowered to allow a rebate in respectof the amount of interest which is reasonable in all thecircumstances. This could occur, for example, where aperson borrows moneys to purchase a building containing aflat above a shop and occupies the flat as his or herresidence. In this case, the intention is that interest onmoney attributable to the flat would be rebatable.

The Bill gives effect to the proposal by providinga rebate for that part of the qualifying interest paid in ayear of income which exceeds 10 per cent per annum of theaverage balance of the loan during the year. For thispurpose the average balance will generally be taken to bethe average of the opening and closing balances of the loanin the year of income. Adjustments may be made indetermining the average balance, however, to account forabnormal payments in reduction of the loan during a yearand for increased borrowings. In calculating the amount tobe excluded as interest up to the 10 per cent per annumlimit, the calculation will be made by reference tointerest ~ during the year and not on the basis ofinterest accrued. As a result, a portion of any payment ofqualifying interest on a loan will attract the rebate ifinterest is accruing on the loan during the year of incomeat a rate in excess of 10 per cent per annum,notwithstanding that loan repayments may be in arrears.This will be so even if interest payments in the year fallshort of an amount equal to the interest accrued at 10 percent per annum.

Where a taxpayer is eligible in a year of incomefor a rebate under this proposal and is also eligible inthe year for a rebate under the existing home loan interestscheme which applies to taxpayers in their first five yearsof owner-occupancy, the taxpayer will receive the benefitof the greater of the two rebates.

In a case where a taxpayer is entitled to arebate, or would have been so entitled if he or she wereliable to pay tax, the taxpayer will be able to elect totransfer the whole or a part of the rebate entitlement tohis or her spouse.

Interest payments which are otherwise allowable asa deduction from assessable income under ordinary incometax rules will continue to be allowed as a deduction andwill not attract the rebate.

Rebate for pensioners(Clause 22)

A further Budget proposal to which the Bill willgive effect is the introduction of a rebate of tax fortaxpayers in receipt of Australian social security orrepatriation pensions that are subject to income tax inAustralia. The maximum rebate of $167 for 1982-83 ($250

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for subsequent years) will shade-out at the rate of 12.5cents for each dollar of taxable income in excess of $5,007($5,429 in subsequent years) . No rebate will thus beavailable at taxable incomes in excess of $6,342 in 1982—83and $7,428 in subsequent years.

Rebate on certain dividends(Clause 4)

The Bill will give effect to the Budget proposalto allow a rebate of tax at the standard rate - 30.67 percent in 1982-83 and 30 per cent in subsequent years - on up

~ to $1,000 of certain dividends included in the taxableincomes of Australian resident individual taxpayers.

Broadly, the Bill proposes that the rebate beavailable in respect of dividends paid by resident publicor private companies, resident corporate unit trusts ornon-resident companies the shares in which are listed onAustralian stock exchanges, other than -

(a) amounts deemed to be dividends under sections65, 108 or 109 of the Income Tax AssessmentAct;

(b) dividends paid by co-operative companies thatare afforded special treatment under Division9 of the Act; or

(C) dividends that are taxed at special higherrates under section 94 or 99A or underDivision 6AA of the Act.

~ By virtue of the limitation of $1,000 and the rateapplicable, the maximum rebate will be $306.70 in 1982-83and $300 in the 1983-84 and subsequent years.

Private companies(Clause 7)

‘ By the amendments proposed by this clause theretention allowance in respect of trading or businessincome which is available to private companies forundistributed income tax purposes is to be increased from70 to 80 per cent, the increase first applying in respectof the 1981-82 year of income.

Gifts(Clause 5)

Amendments proposed by clause 5 will extend thegift provisions of the income tax law which authorisedeductions for gifts of the value of $2 or more made tospecified funds, authorities or institutions in Australia.

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The first of the amendments will permit taxdeductions for gifts made during the 1981-82 and 1982—83financial years to certain Lebanon relief appeals. Theconcession will extend to public funds in Australiaestablished and maintained exclusively for the relief ofpersons (other than members of armed forces) who are inLebanon, or are refugees from Lebanon, and who are innecessitous circumstances as a consequence of attacks upon,or the invasion of, that country by the armed forces ofIsrael.

A second amendment will authorise deductions forgifts made after 17 August 1982 to the United NationsAssociation of Australia Decade of Trees Greening Australiaand to a number of conservation organisations inAustralia. These are the National Parks Association of NewSouth Wales, the Victorian National Parks Association, theVictoria Conservation Trust, the National Parks Associationof Queensland, the Nature Conservation Society of SouthAustralia Incorporated, the National Parks Foundation ofSouth Australia Incorporated, the Western AustralianNational Parks and Reserves Association Incorporated, theTasmanian Conservation Trust Incorporated and the NationalParks Association of the Australian Capital Territory.

Further amendments will authorise deductions forgifts made after 26 August 1982 to the Centre forIndependent Studies, the Playford Memorial Trust, the BoyScouts and the Girl Guides Associations in Australia andAmnesty International in Australia.

Provisional tax for 1982-83(Clause 28)

Provisional tax for the 1982-83 year of income isto be calculated, basically, by applying 1982-83 rates oftax to 1981-82 taxable incomes, as increased by 10 percent. Generally, to the extent that rebates are allowed in1981-82 income tax assessments, they will be taken intoaccount in calculating the provisional tax.

However, where it appears from the informationavailable in the taxpayer’s 1981-82 return of income thathe or she will be entitled in 1982—83 to an increasedspouse, daughter-housekeeper, housekeeper or sole parentrebate, as proposed by clauses 9 to 11 of this Bill, therelevant rebates (including zone rebates where appropriate)allowable in 1981-82 will be increased accordingly forprovisional tax purposes. Also, where the availableinformation permits, the proposed dividend rebate (clause4) and pensioner rebate (clause 22) will be taken intoaccount in the 1982-83 provisional tax calculation.

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Exemption of payments of rehabilitation allowance(Clauses 3, 6, 9 and 11) - -

The Bill will give effect to the income taxaspects of the proposal announced in the Budget that anon-taxable rehabilitation allowance is to be introducedfrom the first pension payday in March 1983. All personsundergoing treatment or training with the CommonwealthRehabilitation Service otherwise eligible for a socialsecurity pension or benefit will he eligible to receive,while under treatment or training and for a period of up tosix months thereafter, a non-taxable rehabilitation

allowance

equivalent to the invalid pension and subject tothe same income test conditions as the invalid pension.The Bill provides tax exemption for the allowance andassociated training and living away from home allowancesand makes a number of consequential amendments to theIncome Tax Assessment Act so that no taxpayer will bedisadvantaged as a result of a person who would otherwisebe eligible to receive an invalid pension becoming eligibleto receive a rehabilitation allowance.

Consequential amendments(Clauses 12, 13, 16, 23 and 26)

As a consequence of the proposed reduction in thestandard rate of tax from 32 per cent to 30 per cent from1 November 1982 (provided for in the accompanying IncomeTax (Rates) Bill 1982) , the rate used to calculate theconcessional expenditure rebate, the health insurancerebate and the housing loan interest rebate, and the rateof tax on certain lump sum payments on retirement ortermination of employment, is to be similarly reduced. The

brate of withholding tax on payments made by miningcompanies to Aboriginal groups from 1 November 1982 is alsoto be reduced - from 6.4 per cent to 6 per cent.

Formal amendments(Clause 27 and Schedule)

P The Bill makes a number of formal amendments tothe Income Tax Assessment Act necessitated by the change inthe title of, and other formal amendments to, the SocialServices Act 1947 made by the Social Services LegislationAmendment Act 1982.

Income Tax (Rates) Amendment Bill 1982

As the accompanying Income Tax (Rates) Bill 1982will declare the relevant rates of tax payable forindividuals and trustees generally for 1982-83 andsubsequent years, this Bill will amend the Income Tax(Rates) Act 1976 - which presently declares these rates forthe 1981-82 and subsequent years - so that it has noapplication beyond the 1981-82 year.

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Income Tax (Rates) Bill 1982

In declaring the rates of tax payable for 1982-83and for 1983-84 and subsequent years by individuals andtrustees generally, this Bill will give effect to theBudget proposal to alter the personal income tax ratescale, with effect from 1 November 1982, to -

increase the zero rate step from $4,195 to$4,595;

increase the top of the standard rate step inthe rate scale from $17,894 to $19,500; and

reduce the standard rate of tax from 32 percent to 30 per cent.

An average rate scale for 1982-83 is provided for,the average being that of the scale applicable up to 31October and that to apply from 1 November 1982.

The Bill will also give effect to the Budgetproposal to withdraw the benefit of the tax-free thresholdfrom non-resident individuals (including trustees taxed ontheir behalf), other than those who were residents for anypart of a year of income or who are in receipt ofAustralian social security and repatriation pensions thatare subject to Australian tax.

Reflecting the fact that the threshold is to bewithdrawn from 17 August 1982 (Budget day), the Billprovides for a proportionate threshold for 1982-83 of $585,and for the full 1982-83 threshold to be available tonon-residents who came to Australia on or before 17 August1982 for a short working visit or who had made firmarrangements for such a visit by that date.

The proposed withdrawal - also from Budget day inthe 1982-83 income year - of the minimum taxable incomelevels applying to accumulating income of non-residenttrust estates to which section 99 of the Income TaxAssessment Act applies, and to the income of non-residentminor children to which Division 6AA of the Act applies, isalso provided for.

Income Tax (Individuals) Bill 1982

The rates of tax payable for 1982-83 and, untilthe Parliament otherwise provides, for 1983-84 byindividuals and trustees generally, which are to hedeclared by the accompanying Income Tax (Rates) Bill 1982,will be formally imposed by this Bill. It will alsoformally impose provisional tax for 1982-83.

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Income Tax (Companies, Corporate Unit Trusts andSuperannuation Funds) Bill 19

The rates of tax payable for 1982-83 by companiesand by trustees of corporate unit trusts and superannuationfunds will be declared and imposed by this Bill. The ratesare the same as those for 1981—82.

Income Tax (Mining Withholding Tax) Amendment Bill 1982

This Bill will amend the Income Tax (Mining~ Withholding Tax) Act 1979, which imposes and declares the

rate of tax payable in respect of mining payments made toAboriginal councils. The amendment is consequential on theproposed reduction in the standard rate of tax to beeffected by the accompanying Income Tax (Rates) Bill 1982and will reduce - also from 1 November 1982 - the rate oftax in respect of mining payments from 6.4 per cent to 6

~ per cent, which represents the new standard rate of 30 percent applied to one—fifth of the gross payments.

A more detailed explanation of the Bills iscontained in the following notes.

INCOME TAX ASSESSMENTAMENDMENT BILL (NO. 5) 1982

Clause 1 : Short title~ etc

By sub-clause (1) of this clause the amending Actis to be cited as the Income Tax Assessment Amendment Act(No. 5) 1982.

Sub-clause (2) will facilitate references to theIncome Tax Assessment Act 1936, which, in the Bill, isreferred to as the “Principal Act”.

Clause 2 : Commencement

So as not to delay the operation of the provisionsof the amending Act, a number of which are to have effectfrom earlier dates specified in them, this clause willcause the amending Act to come into operation on the day onwhich it receives the Royal Assent. But for this clausethe amending Act would, by reason of sub-section 5(lA) ofthe Acts Interpretation Act 1901, come into operation onthe twenty-eighth day after the date of Assent.

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Clause 3 :Exemptions of certain pensions

Clause 3 of the Bill proposes amendments to giveeffect to the income tax aspects of the proposal announcedin the Budget that a non-taxable rehabilitation allowanceis to be introduced from the first pension pay-day in March1983.

Under amendments to the Social Security Act 1947proposed by the Social Security Legislation Amendment Bill1982 persons undergoing treatment or training with theCommonwealth Rehabilitation Service and who are otherwiseeligible for a social security pension or benefit will,from 1 March 1983, be eligible to receive, while undertreatment or training, and for a period of up to six monthsthereafter, a rehabilitation allowance equivalent to theinvalid pension and subject to the same income testconditions as the invalid pension.

The effect of clause 3 is to exempt from incometax the rehabilitation allowance and associated trainingand living away from home allowances by amending section23AD of the Princpal Act to remove references to trainingallowances paid to Commonwealth Rehabilitation Servicetrainees. That section currently operates to declarecertain classes of pensions, benefits and allowances(including some training allowances) - defined as “exceptedpayments” - to be assessable income. As other paymentsunder the Social Security Act by way of pension, benefit orallowance are exempt from tax under section 23AD, noamendment to the Principal Act is required to ensureexemption for the new rehabilitation allowance andliving-away-from-home allowance.

By paragraph (a) of sub-clause (1), a newsub-paragraph (b) (i) is substituted in the definition of“excepted payment” in sub-section 23AD(l) to omitreferences to paragraph 4(f) and section l35D of the SocialSecurity Act. Omission of the reference to paragraph 4(f)is consequential on the repeal of that paragraph by theSocial Services Legislation Amendment Act 1982. Section135D of the Social Security Act, so far as it is relevantto this sub-paragraph, provides for the payment of trainingallowances to persons receiving training with theCommonwealth Rehabilitation Service who would otherwise heentitled to pensions under Part IV (widows’ pensions) orbenefits under Part IVAAA (supporting parents’ benefits) ofthat Act. By virtue of their inclusion within thedefinition of “excepted payment”, training allowancesreceived in lieu of these pensions or benefits areassessable. Consequent upon the pending amendment tosection l35D of the Social Security Act and deletion ofreferences to the section in the definition trainingallowances will, with effect from 1 March 1983, be exemptfrom tax.

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Paragraph (b) of sub-clause (1) will effectivelyexempt from tax a training allowance payable in accordancewith the new section 135D of the Social Security Act to arecipient of the new rehabilitation allowance who wouldotherwise be entitled to a benefit under Part VII of thatAct (i.e. an unemployment or sickness benefit) . This willbe achieved by omitting the reference to that section inparagraph (c) of the definition of “excepted payment” insub-section 23AD(l) of the Principal Act.

Paragraph (c) of sub-clause (1) will deletereferences to former paragraph 4(c) and section l35D (in

~ relation to pensions under Part III) of the Social SecurityAct from paragraph (a) of the defintion of “exceptedpension” in sub-section 23AD(l) . The present reference inrelation to pensions under Part III (i.e., age and invalidpensions) of the Social Security Act means that trainingallowances received in lieu of such pensions are presentlyassessable. The effect of the amendment, achieved by

~ substituting a new paragraph 1(a) in the definition, willbe to exempt from tax training allowances paid torecipients of rehabilitation allowances who would otherwisebe entitled to such pensions.

Sub-clause (2) gives effect to the proposal thatthe exemption authorised by sub-clause (1) is to operate inrelation to payments made on or after 1 March 1983.

Clause 4 : Rebate in respect of certaindividends paid to residents

This clause proposes the amendment of the‘ Principal Act to insert new section 46C which, broadly,will authorise .a rebate of tax at the standard rate on upto $1,000 of eligible dividends paid to Australian residentindividual taxpayers, and certain trustees, by Australianresident companies or corporate unit trusts or bynon-resident companies the shares in which are listed onAustralian stock exchanges. For 1982-83, the proposed‘ rebate will be allowed at the rate of 30.67 per cent (to amaximum of $306.70) and for subsequent years at 30 per cent(a maximum of $300). The rebate allowable cannot, however,exceed the amount of tax that would otherwise be payable -

existing section 16OAD of the Principal Act provides forthis.

Excluded from the scope of the proposed rebate arecertain amounts that are deemed to be dividends for limitedincome tax purposes, as well as dividends paid by companiesthat are co-operative companies for taxation purposes anddividends taxed at special higher rates of tax.

Proposed sub-section 46C(l) will define certainterms used in section 46C.

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“eligible dividend”, being a dividend in respect of whichthe rebate may be allowed, is defined to mean adividend that is paid by a resident company(public or private) or a non-resident companylisted on an Australian stock exchange, as well asa “unit trust dividend” (as defined) paid by a“resident unit trust” (also defined). The termdoes not, however, include an amount that isdeemed to be a dividend under sub-section 65(lB)(where a partnership in which a private company isa partner pays an excessive amount to anassociated person, for example, for servicesrendered) or 108(1) (where a loan or other paymentby a private company to a shareholder represents adistribution of income) or section 109 (where anexcessive amount is paid by a private company to ashareholder, for example, for services rendered bythe shareholder), a dividend paid by a companythat is a co-operative company for the purposes ofDivision 9 and which is allowed a deduction fordividends paid or, in effect, dividends taxed athigher rates under section 94 or Division 6AA ofthe Principal Act.

“eligible taxpayer”, the term used in the new section for ataxpayer who may be entitled to the proposedrebate, is defined to mean an individual taxpayer,not being a taxpayer in the capacity of a trustee,who at any time during the year of income is aresident; a trustee who under section 98 of thePrincipal Act is taxed on behalf of a beneficiarywho is a resident at any time during the year ofincome; and a trustee of a resident trust estate(for the purposes of Division 6 of the Act) who istaxed under section 99 of the Act.

“net eligible dividend income” is the term used to describethe part of gross eligible dividends received byan eligible taxpayer that will attract theproposed rebate. Broadly, it is the net dividendincome - that is, after setting off deductionsrelated to the gross dividends - included in thetaxable income of an eligible taxpayer who is anindividual or included in the net income of atrust estate the trustee of which is an eligibletaxpayer.

Deductions related to gross eligible dividends arethose deductions allowable from dividends that arerelated directly to the dividends - for example,interest on a loan obtained to acquire the shareson which the dividends are paid - and those otherdeductions from dividend income that mayappropriately be related to the eligible

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dividends. Such other deductions would include aproportionate part of deductions allowable fromdividends generally, as well as such a proportionof, for example, deductions allowable fromproperty income other than dividends that are inexcess of such income, which excess, in terms ofsection 50 of the Principal Act, is to be deductedsuccessively from dividend income and then frompersonal exertion income.

“resident unit trust” is defined to mean a unit trust thatis a resident unit trust in relation to the yearof income for the purposes of Division 6B of thePrincipal Act. Basically, such a trust is onethat has either trust property in Australia or onethe trustee of which carries on business inAustralia and, in addition, either the trust hadits central management and control in Australia ormore than 50 per cent of the beneficial interestsin the income or property of the trust was held bya resident or residents of Australia.

“unit trust dividend” is defined to have the same meaningas it has in Division 6B of the Principal Act -

that is, broadly, distributions made or creditedto a unitholder by the trustee of a corporate unittrust out of profits derived by the corporate unittrust.

Sub-sections (2) and (3) are the operativeprovisions of the proposed section under which an eligibletaxpayer, not being a trustee (sub-section (2)), or aneligible taxpayer being a trustee of a trust estate‘ (sub—section (3) ), is entitled to a rebate of tax of 30 percent - 30.67 per cent for 1982-83 by virtue of sub-clause(3) - of so much of any net eligible dividend income asdoes not exceed $1,000.

By sub-clause (2) the amendment proposed bysub-clause (1) is to apply to assessments in respect ofincome of the 1982-83 and subsequent years of income.

Sub-clause (3) is a transitional provision underwhich, consistent with the reduction in the standard rateof tax from 32 per cent to 30 per cent effective from1 November 1982 (proposed in the Income Tax (Rates) Bill1982 - see notes on that Bill), the rate of the proposedrebate on dividends for the 1982-83 income year is to be30.67 per cent.

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Clause 5: Gifts, calls on afforestationshares, pensions, etc.

The purpose of clause 5 is to authorise income taxdeductions for gifts to certain relief appeals establishedin response to the conflict in Lebanon, the Centre forIndependent Studies, the Playford Memorial Trust, the BoyScouts and Girl Guides Associations in Australia, AmnestyInternational in Australia, the United Nations Associationof Australia Decade of Trees Greening Australia and to arange of conservation organisations.

Under section 78 of the Principal Act, gifts ofthe value of $2 or more of money or of property purchasedwithin the preceding 12 months are deductible when made toa fund, authority or institution listed in paragraph78(1) (a). The amount of the deduction available in respectof gifts of property other than money is generally limitedby sub-section (2) to the lesser of the value of theproperty at the time when the gift was made or the amountpaid by the donor for the property.

Paragraph (a) of sub-clause 5(1) will insert newsub-paragraphs (lxxii) to (lxxviii) in paragraph 78(1) (a)of the Principal Act to extend the list of organisationsand funds to which the income tax deduction authorised byparagraph 78(1) (a) applies.

Proposed new sub-paragraph (lxxii) will authorisedeductions for gifts to public funds in Australiaestablished and maintained exclusively for the relief ofpersons (other than members of armed forces) who are inLebanon, or are refugees from Lebanon, and who are innecessitous circumstances as a consequence of the armedconflict in that country. By virtue of the amendmentproposed by paragraph (b) of sub-clause 5(1), gifts toeligible funds will qualify for deduction where made duringthe 1981—82 and 1982—83 financial years.

New sub-paragraphs (lxxiii) and (lxxiv) willrespectively extend the operation of paragraph 78(1) (a) togifts made to a range of conservation bodies and to theUnited Nations Association of Australia Decade of TreesGreening Australia. The eligible conservation bodies arethe National Parks Association of New South Wales, theVictorian National Parks Association, the VictoriaConservation Trust, the National Parks Association ofQueensland, the Nature Conservation Society of SouthAustralia Incorporated, the National Parks Foundation ofSouth Australia Incorporated, the Western AustralianNational Parks and Reserves Association Incorporated, theTasmanian Conservation Trust Incorporated and the NationalParks Association of the Australian Capital TerritoryIncorporated.

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By the operation of sub-clause 5(2), gifts toeligible conservation bodies qualify for deduction wheremade after 17 August 1982.

Proposed new sub-paragraphs (lxxv) to (lxxviii)operate respectively to extend the operation of paragraph78(1) (a) to the Centre for Independent Studies, thePlayford Memorial Trust, the Boy Scouts and Girl GuidesAssociations in Australia and Amnesty International inAustralia. By sub-clause 5(3) gifts to these organisationsqualify for deduction where made after 26 August 1982.

b Paragraph (b) of sub-clause 5(1) and sub-clauses(2) and (3) of cliuse 5 prescribe the various application

dates for the extensions of the gift deduction provisionsauthorised by paragraph 78(1) (a) and have been explained inthe preceding notes.

~ Sub-clause (4) of clause 5, which will not amendthe Principal Act, will ensure that the Commissioner ofTaxation has authority to re-open an assessment made beforethis Bill becomes law if that should be necessary in orderto give effect to the extension of the gift deductionprovisions of the Principal Act proposed by this clause

Clause 6 : Persons to whom Division applies

This clause complements the amendments made byclause 3 which will ensure that rehabilitation andassociated allowances that are to be paid as from 1 March1983 under the Social Security Act 1947 will be exempt fromtax Clause 6 will amend section 1O2AC of the Principal‘ Act so that a person who would otherwise be eligible toreceive an invalid pension will not be disadvantaged bybecoming eligible to receive a rehabilitation allowanceinstead of that pension under related amendments to theSocial Security Act 1947.

‘ The clause enlarges the categories of “exceptedperson” in sub-section 1O2AC(2) to include minors inreceipt of rehabilitation allowances. Such allowanceswould, but for the amendment, fall to be assessed byreference to the provisions of Division 6AA of thePrincipal Act - the special code dealing with the taxing ofincomes of certain minors. Clause 6 will ensure that aminor eligible for invalid pension who becomes arehabilitation allowance recipient will not have theallowance dealt with under Division 6AA

New sub-paragraph (c) (iii) limits the applicationof the paragraph to minors who were eligible to receive aninvalid pension under the Social Security Act immediatelybefore becoming eligible to receive the rehabilitationallowance.

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By sub-clause (2) the amendment made by sub-clause(1) will apply in respect of payments of allowances made onor after 1 March 1983.

Clause 7:Retention Allowance

A company that is classified as a private companyfor the purposes of Division 7 of Part III of the PrincipalAct has a period of 12 months commencing 2 months beforethe end of an income year (the “prescribed period” inrelation to that income year) within which to make aprescribed level of distribution to its shareholders (a“sufficient distribution”) in respect of its taxable incomeof that year. A private company’s taxable income lesscompany tax is its “distributable income”. A distributionof the balance of its distributable income after deductingthe “retention allowance” is a sufficient distribution. Acompany which has not made a sufficient distribution isliable to pay additional tax on the amount of the shortfall.

Section 105B of the Principal Act sets theretention allowance as the aggregate of 70 per cent of aprivate company’s distributable income that comprisestrading or business income and 10 per cent of itsdistributable income that is property income other thandividends from other private companies. There is noretention allowance for property income consisting ofprivate company dividends.

It is proposed by sub-clause (1) of clause 7 toamend paragraph 105B(a) of the Principal Act to increasethe present rate of retention allowance for trading orbusiness income from 70 to 80 per cent. There is to be nochange in the rate of retention allowance for propertyincome.

Under sub-clause (2) the new retention allowancefor trading or business income will apply in determiningwhether a private company has made a sufficientdistribution in respect of income of the 1981-82 incomeyear and subsequent income years.

Clause 8 : Rebates and provisional tax

This clause will effect a technical amendment toparagraph (b) of section l2lDD consequential upon theproposed introduction of a dividend rebate by clause 4.Paragraph (b) provides that a trustee of a superannuationfund is not entitled to the rebates on dividends authorisedby section 46 or 46A of the Principal Act and, by theamendment, such a trustee will also be excluded fromentitlement to the dividend rebate under the new section46C proposed to be inserted by clause 4.

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Clause 9 : Rebates for dependants

This clause proposes two amendments of sectionl59J of the Principal Act under which concessional rebatesof tax may be allowed to resident taxpayers who contributeto the maintenance of certain dependants.

By sub-clause (1), a new sub-section l59J(1B) isto be inserted to provide for an increased rebate of tax inrespect of a dependent spouse or daughter-housekeeper wherea taxpayer would, but for sub-section 159J(lA), have beenentitled to a rebate under section 159J in respect of a

bchild less than 16 years of age (not being a student) or astudent less than 25 years of age. Sub-section l59J(lA)was inserted in 1976 to withdraw entitlement toconcessional rebates for children and students, suchrebates being replaced by family allowances.

In determining whether a taxpayer would be~ entitled to a rebate for a child or student but for

sub-section l59J(lA) (in these notes referred to as anotional rebate) , the other provisions of section l59J haveapplication. For example, where a child or student hasseparate net income for the year in excess of $282, thenotional rebate would be reduced by $1 for every $4 of theexcess, and if the separate net income of the child orstudent was such that the notional rebate was reduced tonil, the increased spouse or daughter-housekeeper rebatewould not be allowable. The taxpayer could, however, beentitled to the full amount of the increased spouse ordaughter-housekeeper rebate as long as any part of thenotional rebate would have been allowable.

‘ Where a taxpayer would have been entitled to anynotional rebate for a child or student, the maximum rebatefor a spouse or daughter-housekeeper is, in terms of newsub—section 159J(1B) , taken as $1030 — $963 for 1982—83 byvirtue of sub-clause (4) - in lieu of $830. The period ofthe year during which the spouse or daughter-housekeeperwas a dependant of the taxpayer and the level of the‘ separate net income (if any) of the dependant are factorsthat are then taken into account in arriving at the actualrebate allowable in respect of the dependant.

Section 159J of the Principal Act also authorisesthe allowance of a concessional rebate for a dependant whois an “invalid relative”. Consequent on the amendmentsproposed by clause 3 of the Bill, clause 9 will also amendsection l59J to ensure that no taxpayer who would otherwisebe entitled to claim a rebate of tax in respect of adependent invalid relative is disadvantaged by reason ofthe dependent person becoming a recipient of arehabilitation allowance instead of the invalid pension.

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Sub-clause 9(2) means that a relative not lessthan 16 years of age -

(a) who is receiving an invalid pension under theSocial Security Act 1947;

(b) who, being otherwise eligible to receive aninvalid pension, is in receipt of arehabilitation allowance; or

(C) in respect of whom the taxpayer produces acertificate from a specified doctorcertifying the person to be permanentlyincapacitated for work within the meaning ofPart III of the Social Security Act 1947,

will be treated as an invalid relative of the taxpayer forthe purposes of section l59J of the Principal Act. Ineffect, the definition of “invalid relative” will beextended to include a person who is not less than 16 yearsof age and who is a child, brother or sister of thetaxpayer and who is in receipt of a rehabilitationallowance. This extended meaning will apply only inrespect of persons who were eligible to receive an invalidpension under the Social Security Act 1947 immediatelybefore becoming eligible to receive the rehabilitationallowance.

By sub-clause (3), the amendment proposed bysub-clause (1) will apply to assessments for the 1982-83and subsequent years of income

Sub-clause (4) is a transitional provision underwhich the maximum rebate allowable for the 1982-83 incomeyear is to be $963. This amount represents the existingmaximum rebate of $830, as increased by $133, beingtwo-thirds of the proposed full year increase of $200,corresponding with the 1 November 1982 commencement dateannounced in the Budget Speech.

Sub-clause (5) provides that the amendment made bysub-clause (2) will operate in relation to rehabilitationallowance payments made on or after 1 March 1983

Clause 10 : Sole parent rebate

This clause will amend seCtion 159K of thePrincipal Act under which a rebate of $580 is allowable toa taxpayer who has the sole care of a child under 16 yearsof age, or a student under 25 years of age, and who wouldhave been entitled to a rebate of tax in respect of thatchild or student if such rebates had not been replaced byfamily allowances.

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Sub-clause (1) of clause 10 will increase themaximum r~bate by $200 from $580 to $780 - by $133 to $713for 1982-83 by virtue of sub-clause (3). This increase isin line with the proposed increase in the dependent spouseor daughter-housekeeper rebate (clause 9) and in thehousekeeper rebate (clause 11)

Sub-clause (2) proposes that the increased rebateapply to assessments in respect of income of the 1982-83and subsequent years of income.

Sub-clause (3) is a transitional provision under

which the maximum sole parent rebate allowable in 1982-83is to be $713, that is, the existing rebate of $580, asincreased by $133, being two-thirds of the full yearincrease of $200, reflecting the 1 November 1982commencement date announced in the Budget.

Clause 11 : Housekeeper

This clause will amend, in two separate respects,section l59L of the Principal Act under which a taxpayermay be entitled to a rebate of tax in respect of ahousekeeper who is wholly engaged in keeping house inAustralia for the taxpayer and in caring for certaindependants. The maximum rebate allowable is $830.

Sub-clause (1) of this clause will make the firstof these amendments. It will amend section l59L toincrease the maximum rebate for a housekeeper by $200 to$1030 — by $133 to $963 for 1982-83 by virtue of sub—clause(3) - where the taxpayer would, but for sub-section‘ 159J(lA) of the Act (refer to the notes on sub-clause (1)of clause 9) , have been entitled to a rebate of tax inrespect of a child less than 16 years of age or a studentless than 25 years of age.

The second amendment of section 159L will be madeby sub-clause (2) which, as with the amendments proposed by‘ clauses 3, 6 and 9, is consequential on the proposedpayment under the Social Security Act 1947 of a specialrehabilitation allowance from 1 March 1983

One of the classes of dependant being cared for bya housekeeper in respect of whom a taxpayer may be entitledto claim a rebate of tax is a spouse who is in receipt ofan invalid pension under the Social Security Act. Ataxpayer who is married is not entitled to such a rebate ifthe spouse is not receiving an invalid pension, unless theCommissioner of Taxation considers it reasonable in theparticular circumstances to allow the rebate

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The effect of sub-clause (2) will be to allow ataxpayer to continue to claim a housekeeper rebate wherethe dependent spouse becomes a recipient of arehabilitation allowance if the spouse was, immediatelybefore becoming eligible to receive that allowance,eligible to receive the invalid pension. This will beachieved by the insertion of a new sub-section (6) insection l59L.

By !ub-clause (3) the amendment made by sub-clause(1) is to apply to assessments in respect of income of the1982-83 and later income years.

Consistent with the corresponding provisions ofclauses 9 and 10 (see notes on those clauses) , sub-clause(4) of this clause will limit the increased rebate to $963for the 1982-83 income year.

Sub-clause (5) ensures that the amendment made bysub-clause (2) in respect of a recipient of arehabilitation allowance will have effect in relation topayments of allowance made on or after the commencement ofthe new scheme, i.e., from 1 March 1983.

Clause 12 : General concessional rebates

This clause will amend the rate used in sectionl59N of the Principal Act to calculate the generalconcessional rebate. Under section l59N, a taxpayer isentitled to a rebate of tax in respect of certain privateexpenditure, including private rates and land taxes, lifeassurance premiums and superannuation payments, educationexpenses and medical and hospital expenses, calculated atthe rate of 32 per cent (the standard rate of tax) of theexcess of such rebatable amounts over $1,590.

As a consequence of the reduction in the standardrate of tax from 32 to 30 per cent - proposed by the IncomeTax (Rates) Bill 1982 - sub-clause (1) of this clause willsimilarly reduce the rate at which the general concessionalrebate is calculated from 32 to 30 per cent. By virtue ofsub—clause (3) , the rate for 1982—83 is to be 30.67 percent.

By sub-clause (2) the amendment made by sub-clause(1) will apply as from the 1982-83 year of income.

For the 1982-83 income year, the rebate rate forthe purposes of section 159N will, by sub-clause (3), be30.67 per cent. This is the rate to be declared for the1982-83 income year by the Income Tax (Rates) Bill 1982which represents an average of the 32 per cent standardrate applying to 31 October 1982 and the reduced standardrate of 30 per cent applying from the announcedcommencement date of 1 November 1982.

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Clause 13 : Premiums paid for basic health insurance

Similar to clause 12 above, the amendment proposedby this clause will vary the rate used in section 159XA tocalculate the rebate for basic health insurance premiumsconsequential upon the proposal to reduce the standard rateof tax from 32 per cent to 30 per cent, effective from 1November 1982.

Section 159XA authorizes an income tax rebate of32 per cent (equivalent to the standard rate of tax) inrespect of amounts paid by a taxpayer to a registeredhealth fund for the purpose of obtaining basic medical orhospital cover.

Sub—clause (1) will substitute the rate of 30 percent for the 32 per cent rate.

~ By sub-clause (2) the amendment will apply for the1982-83 and subsequent years, while by sub—clause (3) , therate to be used for 1982-83 is to be 30.67 per cent (seenotes on clause 12).

Clause 14 : Eligible and prescribed occupationof dwelling

It is proposed by clauses 14 to 21 to amendSubdivision AA in Division 17 of Part III of the PrincipalAct to provide a rebate of tax in respect of certain homeloan interest payments. Payments qualifying under the newscheme are, broadly, those which relate to the interestslice in excess of 10 per cent per annum, on the first$60,000 of a loan or loans on a person’s sole or principalresidence.

At present, the Subdivision authorises a rebate oftax for home loan interest paid during the first 5 years ofowner-occupation of a sole or principal residence and the‘ amendments will introduce the alternative rebate schemewhich has been outlined in the introductory part of thisexplanatory memorandum. Because the same home loaninterest payments will form the basis of a taxpayer’sentitlement to a rebate under either scheme, several of theexisting provisions in Subdivision AA will also operatewith equal effect for the new scheme.

Existing provisions of the law which are relevantin the operation of the new rebate scheme in determiningthe interest which will qualify for rebate are outlinedhereunder.

Firstly, the terms “building society”, “dwelling”,“spouse”, “stratum unit” and “taxpayer”, which are definedin sub-section l59zA(l), will have the same meaning inrelation to the new scheme.

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Section 159ZB sets out the rules that determinefor both schemes whether a person has a “relevant interest”in a dwelling, that is, whether the person has ownershiprights as an owner or long-term lessee or licensee of thedwelling. A rebate of tax will be allowable only inconnection with interest paid in respect of a dwellingwhich the taxpayer uses as his or her sole or principalresidence and in which he or she has a “relevant interest”.

Section 159ZC sets out the general circumstancesin which an amount paid by a taxpayer by way of interest isto be taken as having been paid in respect of a loanconnected with a dwelling. Such an amount is the amount towhich proposed section 159ZNA will apply in determining theinterest which is to be the subject of the new rebate.Section 159ZC performs a similar function for the purposesof section 159ZJ as part of the existing rebate scheme.

Section 159ZC stipulates that, subject to certainexceptions, interest is to qualify for a rebate if it ispaid by a taxpayer on moneys lent to the taxpayer and usedby him or her “for housing purposes connected with adwelling” - those purposes are set out in detail in section159ZD. To safeguard against abuse, interest will notqualify if it is the result of a loan arrangement in whichthe taxpayer and the lender do not deal with each otherindependently and the interest rate is higher than mightreasonably have been expected in an arm’s lengthsituation. Interest on bank overdraft finance used forhousing purposes will qualify for a rebate only if the bankmaintains a separate account in relation to the moneys usedfor that purpose.

Section 159ZD specifies the purposes for whichloan moneys must be wholly or partly applied in connectionwith a dwelling if interest on moneys is to attract arebate of tax in respect of the existing home loan interestrebate scheme. One of those purposes will also have to hepresent if loan interest is to attract the operation of thenew rebate scheme. They are -

to acquire a prescribed interest in land onwhich a dwelling has since been constructed,or to acquire such an interest and construct,or finish construction of, a dwelling on theland;

to construct, or complete the constructionof, a building constituting or containing adwelling on land in which a prescribedinterest is held;

to acqui-re land on which there is an existingbuilding constituting or containing adwelling;

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to acquire a prescribed interest in a stratumunit, that is, to acquire a home unit, townhouse or flat;

to extend a dwelling by adding one or morerooms or a part of a room to the dwelling;

to finance extensions to a dwelling subjectto a stratum title;

to acquire a proprietary right in respect ofa flat or home unit;

to repay or refinance an earlier housing loanthe interest on which would qualify for therebate.

The terms “prescribed interest” and “proprietary right” aredefined in section 159ZB and refer to a person’s ownershipinterest in a dwelling.

Section 159ZE operates in conjunction with section159ZD and is designed to ensure that a taxpayer who doesnot, in a strict sense, borrow moneys to acquire a dwellingbut who incurs interest under a deferred payment,instalment purchase or other arrangement is brought withinthe scope of the rebate provisions.

The section which permits the transfer between ataxpayer and his or her spouse of the right to claim arebate, section 159ZO, will continue to apply. A taxpayerwho meets the requirements of both rebate schemes is to beentitled to transfer the rebate to which he or she isentitled, that is, the greater of the two rebate amounts.

Details of the proposed provisions necessary toimplement the new rebate scheme are contained in the notesthat follow.

Sub-clause (1) of clause 14 will replace existing‘ section 159ZF which sets out the tests to be met by ataxpayer to be an “eligible occupier” of a dwelling at anyparticular time. The term is a drafting aid used todescribe a taxpayer who can qualify for a rebate under theexisting scheme.

New section 159ZF will retain the definition of“eligible occupier” in paragraph (b) and will insert, inparagraph (a), a new definition of “prescribed occupier” ofa dwelling at any particular time. This latter term isalso a drafting aid used to describe a taxpayer who canqualify for a rebate under the new scheme. The tests arethat the taxpayer:

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(a) occupied the dwelling as his or her sole orprincipal residence; and

(b) had a relevant interest in the dwelling,i.e., had a “prescribed interest” or a“proprietary right” in terms of existingsub-section 159ZB (1)

By sub-clause (2) the amendment proposed bysub-clause (1) will apply to assessments in respect ofincome of the year of income that commenced on 1 July 1982and of all subsequent years of income.

Clause 15 : Rebatable interest

Section 159ZJ specifies the amounts paid by ataxpayer in a year of income by way of interest in respectof a loan connected with a dwelling (section 159ZC) whichare to be taken into account in calculating the rebateallowable under section 159ZK for the purposes of theexisting rebate scheme applying to the first five years ofowner-occupation.

The amendment proposed by sub-clause (1) of clause15 to sub-section 159ZJ(7) is a drafting measure occasionedby the incorporation of the new rebate scheme inSubdivision AA.

By sub-clause (2) the amendment proposed bysub-clause (1) is to apply to assessments in respect ofincome of the year of income that commenced on 1 July 1982and of all subsequent years of income.

Clause 16 : Rebate of tax

Section 159ZK is the operative provision whichauthorises a rebate of tax in a taxpayer’s assessment of anamount equal to 32 per cent of the interest subject torebate under the existing scheme. The rebate applies tointerest paid on or after 1 July 1982. Consistent with thereduction of the standard rate of tax from 32 per cent to30 per cent as from 1 November 1982, the rebate will fromthat date be an amount equal to 30 per cent of the interestsubject to rebate. To account for the availability of therebate at 32 per cent for part of the 1982-83 income yearand at 30 per cent for the remainder of the year, theaverage of 30.67 per cent will in practice be applied forthe year.

Paragraphs (a), (c) and (d) of sub-clause (1) aredrafting miasures occasioned by the implementation of thenew rebate scheme.

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Paragraph (b) will change the rate at which therebate is calculated from 32 per cent to 30 per cent.

By sub-clause (2) the amendments proposed bysub—clause (1) are to apply to assessments in respect ofincome of the year of income that commenced on 1 July 1982and of all subsequent years.

Sub-clause (3) means that the rebate of tax, whichby paragraph (1) (a) is to be 30 per cent for subsequentyears, will be 30.67 per cent for the purpose ofassessments in respect of income of the year of income thatcommenced on 1 July 1982. This reflects the reduction inthe standard rate of tax from 1 November 1982.

Clause 17 : Limitation of rebate under section 1S9ZKwhere first occupation date before 1 July 1982

~ Section 159ZL imposes an upper limit on the amountof the rebate of tax allowable to a taxpayer under theexisting scheme (first five years of owner-occupation)where the taxpayer first occupied as owner a dwelling ashis or her sole or principal residence before 1 July 1982.

Sub-clause (1) of clause 17, which inserts areference to section 159ZK, is purely a drafting measureoccasioned by the implementation of the new rebate schemeand, by sub-clause (2), is to first apply to assessments inrespect of income for the year of income that commenced on1 July 1982.

Clause 18 : Limitation of rebate under section 159ZKwhere first occupationdate after 30 June 1982

Section 159ZM has a similar operation to sectionl59zL in imposing an upper limit on the amount of therebate of tax allowable to a taxpayer under the existingscheme and applies where the taxpayer first occupied as‘ owner a dwelling as his or her sole or principal residenceon or after 1 July 1982.

Sub-clause (1) of clause 18 is a further draftingmeasure to similarly insert in that section reference tosection 159ZK.

By sub-clause (2) that amendment also will applyto assessments in respect of income of the 1982-83 andsubsequent years of income.

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Clause 19 : Reduction of rebate limit in cases- -- of co-ownership

Section 159ZN establishes the basis on which anupper rebate limit, determined under section 159ZL or159ZM, applicable to a taxpayer in respect of a rebate oftax under the existing scheme for home loan interest paidin the first five years of owner-occupation is apportionedwhere another co-owner or co-owners also qualify for arebate in respect of the dwelling.

The amendments proposed by sub-clause (1) ofclause 19 are formal drafting measures required by theinsertion of the new rebate scheme provisions.

By sub-clause (2) these amendments are also toapply to assessments for the 1982-83 and subsequent incomeyears.

Clause 20 : Rebate of tax on home loan interest

Sub-clause (1) of clause 20 proposes the insertionof three new sections - sections 159ZNA to 159ZNC - in thePrincipal Act.

Section 159ZNA will specify the amounts paid by ataxpayer in a year of income by way of interest in respectof a loan connected with a dwelling which are to be takeninto account for the purpose of calculating the rebateallowable under section 159ZNB.

Section 159ZNB is the operative provision forcalculating the rebate on qualifying interest while section159ZNC will limit a taxpayer to only one rebate in a yearof income where he or she meets the conditions ofeligibility under both this scheme and the existing schemewhich relates to the first five years of owner-occupationof a dwelling.

Section 159ZNA : Pebatable amounts

The rebate allowable in a year of income underproposed section 159ZNA for interest paid in a year ofincome will apply only to interest which accrues while thetaxpayer is a prescribed occupier (section 1S9ZF)

If the loan moneys are applied by the taxpayeronly partly for purposes connected with the dwelling thenthe interest attributable to moneys used for other purposesis not to be taken into account in calculating the interestqualifying for the rebate. In cases where a dwelling isused only partly as a sole or principal residence, or where

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any profit or loss on its disposal would be required to betaken into account for income tax purposes, theCommissioner of Taxation will determine the appropriateamount of the interest paid that is to qualify.

The rebate will be available only in respect ofqualifying interest that is attributable to the portion ofthe rate of interest on a loan that exceeds 10 per cent perannum, and being interest limited to the first $60,000 of aloan or loans on the dwelling.

Sub-section 159ZNA(l) ensures that the section

applies to an amount of interest on a loan connected with adwelling (section 159ZC) only if the amount is paid by ataxpayer in a year of income and during the year of incomehe or she was, at any time, a prescribed occupier of thedwelling. The amount must be paid on or after 1 July 1982and the interest must accrue while the taxpayer is a“prescribed occupier”. Sub-section (1) is subject tosub-sections (2) , (3) and (4)

Sub-section (2) will ensure that interest paymentson home loans by building societies of an actuarial kind,generally referred to as terminating building societies,are treated on a comparable basis to interest payments onhome loans made by other building societies and lendinginstitutions which operate under a credit foncier method ofrepayment.

Paragraphs (2) (a) , (b) and (C) outline thecircumstances in which an actuariaI-t~e society is thelending institution. These are that moneys have been lentto a taxpayer for housing purposes (paragraph (a)), the

~ building society credits or makes an allowance to theborrower for interest on his or her subscriptions relatedto the loan moneys (paragraph (b)) and those credits orallowances do not form part of the borrower’s assessableincome (paragraph (c)). Where all of these circumstancesare present the amount of interest paid by the taxpayerwhich would otherwise be taken into account in section

P 159ZNA is to be reduced in accordance with paragraphs (d)and (e).

By those two paragraphs the reduction is to be theamount of credit or allowance referred to in paragraph (b)in the case of a sole borrower or, in the case of jointborrowers, an amount, not exceeding that credit orallowance, as determined by the Commissioner. Such ade,terminatiori would, if the taxpayer disagreed, be capableof being reviewed by an independent Taxation Board ofReview.

Proposed sub-section (3) allows for theapportionment of interest paid in a year of income whereloan funds are applied only partly in connection with

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acquiring, constructing or extending a dwelling. Section159ZD sets out the kinds of expenditure to which loanmoneys are to be applied before interest on the loan willqualify for the rebate. To the extent that the taxpayerapplies the loan moneys other than for those purposes,interest which relates to the proportion so applied will beexcluded from the operation of section 159ZNA. By way ofexample, a taxpayer may spend part of a loan to purchase acar or acquire furnishings, in which case interest on themoneys so applied will not qualify.

Sub-section (4) relates to the apportionment ofhome loan interest paid by a taxpayer in a year of incomein certain other specified circumstances where it would notbe appropriate to take the whole of the interest paid intoaccount. Where the sub-section applies, the Commissionerof Taxation is empowered to determine how much of the totalinterest payment is reasonably to be regarded as comingwithin section 159ZNA. A Taxation Board of Review wouldreview the Commissioner’s decision where a dissatisfiedtaxpayer exercises his rights under the objection andappeal provisions of the law.

Paragraph (4) (a) means that where a taxpayer is aprescribed occupier of a dwelling during the whole or partof the year of income and has paid during the year ofincome interest on a loan connected with the dwelling, theCommissioner may, in the circumstances specified inparagraph (b) , reduce the otherwise qualifying amount to anamount whfch, in his opinion, is reasonable in all thecircumstances. This will generally involve ascertainmentof the proportion of loan moneys applied to that part of abuilding or dwelling used as the sole or principalresidence of the taxpayer.

The specified circumstances in which theCommissioner may decide to reduce the amount of home loaninterest otherwise qualifying are where the dwelling orpart of the dwelling, the building containing the dwellingor a part of that building, the land on which the buildingstands or a part of that land was -

used or held for the purpose of gaining orproducing income or for carrying on abusiness for that purpose (sub-paragraph(i)); or

used for some other purpose by the taxpayer -

not being use as the taxpayer’s sole orprincipal residence or a use related to suchuse (sub-paragraph (ii)).

This sub-section has two purposes. First, it aimsto prevent a taxpayer from obtaining both a home loaninterest rebate and a deduction from assessable income in

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relation to the same interest payments. Second, it isdesigned to deny a rebate in respect of an approprite partof interest payments in any case where a taxpayer’sdwelling is used during a year for a purpose other -than ashis or her sole or principal residence.

For example, a taxpayer may have a flat attachedto the house which is used for income producing purposes.Interest incurred on loan moneys attributable to acquiringthe flat would be an allowable deduction, from the rentreceived, in calculating the taxpayer’s taxable income andtherefore would, by virtue of sub-section (4) , beineligible for the rebate.

Sub-section (5) expands the operation ofsub-section (4) to a case where a taxpayer disposes ofproperty or part of a property on which a dwelling issituated and a profit from the sale of the property isassessable not under the general provisions of the law (inwhich case sub-section (4) would itself apply), but underparagraph 26(a) or section 26AAA or a loss on sale isdeductible under section 52. In that case the property isto be taken to have been used (at the time or timesspecified in paragraph (5) (d) and (e)) for the purpose ofgaining or producing income so that any interest paid inrelation to it will be subject to reduction by theoperation of sub-paragraph (4) (b) (1).

In more detail, paragraph (5) (a) deals with theacquisition of property for the purposes of profit-makingby sale where the profit on sale falls to be included inassessable income under the first limb of paragraph 26(a)or a deduction is allowable under section 52 for any losswhich occurs on sale.

Where paragrah (a) applies to particular property,that property will, by virtue of paragraph (d), be deemedto have been used by the taxpayef for income-producingpurposes at all times during which the property was ownedby the taxpayer. The effect of this will be to deny a‘ taxpayer a rebate for interest which has already been takeninto account in calculating the profit included in thetaxpayer’s assessable income or in calculating the lossallowed as a deduction.

A similar result is achieved under paragraphs (b)and (e) if a profit is to be included in assessable incomeunder the second limb of paragraph 26(a) or a loss isallowable as a deduction under section 52 in respect ofproperty which has been ventured in a profit-makingundertaking or scheme. Where this occurs the property isto be taken to have been used by the taxpayer for thepurpose of gaining or producing income from the time it washeld for the purpose of, or in connection with, theprofit-making undertaking or scheme.

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Paragraph (c) concerns cases where a profit fromthe sale of property within 12 months of acquisition isincluded in assessable income under section 26AAA. Byvirtue of paragraph (d) the property will be deemed to havebeen used for income-producing purposes at all times duringwhich the property was owned by the taxpayer and this willbring cases involving section 26AAA within the ambit of theCommissioner’s authority to determine, under sub-section(4), the extent (if any) to which interest on the propertyis rebatable.

Proposed sub-section 159ZNA (6) sets out theformula by which an amount of interest paid in a year ofincome in respect of a loan connected with a dwelling,which after the operation of sub—sections (1) to (4) is tobe taken into account for the purposes of section 159ZNA,is to be reduced to achieve the result that the rebate isallowed only on such part of the qualifying interest asrepresents the proportion attributable to the excess of theinterest rate above 10 per cent per annum.

The formula calculates the amount to be excludedfrom interest which attracts the rebate as 10 per cent perannum of the average balance of the loan during itscurrency in the year of income. The formula also allows anadjustment to be made to account for a situation where theamount of interest paid in a year of income and which isinterest taken into account for the purposes of section159ZNA is greater or less than the amount of interest whichin fact accrues on the loan during the year of income.

The formula is A+B x CD which

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represents the following factors:

A is an amount equal to the balance at the commencementof the year of income of the loan in respect of whichthe interest is paid in that year or, where the loanwas made during the year, an amount equal to the amountof the loan;

B is an amount equal to the balance at the end of theyear of income of the loan in respect of which theinterest is paid or, where no amount is owing on theloan at the end of the year, nil;

C is the number ascertained by dividing the amount ofinterest which is to be taken into account for thepurposes of section 159ZNA in respect of the loan,after the operation of sub-sections (1) to (4), by theamount of interest which accrued in respect of the loanduring the year of income; and

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D is the number of days during the year of income inrespect of which interest accrued in respect of theloan.

The amount obtained after deducting the amountascertained by the formula from the amount of interesttaken into account for the purposes of section 159ZNA isthe “rebatable amount” being the amount which, subject tosub-sections (7) arid (8) , is to be subject to the rebate oftax calculated in accordance with section 159ZNB.

Sub-section (7) is the mechanism for adjusting theamount calculated as the average balance of a loanthroughout its currency in a year of income (the componentA-I-B of the formula in sub-section (6)), where significant

2additions or reductions to the unpaid balance of the loanoccur during the year of income.

The Commissioner of Taxation is to be given a

b discretion in certain circumstances to adjust the componentif he is of the opinion that the amount represented by thecomponent is not a reasonable approximation of the averageunpaid balance during the period of the loan in the incomeyear. This adjustment may be made to account for paymentsof principal during the year additional to payments ofprincipal required to be made under the loan contract(paragraph (a)) , to take account of repayment of principalon early termination of the loan (paragraph (b)) or for anincrease (additional borrowing) in the amount of the loanduring the year (paragraph (c)).

For example, if a loan is paid off during a yearof income otherwise than by payment of the last scheduled‘ instalment under the loan agreement, such as may occur when

•a mortgage is discharged on sale of a house, an adjustmentmay be made if the average of the opening and closingbalances of the loan for the year would not fairlyrepresent the average amount outstanding during the year.

Sub-section (8) contains provisions to reduce the‘ rebatable amount calculated in accordance with sub-section(6) where the unpaid balance of the loan, or the total ofthat unpaid balance and the unpaid balance of any otherloan connected with the dwelling, at the end of the year ofincome (or at an earlier time during the year when thetaxpayer ceases to be a prescribed occupier of thedwelling) exceeds the statutory limit of $60,000.

Where the sub-section operates in respect of aloan or loans, the rebatable amount otherwise applicable(sub-section (6)) is to be reduced in the same proportionas the statutory amount of $60,000 bears to the balance ofthe loan (or sum of the loans). Loans to be taken intoaccount for this purpose include not only the loan to which

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the interest which is rebatable relates but any other loanmade to the taxpayer or any other person where the moneyswere applied for housing purposes connected with thedwelling.

Paragraph (b) of sub-section (8) will ensure thatthe unpaid balance of a loan at the relevant time is takeninto account in applying the sub-section to the extent onlythat the loan was used wholly for eligible purposesreferred to in sub-section 159ZD(l) in connection with thedwelling. This reflects the fact that, to the extent aloan is not applied for eligible housing purposes, intereston the loan is not treated as interest to which section159ZNA applied.

Sub-section (9) relates to the operation ofsub-section (8) and the reduction of a rebatable amountwhere the balance of an unpaid loan (or loans) on adwelling at the relevant time exceeds $60,000. It haseffect where it would not be appropriate to take intoaccount the whole of the unpaid balance of a loan indeciding whether or not the outstanding balance or balancesexceed $60,000 in applying sub-section (8)

Sub-section (9) will operate where the buildingcontaining the dwelling, a part of the building, the parcelof land on which the building is constructed or a part ofthe land was -

used or held for the purpose of gaining orproducing income or for carrying on abusiness for that purpose (sub-paragraph(b) (i) ) ; or

used for some other purpose by the taxpayer -

not being use as the taxpayer’s sole orprincipal residence or a use related to suchuse (sub-paragraph (b) (ii))

Where one of these circumstances applies theCommissioner may, if he considers it fair and reasonable todo so, decide either not to reduce the rebatable amountunder sub-section (8) or to reduce it by less thansub-section (8) would. An example of such a circumstancewould be where a loan has been used both in acquiring abuilding containing a flat for use as the taxpayer’s soleor principal residence and an attached shop. The part ofthe loan attributable to purchase of the shop would not hetaken into account in a calculation under sub-section (8)Consonantly, the interest paid on that part of the loanwould not be rehatable (sub-section 159ZNA(4)). On theother hand, if a dwelling is used partly as a sole orprincipal residence and partly for other purposes theunpaid balance of the loan related to acquiring the

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dwelling will not be reduced because of that other use eventhough the interest otherwise rebatable would be reducedbecause of that use.

Sub-section (10) will allow a greater proportionof a rebatable amount in respect of a loan to be taken intoaccount following the operation of sub-section (8) wherethe Commissioner of Taxation is satisfied that, havingregard to the timing of any increase in the unpaid balanceof a loan (or loans) on a dwelling during the year or anyadditional loan (or loans) made during the year, thatresult is appropriate - the provision will apply only if

the unpaid balance of a loan (or loans) on a dwelling atthe end of a year of income (or earlier time when thetaxpayer last occupies the dwelling in a year) exceeds$60,000.

The Commissioner will be empowered to take eitherno part of the increase (or the new loan) or only aspecified part of the increase into account in reducing therebatable amount in sub-section (8)

This recognises that where there has been anincrease in a loan (or loans) during the year the balanceat the end of the year may not be a sufficientapproximation of the average balance outstanding over theperiod. As a consequence, in applying sub-section (8) theCommissioner will be able to decide that no adjustment, ora lesser adjustment, need be made to the rebatable amountif the unpaid balance of a loan increases during the year.

Sub-section (11) will ensure that prepayments ofinterest are disregarded in determining the amount of

~ rebatable interest in a year of income. Pre-paid interestwill be deemed to have been paid in the income year inwhich the interest falls due and is to be considered inrebate calculations for that year and not in the year inwhich it is in fact paid.

Section 159ZNB is the operative provision forcalculating the rebate of tax allowable in a taxpayer’sassessment. The rebate is an amount equal to 30 per centof the rebatable amount (paragraph (a)) or, where there ismore than one such rebatable amount, the sum of thoseamounts ~paragraph (b)). For assessments of income of the1982-83 year the rebate will be at the rate of 30.67 percent (see sub-clause (2)).

The “rebatable amount” is the amount ascertainedunder section 159ZNA.

Section 159ZNC gives effect to the intention that,where a taxpayer satisfies the conditions of eligibilityfor a rebate in a year of income under both the new scheme

36.

and the existing home loan interest scheme (related to thefirst 5 years of home ownership), the taxpayer is to beentitled only to the greater of the two rebate amounts.

Sub-clause (3) , which does not amend the PrincipalAct, will allow any a~sessment that may already have beenmade in respect of the 1982-83 year to be amended so as toallow a rebate under this scheme.

Clause 21 Rebate where interest paid by trustee

Sub-sections 159ZQ(l) and (2) operate in respectof the rebate scheme related to the first five years ofowner-occupation of a dwelling and extend the scheme tothose cases where a trustee of a trust estate pays homeloan interest out of income to which a beneficiary ispresently entitled, or applies income of the trust estatefor the benefit of the beneficiary by payment of home loaninterest, and the interest relates to a dwelling which thebeneficiary uses as his sole or principal residence. Thesesub-sections will also operate in respect of the new rebatescheme. - -

Sub-section 159ZQ(3) permits a rebate of tax to beallowed in the assessment up to date of death of a deceasedperson in respect of interest accrued before the date ofdeath and paid by the trustee during the year of income inwhich the deceased person died. Sub-clause (1) of clause21 proposes a drafting amendment which will allow for thesub-section to operate in a similar manner in respect ofthe new rebate scheme.

Sub-clause (2) will provide that the amendmentapplies to assessments in respect of income of the year ofincome that commenced on 1 July 1982 and of all subsequentyears.

Clause 22 Rebate in respect of certain pensions

This clause proposes the insertion of new section16OAAA in Division 17 of the Principal Act under whichtaxpayers in receipt of Australian social security orrepatriation pensions that are subject to tax in Australiamay be entitled to a rebate of tax designed to ensure thatpersons wholly or mainly dependent on such pensions willnot have to pay tax. The rebate, the maximum amount ofwhich is $250, will be shaded-out at the rate of 12 5 centsfor each dollar by which the taxpayer’s taxable incomeexceeds a specified level.

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Sub-clause (1) will insert the new section. Toqualify for a rebate, the assessable income of the taxpayermust include a pension, allowance or benefit paid under oneof the Acts listed in paragraphs (a) to (f) of the section,namely: --

(a) the Interim Forces Benefits Act 1947;(b) the Repatriation Act 1920;(c) the Repatriation (Far East Strategic Reserve)

Act 1956;(d) the Repatriation (Special Overseas Service)

Act 1962;(e) the Social Security Act 1947 other than Part

VII of that Act; and -

(f) the Tuberculosis Act 1948.

The rebate will not be allowable by virtue of the receiptof a pension, allowance or benefit that is nOt subject totax in Australia, for example, a war widow’s pension, or a

~ pension that is, under the terms of one of Australia’sagreements for the avoidance of double taxation, subject totax only in the country in which the recipient resides.Nor, by virtue of the exclusion in paragraph (e), will therebate be allowable for recipients of payments made underPart VII of the Social Security Act 1947 (unemployment,sickness and special benefits) , unless they have qualifiedby reason of the receipt of one of the other taxablepensions, allowances or benefits.

Where a taxpayer’s assessable income includes oneof the relevant pensions, allowances or benefits, he or sheis to be entitled to a rebate calculated in accordance withparagraphs (g) and (h) of the new section.

Paragraph (g) is to the effect that where ataxpayer’s taxable income (that is, total assessable incomeless allowable deductions) is $5,429 or less, the rebate tobe allowed is $250 ($167 for 1982-83 — see sub—clause(3)). The rebate cannot, however, in terms of existingsection 16OAD of the Principal Act, exceed the tax thatwould otherwise be payable.

By paragraph (h), the rebate will be “shaded-out”where a taxpayer’s taxable income exceeds $5,429 ($5,007for 1982-83, see sub—clause (3)). In such a case, therebate of $250 is to be reduced by 12.5 cents for each $1of the excess. For example, if the 1982-83 taxable incomeof a taxpayer were $5,807, the maximum rebate for that year- $167 (see sub-clause (3)) — would be reduced by $100 to$67. The rebate will shade-out fully at a taxable incomeof $6,343 in 1982-83 and $7,429 in subsequent years.

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By sub-clause (2), the new section 16OAAA is tofirst apply in income tax assessments of the 1982-83 yearof income, but this is subject to sub-clause (3) which is atransitional provision having application for that yearonly.

In applying proposed section 16OAAA in 1982-83assessments, the rebate to be allowed is, by virtue ofsub-clause (3), to be $167 - being two-thirds of the fullrebate of $250 (which will be ~.ilowed in 1983-84 andsubsequent years) reflecting the date of introduction ofthe rebate, 1 November 1982. The rebate of $167 will beallowed where taxable income does not exceed $5,007 andwill shade-out at the rate of 12.5 cents for each $1 oftaxable income in excess of $5,007.

Paragraph (c) of sub-clause (3) is a transitionalprovision consequential on changes proposed to the SocialSecurity Act 1947 to provide for a tax-free rehabilitationallowance. For 1982-83, a taxpayer will not be entitled tothe proposed new rebate by virtue of the inclusion inassessable income of an allowance paid under section 135Dof the Social Security Act 1947, to the extent that thesection applies in relation to a benefit paid under PartVII of that Act - that is, an allowance related tounemployment, sickness or special benefits, whichthemselves do not attract the rebate.

Payments made under section l35D of the SocialSecurity Act 1947 on or after 1 March 1983 will not beincluded in assessable income (see notes on clause 3 ofthis Bill) so that for 1983-84 and subsequent years thereceipt of such a payment will not be relevant for -thepurposes of the rebate.

Clause 23 : Rebate in respect of payments received inlieu of annual leave or long re~vice leave

The amendments to section 16OAA of the PrincipalAct proposed by this clause are consequential upon theproposals in the Income Tax (Rates) Bill 1982 to reduce thestandard rate of tax from 32 to 30 per cent and to removethe tax-free threshold from non-residents.

A rebate of tax is allowed under section 16OAA ofthe Principal Act to ensure that no more than the standardrate of tax is payable on any amount included in theassessable income of a taxpayer because of the operation ofsection 26AC of the Principal Act (that is, a paymentreceived on retirement in respect of unused annual leave)or because of the operation of section 26AD (that is, apayment received on retirement in respect of unused longservice leave attributable to eligible service after 15August 1978) . Broadly, the rebate allowable is the amount

39.

by which the actual tax that can be attributed to therelevant payments exceeds the tax that would be payable atthe standard rate on the payments.

For this purpose, the section contains referencesto the 32 per cent standard rate and to the taxable incomelevels of $4,195 (the top of the zero rate step) and$17,894 above, and up to which, respectively, the standardrate presently applies. Changes to that rate, and to thoseamounts, and the withdrawal of the zero tax step fromnon-residents, proposed in the Income Tax (Rates) Bill1982, necessitate the amendments proposed by sub-clause (1).

Paragraph (a) of sub—clause (1) omits thereference -- in paragraph 16OAA(l) (b) to $17,894 andsubstitutes $19,500 with effect from 1983—84 (seesub-clause (4)), that is, the top of the standard rate stepin the personal income tax rate scale as proposed in theIncome Tax (Rates) Bill 1982.

Paragraph (b) substitutes the proposed newstandard rate of tax - 30 per cent - for the reference to32 per cent in paragraph 16OAA(1) (ci) . By virtue ofsub-clause (4) , the proposed rate for 1982-83 - 30.67 percent - will apply for 1982-83.

Paragraph (c) will insert in sub-section 16OAA(2)a definition of the term “non-resident taxpayer”. Thisterm has the same meaning as it is to have in sub-section3(1) of the Income Tax (Rates) Bill 1982 (see notes in thismemorandum on that Bill) . The question of whether or not a

• taxpayer is a non-resident taxpayer is relevant in thecalculation of the rebate to be allowed under section

b16OAA. As a non-resident taxpayer is no longer to beentitled to the benefit of the tax-free threshold, that is,the zero rate of tax on the first slice of taxable income,a different basis of calculating the rebate allowable tosuch a taxpayer is necessary.

Paragraph (ci) of sub-clause (1) proposes the

substitution

in sub-section 16OAA(2) of a new definition of“relevant income amount” which is, in effect, the amount ofthe annual leave or long service leave payment on which taxat the standard rate only is payable.

Paragraph (a) of the definition is effectively arestatement of the existing definition with the referencesto the tax-free threshold of $4,195 altered to the proposednew level of $4,595 ($4,462 for 1982-83 by sub—clause(4)). The paragraph applies only where the taxpayer is aresident taxpayer (that is, where he or she is not anon-resident taxpayer as defined). As is the case with theexisting definition, the amount of the annual or longservice leave payment (or the sum, where there are 2 ormore amounts) that is to attract tax at the standard rateis, in effect, the whole of that amount, where other

40.

taxable income is equal to or exceeds the tax-freethreshold, or the excess of that amount over the tax-freethreshold, where other taxable income does not exceed thatthreshold.

Paragraph (b) of the definition of “relevantincome amount” applies in the case of a non-residenttaxpayer. Reflecting the fact that such persons are not tobe entitled to the benefit of the tax-free threshold, therelevant income amount for a non-resident taxpayer is theamount of the assessable annual leave or long service leavepayments, or where there are two or more such amounts, theaggregate thereof. Under transitional arrangements for1982-83, a proportionate tax-free threshold of $585 is tobe allowed to non-resident taxpayers in 1982-83 and thedefinition of “relevant income amount” in relation to suchtaxpayers for that year is modified accordingly byparagraph (c) of sub-clause (4)

Paragraph (e) of sub-clause (1) inserts adefinition of “resident taxpayer”, which - like that of“non-resident taxpayer” - has the same meaning as thatproposed in the Income Tax (Rates) Bill 1982.

By sub-clause (2), the amendment made by paragraph(a) of sub—clause (1) —substituting $19,500 for $17,894 insection 16OAA - is to first apply in 1983-84 income taxassessments. This is so because the full effect of thechanges to the income tax rate scale, one of which is toincrease the top of the standard rate step from $17,894 to$19,500, will not operate until 1983—84. For 1982—83, therate of 30.67 per cent which, by sub-clause (4), is to be

-rate of tax payable on relevant annual and long serviceleave payments in 1982-83, will apply up to $17,894 (seenotes in this memorandum on the Income Tax (Rates) Bill1982)

By sub-clause (3), the amendments made byparagraphs (b) - to (e) of sub-clause (1) apply from the1982-83 year, subject to the provisions of sub-clause (4)

Sub-clause (4) applies only for the 1982-83 yearof income and is to the effect that, for that year, the 30per cent referred to in paragraph (1) (ci) of section 16OAA(as proposed to be amended by sub-clause (1)) shall, byparagraph (a), be read as 30.67 per cent; and the referenceto $4,595 in sub—secti~n (2) shall, by paragraph (b) , beread~asbeing $4,462. lilese provisions reflect the incometax rate scale that is to apply for 1982-83 (see notes inthe memorandumon the Income Tax (Rates) Bill 1982).

Paragraph (c) of sub-clause (4) proposes that, for1982-83 only, par~raph (b) of the new definition of“relevant income amount” (inserted by sub-clause (1)) is tohave a different meaning. This transitional measurereflects the partial tax-free threshold of $585 (proposed

41.

by the Income Tax (Rates) Bill 1982) that is to beavailable in 1982-83 to non-residents. (See notes onsub—clause 23(1)). -

The “relevant income amount” for 1982-83 in thecase of a non-resident taxpayer is to be the amount of theassessable annual or long service leave payment (or theirsum, if there is more than one) , where other taxable incomeis equal to or exceeds $585, or the excess of that amountover $585, where other taxable income (if any) does- notexceed $585.

Clause 24 Amendment of assessments

This clause will amend sub-section (10) of section170 of the Principal Act, which section governs the powerof the Commissioner of Taxation to amend income taxassessments. Sub-section 170(10) provides that nothing in

b section 170 is to prevent the amendment of an assessment atany time for the purpose of giving effect to specifiedprovisions of the Principal Act. -

By this clause it is proposed to insert insub-section 170(10) a reference- to new sub-section159ZNA(5) which clause 20 of the Bill proposes to insert inthe Principal Act.

As amended, sub-section 170(10) will enable theCommissioner to give effect to sub-section 159ZNA(5) byamending at any time the assessmentof a taxpayer where, byoperation of the relevant provisions, - a taxpayer isassessed on a profit arising, or is allowed a deduction for‘ a loss, on sale of a dwelling in respect of which a homeloan interest rebate has been allowed. Similar provisionsalso operate in respect of the existing home loan interestrebate scheme (sub-section 159ZJ(6)).

The need to include a reference to sub-section159ZNA(5) in sub-section 170(10) arises because facts may

emergesome time after a taxpayer acquired a dwelling,

which he or she used as his or her sole or. principalresidence, which indicate that the dwelling (or part of theproperty on or in which the dwelling is situated orcontained) was acquired for a purpose which results in aprofit or loss on disposal being reflected in taxableincome or that the property was ventured as part of aprofit-making undertaking or scheme. Where such an eventoccurs the Commissioner will be authorised by sub-section170(10) to amend an assessment at any tine to give effectto sub-section 159ZNA(4) as affected by sub-section15 9ZNA(5)

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Clause 25: Provisional tax on estimated income

This clause proposes an amendment to section 221YDA of the Principal Act to insert references to proposednew sections 46C (rebate in respect of certain dividendspaid to residents - clause 4) and 16OAAA (rebate in respectof certain pensions - clause 22) and to existingSubdivision AA of Division 17 of Part III as amended byclauses 14-21 (home loan interest rebates).

Under section 221YDA, a taxpayer may apply for avariation of the provisional tax that he or she has beencalled upon to pay (see notes on clause 28 for the basis ofcalculating 1982-83 provisional tax). In his or her“self-assessment” application, the taxpayer provides anestimate of taxable income for the year in question, thecomposition of that taxable income and the rebates orcredits to which he or she will be entitled for the year.Provisional tax is then recalculated on the basis of thoseestimates.

The amendments proposed by sub-clause (1) willenable a taxpayer to make estimates for this purposerelating to the new rebates in respect of dividends andpensions, and the home loan interest rebate, and have theestimates taken into account in recalculating his or herprovisional tax.

By paragraph (a) of sub-clause (1) , paragraph 221YDA(l) (cia) will be amended to permit the taxpayer toestimate his entitlement (if any) to these rebates.Similarly, paragraph (b) proposes an amendment tosub-paragraph 221YDA(2) (a) (ii) under which a taxpayer’sestimated entitlement to these rebates may be taken intoaccount in recalculating the provisional tax payable.

By sub-clause (2), the amendments made bysub-clause (1) are to apply in ascertaining provisional taxpayable for the 1982-83 and later income years.

Clause 26 : Deductions from mining payments

This clause will amend sub-section 221ZB(l) of thePrincipal Act in consequence of the reduction in thestandard rate of tax, as from 1 November 1982, proposed bythe Income Tax (Rates) Bill 1982.

Section 221ZB provides that a person shall notmake a mining payment, that is, broadly, a payment inrespect of mining operations on aboriginal land, unless theperson has made a deduction therefrom of an amount equal to6.4 per cent of the payment, that is, an amount equal totax at the standard rate of 32 per cent on an amount equalto one—fifth of the payment.

43.

By sub—clause (1), the reference to 6.4 per centin sub-section 221ZB(l) is to be replaced by a reference to6 per cent, equal to the amount ascertained by applying theproposed new standard rate of 30 per cent to an amountequal to one—fifth of the payment.

Sub-clause (2) specifies that the amendment madeby sub-clause (1) is to apply to mining payments made orapplied on or after 1 November 1982.

Clause 27 : Formal amendments

The Bill makes a number of formal amendments tothe Act necessitated by the change of title of and otherformal amendments to the Social Services Act 1947 made bythe Social Services Legislation Amendment Act 1982. Theamendmentsare specified in column 2 of the Schedule to theBill.

Clause 28: Provisional tax for 1982-83year of income

The purpose of this clause, which will not amendthe Principal Act, is to specify the basis for calculating1982-83 provisional tax of taxpayers who do not“self-assess”. Broadly, the provisional tax is to becalculated by applying 1982—83 rates of tax to 1981-82taxable incomes as increased by 10 per cent. Rebates areto be taken into account as allowed in 1981-82 income taxassessments, except where it appears from the informationavailable in the taxpayer’s 1981-82 income tax return that

~ he or she will be entitled in 1982-83 to an increasedspouse, daughter-housekeeper, housekeeper or sole parentrebate (proposed by clauses 9 to 11 of this Bill). In suchcases, the relevant rebates - including zone rebates asappropriate - allowed in 1981-82 will be increasedaccordingly.

Provided the information available from thetaxpayer’s 1981-82 return permits, the proposed rebate inrespect of certain dividends (clause 4) and that in respectof certain pensions (clause 22) that would have beenallowable if those amendments had applied in 1981-82, willalso be taken into account in calculating 1982-83provisional tax.

Where a taxpayer chooses to “self-assess”, i.e.,to have 1982-83 provisional tax based on his or her ownestimate of 1982-83 income, the provisional tax will be,basically, the amount calculated by applying 1982-83 ratesof tax to that estimated income and by deducting estimated1982—83 rebates.

44.

For a taxpayer whose 1981-82 taxable incomereflects a deduction allowed for capital moneys expended inproducing a qualifying Australian film, 1982-83 provisionaltax is to be calculated as if no such deduction had beenallowed, with the taxable income so adjusted increased by10 per cent.

For primary producers who do not self-assess, theclause will require that, for provisional tax purposes, anyaveraging rebate to which the primary producer is entitledbe recalculated using 1981-82 taxable income (as adjustedfor any income equalisation deposits or withdrawals orcapital expenditure on a qualifying Australian film) asincreased by 10 per cent. 1982-83 rates of tax will beapplied, as will the average income for 1981-82 taxationpurposes - the average income itself will not be increasedto reflect the 10 per cent adjustment of taxable income.If a primary producer qualified for a part only of theaveraging benefit in 1981-82 (i.e., where his or her incomeother than from primary production in that year exceeded$5,000), the clause will require, in effect, that theproportion of the recalculated averaging benefit to beallowed in calculating 1982-83 provisional tax is to he thesame as that allowed in calculating 1981-82 tax payable,that is, it is not to be reduced to reflect the notional 10per cent increase in income other than from primaryproduction.

For taxpayers deriving a notional income asspecified by section 59AB (depreciation recouped), section86 (lease premiums) , or section 158D (abnormal income ofauthors or inventors) of the Assessment Act, the clausewill have the effect that, unless they “self—assess”, theirprovisional tax, before deduction of rebates, is to becalculated by applying to their 1981-82 taxable incomeincreased by 10 per cent, the 1982-83 rate of taxapplicable to their 1981-82 notional income, that is, therate of tax is not to be increased to reflect a 10 per centincrease in notional income.

For taxpayers who were minors, (i.e., under 18years of age) at 30 June 1982 and who were liable for taxfor 1981-82 under the arrangements applying to minors(i.e., the minor’s eligible taxable income for the purposesof Division 6AA of Part III of the Assessment Act for thatyear was greater than $1,040) the proportion of the taxableincome, as increased by 10 per cent, that is to be taken asbeing eligible taxable income, for purposes of theprovisional tax calculation, is to be the same as thatwhich the 1981-82 eligible taxable income of the taxpayerbore to his or her taxable income for that year.

Of course, if a taxpayer derives salary or wageincome in addition to income on which provisional tax ispayable, sub-section 221YC(lA) of the Assessment Actenables the provisional tax otherwise payable to beappropriately adjusted.

45.

INCOME TAX (RATES) AMENDMENTBILL 1982

This Bill will amend the Income Tax (Rates) Act1976 which declared the rates of tax payable by individualsand trustees generally for the 1981-82 and subsequentfinancial years.

As the Income Tax (Rates) Bill 1982 (which isdiscussed later in this memorandum) will declare the ratespayable for 1982-83, and those for 1983-84 and subsequentfinancial years, the 1976 Act is to be amended so that itwill have no further application in relation to income ofyears subsequent to the 1981-82 year.

To this end, each of the amendments proposed byclauses 3 to 10 of this Bill formally delete references inthe 1976 Act to years subsequent to the 1981-82 year.

INCOME TAX (RATES) BILL 1982

This Bill will declare the rates of tax payable byindividuals and trustees (other than trustees of corporateunit trusts and superannuation funds in respect of whom therelevant rates of tax are to be declared and imposed by theaccompanying Income Tax (Companies, Corporate Unit Trustsand Superannuation Funds) Bill 1982) for the 1982-83financial year and the 1983-84 and subsequent financialyears.

The Bill provides for the proposed increase in thezero rate step (tax—free threshold) from $4,195 to $4,595,the increase in the top of the standard rate step from

~ $17,894 to $19,500 and the reduction in the standard rateof tax from 32 per cent to 30 per cent - each applying from1 November 1982. It also provides for the proposedwithdrawal of the zero rate step from non-residentindividuals (including trustees taxed on their behalf) fromBudget day, 17 August 1982.

The Bill is divided into three Parts. Part I is apreliminary Part, which includes definitions of terms usedin the Bill. Part II declares the rates of tax payable forthe 1982-83 financial year and Part III declares thosepayable for the 1983-84 and subsequent financial years.Parts II and III each have four Divisions.

In each case, Division 1 formally provides thatthe rates declared by the Part apply for the financial yearreferred to in the Part. Division 2 declares the rates oftax and notional rates ordinarily payable for the relevantfinancial year, while Divisions 3 and 4, dealing withresidents and non-residents respectively, declare the ratesof tax payable where Division 6AA of the Assessment Act

46.

applies to certain income of minor children. The rates oftax payable in the various circumstances are set out in theSchedules to the Bill.

The rates of tax declared for a financial year areimposed and levied for that year by a separate Act. Theaccompanying Income Tax (Individuals) Bill 1982 will imposetax, at the rates declared in this Bill, for the 1982-83financial year and, until the Parliament otherwiseprovides, for the 1983-84 financial year.

Notes on the clauses of the Bill are set out below.

PART I - PRELIMINARY

Clause 1 : Short title

This clause provides for the Act to be cited asthe Income Tax (Rates) Act 1982.

Clause 2 : Commencement

By this clause, it is proposed that the Act willcome into operation on the day on which it receives theRoyal Assent. But for this clause, the Act, by reason ofsub-section 5(lA) of the Acts Interpretation Act 1901,would not come into operation until the twenty-eighth dayafter the date of Assent.

Clause 3 : Interpretation

The provisions of clause 3 are comparable, in manyrespects, with section 3 in the Income Tax (Rates) Act 1976and the following notes are confined to the areas in whichthey differ from the provisions of that Act.

Several definitions which are relevant to theproposed withdrawal of the zero rate step from non-residentindividuals (including trustees taxed on their behalf),other than non-residents in receipt of Australian socialsecurity and repatriation pensions that are taxable inAustralia, have been included in the Bill. These are:

“prescribed non-resident” is defined as a person who, atall times during the year of income, was anon-resident for the purposes of the AssessmentAct, other than a person to whom there was payableat any time during the year of income anAustralian social security or repatriationpension, allowance or benefit that is taxable inAustralia and, for the 1982-83 income year only,other than a person who came to Australia on a

47.

short working visit on or before 17 August 1982(Budget day) or who had made firm arrangements forsuch a visit by that date. This term is used inthe definitions of “non-resident beneficiary”,“non—resident taxpayer”, “resident beneficiary”and “resident taxpayer”. A person who is anon-resident but is not, in relation to a year ofincome, a “prescribed non-resident” by virtue ofthe exclusions in this definition, will beentitled to the zero rate step in respect of thatyear of income.

“non-resident beneficiary” is defined to mean a beneficiaryin a trust estate who is a “prescribednon-resident” (see notes on that definition) . Theterm is relevant in determining the rate of tax

payable by a trustee who is assessed on behalf ofsuch a beneficiary.

“non-resident taxpayer” is the term used to describe ataxpayer who is not to be entitled to the zerorate step (tax-free threshold) in 1983-84 andsubsequent years and who is entitled to only apartial threshold in 1982-83. Such a taxpayer isdefined as a taxpayer who is a “prescribednon-resident” (see notes on that definition)

“non-resident trust estate” is defined to mean a trustestate that is not a “resident trust estate” (asdefined) . The term is relevant in determining therate of tax payable by the trustee of a trustestate in pursuance of section 99 of theAssessment Act.

“resident beneficiary” is defined as a beneficiary of atrust estate who is not a “prescribednon-resident” (see notes on that definition). Thetax payable by the trustee of a trust estate onbehalf of a beneficiary will depend on whetherthat beneficiary is or is not a “prescribednon-resident”.

“resident taxpayer” is to mean a taxpayer who is not a“prescribed non-resident” (see notes above on thisdefinition) . A resident taxpayer will be entitledto the tax-free threshold, as proposed to beincreased.

“resident trust estate” has, in effect, the same meaning asfor the purposes of the trust provisions(Division 6) of the Assessment Act. Under thatDivision, a trust is taken to be a resident trustestate where a trustee is a resident or thetrust’s central management and control is in

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Australia. The tax payable by a trustee of atrust estate to which section 99 of the AssessmentAct applies will depend on the residential statusof the trust estate.

PART II - FINANCIAL YEAR COMMENCINGON 1 JULY 1982

Part II, comprising four Divisions and clauses 6to 11 inclusive, in conjunction with Schedules 1 to 6 willformally declare the rates of tax payable for the 1982-83financial year.

Division 1

Clause 6 : Application of Part

This clause will state formally that the rates oftax declared by Part II are to apply for the 1982-83financial year.

Division 2 -

Clause 7 : Rates of tax and notional rates

Clause 7 declares the ordinary rates of taxpayable by individuals and trustees generally, and thenotional rates for purposes of the primary produceraveraging provisions, for the 1982-83 financial year. Therelevant rates so declared are set out in Part I of each ofSchedules 1 to 4, as they are to apply in - respect ofresident taxpayers, resident beneficiaries and residenttrust estates, and in Part II of each of Schedules 1 to 4as they are to apply in respect of non-resident taxpayers,-non-resident beneficiaries and non-resident trust estates.

The 1982-83 general rates of tax for individualsare declared by sub-clause (1) and are set out in Schedule1 - -Part I for residents and Part II for non-residents.-The 1982-83 rates for resident taxpayers vary from those ofthe 1981-82 year, reflecting the proposed increase in thezero rate step from $4,195 to $4,595, the increase in thetop of the range over which the standard rate is to applyfrom $17,894 to $19,500 and the reduction in the standardrate of tax from 32 to 30 per cent, as from 1 November1982. The rate scale set out in Part I of Schedule 1 is,in effect, an average of the rates applicable up to31 October 1982 (as to four-twelfths) and of the new scaleto apply from 1 November 1982 (as to eight-twelfths)

The general rates of tax for resident taxpayersfor 1982-83 are as follows:

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Parts of Taxable Income

- NotExceeding Exceeding Rate

$ $ - %

4,462 17,894 - 30.6717,894 19,500 35.3319,500 35,788 4635,788 60

Tax payable may be calculated from the following table:

Parts of Taxable Income

Not -

Exceeding Exc~ing Tax on Total Taxable Income$

0 4,462 Nil -

4,462 17,894 Nil + 30.67 cents for each dollarof taxable income in excess of$4,462

17,894 19,500 $4,ll9.5944 ÷ 35.33 cents for eachdollar of taxable income in excessof $17,894

19,500 35,788 $4,686.9942 + 46 cents for eachdollar of taxable income in excessof $19,500 -

35,788 $12,179 4742 + 60 cents for eachdollar of taxable income in excessof $35,788.

For non-resident taxpayers, the general 1982-83rates, as set out in Part II of Schedule 1, differ in thatthe zero rate step (tax-free threshold) is $585, in lieu -of‘ $4,462. This reflects the proposed removal of thethreshold with effect from Budget day, 17 August 1982.

The general rates of tax for 1982-83 for non-residents are: -

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Parts of Taxable Income

NotExceeding Exceeding Rate

$ $

585 17,894 30.6717,894 19,500 35.3319,500 35,788 4635,788 60

Tax payable may be calculated from the following table:

Parts of Taxable Income

Not

Exceeding Exceeding Tax on Total Taxable Income

$ 0 585 Nil -

585 17,894 Nil + 30.67 cents for each dollar

of taxable income in excess of $58517,894 19,500 $5,308.6703 + 35.33 cents for each

dollar of taxable income in excessof $17,894

19,500 35,788 $5,876.0701 + 46 cents for eachdollar of taxable income in excessof $19,500

35,788 — $l3,368~550l ÷ 60 cents for eachdollar of taxable income in excessof $35,788.

Sub-clauses (2) to (7) of clause 7 correspond withsub-sections (2) ~to (7) of section 6P of the Income Tax(Rates) Act 1976.

The averaging benefit under section 156 of theAssessment Act for primary producers to whom the averagingprovisions of the Assessment Act apply for 1982-83 will becalculated by reference to the notional rates declared bysub-clause (2), as set out in Schedule 2 - Part I forresidents and Part II for non-residents. These rates willbe used to determine the averaging benefit of a primaryproducer whose taxable income exceeds his or her averagei nc ome.

Basically, averaging benefit is the differencebetween tax payable on the taxable income at general ratesand tax payable on that income at the notional rate, thatis, the rate of tax applicable to the average income.

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Sub-clause (3) (which is subject to clauses 8 and10) and Schedule 3 - Part I for residents and Part II fornon-residents — will declare the 1982—83 rates of taxapplicable to a taxpayer deriving a notional income asspecified by section 59AB (depreciation recouped), section86 (lease premium) or section 158D (abnormal income ofauthors and inventors) of the Assessment Act. In thesecases the rate of tax payable will be a rate ascertained bydividing by the notional income, an amount equal to the taxpayable at the general rates specified in Schedule 1 on ataxable income equal to the notional income.

Sub-clause (4) , which is also subject to clauses 8and 10, will declare the 1982-83 rates of tax (as set outin Schedule 4 - Part I for residents and Part II fornon-residents) payable by trustees assessed under section

98 of the Assessment Act on behalf of a beneficiary, orassessed under section 99 on accumulating income of a trustestate.

The effect of the average rate scale applying for1982-83 is reflected in Schedules 2 to 4 by references tothe rates of tax payable under Schedule 1.

Sub-clause (5) of clause 7 declares the rate offurther tax payable for the 1982-83 financial year inpursuance of section 94 of the Assessment Act where thereis included in the taxable income of a taxpayer any amountof income to which that section applies, i.e., a share ofpartnership income that is or is deemed to be income overwhich the person does not have the real and effectivecontrol and disposal.

~ The sub-clause will impose further tax on incometo which section 94 applies at a rate equal to 50 per centreduced by the average ordinary rate of tax applicable tothe taxpayer’s total taxable income. The average ordinaryrate of tax is determined for this purpose as beingordinary tax payable divided by the total taxable income.It is expressly provided by the sub-clause that the

ordinary tax payable is to be the tax before allowance ofany rebate or credit to which the taxpayer is entitled.

Sub-clause (6) declares the rate of further taxpayable for the 1982-83 financial year in pursuance ofsection 94 of the Assessment Act where the taxpayer is atrustee liable to be assessed and to pay tax under section98 or section 99 of that Act.

Sub-clause (7) declares 60 per cent as the rate oftax payable by a trustee liable to tax pursuant to section99A for the 1982-83 financial year - the same rate as for1981—82.

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Division 3 - Resident taxpayers, resident beneficiaries andresident trust estates

Division 3 is comprised of clause 8 - declaringthe rates of tax payable by resident taxpayers or trusteestaxed on behalf of resident beneficiaries, where Division6AA of Part III of the Assessment Act applies - andclause 9 which -deals with the limitation on tax payable bytrustees of certain resident trust estates who are liableto be assessed under section 99 of the Assessment Act.

Clause 8 : Rates of tax where Division 6AAof Part III of the Assessment Act applies

This clause will declare the rates of tax that areto be payable for the 1982-83 financial year by a residenttaxpayer who is a minor and whose taxable income includesincome that is eligible taxable income for the purposes ofDivision 6AA of Part III of the Assessment Act of more than$1,040. The clause will not apply if the eligible incomeis $1,040 or less, and the general rates of tax will inthat case apply to the whole of the taxable income.

The clause will also declare the rates of tax thatare to be payable for the 1982-83 financial year by atrustee of a trust estate who is liable to be assessed andto pay tax under section 98 of the Assessment Act on ashare of the net income of a trust estate to which aresident taxpayer who is a minor is presently entitled,where Division 6AA is applicable to a part of that share orto parts of two or more such shares, if the part, or sum ofthe parts, is greater than $1,040.

Sub-clause (1) will declare the rates of tax thatare to be paid for 1982-83 by a resident minor whose incomeincludes eligible taxable income of more than $1,040. Therates declared by that sub-section are set out in Part I ofSchedule 5.

Paragraph (a) of Part 1 of Schedule 5 sets out therates of tax that are to be payable on that part of theminor’s taxable income that is not eligible taxableincome. This income is referred to in the Schedule as the“relevant part” of the taxable income.

The rates of tax that, by paragraph (a) , are toapply to the relevant part of a minor’s taxable income arethe same as the normal rates that would have applied tothat income if it had been the minor’s only income.

Paragraph (b) of Part 1 of Schedule 5 sets out therates of tax that are to be paid on the eligible taxableincome. The rate is 46 per cent, except where the ordinaryrate payable on the income is higher. In the latter

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circumstances the excess over $35,788 of the person’staxable income will be taxed at the ordinary maximum rateof 60 per cent applicable to taxable income above thatlevel.

Sub-clause (2) of clause 8 is set against thebackground that $1,041 is the minimum amount of eligibletaxable income that is to be taxed at the rates applicableto eligible income of resident minors - eligible income upto $1,040 is to be taxed in the ordinary way and, if totaltaxable income does not exceed $4462, no tax will bepayable on eligible income of up to $1,040. If the 46 per

~ cent rate were to apply to eligible income of $1,041, theresult could be that the derivation of one additionaldollar of eligible income would produce tax of almost $500.

To avoid this result, sub-clause (2) provides for“shading-in” arrangements to apply where the eligibletaxable income is between $1,041 - the point where such

b income becomes liable to be taxed at the 46 per cent rate -

and $3432 - the point where the tax under the “shading-in”arrangements reaches the tax at the 46 per cent rate.

Sub-clause (3) of proposed clause 8 declares therates of tax payable by a trustee, who is taxable undersection 98 of the Assessment Act in respect of -a residentbeneficiary’s share of the net income, if Division 6AA ofPart III of the Assessment Act applies to more than $1,040of the share.

The rates payable in those circumstances are setout in Part I of Schedule 6 which is to the same broadeffect as Part I of Schedule 5 which applies to eligibleincome derived directly by a minor.

Sub-clause (4) of proposed clause 8 specifies thatthe rates of tax set out in Part I of Schedule 6 may indefined circumstances also apply where the eligible part ofthe share of the net income of a trust estate in respect ofwhich a resident minor is presently entitled does not‘ exceed $1,040. This will be the case where Division 6AAalso applies to a part of the beneficiary’s share of thenet income of another trust estate or other trust estatesand the total of all of the eligible parts exceeds $1,040.Sub-clause (5) is also relevant in this regard.

Sub-clause -(5) is set against the background that“shading-in” arrangements, to the same effect as thosedescribed in the notes on sub-clause (2) in relation to theeligible income of a minor, are to apply under sub-clause(6) , when read with sub-clause (7), where a residentbeneficiary is entitled to a share of the net income ofonly one trust estate and Division 6AA applies to an amountof that share of between $1,041 and $3,432. Thesearrangements cannot apply in a case where sub-clause (4)

54.

applies since the eligible part in this case is $1,040 orless. However, sub-clause (5) will empower theCommissioner of Taxation to reduce the tax that wouldotherwise be payable in accordance with sub-clause (4)where the sum of the eligible parts of the shares of netincome of trust estates in respect of which the residentbeneficiary is presently entitled does not exceed $3,432.Sub-clause (9) sets out matters to which the Commissioneris to have regard in deciding on the amount of thereduction in the tax payable that is to be made inaccordance with sub-clause (5) . The broad aim is to arriveat an amount of tax on the notionally aggregated trustincomes that is equivalent to the amount that would resultunder the “shading-in” provisions of sub-clause (6) if theincome were that of only one trust estate.

Sub-clause (6) provides, subject to sub-clause(7), “shading-in” arrangements that are to apply where theeligible part of the share of a minor resident beneficiaryof the net income of a trust estate exceeds $1,040 but doesnot exceed $3,432. The “shading-in” arrangementscorrespond in effect with those applicable to eligibleincome of between $1,041 and $3,432 derived directly by aminor - see notes on sub-clause (2).

Sub-clause (7) specifies that sub-clause (6) isnot to apply to limit the tax payable by a trustee on theeligible part of a share of the net income of a trustestate in respect of which a resident minor is presentlyentitled that is between $1,041 and $3,432 if thebeneficiary is also entitled to a share of income ofanother trust estate or other trust estates, to a part ofwhich or of each of which Division 6AA applies. However incircumstances where sub-clause (6) is not applied becauseof the operation of sub-clause (7) , sub-clause (8) empowersthe Commissioner o~ Taxation to reduce the tax that wouldotherwise be payable by the trustee in accordance withsub-clause (3) if the sum of the eligible parts does notexceed $3,432. Sub-clause (8) will have a correspondingeffect in relation to a trustee who would otherwise beliable to pay tax under sub-clause (3) , as sub-clause (5)is to have in relation to a trustee who would otherwise beliable to pay tax under sub-clause (4).

Sub-clause (9) sets out the matters to which theCommissioner is to have regard in forming an opinion, forthe purposes of sub-clause (5) or (8), as to the amount, ifany, by which the tax that would otherwise be payable by atrustee on a share of the net income of a trust estateshould be reduced. The sub-clause, in effect, requires theCommissioner to notionally aggregate all of the shares oftrust net income in respect of which a resident beneficiaryis presently entitled, and all of the parts of those sharesto which Division 6AA of Part III of the Assessment Actapplies. Having done that, the Commissioner then has to

55.

determine the amount to which the tax payable by a trusteeon a share of the net income of a trust estate would havebeen limited under sub—clause (6) if that share were equalin amount to the sum of those shares and included aneligible part equal in amount to the sum of those eligibleparts. As a final step, the Commissioner has to haveregard to the amount by which he has, by the application ofsub-clause (5) or (8) , reduced the tax payable on the shareor shares of the resident beneficiary of the net income ofany other trust estates.

Clause 9 : Limitation on tax payableby certain trustees

This clause is the counterpart of section 6R ofthe Income Tax (Rates) Act 1976. It will apply for the1982-83 year where a trustee is assessable under section 99

bof the Assessment Act in respect of the net income of aresident trust estate that is either an inter vivos trustor the estate of a person who died 3 years or more beforethe end of the year of income, and in respect of which thetrustee is not entitled to the zero rate step. The clausewill limit the tax otherwise payable by the trustee interms of sub-clause 7(4) and Part I of Schedule 4.

Sub-clause (1) will provide that the trustee isnot to be liable to tax if the net income or the part ofthe net income of the resident trust estate does not exceed$416. Sub-clause (2) will apply where the net income doesexceed $416 but not $1,076 and will limit the tax to 50 percent of the excess over $416.

‘ Division 4 - Non-resident taxpayers, non-residentbeneficiaries and non-resident trust estates

Division 4 applies to non-residents in much thesame way as Division 3 applies to residents. It declaresthe 1982-83 rates of tax payable by non-resident taxpayers,and trustees assessed on their behalf, where Division 6AA‘ of Part III of the Assessment Act applies, and limits the1982-83 tax payable by trustees of certain non-residenttrust estates who are liable to be assessed under section99 of that Act.

Clause 10 de~ils with Division 6AA cases and issimilar to clause 8, except that tax is payable by anon-resident on eligible taxable income exceeding $136($1,040 for residents) . This reduced minimum taxableincome for 1982-83 reflects the removal of the $1,040minimum taxable income from non-residents with effect from17 August 1982 (Budget day). Where the eligible taxableincome of a non-resident exceeds $1,040, tax is payable atthe same rate (46 per cent) as that payable by a resident.

56.

Where the eligible taxable income exceeds $136 but does notexceed $1,040, the rate is 30.67 per cent. “Shading-in”arrangements are provided for in both cases.

Sub-clause (1) of clause 10 declares the rates oftax that are payable f~r 1982-83 by a non-resident taxpayerwhose income includes eligible taxable income of more than$136. The rates declared are as set out in Part II ofSchedule 5, which operates in a similar way to Part I ofthat Schedule (resident taxpayers) - see notes on clause 8.

Sub-clause (2) is set against the background that$137 is the minimum amount of eligible taxable income thatis to be taxed at the rates applicable to eligible incomeof non-resident minors. The rate of tax is 30.67 per centon such income in excess of $136 but not in excess of$1,040. However, if the 30.67 per cent rate were to applyfrom $137, the result would be that the derivation of onedollar of eligible income more than $136 would produce anamount of tax payable of $42. Accordingly, paragraph (a)of the sub-clause “shades-in” the tax payable over theincome range $137 to $254, at the rate of 66 per cent ofthe excess of income over $136, at which point an averagerate of tax of 30.67 per cent is reached. If a greateramount of tax would be payable at ordinary rates of tax onthe eligible income when aggregated with other income, thegreater amount will be payable.

Paragraph (b) limits the tax that would otherwisebe payable under Part II of Schedule 5 to 30.67 per cent ortax at normal rates, whichever is the greater. Thelimitation applies to income in excess of $254 - the pointat which 30.67 per cent becomes payable under the earliershading arrangement - but not in excess of $1,040 - where,subject to further shading, a rate of 46 per cent becomespayable under Part II of Schedule 5. The further shading(paragraph (c)) operates between $1,041 and $1,837, so thatthe tax at 30.67 per cent on $1,040 moves gradually to 46per cent at $1,837.

Sub-clause (3) of clause 10 declares the rates oftax payable by a trustee who is taxable under section 98 ofthe Assessment Act in respect of a non-residentbeneficiary’s share of the net income, where Division 6AAof Part III of the Assessment Act applies and the shareexceeds $136. The rates of tax payable in thosecircumstances are set out in Part II of Schedule 6.

Allowing for the reduced minimum taxable income of$136, the rate of tax of 30.67 per cent applying from $137to $1,040 and the “shading-in” arrangements which arebasically as for a non-resident individual minor (explainedabove), sub-clauses (4) to (9) have similar application toa trustee taxed on behalf of a non-resident beneficiary

57.

where Division 6AA applies as sub-clauses (4) to (9) ofclause 8 (see earlier notes on these sub-clauses) do in thecase of a resident beneficiary where the Division applies.

Clause 11 : Limitation on tax payable by certain trustees

Clause 11 applies to limit the tax payable for1982-83 by a trustee assessed under section 99 in respectof the net income of a non-resident inter vivos trust or anon-resident trust estate of a person who died 3 years ormore before the end of the year of income. The clause

~ mirrors clause 9 that applies in the case of resident trustestates, except that a minimum taxable income of $54 and“shading-in” arrangements up to $139 (in lieu of $416 and$1,076 respectively for resident trust estates) areprovided for. The $54 reflects the removal of the minimumtaxable income of $416 from non-residents with effect from17 August 1982. The rates of tax otherwise payable by such

~ a trustee are declared by sub-clause 7 (4) , as set out inPart II of Schedule 4.

PART III - FINANCIAL YEAR COMMENCINGON 1 JULY 1983 ANDSUBSEQUENTFINANCIAL YEARS

This Part has four Divisions, corresponding ineffect, in relation to 1983-84 and subsequent financialyears, with the four Divisions in Part II relating to1982—83.

Division 1

Clause 12 : Application of Part

Clause 12 formally provides that the rates of taxdeclared by Part III will apply for the 1983-84 andsubsequent financial years.

Division 2

Clause 13 : Rates of tax and notional rates

Clause 13 will declare the ordinary rates of taxpayable for 1983-84 and subsequent financial years byindividuals and trustees generally. The rates are set outin Schedules 7 to 10 to the Bill. The rates to apply toresident and non-resident taxpayers are set out in Part I(residents) and Part II (non-residents) of those Schedules.

The general rates of tax to apply to residentindividuals are those declared by sub-clause (1) of clause13 and set out in Part I of Schedule 7. The rates willdiffer from those for the 1982-83 financial year (as setout in Part 1 of Schedule 1) in that they will reflect thefull effect of the proposed increase in top of the zerorate step (or tax-free threshold) and the top of the

58.

standard rate step in the income tax rate scale from $4,195and $17,894 respectively to $4,595 and $19,500respectively, and the reduction in the standard rate from32 per cent to 30 per cent.

The effective rates of tax for residents, under

Part I of Schedule 7, are:

Parts of Taxable Income

Exceeding Not Exceeding Standard Rate Surcharge Total

$ $ %0 4,595 NIL NIL NIL

4,595 19,500 30 NIL 3019,500 35,788 30 16 4635,788 — 30 30 60

The general rates of tax applicable to non-residentindividuals are also declared by sub-clause (1) of clause13, and are set out in Part II of Schedule 7. These ratesalso differ from those set out in Part II of Schedule 1that is to apply for the 1982-83 financial year. Theyprovide no zero rate step (or tax-free threshold) - thepartial threshold of $585 applying for 1982-83 being atransitional measure reflecting the removal of thethreshold from non-residents with effect from 17 August1982 (Budget day). The rates for 1982-83 and subsequentyears for non-residents do, however, provide for theincrease in the top of the standard rate step to $19,500and the reduction in the standard rate itself from 32 percent to 30 per cent.

These effective rates for non-residents are set outbelow:

Parts of Taxable Income

Exceeding Not Exceeding Standard Rate Surcharge Total

$ $0 19,500 30 NIL 30

19,500 35,788 30 16 4635,788 30 30 60

Sub-clauses (2) to (7) of clause 13, as applicableto 1983-84 and subsequent financial years, correspond withsub-clauses (2) to (7) of clause 7 (applicable for 1982-83)which were discussed earlier in this memorandum. The noteson sub-clauses (2) to (7) of clause 13 are thereforelimited to a brief outline of their purpose and thepractical differences as compared with the sub-clauses for1982—83.

Sub-clause (2) declares the notional rates of taxfor purposes of the average rebate for primary producers towhom the averaging provisions of the Assessment Act apply.

59.

These rates are set out in Schedule 8 - Part I forresidents and Part II for non-residents, and reflect thechanges to the standard rate and in the various thresholdseffected by sub-clause (1) and Schedule 7.

Sub-clause (3), with Schedule 9, declares the ratesof tax payable by those taxpayers deriving a notionalincome as specified by section 59AB (depreciationrecouped) , section 86 (lease premium) or section l58D(abnormal income of authors or inventors) of the AssessmentAct for the 1983-84 and subsequent financial years. Thesenotional rates will reflect the changes effected bysub-clause (1) and Schedule 7.

Sub-clause (4) of clause 13, which is subject toclauses (14) and (16), declares the rates of tax payable bya trustee in pursuance of section 98 or 99 of theAssessment Act for the 1983-84 and subsequent financialyears. The rates declared by the sub-clause are set out in

~ Schedule 10 and, to the extent specified by the referencesin that Schedule to Schedules 7 and 9, will reflect thechanges effected by sub-clauses (1) and (3) and thoseSchedules.

As with sub-clause (5) of clause 7, sub-clause (5)of this clause declares the rate of further tax payable onincome to which section 94 of the Assessment Act applies -

“uncontrolled partnership income” - to be a rate of 50%,reduced by the average ordinary rate of tax applicable tothe taxpayer’s total income. Sub-clause (6) declares therate of further tax payable in pursuance of section 94where a trustee is liable to be assessed and pay tax undersection 98 or 99 of the Assessment Act.

‘ By sub-clause (7), the rate of tax payable for the1983-84 and subsequent financial years by a trustee liableto tax pursuant to section 99A of the Assessment Act is tobe 60% - the same rate as for 1982-83.

Division 3 - Resident taxpayers, resident beneficiaries andresident trust estates

Clause 14 : Rates of tax where Division 6AA ofPart III of the Assessment Act applies

Clause 14 declares the rates of tax payable for the1983-84 and subsequent financial years by a residenttaxpayer and a trustee assessed on behalf of a residentbeneficiary, where Division 6AA of Part III of theAssessment Act applies. The rates are set out in Part I ofSchedule 11 - resident taxpayers - and Part I of Schedule12 - trustees on behalf of resident beneficiaries.

Except that the changes in ordinary rates of taxfor 1983-84 will apply to income other than eligibleincome, the rates of tax declared, the income level above

60.

which they apply ($1,040) and the “shading-in” arrangementsare the same as for 1982-83. See the notes in thismemorandum on clause 8, which applies for 1982-83.

Clause 15 : Limitation on tax payableby certain trustees

Clause 15 limits the tax otherwise payable for1983-84 and subsequent years - as does clause 9 for the1982-83 financial year (see notes on that clause) - bytrustees of certain resident trust estates who are liableto be assessed under section 99 of the Assessment Act.

Sub-clause (1) will provide that the trustee is notliable to tax if the net income of the resident trustestate does not exceed $416 (as for 1982-83). Sub-clause(2) will apply where the net income exceeds $416 but not

~T7040 ($1,076 for 1982-83) and will limit the taxotherwise payable in terms of sub-clause 13(4) and Part Iof Schedule 10, to 50 per cent of the excess over $416.The lower amount of $1,040 at which “shading-in” isachieved reflects the 30 per cent standard rate applyingfor 1983-84 and subsequent years (a rate of 30.67 per centis to apply for 1982—83)

Division 4 : Non-resident taxpayers, non-residentbeneficiaries and non-resident trust estates

Clause 16 : Rates of tax where Division 6AA of Part IIIof the Assessment Act applies

Clause 16 will declare the rates of tax payable forthe 1983-84 and subsequent financial years by anon-resident minor taxpayer and by a trustee assessed onbehalf of a non-resident minor beneficiary, where Division6AA of Part III of the Assessment Act applies. The ratesare set out in Part II of Schedule 11 - non-residenttaxpayers - and Part II of Schedule 12 - trustees on behalfof non-resident beneficiaries - and, except that thechanges in ordinary rates of tax for 1983-84 will apply toincome other than eligible income, are effectively the sameas for 1982-83 (Parts II of Schedule 5 and 6).

There is, however, to be no minimum taxable incomein these cases for 1983-84 and subsequent years - theminimum taxable income of $136 available for non-residentsin 1982-83 (clause 10) reflects the proposed withdrawal ofthe minimum taxable income of $1,040 from non-residents asfrom 17 August 1982 (Budget day) . For 1983-84 andsubsequent years the rate of tax on eligible income up to$1,040 is to be the standard rate of 30 per cent or tax atnormal rates, whichever is greater, and, subject to“shading-in” arrangements, the rate of 46 per cent willapply to relevant income over $1,040 - the existingsituation.

61.

Sub-clause (1) of clause 16 declares the rates fora non-resident individual minor deriving eligible income,as set out in Part II of Schedule 11.

Sub-clause (2) limits the tax payable in terms ofsub-clause (1), where the income involved does not exceed$1,040 and where it does exceed $1,040 but not $1,872.Paragraph (a) limits the tax payable on eligible income notexceeding $1,040 to 30 per cent or tax on that income, whenaggregated with other income, at ordinary rates, whicheveris the greater. Paragraph (b) provides “shading-in”arrangements for eligible income between $1,041 and$1,872. These arrangements are similar to those providedin paragraph (2) (c) of clause 10 for the 1982-83 year - seenotes on that clause.

Sub-clause (3) declares the rates set out in PartII of Schedule 12 to be the rates of tax payable for1983-84 and subsequent years by a trustee taxed on behalf

of

a non-resident minor beneficiary. The rates are thesame as for non-resident individuals (Part II of Schedule

• 11).

Sub-clause (4) , which is subject to sub-clause (5)limits the tax otherwise payable by a trustee in terms ofsub-clause (3) in the same way as sub-clause (2) does forindividuals. - -

Sub-clauses (5) to (7) are to the same effect assub-clauses (7) to (9) of clause 10 which relate to the1982-83 year. See the earlier notes on those sub-clauses.Sub-clauses (5) to (7) apply where a non-resident minorbeneficiary, on whose behalf a trustee is assessed, isentitled to income from another trust estate to whichDivision 6AA of the Assessment Act also applies.

62.

INCOME TAX (INDIVIDUALS) BILL 1982

This Bill will formally impose the tax payable inrespect of income derived by individuals, and by trusteesgenerally, during the 1982-83 income year. As is customaryin such a Bill, it will also formally impose 1982—83provisional tax. It is complementary to the Income Tax(Rates) Bill 1982 which, as explained earlier, will declarethe rates of tax to apply to such taxpayers.

The Bill is similar to the Income Tax (Individuals)Act 1981 and the following notes are confined to the majorclauses of the Bill.

Clause 5 : Imposition of income tax

Sub-clauses (1) and (2) have the effect, when readwith clause 7, of formally imposing income tax payable byindividuals and trustees (other than trustees ofsuperannuation funds and corporate unit trusts in respectof whom the relevant rates of tax are to be declared andimposed by the accompanying Income Tax (Companies,Corporate Unit Trusts and Superannuation Funds) Bill 1982)for the 1982-83 financial year at the rates to be declaredfor that year by the Income Tax (Rates) Bill 1982. Therates of tax to be declared by that Bill for 1982-83reflect the proposed reduction in the standard rate of tax,the proposed increase in the top of the standard rate stepin the personal income tax rate scale and, for residents,the proposed increase in the zero rate step. They alsoreflect, for non-residents generally, the withdrawal of thezero rate step with effect from 17 August 1982 (Budgetday). For further details of these measures, see the notesin this memorandum on the Income Tax (Rates) Bill 1982.

Sub-clause (3) excludes from the scope of the Billtaxes that are payable in accordance with various sectionsof the Assessment Act and which are imposed by separateActs. These other taxes and the relevant sections of theAssessment Act involved are those imposed on divertedincome (section l2lH) , interest paid on bearer debentures(section 126), withholding taxes (sections l28B, l28N andl28V), branch profits tax (section l28T), film and videotape royalties (section 136A) and the redemption of droughtbonds in certain circumstances (section 159C)

Clause 7 : Levy of tax

Clause 7 operates to formally levy the tax imposedby clause 5 of the Bill in respect of the 1982-83 financialyear and, until the Parliament otherwise provides, for the1983-84 financial year. This will mean that the “average”rates set out in the Income Tax (Rates) Bill 1982 for the1982-83 financial year are to be levied and payable for

63.

that year only. The general rates set out in that Bill forthe 1983-84 financial year will apply on an interim basisfor the 1983-84 financial year until the Parliament enactsprovisions corresponding with this Bill for that year.

Clause 8 will formally impose provisional tax forthe 1982-83 financial year on the basis specified in clause28 of the Income Tax Asessment Amendment Bill (No.5) 1982.The method of calculation of 1982-83 provisional tax isdescribed in earlier notes relating to that clause.

INCOME TAX (COMPANIES, CORPORATEUNIT TRUSTS ANDSUPERANNUATIONFUNDS) BILL 1982

The main purpose of this Bill is to impose incometax for the 1982-83 financial year, at the rates declaredin the Bill, on the 1981-82 incomes of companies and ofcorporate unit trusts, and the 1982-83 incomes ofsuperannuation funds.

Other rates of income tax payable for the 1982-83financial year - by individuals and by trustees generally -

will be declared by the Income Tax (Rates) Bill 1982 and• imposed by the Income Tax (Individuals) Bill 1982; the

“branch profits” tax that is payable by non-residentcompanies is imposed by the Income Tax (Non-ResidentCompanies) Act 1978; and other rates of tax payable underparticular sections of the Assessment Act are imposed bythe Income Tax (Dividends and Interest Withholding Tax) Act1974, the Income Tax (Film Royalties) Act 1977, the IncomeTax (Drought Bonds) Act 1969, the Income Tax (BearerDebentures) Act 1971, the Income Tax (Withholding Tax

Recoupment)

Act 1971, the Income Tax (Mining WithholdingTax) Act 1979, and the Income Tax (Diverted Income) Act1981.

The practical effect of the present Bill will bethe same as the Income Tax (Companies, Corporate UnitTrusts, and Superannuation Funds) Act 1981, which declared

b and imposed the rates of income tax payable by companies,corporate unit trusts and superannuation funds for the1981-82 financial year.

The rates of income tax declared by clauses 6 to 8of this Bill for the 1982-83 financial year are as follows:

- by clause 6, the general rate of tax payableon taxable income of companies is to remainat 46 per cent;

- by clause 6, the rate of additional taxpayable by a private company on the amount bywhich dividends paid- fall short of asufficient distribution remains at 50 percent;

64.

- by clause 6, the general rate of tax payableby a friendly society dispensary on itstaxable income is to remain at 41 per centfor the 1982-83 financial year;

- by clause 7, the rate of tax payable by atrustee on the net income of a corporate unittrust to which section 102K of the AssessmentAct applies remains at 46 per cent;

- by clause 8, the rate of tax payable oninvestment income of a superannuation fundthat does not, under the “30/20” rule, investa sufficient proportion of its assets inpublic securities remains at 46 per cent;

- by clause 8, the rate of tax payable oncertain taxable income of superannuationfunds to which section 121CA or 121CB of theAssessment Act applies is to remain at 50 percent; and

- by clause 8, the rate of tax payable onincome of trusts qualifying as superannuationfunds to which section l2lDA of theAssessment Act applies is to remain at 60 percent.

Clause 10 formally levies tax imposed by clause 5at the rates declared in clauses 6 to 8 inclusive for the1982-83 financial year and, until the Parliament otherwiseprovides, for the 1983-84 financial year. For that reason,sub-clause (3) of clause 10 provides that the rate of taxto be levied for the 1983—84 financial year on the 1982—83income of a friendly society dispensary will be the rateprovided for non-profit companies generally (that is, 46per cent). The need for this particular measure arisesfrom the announcement in the 1981-82 Budget that, from thecommencement of the 1983-84 financial year, friendlysociety dispensaries would be taxed on the same basis asnon-profit companies generally, in lieu of the specialbasis of assessment presently applying to such bodies.Associated amendments to the Assessment Act were made bythe Income Tax Laws Amendment Act (No. 3) 1981.

Clause 12 of the Bill will authorise thecollection of instalments of company tax and corporate unittrust tax in the 1983-84 financial year in accordance withthe relevant provisions of the Assessment Act. Under thoseprovisions, the first of three such instalments is due notearlier than 15 August 1983.

65.

INCOME TAX (MINING WITHHOLDING TAX) AMENDMENTBILL 1982

This Bill will amend the Income Tax (MiningWithholding Tax) Act 1979 to reflect, in the rate of taximposed on mining payments to Aboriginal councils, thereduction in the standard rate of tax proposed by theIncome Tax (Rates) Bill 1982.

The Income Tax (Mining Withholding Tax) Act 1979declares and imposes the rates of tax payable in respect ofmining payments made on or after 1 July 1979 relating tothe use of Aboriginal land for mining and exploration

~ purposes. Such payments are presently subject to tax atthe rate of 6.4 per cent of the gross amount of thepayments, which is the equivalent of the present standardrate of tax of 32 per cent applied to one-fifth of thegross payments.

• The amending Bill will reduce the rate of tax on

b the mining payments from 6.4 per cent to 6 per cent -

representing the proposed new standard of 30 per centapplied to one-fifth of the gross - payments. The reducedrate is to apply to mining payments made on or after1 November 1982 - the date of effect of the standard ratereduction.

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