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Wednesday, 14 October 1931

Mr THEODORE (Dalley) (Treasurer) . - by leave - On several occasions during the past few months, members of both Houses of this Parliament have complained of unfair discrimination between the citizens of different States by reason of the fact that, in two States, a deduction in income tax assessments on account of unemployment relief tax is being refused, because the tax is not described as State income tax, whilst in other States the corresponding tax has been levied as an additional State income tax, and is, therefore, an allowable deduc tion. In consequence of those representations, the Commissioner of Taxation gave, further consideration to the possible removal of this discrimination, and sought the advice of the Attorney-General's Department. That advice has been received, and discloses a curious position.

The legal opinion on the subject is that State unemployment relief tax, which is levied as such by reference to income, is an income tax, and that, in accordance with the provisions of paragraphb of sub-section1 of section 23 of the Income Tax Assessment Act, it falls within the deductionallowable for State income tax if it is annually assessed. Unemployment relief tax which is not annually assessed, but which is deducted from salaries and wages at the source, is not a permissible deduction. It appears that all the State acts which impose unemployment relief tax, provide that in the case of salary and wage earners, it shall be deducted at the source, and where this is the only manner in which the tax is calculated and collected, the tax is not an allowable deduction in the federal assessments of the persons concerned. Thus one discrimination is removed by the opinion, namely, that previously existing between the several States as States, whilst another discrimination has been discovered as between the citizens ofa State. It is intended to remove this newly discovered discrimination as early as possible.

It may be added that the foregoing observations regarding unemployment relief tax apply equally to the Western Australian hospital fund tax, because that tax also is a tax on income. The Commissioner of Taxation has decided, in the light of the Crown Law Department's advice, to allow deductions of State unemployment relief tax and the Western Australian hospital fund tax in those cases in which it is legally deductible; that is, where it is annually assessed. The Commissioner intends to apply his decision retrospectively to past assessments in which the deduction has not been allowed, provided, as required by section 37 of the Income Tax Assessment Act, the tax on these assessments was originally due and payable not more than three years prior to the 1st October, 1931.Unemployment relief tax which is deductedat the source, and, therefore, is not annually assessed, cannot be allowed as a deduction underthe present law. The Government will consider an amendment of thelaw to remove this anomaly.

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