Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard   

Previous Fragment    Next Fragment
Wednesday, 3 October 1984
Page: 1074


Senator GRIMES (Minister for Social Security) —I move:

That the Bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.


Senator Harradine —Mr Deputy President, I take a point of order. Do I understand that leave has been sought to have the second reading of the Bills forthwith, immediately after the Bills have been read a first time?


The DEPUTY PRESIDENT —Yes.


Senator Harradine —Leave has not been sought for that.


The DEPUTY PRESIDENT —Leave is not required for the second reading debate to proceed immediately as these Bills originated in the House of Representatives. Is leave granted for the second reading speeches to be incorporated in Hansard? There being no objection, leave is granted.

The speeches read as follows-

INCOME TAX (RATES) AMENDMENT BILL 1984

The purpose of this Bill is to amend the Income Tax (Rates) Act 1982, which declares the rates of tax payable by individuals and trustees generally, to implement the Budget proposal to alter the personal income tax rate scale. Honourable senators will recall that the Treasurer (Mr Keating), in his Budget Speech, announced that there would be a significant cut in personal income tax, particularly for those on low and middle incomes. At a cost of $1,300m in 1984- 85, and over $2,100m in a full year, virtually all taxpayers are to receive a reduction in tax, with the biggest percentage reduction going to lower income earners.

With effect from 1 November 1984, there is to be a new five-step tax scale, replacing the old three-step scale, in order to make the tax system more progressive and fairer. At the lower end of this scale, the tax rate for resident taxpayers on taxable income in the range $4,596 to $12,500 is to be reduced from 30 per cent to 25 per cent. A rate of 48 per cent is to apply to taxable incomes in the range $28,001 to $35,000 and the threshold at which the maximum marginal rate of 60 per cent commences is to be reduced from $35,789 to $35,001. These changes to the rate scale will be reflected in reduced pay as you earn instalments from 1 November 1984.

Reflecting the commencement date of 1 November 1984, the rate scale for 1984-85 is to be an average of the 1983-84 rate scale and the scale to apply from 1 November 1984-made up of four-twelfths of the 1983-84 scale and eight-twelfths of the new scale. The average rate scale will mean that for 1984-85 the rate of tax payable by residents on income in the range $4,596 to $12,500 will be reduced from 30 per cent to 26.67 per cent, while for that part of taxable income in the range $28,001 to $35,000 and $35,001 to $35,788 the rates of tax payable will be 47.33 and 55.33 per cent respectively.

The benefit of the reduced 25 per cent rate of tax will not be extended to non- residents, other than those in receipt of taxable Australian social security and repatriation pensions. The reasons for extending such concessions to residents are seldom relevant to non-residents, and particularly in this case as the reduction in personal income tax is in recognition of the wage restraint exercised by Australian workers. This means that the standard rate of 30 per cent will continue to apply to the taxable income of non-residents up to $19,500 , and the general rates announced in the Budget will apply to the income above $ 19,500.

The income tax law currently provides for tax at the rate of 46 per cent or higher to apply to certain types of income derived by some unmarried minors. The $417 income threshold at which those rates become payable, the associated shading-in arrangements, and the minimum rate applicable of 46 per cent are to remain unchanged. The new rates applicable to income above $28,000 will, however , also apply to such income of unmarried minors.

The present Bill will also provide that the Income Tax (Rates) Act 1982 will not apply to a trustee of an ineligible approved deposit fund. The rate of tax payable by such a trustee is to be the general company rate of 46 per cent and will be declared and imposed by the Income Tax (Companies, Corporate Unit Trusts and Superannuation Funds) Bill 1984 which I will introduce shortly.

Provisions of the Bill are explained in detail in the explanatory memorandum that has been made available to honourable senators. I commend the Bill to the Senate.

INCOME TAX (INDIVIDUALS) BILL 1984

This is an annual measure which formally imposes personal income tax rates for the current financial year. The rates imposed by this Bill are those declared in the Income Tax (Rates) Act 1982 as proposed to be amended by the Income Tax ( Rates) Amendment Bill 1984 which I have just introduced. As I explained in my second reading speech on that Bill, the rates for 1984-85 reflect the Budget decision to provide a significant cut in personal income tax, particularly for those on low and middle incomes, by changing the personal income tax rate scale with effect from 1 November 1984. The resulting tax reductions will benefit virtually all taxpayers, and are to be reflected in lower pay as you earn deductions from 1 November 1984. New tax instalment schedules to reflect the changes to be made to the income tax rate scale are being prepared and will be released as soon as possible to enable employers to incorporate the new instalments in their payroll procedures before 1 November. The reduction in tax will be reflected in provisional tax payable for 1984-85, which is also formally imposed by this Bill. I commend the Bill to the Senate.

INCOME TAX (COMPANIES, CORPORATE UNIT TRUSTS AND SUPERANNUATION FUNDS) BILL 1984

This Bill will formally impose income tax for 1984-85 on the 1983-84 taxable income of companies, registered organisations and unit trusts treated as companies for tax purposes as well as on the current year taxable income of superannuation funds, ineligible approved deposit funds and trust income of non- resident company beneficiaries. The rates of tax are also declared by the Bill and, except for some changes relating to certain superannuation funds and the imposition of income tax upon the taxable income of registered organisations, they are the same as for 1983-84. The provisions of the Bill follow the same lines as in other years and details of the various rates are set out in the explanatory memorandum that has been made available to honourable senators. I commend the Bill to the Senate.

MEDICARE LEVY BILL 1984

The Medicare Levy Bill 1984 declares the basic rate of Medicare levy for 1984- 85 and, until the Parliament otherwise provides, for 1985-86. The basic rate will be 1 per cent of taxable income. The Bill also contains rules for fixing the maximum amount of levy payable and the income points below which people with low incomes will not be called on to pay any levy. In addition, it contains rules for reducing the levy otherwise payable by veterans, war widows, defence force personnel, and certain other prescribed persons who are exempt from the levy for part of a year, or who are required to pay levy because they have dependants eligible for Medicare benefits.

From 1 November 1984, the maximum amount of levy payable by an individual or a married couple is to be increased from $700 to $750. This will mean that in 1984 -85, a levy ceiling of $733.32-a pro-rating of the existing ceiling of $700 and the proposed $750 ceiling-will apply. In order to continue to shelter low income earners from the levy, the income thresholds at which levy becomes payable are to be increased from 1 July 1984. For 1984-85, individuals with taxable incomes of $7,110 or less, and married couples and sole parents with family incomes of $ 11,803 or less, will be exempt from the levy. The income threshold for married couples and sole parents will increase by a further $1,330 for each dependent child or student involved. For example, married couples with two dependent children will pay no levy until their combined taxable incomes exceed $14,463. The estimated cost of these changes is $8m in 1984-85 and $12m in a full year.

Explanations of each clause of the Bill are contained in the explanatory memorandum that has been made available to honourable senators. I commend the Bill to the Senate.

BANK ACCOUNT DEBITS TAX ADMINISTRATION AMENDMENT BILL 1984

The main purpose of this Bill, and a further Bill I will introduce shortly, is to permit three additional exemptions from the bank account debits tax. These exemptions were decided upon by the Government following a review of the tax and were announced by the Treasurer (Mr Keating) in the Budget Speech. A statement outlining the decisions taken by the Government as a result of the review was issued by the Treasurer on 22 August 1984. As indicated in that statement, the Government confined its review of the tax to the exemption provisions pending the outcome of an inquiry into the distribution of taxing powers between the Commonwealth and the States. Honourable senators will be aware of the numerous organisations and individuals who have made representations seeking exemptions from the tax in recent months. Those representations were given very careful consideration by the Government and it was concluded that it would be appropriate to grant three additional exemptions. The Government believes that the new exemptions will rationalise the existing exemption provisions while at the same time retaining the original concept of a broad based tax with few exemptions.

The present Bill will grant two new exemptions. First, it will extend the range of exemption to include parents and citizens associations and other support groups for institutions that are themselves exempt from the tax. Secondly, it will exempt local councils and government bodies in respect of any minor business activities they carry on. In addition, the Bill will clarify the operation of the legislation in relation to government bodies whose enabling legislation includes a provision generally exempting the body from Commonwealth taxes. The Bill will also modify requirements relating to the lodgment with the Taxation Office of certain returns by banks.

I turn now to discuss in more detail the changes proposed by this Bill. Under the present law, a public benevolent or religious institution, a public or private non-profit hospital and a government or private non-profit school, college or university is exempt from the tax. The Bill proposes that exemption also be granted to organisations whose function is to support one of those exempt institutions. The proposed exemption will thus apply to parents and citizens associations and like bodies which exist to serve the interests of particular schools. Auxiliaries set up to raise funds for a hospital or a public benevolent institution such as an aged people's home will also be eligible for exemption. Exemption will not, however, extent to umbrella support groups whose purpose is to promote in a more general way the interests of schools, hospitals or other exempt institutions not to broadly based support groups such as community service clubs. The new exemption will apply to debits made to accounts on or after the first day of the month following the month in which the amending Act receives the royal assent.

The Bill also liberalises the exemption currently provided to certain government bodies. Under the present law, government bodies are eligible for exemption from the tax, except in relation to bank account debits resulting from transactions connected with a business undertaking or if their sole or principal function is to carry on a business. This policy of taxing all business activities of government bodies ensures equality of tax treatment with any private sector competitors but has meant that local councils that carry on business activities such as operating swimming pools, child care centres and caravan parks are subject to the tax in respect of those activities even where they represent an insignificant part of a council's functions and are not commercial in a real sense. Because transactions relating to such business activities are generally conducted through the council's main operating bank account, that account is not eligible for the issue of a certificate of exemption. Instead, the council is initially required to pay tax on all debits to the account and subsequently claim a refund from the Commissioner of Taxation of the tax paid on the non-business debits.

The Government believes that the administrative burden in these particular situations is disproportionate to the very small amount of revenue involved. Accordingly, the Bill will extend the scope of the exemption provided to government bodies that do not primarily carry on business undertakings so that such a government body will be eligible for exemption not only in respect of its non-business activities but also in respect of any business activity that forms a minor or insignificant part of its functions. This will mean, for example, that a local council will no longer be subject to the tax in respect of business activities such as operating a swimming pool where, viewed overall, that activity represents a minor part of the council's functions. On the other hand, a council that carries on, for example, a substantial electricity supply undertaking will not be eligible for exemption in respect of debits relating to that activity. The change to the exemption arrangements for government bodies will also operate in relation to debits made on or after the first day of the month following the month in which the amending Act receives the royal assent.

This Bill is also to clarify the operation of the bank account debits tax law in relation to government bodies whose enabling legislation include a provision exempting them from Commonwealth taxes. The intended operation of the existing law is that government bodies are entitled to exemption from the tax only if they satisfy the specific tests for exemption of government bodies contained within the bank account debits tax legislation. As mentioned earlier, those tests are designed to ensure that government bodies are not eligible for exemption in respect of substantial business activities. Nevertheless, legal arguments have been advanced that government bodies that carry on substantial business undertakings are completely exempt from the bank account debits tax if they have a general tax exemption provision in their enabling legislation. The amendments will make it clear that a government body will only be entitled to exemption from the tax if it satisfies the specific tests for exemption of government bodies contained in the bank account debits tax legislation. This particular measure will be made effective in relation to bank account debits occurring on or after 22 August 1984 which was the date on which the Treasurer announced that the law would be amended in this way.

The final measure proposed by this Bill will vary a machinery provision in the existing legislation which stipulates that banks must lodge an annual return relating to exempt accounts specifying the names and addresses of the account holders in alphabetical order. The Bill will replace the requirement to furnish a list of account holders in alphabetical order with a requirement that the bank furnish the return in an approved form containing such particulars as are required by the form. This is consistent with the existing provision relating to lodgment of returns for taxable accounts and will assist the Commissioner of Taxation in exercising appropriate control over the system of certificates of exemption.

As is usual with amendments to the taxation laws, an explanatory memorandum giving technical details of the amendments contained in the Bill is being circulated to honourable senators. I commend the Bill to the Senate.

BANK ACCOUNT DEBITS TAX AMENDMENT BILL 1984

This Bill will give effect to the proposals announced in the Budget Speech to exempt debits below $1 from the bank account debits tax and to increase the tax on debits of $10,000 or more from $1 to $1.50. At present, there is no minimum debit below which the tax does not apply. This means that the minimum rate of tax of 10c is charged on very small debits including on small debits for financial institutions duties levied by some States. The Bill will ensure that debits below $1 are not subject to bank account debits tax. In order to offset the cost of the exemption of debits below $1 and the two other new exemptions announced in the Budget, the Bill proposes to increase the rate of tax on debits of $10,000 or more from $1 to $1.50. This increase, like those two changes, will apply to debits made to accounts in the month following royal assent. I commend the Bill to the Senate.