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Friday, 11 September 1942


Mr CHIFLEY (Macquarie) (Treasurer) .- I move-

That, in respect of all assessments for the financial year which commenced on the first day of July. One thousand nine hundred and forty-two and all subsequent years -

(a)   in lieu of the taxable income excepted from the super-tax imposed by section six of the Income Tax Art 1942 by paragraph (c) of the proviso to that section, the following taxable income be excepted: - " the mutual income, as defined in sub-section (1a.) of section one hundred and sixty c of the Income Tax Assessment Act1936- 1942. of a life assurance company."; and

(b)   in lieu of the rate specified in clause (1) of sub-paragraph (iii) of paragraph (a) of the Seventh Schedule to the Income Tax Act 1942 in the case of a life assurance company other than a mutual life assurance company, the following rate of tax be substituted : - " (1) in respect of the mutual income of the company as defined in sub-section (1a.) of section one hundred and sixty c of the Income Tax Assessment Act 1936-1942- Sixty pence.".

The amendments which will be made to the Income Tax Act passed in June last, relate to the rates of tax to be imposed for the current financial year on the mutual income of partly mutual life assurance companies. The resolutionis complementary to amendments that are being made in the Income Tax Assessment Act to alter the basis of calculating the amount of that mutual income. Under the uniform income tax plan, tax at the rate of 5s. in the £1 is payable on the mutual income of these companies. The ordinary rate of 6s. in the £1 is levied on the non-mutual income. The mutual income is also freed from liability to' the super tax of1s. in the £1 and from the further tax on undistributed profits of 2s. in the £1.

As I explained in my second-reading speech on the Income Tax Assessment Bill, the mutual income of partly mutual companies is calculated under the present law by comparing the amount of profits divided among policy-holders for the year with the total profits for the same year. That is the basis of ascertaining the mutual income which is free from super tax and undistributed profits tax, and is subject to the concessional rate of 5s. in the £1. Provision is being made in the Income Tax Assessment Bill to alter the basis of ascertaining the amount, of the mutual income of the companies. This alteration is being made because the present basis operates unfairly. Owing to war-time conditions, the companies have found it necessary to create considerable special reserves, so that a very substantial part of the profits is not divided among either policy-holders or shareholders. As a consequence, a comparison of profits distributed to policy-holders with total profits applies inequitably. Accordingly, the Income Tax Assessment Bill provides, by amendment to section 160c 1 a, that the mutual income shall be calculated by comparing the amount of profits divided among policy-holders with the total profits divided among both policy-holders and shareholders.

The purpose of the resolution is to give to the expression " mutual income " of partly mutual life assurance companies the same meaning in the rating act as that which is being adopted in the Income Tax Assessment Act. As I have already announced, the rates of tax imposed for the current financial year remain unaltered.

Progress reported.







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