Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Full Day's HansardDownload Full Day's Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Tuesday, 30 November 1965


The TEMPORARY CHAIRMAN - There being no objection, the right honorable gentleman may adopt that course.


Mr HAROLD HOLT - The amendment that I have just moved relates to the commencement date of the provisions of clause 13. Under the terms of that clause, dividends declared after 10th June last are not to be exempt from income tax if shares issued in satisfaction of the dividends are redeemable in the strict sense known to company law or in the wider sense set out in that clause. An illustration of shares that are treated by that clause as redeemable in the wider sense is found in bonus shares that are issued by a company out of capital profits with a view to their being cancelled and cash paid to shareholders on a subsequent reduction of the capital of the company. The issue of non-redeemable bonus shares followed by a reduction of capital and payment of cash to the shareholders achieves much the same result as a bonus issue of redeemable shares redeemed by cash payments.

The Government's decision to seek an amendment of the law was announced in my statement of 10th June 1965, which indicated that the amendment would apply to dividends declared after that date. The statement referred in specific terms to redeemable preference shares. It also, I thought, indicated the Government's general concern with arrangements for making taxfree distributions of profits to shareholders in cash. However, it appears from representations received that some people at least did not infer from my statement that the proposed amendment would extend beyond redeemable shares strictly so called. This being so, further consideration has been given to the question of the conmmencement date of this amendment of the law. Insosar as it relates to redeemable shares, it is proposed that the commencement date of 10th June 1965 set out in this clause shall be retained. To the extent that the amendment of the principal Act relates to shares that are not redeemable in the strict sense, it is proposed that the amending provisions shall apply only to shares issued in satisfaction of a dividend declared after the date of introduction of the Bill' in this chamber - 28th October 1965. The amendment that I have just moved will give effect to these proposals.

The second amendment, which, as I have said, I shall formally move later, relates to a matter on which I have received representations from several quarters. In particular, I mention representations made by the honorable member for Swan (Mr. Cleaver). This amendment relates to the commencement date of clause 20 and affects deductions allowable for company losses. Clause 20 will insert a new sub-section (5.) in section 80b of the principal Act. Subclause (3.) of the clause now before the Committee provides that the new sub-section is to operate from the commencement of the current income year. This is the commencement date of the provision being replaced by the new sub-section, which is designed as a safeguard against special arrangements entered into for the purpose of avoiding the percentage of shareholding test governing deductions for prior year losses of companies. Existing sub-section (5.) of section 80b provides a safeguard against the use of options as a device to avoid the percentage of shareholding test.

After the passage of the 1964 legislation, there were suggestions that possibly other arrangements that would have the same effect as the options covered by the safeguard were being resorted to and that these arrangements were not clearly within the scope of this safeguard. The amended provision inserted by clause 20 was designed to ensure that these more complex arrangements were not substituted for the option arrangement that was covered by the 1964 legislation. The honorable member for Swan has put to me most convincingly that taxpayers were entitled to act in accordance with their understanding of the 1964 provisions and that we should have regard to this fact. What I now propose is that the amendments made by clause 20, insofar as they affect arrangements of the type not known when the 1964 legislation was introduced, should not apply in assessments for the 1965-66 income year if the arrangements were entered into-


Mr Cleaver - Does it apply only to one year?


Mr HAROLD HOLT - This was the period that applied to the earlier provision. We could hardly put these on a more favourable basis than those that were covered by the earlier provision. I might mention that the altered commencing date 1 am proposing proceeds on the same principles as the 1964 legislation affecting company losses. That legislation allowed companies that had been taken over to continue to deduct losses against income derived up to 30th June 1965. The modification in the amendment I have moved will correspondingly allow deduction of losses to the companies concerned against income derived up to 30th June 1966.

Amendment agreed to.







Suggest corrections