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Wednesday, 27 September 1972
Page: 1239


Senator COTTON (New South WalesMinister for Civil Aviation) - 1 move:

That the Bill be now read a second time.

The purpose of this Bill is to declare the rates of income tax for the current finan cial year 1972-73. The Bill will give effect to changes mentioned in the Budget Speech. The Bill's most significant feature is the new personal tax scale which will reduce tax payable by individuals by an average of 10 per cent. The new scale will apply free of any additional levy. It is estimated that, as compared with tax that would be payable if the existing scale and 2i per cent levy were continued, the new scale will reduce income tax payments in 1972-73 by $380m and by $480m in a full year.

As was said in the Budget Speech, the interaction of money incomes rising with inflation and the progressive rate scale has led to income taxation becoming too heavy a burden. The low income earner is contributing a proportion of his income in taxation far higher than 10 or 15 years ago; the man on average weekly earnings or a little more is finding income taxation looming increasingly larger in his calculations; and the managerial or professional man is facing marginal rates of taxation which on any reasonable criteria are very high indeed. The new scale is designed to give the greatest percentage reductions in taxation at the lower end of the income scale. The tax payable on a taxable income of $2,000 will be reduced by 14.2 per cent. For a taxable income of $4,000 the reduction will be 12.4 per cent. At $10,000 the reduction will be 8 per cent and at $20,000, 6.6 per cent.

If we are to make the large percentage reductions which we wish to see at the lower and medium income levels, the rate of progression of marginal tax rates would become very steep indeed if the point at which the maximum marginal rate becomes effective were to remain unchanged. That point, which was $32,000 under the scale existing since 1954-55. was altered in the course of the changes made in 1970-71 and is now $20,000. Wc propose to set a new point of $40,000 at which the new maximum rate of 663 per cent - that is, the present maximum rate but without the 2i per cent levy - will apply. These reductions in tax payable will also be fully reflected in tax payable by primary producers subject to the averaging provisions of the law and by taxpayers whose rate of tax is based on a notional income.

The minimum taxable income for individuals will be raised by the Bill from $417 to ยง1,041. This new minimum will also apply in assessments of trustees on income of trust estates to which a beneficiary is presently entitled but is under a legal disability. As a consequence of the increase in the minimum taxable income in these cases changes are proposed in the 'shading-in' arrangements which apply to cushion the impact of moving from complete exemption into lax at normal rates. Tax at normal rates will commence to apply on taxable incomes above SI, 120 instead of $428 as at present. For taxable incomes between $1,041 and $1,120 the tax payable will be limited to two-thirds of the amount by which the taxable income exceeds $1,040. The change in minimum taxable income, which will free some 600,000 taxpayers from tax, is estimated to reduce personal income tax payments by $14m in 1972-73 and by $!8m in a full year.

The present exemptions granted under the age allowance will remain for eligible people. Because of the reduction in the general rates of tax, however, tax as limited by the age allowance will now shade-in' to the general rate scale at $2,202 or, where the married couple provisions apply, $3,871. Schedules of tax instalment deductions to be made by employers from salaries or wages paid to employees have been revised in the light of the proposed reduction in tax rates and the increased minimum taxable income. The new schedules have effect as from 1st September. Provisional tax payable in respect of the income year ending 30th June 1973 will also be adjusted to take account of the changes proposed by the Bill.

Apart from the features I have mentioned, the provisions of the Bill have the same practical effect as corresponding legislation for the 1971-72 year. Technical aspects of the Bill are explained in the explanatory memorandum which is being circulated. I commend the Bill to the Senate.

I point out that there are 4 associated taxation Bills. I have just read the second reading speech on the Income Tax Bill. The second is the Income Tax Assessment Bill (No. 5) on which the second reading speech has been made already. The third is the Sales Tax (Exemptions and Classifications) Bill (No. 2) on which the second reading speech has been made already. The fourth is the Export Payments Insurance Corporation Bill on which the second reading speech also has been made already. It would be appropriate, with the permission of honourable senators and the Leaders of the Australian Labor Party and the Australian Democratic Labor Party, to have a cognate debate on these Bills. Honourable senators could speak on these Bills and, of course, separate questions could be put.

The ACTING DEPUTY PRESIDENT (Senator Laucke) - ls it the wish of the Senate that these Bills be taken as cognate measures? There being no objection, it is so ordered.

Debate interrupted.







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