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Wednesday, 23 November 1938

Mr NAIRN (Perth) .- I support the bill. In one respect, however, it needs amendment, namely, in regard to the date upon which it comes into operation. This applies particularly -to clause 5, which deals . with exempt income. At present, if a company receives exempt income, it is entitled to, and does; in practice, declare a dividend on the whole of the income received. The purpose of the bill is to give the company exemption only in respect of the net income, and to prevent it from distributing the whole of the income received from abroad, irrespective of the cost of earning the income. If the bill is passed in its present form, it will have an adverse effect on those companies which have already made a distribution of this class of income for the current year. We must remember that nearly five months of this financial year have already elapsed, and companies are liable to lose, not only the partial exemp- tion to which they would be entitled,- but also the benefit of any exemption.' I am sure that that was not intended by the Government.

Take, for example, a company which has financed a gold concern in New Guinea, and has shares on which it receives .dividends of £10,000 this year. The outgoing may amount to £5,000 a year. The company has already made a distribution. There was no purpose in bringing the amount into account at the end of the financial year. Those exempt moneys must not be confused with the ordinary moneys of the company. If it mixes its exempt funds with its ordinary funds it will lose the exemption altogether. Under the existing law, a company which distributes the whole of the moneys received from abroad would pay part out of exempt income, and part out of its ordinary funds. A dividend would not, therefore, be paid wholly out of exempt income. In the circumstances, a company would, on the wording of section 44 of the original act, lose altogether its right to exemption. The purpose of this amendment is to ensure that the company shall receive exemption only in respect of the net income, in this instance £5,000, but the company should be guaranteed exemption in respect of that amount. Therefore, I propose to move an amendment standing in my name which will have this effect.

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