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Tuesday, 9 May 1989
Page: 2063


Senator COOK (Minister for Resources)(3.46) —I move:

That this Bill be now read a second time.

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

Leave granted.

The speech read as follows-

The Bill will amend various taxation acts to give effect to matters announced on 12 April by the Treasurer in his economic statement.

The Bill will declare the general rates of income tax payable by individuals and trustees generally for the 1989-90 and subsequent financial years.

It will also declare the rate of fringe benefits tax to apply from 1 April 1990.

Other measures to be implemented by this Bill will increase the maximum levels of the rebates of tax available to taxpayers who support certain dependants and allow those rebates to be indexed annually.

The Bill will also allow instalments payable under the quarterly provisional tax system to be reduced to take account of the reduction in tax rates.

PERSONAL TAX RATES

I turn now to the personal income tax rate measures contained in the Bill.

The reform of the rate scales will be in two stages.

With effect from 1 July 1989 a five-step scale will apply and this will reduce to a four-step scale from 1 January 1990.

There is to be no change in the tax-free threshold of $5,100.

From 1 July 1989 the existing 24 per cent rate will be reduced to 21 per cent and will apply to income over $5,100 and up to a new threshold level of $17,650.

The 29 per cent rate will continue to apply, but in the altered income range $17,651 to $20,600.

The existing 40 per cent rate will be reduced to 39 per cent and apply to income from $20,601 to $35,000. For income over $35,000 and up to $50,000 the rate of 49 per cent will be reduced to 47 per cent.

Finally, for income over $50,000 the 49 per cent rate will be reduced to 47 per cent from 1 January 1990. To give effect to this decision a composite rate of 48 per cent will apply to that income on assessment for the 1989-90 year of income.

These tax cuts will be reflected in lower pay-as-you-earn deductions from 1 July 1989 and, in the case of income over $50,000, from 1 January 1990.

The changes to the rate scale will also affect non-residents with the rate of 29 per cent applying on income up to $20,600 and above that amount reduced rates will apply as for residents.

Other rates to be reduced include the rate on unearned income of minors which will be 48 per cent for 1989-90 and 47 per cent for all subsequent years, subject to shading-in arrangements for income just over $416.

Also the rate of tax on trustees assessed under section 99a of the Income Tax Assessment Act will be 48 per cent for 1989-90 and 47 per cent in subsequent years.

The cost to revenue of the personal tax cuts and the increases I will outline shortly to dependant rebates is $4,900m in 1989-90 and $5,700m in 1990-91.

FRINGE BENEFITS TAX RATE

The rate of fringe benefits tax will be reduced to 47 per cent for the year of tax commencing on 1 April 1990 and subsequent years.

The cost to revenue is estimated at $55m in 1990-91 and $60m in 1991-92.

DEPENDANT REBATES

Increased levels of concessional rebates for dependants are being made available for 1989-90 and subsequent income years.

As announced by the Treasurer, the dependant spouse rebate will be increased to $1,000, and to $1,200 where there is a dependant child or student.

Similar increases will apply to the rebates for a daughter-housekeeper or a housekeeper.

The level of the sole parent rebate is being increased to $940 and the levels of the concessional rebates for an invalid relative, a parent or a parent-in-law are also being increased.

There will be a flow-on of these increases to the zone rebates of tax for people in isolated areas.

INDEXATION OF CONCESSIONAL REBATES

In addition, the Bill will give effect to the announcement that from 1990-91 the concessional rebates referred to earlier will be indexed annually on the basis of movements in the all groups Consumer Price Index.

QUARTERLY PROVISIONAL TAX

The Bill will permit the Commissioner of Taxation to reduce to an appropriate level the amount of a quarterly provisional tax instalment otherwise payable in circumstances such as these where tax cuts have been announced.

I commend the Bill to the Senate.

Debate (on motion by Senator Tambling) adjourned.