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Thursday, 31 August 1972
Page: 1116

Dr Gun asked the Treasurer, upon notice:

(1)   What was the estimated annual loss to Commonwealth revenue of the standard deduction from taxable income for a first child of $208 and subsequent children of $156 for the latest year for which figures are available.

(2)   What is the tax saving on $208 and $156 to a taxpayer earning the present national minimum wage.

(3)   What would be the loss to revenue, compared with the revenue obtained from the abolition of the deduction from taxable income for dependent children, if that deduction was replaced by a standard deduction from tax payable of the amount given in answer to part (2).

Mr SNEDDEN (BRUCE, VICTORIA) - The answer to the honourable member's question is as follows:

(1)   The latest income tax statistics which provide a basis for making such estimates relate to the 1970-71 income year. Using these statistics, it has been estimated that the loss to Commonwealth revenue from deductions allowed for the maintenance of children under 16 years of age in assessments of taxable individuals for the 1970-71 income year was approximately $l70m. This estimate takes account of the cost of all deductions for maintenance of child dependants under 16 years of age allowed to taxable individuals, not only the cost in respect of children for whom the maximum deductions of $208 and $156 were allowed.

(2)   and (3) Statistics that would enable an accurate estimate to be made of the present cost of the relevant deductions are not available, lt has been considered appropriate, therefore, for the purposes of the comparison sought by the honourable member, to relate the tax saving on the amounts specified to a taxpayer earning the national minimum wage in 1970-71 with the cost of the deductions allowed for that year. The national minimum wage in 1970-71, taken as the 6 State Capital Cities average minimum weekly wage for adult males under awards made by the Commonwealth Conciliation and Arbitration Commission, was $42.40 during the period from 1st July 1970 to 31st December 1970 and $46.40 in the second half of the 1970-71 financial year, equivalent to $2,309 for the 1970-71 income year.

The tax saving in respect of the 1970-71 income year resulting from a deduction of S208 to a taxpayer earning an annual income equivalent to the national minimum wage (assuming that he had no other deductions) amounted to $41.57. The further tax saving to the taxpayer resulting from an additional deduction of $156 amounted to $29.94. Assuming that all taxpayers who were allowed concessional deductions of any amount in respect of dependent children under 16 years of age for the 1970-71 income year had been allowed a standard reduction in tax payable of $41.57 for each first child under 16 years of age and $29.94 for each other child under 16 years of age, the revenue loss would have been approximately $II5m

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