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Tuesday, 19 August 1980
Page: 279

The table below lists taxation measures announced both prior to and in the Budget and shows the estimated effects on receipts in 1980-81 and in a full year.

Estimated Change in Receipts

Measure 1980-81 Full Year(a)

Personal Income Tax -

Indexation of rate scale(6)....... ~

Increase in dependant rebates^)...... j

Australians working overseas.......

Gifts-

To TAFE institutions.......

To certain overseas aid organisations.....

Superannuation deductions for self-employed persons and employees not covered by employer-sponsored arrangements Business Income - Farm water conservation and conveyance^) ....

Accelerated depreciation.......

Measures related to eradication of brucellosis and tuberculosis in cattle..........

Interest rate on income equalisation deposits(/i) Liquefied Petroleum GasIncrease in rate of levy(£).......

TOTAL.......... -587 -872

$ million 8 million

-636 -690 -1 -2

- (c)

-9 -100

-8 -38

-2 -110(/)

- -KkT)-2(i) +1(7)

+71 +71

(a)   Full year estimates are the ultimate changes in receipts that would have obtained if new rates or other arrangements had applied for the whole of 1980-81 (i.e. from 1 July 1980) to the estimated level of the relevant tax base in that year.

(b)   Announced on 6 March 1980. lc) Less than $0.5 million.

(d)   No estimate is given as the organisations have not yet been decided upon. See text. le) Announced on 14 April 1980. (/) Represents the estimated effect of loading in depreciation rates on cost of a full first year's depreciation on estimated expenditure in 1980-81 on qualifying plant. If annual expenditure remained at that level in subsequent years, the cost in each year would increase for several years until the middle of a transitional period, reaching a peak of approximately S250 million in 1985-86 and 1986-87.

(g)   Estimated effect in first full year.

(h)   Announced on 6 August 1980.

(i)   Estimated revenue effect of deduction for additional deposits, as a consequence of the increase in interest rate. (/) Gain in subsequent years is attributable to increased interest receipts in assessable income, no allowance being made in the full year figures for any net reduction in assessable income from additional deposits. Additional outlays on interest would give rise to a net cost to the Budget.

(k)   Announced on 8 April 1980. Change in receipts is measured against base of what the pre-8 April excise rate would have yielded on estimated 1980-81 excisable production.

Personal Income Tax

Rate Scale and Dependant Rebates

In line with the decision announced on 6 March, a half-indexation adjustment has been applied to the rate scale effectively applying from 1 December 1979 to 30 June 1980, to derive the 1980-81 scale. The factor applied was 1.038.

As also announced on 6 March, various dependant rebates for 1980-81 have been increased by 34 per cent. The rebate for a spouse, housekeeper or daughter-housekeeper has been increased from $597 to $800, the sole parent rebate from $417 to $559, the invalid relative rebate from $270 to $362 and the parent or parent-in-law rebate from $539 to $722. In addition, the notional rebates for dependent children that are taken into consideration in calculating zone allowance rebates have been increased from $270 and $203 to S362 and $272 respectively.

The rate scale for assessment of 1980-81 income tax is:

On 1 July 1980 the PAYE instalment deductions were adjusted to reflect the increase in the spouse and associated rebates and the indexation adjustment of the rate scale.

Provisional tax arrangements seek to achieve reasonable consistency between the treatment of PAYE and provisional taxpayers. Since 1976 the provisional payment of those who do not self-assess has been derived by applying to their preceding year's income, rates which are somewhat higher than the current year's rates. For example, a loading of 3 percentage points was applied to the normal rates in calculating their 1979-80 provisional payments. This was done as a means of achieving a degree of consistency in times of rising incomes between them and PAYE taxpayers and provisional taxpayers who self-assess. In 1980-81 that objective will be met by adjusting the income, rather than the rates, in the calculation of the provisional payment of those who do not self-assess. Specifically, the 1980-81 rate scale will be applied to their 1979-80 income increased by 7.5 per cent and dependant rebates will be allowed at 1980-81 values. The 7.5 per cent is a conservative estimate of the average rise in provisional incomes for 1980-81, and the arrangements should result in provisional tax of taxpayers who do not self-assess being closer over the whole range of incomes to the provisional tax payable by taxpayers who do self-assess (and by PAYE taxpayers) than has been the case in the past.

Provisional taxpayers of course retain the option of self-assessing, i.e. providing an estimate of their income for the current year which is used in calculating their provisional payment. The provisional payment of those who self-assess will be derived by applying 1980-81 rates and rebates in conjunction with their estimate of 1980-81 income.

Australians Working Overseas

The present law contains provisions to prevent international double taxation on foreign-source income which Australian residents earn from personal services performed in another, country. Under those provisions, which are varied in some respects by double taxation agreement's, the income is exempt from Australian tax if the country of source taxes it, and is taxed by Australia if the country of source exempts it.

It is proposed to provide some relief from Australian tax on certain foreignsource income which Australian residents earn from personal services overseas where the country of source does not tax it, either because it does not levy income tax or because it forgoes its tax (e.g. where the work is done under contracts with international bodies such as the World Bank or the Asian Development Bank). The new treatment will not apply where the country of source exempts the income only because of the terms of a double tax agreement with Australia, the intention of which is to avoid double taxation of the income in question.

The new arrangements will apply where the personal services are performed overseas in connection with approved development, construction and other projects. A certificate of approval for the project should be sought from the Department of Trade and Resources. A certificate would be issued on the approval of the Minister for Trade and Resources (or his delegate) and the Treasurer (or his delegate) being satisfied, on the basis of Australia's national interest, that the project is an approved project and is of the following types:

(a)   the design, supply or installation of equipment or facilities;

(b)   the construction of works;

(c)   the development of urban and regional areas;

(d)   development of agriculture;

(e)   advice and/or assistance for the management or administration of a government department or a public utility; or

(f)   such other projects of a type approved in writing by the Minister for Trade and Resources and the Treasurer.

The certificate would be one of the necessary conditions for exemption of persons engaged on the project. The certificate would be given on the condition that certain details of the project would be provided following entry into a contract to carry out the project, and that certain arrangements be completed with the Australian Taxation Office before the departure of personnel.

The major features of the arrangements will be:

Australian residents working overseas on approved projects, whether employees or self-employed, may be eligible for relief if they are working for an Australian resident or an Australian government, for the Government of the country where the work is performed, or under contract to an international body such as the World Bank; o where the work is performed on a single project in the other country for a continuous period of twelve months or more, the foreign-source income will be exempted in full; o where the work is performed on a single project in the other country for a continuous period of between three and twelve months, the relief will be exemption of a minimum of 25 per cent of the foreign-source income, increasing on a time basis to 100 per cent for an assignment of twelve months; o to permit short-term returns to Australia in connection with the eligible projects, two or more periods of absence from Australia will be treated as a continuous period where the number of intervening days in Australia does not exceed one sixth of the total dme spent on the project site; and ° these new arrangements, which will include appropriate safeguards, will apply to income earned on projects approved and entered into after 19 August 1980.

Gifts

Two additional categories of gifts will become deductible for income tax purposes.

Gifts to eligible non-governmental overseas aid organisations providing financial support to appropriate programs and organisations in developing countries will be an allowable deduction. Eligible organisations will be determined by the Treasurer after consulting the Minister for Foreign Affairs, and will be announced at a later date. Gifts made after that date to the eligible organisations will be deductible.

Gifts to TAFE institutions and to other Commonwealth institutions prescribed under the Tertiary Education Commission Act will be deductible where the gifts are to be applied to technical and further education or other tertiary education. Where an eligible institution provides both TAFE and secondary courses, the Minister for Education will certify, for purposes of determining deductibility of gifts, which purposes and facilities are for tertiary education. The deductible gifts will include those made to residential colleges at eligible institutions. The present certification in respect of gifts to colleges of advanced education is no longer necessary, and gifts to such colleges will be allowable deductions without the certification process.

Superannuation Deductions for Self-employed Persons and Employees not covered by Employer-sponsored Arrangements

The main features of the present law relating to superannuation arrangements are: o contributions by an individual to a fund to provide superannuation benefits for himself or his dependants are included in rebatable expenditure, within a limit of $1200 per annum for the sum of life insurance premiums and superannuation contributions, and entitle him to a rebate at the standard rate of tax on any excess of his total rebatable expenditure over $1590. That applies whether the contribution is by an employee contributing to an employer-supported fund, an employee who is not supported by an employer-sponsored scheme and who makes his own arrangements to contribute to a public superannuation fund, or a self-employed person; o employees who are members of an employer-supported fund also have the benefit of employer contributions on their behalf, and are not taxed on those amounts. There is no corresponding benefit for self-employed persons or for employees who are not supported by an employer-sponsored scheme; and o retirement benefits received as pensions are assessable income, except to the extent of any undeducted purchase price. Retirement benefits received as lump sums by self-employed persons and unsupported employees are taxfree, while 5 per cent of lump sums received on retirement by employees who are members of employer-sponsored schemes is assessable income.

It is proposed to amend the treatment of contributions and lump-sum benefits in respect of self-employed persons and employees not covered by employer-sponsored arrangements in the following main respects: o up to $1200 per annum of contributions made by them after 19 August 1980 to a qualifying fund (i.e. a fund that qualifies under section 23 (ja) or section 79 of the Income Tax Assessment Act) to provide retirement benefits for themselves and their dependants will be deductible from their assessable income. This will provide something comparable to the benefit which supported employees obtain when their employer contributes to a fund for them; ° contributions in excess of $1200 per annum will remain rebatable expenditure, up to the existing limit of $1200 for life insurance premiums and superannuation contributions, as they are for all contributions by supported employees; and ° 5 per cent of lump sums received from qualifying funds after 19 August 1980 will be assessable income, to the extent that those lump sums are derived from contributions after that date and from earnings of the fund from the investment of those contributions. In other words, that part of the lump sums will be taxed to the same extent as lump sums received on retirement by supported employees. The part of their lump sum retirement benefit derived from contributions made up to 19 August 1980, and earnings on the investment of these contributions, will remain tax-free. It will be a condition for eligibility that no other person contributes to a fund for the taxpayer's benefit or agrees to provide superannuation benefits for the taxpayer or his or her dependants.

Business Income

Farm Water Conservation and Conveyance

The Prime Minister announced on 14 April that expenditure contracted for after that date on conservation or conveyance of water in a business of primary production would be deductible in full in the year in which the expenditure was incurred.

Accelerated Depreciation

Existing rates of depreciation will be increased by 20 per cent (by means of a Joading on the rates) in respect of new or second-hand plant ordered after 19 August 1980. The loading will not apply, however, to motor vehicles of the types to which the investment allowance does not apply or to plant for which concessional statutory rates are available.

Eradication of Brucellosis and Tuberculosis in Cattle

The income tax law will be amended in two respects to encourage further progress towards eliminating brucellosis and tuberculosis infection in cattle: o Section 36aaa of the Income Tax Assessment Act will be extended to profits arising from the death, or disposal for destruction in pursuance of a compulsory destocking order, of livestock from 1 July 1980 in respect of any animal disease. That extension will permit a primary producer to offset any relevant profit against the deductible cost of replacement stock acquired for up to five income years after the year of death or disposal for destruction (any unabsorbed balance being assessable income in the last of those five years), and so defer tax on the relevant profit until the replacement stock is sold. A primary producer who breeds replacement stock may elect to include an appropriate part of the profit in assessable income; and o for cattle properties certified as subject to brucellosis or tuberculosis and in relation to which herd control is difficult, expenditure incurred by 30 June 1984 on internal fences and stockyards under contracts entered into while a certificate is in force will be deductible in full in the year in which the expenditure is incurred. The investment allowance will not apply to expenditure written off in full in one year.

Interest Rates on Income Equalisation Deposits

On 6 August 1980 the Treasurer announced that the interest rate paid to primary producers on income equalisation deposits would be increased from 5 per cent per annum to 7 per cent. The higher rate took effect from 7 August 1980 and applies to deposits held at that time as well as to deposits made subsequently.

Liquefied Petroleum Gas

On 8 April 1980 the Minister for National Development and Energy announced LPG pricing measures and new arrangements for determining the levy on naturally occurring LPG. Under these arrangements producers of naturally occurring LPG from fields in production prior to 17 August 1977 pay excise at a rate equivalent to 60 per cent of the margin by which the weighted average of wholesale prices on domestic and export sales exceeds $147 per tonne. The excise accordingly rose from $27.55 per tonne to $77.00 per tonne on 8 April 1980, and to $80.40 per tonne on 1 July 1980.







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