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Tuesday, 27 November 1973
Page: 2123

The PRESIDENT -Is leave granted? There being no objection leave is granted. (The Speech read as follows)-

The purpose of this Bill is to declare the rates of income tax for the 1973-74 financial year. The rates for individual taxpayers are the same as those that applied for the previous year. However, as explained in the speech on the Income Tax Assessment Bill (No. 5) 1973, some changes are proposed in the arrangements for the relief from taxation of aged persons with low or modest incomes. Briefly put, these arrangements are firstly that the age allowance is not to be re-enacted and secondly that a rebate of tax is to be allowed where a taxpayer's taxable income is $3,847 or less. The rebate is to be $ 156 less 25c for each $ 1 by which the person's taxable income is greater than $3,224. The rates of tax for companies proposed in the Bill will apply to income derived in the 1972-73 income years. The general rate of tax payable by public companies 47.5 per cent- remains unchanged as do the rates payable by co-operative companies, non-profit companies and friendly society dispensaries. There are, however, changes in the rates of tax payable on the income of private companies, on the mutual income of life assurance companies and on dividend income on nonresident companies.

As was said in the Budget Speech there is no reason why private companies and public companies should not pay tax at corresponding rates. Notions of capacity to pay based on level of income have a place in the personal income tax system, but not the company tax system. Private companies may be owned by taxpayers on very high incomes who can obtain a number of tax benefits by using the company form of operation. It is proposed, over a period of 2 years, to bring the private and public company rates into line. As a first step, private companies are to be taxed on income of" the 1972-73 income year at the single rate of 45 per cent. Previously the rates were 37.5 per cent on the first $10,000 of taxable income and 42.5 per cent on the balance. It is notorious that this encouraged tax avoidance by company splitting.

It is also proposed to do away with the reduced rates of tax on the mutual income of life assurance companies, and on the first $10,000 of dividend income of non-resident public companies. Whatever justification there once may have been for these special rates has long since ceased to exist and it is proposed to tax these classes of income at the general public company rate of 47.5 per cent. In line with the proposed increase in the rates of tax payable by mutual life assurance companies the rate of tax payable on the investment incomes of 1973-74 of superannuation funds which do not invest sufficiently in public securities will be 47.5 per cent. In other respects the provisions of the Bill have the same effect as the corresponding provisions of the Income Tax Act 1 972. Further explanations are contained in the explanatory memorandum that is being circulated. I commend the Bill to the Senate.

Debate (on motion by Senator Cotton) adjourned.

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