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Important Statutory Alterations to the Taxation Legislation Since the Taxation Review Committee Commenced its work

INCOME TAX

                       


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Subject of the alteration   Short description of the purpose of the amendments  
Income Tax Assessment Act 1973—No. 51 of 1973—Assented to 14.6.73  
Converting plant for use under the metric system:  Section 53G inserted to allow an outright deduction for expenditure on converting plant for use under the metric system of measurement. 
Company bad debts:  Amended to ensure that deductions otherwise available to a company for debts owed to it and written off as bad are not to be available unless the company satisfies the ‘continuing ownership test’ or the ‘same business test’. 
Company losses:  The purpose of the changes was mainly to strengthen the ‘continuing ownership test’ in relation to deductions for company losses and to strengthen safeguards against devices designed to avoid the operation of the test. 
Life insurance premiums:  Amended so that premiums paid on a new life insurance policy would only be tax deductible if benefits other than death benefits are not payable under the policy within a period of 10 years after its commencement. 
Undistributed profits tax—private companies:  Amended to provide that a private company is required to satisfy the ‘continuing ownership test’ or the ‘same business test’ as a condition of its being able to take into account for purposes of tax on undistributed income, any amount which may have been paid in excess of a sufficient distribution of the income of a previous year. 
Export promotion expenditure:  Amended to extend to 30 June 1974 the operation of the provisions under which a rebate of tax is allowable in respect of certain expenditure to promote exports. 
Income Tax Assessment Act (No. 2) 1973—No. 52 of 1973—Assented to 14.6.73  
Australian Government benefits and assistance:  Amended to exempt from income tax, payments received by way of domiciliary nursing care benefit under the National Health Act 1953–1972 and to exempt from income tax, Commonwealth assistance given in connection with the education of isolated children. The amendments also covered the effect of those payments on concessional deductions. 
Experts visiting Australia:  Amended to withdraw the income tax allowances which were available to certain visiting experts from overseas. 



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Capital subscribed to mining companies: 
Amended to withdraw the deduction available to shareholders for calls or other share moneys paid to companies engaged in mining or prospecting for minerals (including oil and natural gas) in Australia or Papua New Guinea. 
Income Tax Assessment Act (No. 3) 1973—No. 53 of 1973—Assented to 18.6.73  
Income tax appeals:  Amended to provide that income tax appeals falling within the single justice jurisdiction of the High Court will now come within the jurisdiction of the State Supreme Courts. 
Income Tax Assessment Act (No. 4) 1973—No. 164 of 1973—Assented to 11.12.73  
Norfolk Island and other territories:  Amended to make the income tax law apply to Norfolk Island, Cocos (Keeling) Islands and Christmas Island as if they were part of Australia but to continue, by new provisions, to exempt Island and other ex-Australian source income of people genuinely living on the Island, and of companies wholly owned and controlled by such people. 
Undistributed profits tax—private companies:  In order to prevent avoidance of Australian tax, the amendments had the effect that a dividend paid by an Australian private company to a private ‘repository’ company resident in Papua New Guinea will not be counted as a dividend for the purpose of calculating whether the Australian company has a liability for undistributed profits tax. 
Income Tax Assessment Act (No. 5) 1973—No. 165 of 1973—Assented to 11.12.73  
Income of a bona fide prospector:  Amended to withdraw the exemption of income derived by a bona fide prospector from the disposal of rights to a mine. 
Australian Government pensions:  Withdrawal of the exemption from tax of age pensions. 
Profit on sale of property:  To provide for the inclusion in a taxpayer's assessable income of profits arising from the sale, within 12 months of purchase, of property purchased after 21 August 1973. 
Trading stock of a winemaker:  Winemakers are now being required progressively to value their trading stock on one of the three bases available to taxpayers generally, i.e. at the option of the taxpayers, its cost price, or market selling value or the price at which it can be replaced. 
Dividends from certain mining profits:  Amended to withdraw the exemption of dividends paid out of profits from gold mining and certain other mining profits generally exempt in the hands of the company. 
Withholding tax on dividends and interest flowing to Papua New Guinea:  The system of withholding tax on dividends and interest going to Papua New Guinea was introduced. 



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Primary producers—depreciation: 
Amended so that accelerated depreciation is no longer available for primary production plant and structural improvements. General depreciation rates will apply to such plant. 
Investment allowance:  Amended so that investment allowance which permitted a deduction from assessable income of 20 per cent of capital expenditure on specified new plant no longer applies. 
Rates and taxes:  Amended so that the deduction for payments for private rates is only available in respect of a taxpayer's principal residence, and is limited to $300 per year. 
Certain expenditure on primary production land:  Amended so that certain capital expenditure incurred by primary producers which was immediately deductible, is no longer deductible on this basis. Such expenditure is now deductible either by way of ordinary depreciation or over 10 years. 
Gifts:  Amended so that gifts made for the construction or the maintenance of public war memorials are no longer tax deductible. 
Public companies:  Amended so that the Commissioner may use his discretionary power to declare a company a public company for tax purposes, when a company fails in some insignificant way to qualify as a public company under the specific tests in section 103A, but which company is essentially public in character. 
Undistributed profits tax—private companies:  Amended so that the provisions introduced by Act No. 164 of 1973 are extended to cover dividends paid by private companies to private ‘repository’ companies set up in any country outside Australia, e.g. in a tax haven. The retention allowance in relation to trading income was increased to a flat rate of 50 per cent. 
Life assurance companies:  Amended so that the special deduction allowable to life assurance companies is reduced from 3 per cent of calculated liabilities to 2 per cent of calculated liabilities. The amount of dividends in respect of which a life assurance company is allowed a rebate of tax under section 46 is to be reduced by an appropriate part of the deductions allowable for expenses of general management and in relation to calculated liabilities. 
Export promotion expenditure:  Amended so that a rebate of tax will not apply for export market development expenditure incurred to develop export markets for meat. 
Company tax instalments:  The first stage of the scheme to collect company tax in quarterly payments was introduced. 
Tax instalment deductions:  Amended so that certain payments of workers’ compensation, sickness pay and accident pay made to an employee will be subject to tax instalment deductions under the pay-as-you-earn system. 



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Income Tax Assessment Act 1974—No. 26 of 1974—Assented to 1.8.74  
Members of the Defence Force:  Amendments of the income tax law to bring the Act, in so far as it relates to the taxation of Defence Force allowances, into harmony with the current pay structure of the Defence Force. 
Interest withholding tax:  Amended to ensure that interest paid to non-residents from Australia through an overseas branch of a business conducted by an Australian resident will be subject to withholding tax. 
Company tax instalments:  Amended to complete the phasing in of the system of collecting company tax by quarterly payments. 
Income Tax Assessment Act (No. 2) 1974—No. 126 of 1974—Assented to 6.12.74  
Mining activities on the continental shelf:  Amended so that exploration or mining and associated activities for minerals other than petroleum carried out on the continental shelf are treated for income tax purposes as though the activities were conducted on the mainland. 
Exemption of certain mining income:  The exemption from tax of one-fifth of the profits earned from mining prescribed metals or minerals was withdrawn. 
Credit unions:  Amended to exempt qualifying credit unions from income tax on interest derived from loans to members. 
Cars available to employees for private use:  Amended to prescribe a formula to ascertain the value of a benefit which arises where an employee has available for his private use a car owned or held on lease by another person. 
Employee share acquisitions:  A new provision was included to govern the taxing of employee benefits associated with the acquisition of shares in companies or of rights to acquire shares. 
Club fees and leisure benefits:  Amended to prohibit the allowance of income tax deductions for sporting and social club fees and, in certain circumstances, for expenditure relating to boats and other leisure facilitities such as holiday cottages. 
Child-care facilities:  Provision made for the allowance of depreciation on plumbing fixtures and fittings provided by employers for use in the care of employees’ children. 
Dependants:  Amended to remove the requirement that a dependant be a ‘resident’ of Australia or Papua New Guinea in order that a taxpayer may claim a concessional deduction for the maintenance of the dependant. 
Education expenses:  Amended so that the maximum deduction claimable for education expenses of a student or for self-education expenses be reduced from $400 to $150. 
Interest on home loans:  Provision made for an income tax deduction for interest paid on home loans. 



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Life assurance companies: 
Amended so that the special deduction allowable to life assurance companies under section 115 is reduced from 2 per cent of calculated liabilities to 1 per cent of calculated liabilities. 
Mining for other than oil or natural gas:  Amended so that capital expenditure, other than exploration expenditure, will be deductible by reference to the estimated life of the mine or, in the case of plant, as depreciation allowances, if the taxpayer so elects. Previously much capital expenditure could be deductible outright in the year it was incurred or, in the case of housing and welfare, over a 5-year period. 
Also amended so that amounts expended on exploration and prospecting are immediately deductible from the net mining income of the year of expenditure, and where there is excess expenditure it will be allowable as a deduction against the net mining business income (including income from associated activities) of the taxpayer in the next year in which such income is derived. If the income of that next year is insufficient to offset all of the excess, the balance will be carried forward for deduction successively against the net mining income of the subsequent year or years. Previously the excess was deductible over the life of the mine. 
Transport of minerals:  Amended so that the period over which expenditure incurred on a railway, road, pipeline or other facility for transporting minerals (including petroleum) and mineral products is deductible is changed from 10 years to 20 years. 
Prospecting and mining for petroleum:  The new provisions allow capital expenditure incurred in developing a petroleum field to be deducted over the estimated life of the field against net assessable income from petroleum. Under the previous provisions the expenditures were immediately deductible. Plant expenditure may be claimed by claiming ordinary depreciation allowances if preferred. 
Exploration expenditure is, as before, immediately deductible from net assessable income from petroleum. Any excess will be deductible successively against any such income derived in subsequent years. 
Low-income taxpayers with families:  Provision made for taxpayers whose tax saving from the concessional deductions for the maintenance of dependants is less than 40 per cent of the amount of those deductions to be allowed a rebate of tax to give them an overall tax saving, by means of the dependants deduction and tax rebate, of 40 per cent of the deductions. 



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ESTATE DUTY 
Estate Duty Assessment Act 1974—No. 130 of 1974—Assented to 6.12.74  
Matrimonial home:  Provision made for a deduction of up to $35,000 in the assessment of estate duty payable where an interest in the matrimonial home passes to a surviving spouse. 
Release from liability in cases of hardship:  Amendments made to establish a board with power to release a person in whole or in part from liability to pay estate duty where extraction of the full amount would entail serious hardship to a beneficiary. 
SALES TAX 
Sales Tax (Exemptions and Classifications) Act (No. 2) 1973—No. 181 of 1973—Assented to 14.12.73  
Exemptions:  Amended to withdraw the exemption of carbonated beverages containing a specified quantity of Australian fruit juices. 

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