State income tax on interest on commonwealth loans
whether interest on Commonwealth loans is subject to taxation under Victoria and New South Wales Acts in relation to unemployment relief: COMMONWEALTH INSCRIBED STOCK: effect of statement in prospectus that interest is not liable to state income tax
TAXATION OF LOANS ACT 1923 s 4: COMMONWEALTH INSCRIBED STOCK ACT 1911 s 52B
The Secretary to the Treasury has forwarded the following memorandum asking
for advice:
I shall be glad if you will kindly advise whether interest on Commonwealth loans is subject to taxation under the Acts recently passed in Victoria and New South Wales in relation to unemployment relief.
Section 4 of the Taxation of Loans Act 1923 provides as follows:
- Notwithstanding anything contained in any Act, the interest on any loan raised in Australia, after the date of the commencement of this section, by the Commonwealth or by any authority constituted by or under any law of the Commonwealth, shall be subject to taxation under the laws of the respective States relating to Income Tax:
- This section shall not commence until a date to be fixed by proclamation.
Provided that the taxation imposed by any State in pursuance of this section shall be at a rate not exceeding that applicable, under the law of that State, to interest on any loan raised by it, and shall not apply to a greater extent than it would apply if the interest on the loan raised by the Commonwealth, or by any authority constituted by or under any law of the Commonwealth, had been interest on a loan raised by that State.
I understand that this section has not yet commenced, a proclamation having not yet been issued. The prospectus in respect of each loan issued by the Commonwealth states that the interest on the loan is liable to taxation by the Commonwealth but is not liable to State Income Tax.
Section 52B of the Commonwealth Inscribed Stock Act 1911–1927 is as follows:
52B. The interest derived from stock or Treasury Bonds shall not be liable to income tax under any law of the Commonwealth or a State unless the interest is declared to be so liable by the prospectus relating to the loan on which the interest is payable.
In my opinion, section 52B is to be applied in determining whether the interest on the above loans is subject to taxation. I think, therefore, that the interest on the loans is not liable to State Income Tax, in view of the statements contained in the prospectus relating to each loan.
[Vol. 24, p. 646]