The Secretary to the Treasury has asked for my advice upon a question raised by the Governor of the Commonwealth Bank, whether interest on deposits in the Savings Bank Department of the Commonwealth Bank is subject to the payment of income tax by a depositor in Queensland.

Section 6 of the Queensland Government Savings Bank Acts Amendment Act of 1912 is as follows:

6. After section one of The Savings Bank Amending Act of 1882, the following section is inserted:-

[2] Notwithstanding anything contained in any other Act, no sum due or payable or paid or derived in respect of or from any deposit in a Government Savings Bank shall be or be deemed to be 'income' within the meaning of any law relating to income tax, and no such interest shall be subject to income tax.

In my opinion this enactment applies only to Government Savings Banks of the State of Queensland; and therefore interest on deposits in the Queensland branch of the Commonwealth Bank is not exempted by it from income tax.

Interest from a deposit in the Savings Bank Department of the Commonwealth Bank is 'income' within the meaning of the Queensland Income Tax Act of 1902; and in my opinion there is nothing in the Constitution which exempts such interest from liability to State income tax, even though the State may choose to specially exempt interest on deposits in the State Bank.

It may be that the effect, and even the intention of the State enactment is to give the State Bank an advantage in competition with the Commonwealth Bank; but there is nothing to prevent a State, at its own expense favouring its own institutions.

The case would of course be different if the State enactment, on its face, appeared to be in reality not a law relating to State income tax, but a burden on the Common-wealth Bank.

[Vol. 12, p. 399]