The Commissioner of Taxation has forwarded the following memorandum for advice:

Section 5 of the Income Tax Act (No. 41) of 1915 prescribes that income tax shall be levied in and for the financial year beginning on the first day of July One thousand nine hundred and fifteen, and section 4 of the same Act prescribes the rates at which the tax shall be levied.

Section 10 of the Income Tax Assessment Act 1915 prescribes the period upon which the tax shall be levied as the financial year ending on the thirtieth day of June preceding the financial year in and for which the tax is payable.

In connection with travelling theatrical artists, it is necessary to assess the amount of tax payable by them before they depart from Australia, and while there should be no difficulty in collecting tax upon income earned during the past period, I am doubtful whether there is power under the law to demand tax for a financial year which still lies ahead.

A similar point arises in connection with ships chartered by persons whose taxation is provided for under section 22, which may touch at Australian ports during the period on which tax is based and may not return to Australian waters again. In such case tax is being assessed on profits made on a particular voyage which may have been begun in the present year, that is, before the dawn of the financial year in which the tax is properly collected.

Section 52 (e) of the Assessment Act provides that an agent is authorised and required to retain from time to time out of any money which comes to him in his representative capacity so much as is sufficient to pay income tax which is, Or will become, due in respect of the income.

I should be glad to learn whether in your opinion, an agent may retain moneys to pay tax even though the rates for the year have not yet been fixed by Act of Parliament, and should be glad if the matter were treated as expeditiously as possible.

THEATRICAL ARTISTES

By sub-section (2) of section 28 of the Income Tax Assessment Act 1915 it is provided that the first assessment of income tax shall be as for the financial year commencing on the first day of July One thousand nine hundred and fifteen, and each subsequent assessment shall be as for the succeeding financial year: Provided that nothing in the sub-section is to prevent the Commissioner requiring returns to be furnished to him before the commencement of any financial year for which income tax is to be assessed.

By section 29 of the Act the Commissioner is empowered at any time to require a person to furnish a return, and assessments can be made upon and in respect of the return in such manner as is necessary. Under these sections the Commissioner can require theatrical artistes to furnish returns now for income earned since 30 June of this year, and can make the necessary assessments on those returns. The assessment having been made, the taxpayer becomes liable to pay tax on the amount included in that assessment.

Ordinarily, under section 10, the tax is assessed in one year for the income of the previous year, so that under ordinary circumstances the artiste would not pay tax until 1916-1917 at the rate applicable to that financial year.

As the Commissioner in due exercise of his power has assessed the artiste in the year 1915-1916, the amount of tax payable on that assessment must be calculated at the rate for that year, as the tax is being levied for that year within the meaning of section 5 of the Income Tax Act 1915. The fact that in ordinary circumstances the tax would be levied in 1916-1917 cannot affect the position when under extraordinary powers the Commissioner has levied the tax in 1915-1916.

In my opinion where tax is demanded in respect of income before the end of the financial year in which the income is earned, the Commissioner can, in calculating the tax, use the rate applicable to that year. In collecting the tax it will be necessary to assess the artiste personally, unless that artiste has an agent in Australia. To make the person in Australia, who engaged the artiste, the agent for the purposes of the Act would not empower the Commissioner to collect the tax due by the artiste from that person, as he does not receive any money on behalf of the artiste in a representative capacity within the meaning of section 52 (e) of the Income Tax Assessment Act.

SHIP CHARTERERS

The general scheme of the Act is that the income earned in one financial year is the basis for the tax to be paid in the next financial year, but the Act contemplates exceptions to this general rule, as section 10, which lays down this general rule, opens with the words 'subject to the provisions of this Act'.

Ship charterers are an exception to this general rule, as section 22 provides that upon being required so to do the agent must furnish a return, and the Commissioner is empowered to assess the master, who must pay the tax before the vessel leaves port. The tax is, therefore, to be paid in the year in which the income is earned, and the question of the rates to be fixed for future years does not arise.

The rates at present in force are for the financial year 1915-1916, and as the tax to be paid by the master is to be paid during the year 1915-1916, in my opinion, the Commissioner can assess the master at the rates for the year 1915-1916.

[Vol. 14, p. 168]