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

Section 13 of the Income Tax Assessment Act reads as follows:

This Act shall not apply to any person who is on active service during the present war with the military or naval forces of the Commonwealth or any part of the King's Dominions or of an ally of Great Britain so far as regards income derived from personal exertion and earned prior to the commencement of this Act or during the present state of war.

The Act was assented to on 13 September 1915.

A taxpayer enlisted for active service on 13 August 1915 and was discharged from the forces as medically unfit on 8 December 1915.

Will you be so good as to advise me whether, in your opinion, this taxpayer is entitled to exemption under the section quoted so far as regards income derived from personal exertion during the period 1 July 1914 to 30 June 1915.

I may mention that in administration the term 'active service' has been construed as service outside Australia.

As the taxpayer had enlisted prior to the commencement of the Act he was at that date on active service within the meaning of section 13. So long as he was on active service the provisions of the Act would not apply to him, but immediately he was discharged from service he could no longer claim the immunity conferred by section 13. From the time of his discharge he became liable to the provisions of the Act in the same way as an ordinary citizen of the Commonwealth.

At the time of his discharge the day for filing returns had passed. Having been on active service at the time returns were due he would not be liable on his discharge to a penalty for failure to send in a return.

He would not be liable to send in a return under section 28, as the time for sending in returns would have expired before the Act was applicable to him.

By section 29 of the Act the Commissioner may at any time require any person to furnish a return in respect of the whole or any part of the income received by him.

The powers conferred by this section are very wide, but I do not think that they empower the Commissioner to require a return from a person who, at the time set out in section 28, is exempt from making a return. To hold otherwise would mean that if a person were exempt from filing returns and paying tax for several years and then lost the exemption, the Commissioner could require returns and assess tax for those past years under section 29. I do not think that such a course was intended.

In my opinion the taxpayer is not liable for the year ending 30 June 1915.

[Vol. 15, p. 110]

1. This opinion is unsigned in the Opinion Book, but it is attributed to Sir Robert Garran.