Income Tax Act 1926

Legislation au C1926A00049 Not in force Act

Legislation content

 

INCOME TAX.

 

No. 49 of 1926.

An Act to impose Taxes upon Incomes.

[Assented to 23rd August, 1926.]

BE it enacted by the King’s Most Excellent Majesty, the Senate, and the House of Representatives of the Commonwealth of Australia, as follows:—

Short title.

1. This Act may be cited as the Income Tax Act 1920.

Incorporation.

2. The Income Tax Assessment Act 1922-1925 shall be incorporated and read as one with this Act.


Imposition of Income tax.

3. Income tax is imposed at the rates and amounts declared in this Act.

Rates of income tax.

4.—(1.) The rate of the income tax in respect of income from personal exertion shall be as set out in the First Schedule to this Act.

(2.) The rate of the income tax in respect of income derived from property shall be as set out in the Second Schedule to this Act.

(3.) The rates of the income tax in respect of a total taxable income derived partly from personal exertion and partly from property shall be as set out in the Third Schedule to this Act.

(4.) Notwithstanding anything contained in the last three preceding sub-sections, where a person would, apart from this sub-section, be liable to pay income tax of an amount less than One pound, the tax payable by that person shall be One pound.

(5.) The rates of the income tax payable by a company shall be as set out in the Fourth Schedule to this Act.

Additional tax.

5. In addition to the tax payable under the preceding provisions of this Act, there shall be payable, in the case of incomes in respect of which the tax is calculated under the First, Second or Third Schedules, an additional tax equal to twenty per centum of the amount of the tax so calculated.

Levy of income tax.

6.—(1.) Income tax shall be levied and paid for the financial year beginning on the first day of July One thousand nine hundred and twenty-six.

(2.) This Act shall also apply to all assessments for financial years subsequent to that beginning on the first day of July One thousand nine hundred and twenty-six made prior to the passing of the Act for the levying and payment of the income tax for the financial year beginning on the first day of July One thousand nine hundred and twenty-seven.

 

THE SCHEDULES.

——

FIRST SCHEDULE.

Rate of Tax upon Income Derived from Personal Exertion.

For so much of the whole taxable income as does not exceed £7,600 the average rate of tax per pound sterling shall be threepence and three eight-hundredths of one penny where the taxable income is One pound sterling, and shall increase uniformly with each increase of One pound sterling of the taxable income by three eight-hundredths of one penny.

The average rate of tax per pound sterling for so much of the taxable income as does not exceed £7,600 may be calculated from the following formula:—

R = average rate of tax in pence per pound sterling.

I = taxable income in pounds sterling.

For every pound sterling of taxable income in excess of £7.600 the rate of tax shall be sixty pence.


SECOND SCHEDULE.

Rate of Tax upon Income Derived from Property.

(a) For such part of the taxable income as does not exceed £546 the average rate of tax per pound sterling shall be that given by the following formula:—

R = average rate of tax in pence per pound sterling.

I = taxable income in pounds sterling.

(b) For such part of the taxable income as exceeds £546 but does not exceed £2,000, the additional tax for each additional pound of taxable income above £546 shall increase continuously with the increase of the taxable income in a curve of the second degree in such a manner that the increase of tax for one pound increase of taxable income shall be—

11.713 pence for the pound sterling between £545 10s. and £546 10s.

12.768 pence for the pound sterling between £599 10s. and £600 10s.

14.672 pence for the pound sterling between £699 10s. and £700 10s.

16.512 pence for the pound sterling between £799 10s. and £800 10s.

18.288 pence for the pound sterling between £899 10s. and £900 10s.

20.000 pence for the pound sterling between £999 10s. and £1,000 10s.

27.600 pence for the pound sterling between £1,499 10s. and £1,500 10s.

33.600 pence for the pound sterling between £1,999 10s. and £2,000 10s.

(c) For such part of the taxable income as exceeds £2,000 but does not exceed £6,500, the additional tax for each additional pound of taxable income above £2,000 shall increase continuously with the increase of the taxable income in a curve of the third degree in such a manner that the increase of tax for one pound increase of taxable income shall be—

33.600 pence for the pound sterling between £1,999 10s. and £2,000 10s.

40.000 pence for the pound sterling between £2,499 10s. and £2,500 10s.

45.300 pence for the pound sterling between £2,999 10s. and £3,000 10s.

49.600 pence for the pound sterling between £3,499 10s. and £3,500 10s.

53.000 pence for the pound sterling between £3,999 10s. and £4,000 10s.

55.600 pence for the pound sterling between £4,499 10s. and £4,500 10s.

57.500 pence for the pound sterling between £4,999 10s. and £5,000 10s.

58.800 pence for the pound sterling between £5,499 10s. and £5,500 10s.

59.600 pence for the pound sterling between £5,999 10s. and £6,000 10s.

60.000 pence for the pound sterling between £6,499 10s. and £6,500 10s.

(d) For every pound sterling of taxable income in excess of £6,500 the rate of tax shall be sixty pence.

 

THIRD SCHEDULE.

Rates of Tax in respect of Taxable Income Derived Partly from Personal Exertion and Partly from Property.

(a) For every pound sterling of taxable income derived from personal exertion, the rate of tax shall be ascertained by dividing the total amount of the tax that would be payable under the First Schedule if the total taxable income of the taxpayer were derived exclusively from personal exertion by the amount of the total taxable income.

(b) For every pound sterling of taxable income derived from property, the rate of tax shall be ascertained by dividing the total amount of the tax that would be payable under the Second Schedule if the total taxable income of the taxpayer were derived exclusively from property by the amount of the total taxable income.

 

FOURTH SCHEDULE.

Rates of Tax Payable by a Company.

(a) For every pound sterling of the taxable income of a Company, the rate of tax shall be One shilling.

(b) For every pound sterling of interest paid or credited by the Company to any person who is an absentee, in respect of debentures of the Company or on money lodged at interest with the Company by such person, the rate of tax shall be One shilling.

Overview

The Income Tax Act 1920, enacted by the Parliament of Australia, was introduced to establish a formal structure for the imposition and collection of income tax within the nation. The Act aimed to address the need for a systematic approach to taxing income, ensuring that individuals and companies contribute to the Commonwealth's revenue based on their earnings. The policy objective was to provide a transparent and equitable tax framework that could generate necessary funds for governmental functions while maintaining fairness among taxpayers. The Act consolidated previous legislation, such as the Income Tax Assessment Act 1922-1925, and established specific rates for various income sources, including personal exertion, property, and business income. An additional tax was also imposed on incomes calculated under the primary schedules to further bolster revenue collection.

Scope and Application

The Income Tax Act 1920 applies to all individuals and entities within the Commonwealth of Australia, including residents and non-residents, who have income derived from personal exertion, property, or through corporate entities. The Act imposes income tax at rates specified in the Act, which are detailed in the accompanying schedules for income from personal exertion, income derived from property, and for a combination of both sources. Additionally, the Act imposes an additional tax of twenty per centum on the amount of tax calculated under the First, Second, or Third Schedules. The Act applies to financial years beginning on the first day of July 1926 and extends to assessments for subsequent financial years made prior to the passing of the Act for the financial year beginning on the first day of July 1927. Notably, the Act also incorporates the Income Tax Assessment Act 1922-1925, thereby extending its scope and application through subordinate instruments. However, there are stated exclusions, such as the minimum tax liability of one pound for individuals with an otherwise lower tax obligation.

Key Provisions

The Income Tax Act 1920, as referenced in sections (1) and (2), serves as the foundational piece of legislation for imposing income taxes in Australia. This Act incorporates the Income Tax Assessment Act 1922-1925, ensuring that the latter is read as one with the former. Section (3) imposes income tax at rates and amounts declared within this Act, while sections (4) and (5) specify the rates of income tax applicable to different types of income, including income from personal exertion, income derived from property, and income from a combination of personal exertion and property, as well as the rates for companies. Additionally, section (5) imposes an additional tax of twenty per centum of the amount of the tax calculated under the specified schedules. Section (6) outlines the levy of income tax, applicable to the financial year beginning on the first day of July 1926, and extends to assessments for subsequent financial years made prior to the passing of the Act for the financial year beginning on the first day of July 1927. Under this Act, taxpayers are required to accurately report their income and calculate their tax liability based on the rates specified in the schedules. Section (4) details the specific tax rates for different income brackets, with incremental increases for higher income levels. For instance, the tax rate for income derived from personal exertion increases progressively with the amount of income, as specified in the First Schedule, while income derived from property is taxed at rates outlined in the Second Schedule. Companies, as addressed in section (5), are subject to a flat rate of tax on their taxable income. Taxpayers must also account for the additional tax mentioned in section (5), which amounts to twenty per centum of the tax calculated under the First, Second, or Third Schedules. Failure to comply with the obligations imposed by this Act can result in various consequences. While the Act does not explicitly list offences, penalties, or maximum penalties for breach, non-compliance with tax laws generally can lead to civil or criminal penalties. Civil penalties may include fines or additional taxes, while criminal penalties could involve imprisonment. The exact penalties would be determined by other relevant legislation, such as the Income Tax Assessment Act 1936 or subsequent amendments, which may impose specific fines or imprisonment terms for serious breaches of tax laws.

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Area of Law
Taxation Law
Instrument
Act
Concepts
Definitions & Interpretation
Imposition of Income tax
Rates of income tax
Additional tax
Levy of income tax

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.