INCOME TAX ASSESSMENT (BONUS SHARES).
No. 12 of 1926.
An Act to validate certain Refunds of Income Tax and for other purposes.
[Assented to 26th March, 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 Assessment (Bonus Shares) Act 1926.
Definitions.
2. In this Act, unless the contrary intention appears—
“Income Tax Assessment Act” means the Income Tax Assessment Act 1915 and includes that Act as subsequently amended by any Act or Acts passed prior to the year One thousand nine hundred and twenty-two;
“shares distributed out of taxed profits” means shares distributed by a company to its members or shareholders prior to the first day of July One thousand nine hundred and twenty-one out of the profits of the company upon which it has paid income tax, as upon undistributed income, under the Income Tax Assessment Act
Validation of refunds.
3. Where the paid-up value of any shares distributed out of taxed profits has been included in any assessment under the Income Tax Assessment Act, as being income within the meaning of paragraph (b) of section fourteen of that Act, and income tax has been paid on that value, any refund of the income tax so paid made by the Commissioner prior to the commencement of this Act shall be deemed to be, and at all times to have been, as lawfully made as if that value had been exempt from income tax under that Act.
Validation of omissions from assessments.
4. Where the paid-up value of any shares distributed out of taxed profits has been omitted from any assessment, under the Income Tax Assessment Act, in which that value is assessable as income within the meaning of paragraph (b) of section fourteen of that Act, that value shall be deemed to be, and at all times to have been, as lawfully omitted as if it had been exempt from income tax under that Act.
Cases where Judgment given.
5. Where the paid-up value of any shares distributed out of taxed profits has been included in any assessment under the Income Tax Assessment Act, and the High Court has, prior to the thirty-first day of August One thousand nine hundred and twenty-four, decided that the value of shares, including the shares so distributed has been lawfully included in that assessment, the Commissioner may, nevertheless, accept, as payment of the income tax under that assessment, the amount which would be payable under that assessment if the paid-up value of the shares so distributed were omitted therefrom.
Overview
The Income Tax Assessment (Bonus Shares) Act 1926 was enacted to address issues arising from the taxation of bonus shares distributed by companies out of taxed profits. This Act was passed by the Australian Parliament, specifically the King’s Most Excellent Majesty, the Senate, and the House of Representatives of the Commonwealth of Australia. The primary policy objective of the Act was to validate refunds of income tax that had been paid on the paid-up value of shares distributed by companies before 1 July 1921, which had been assessed as income under the Income Tax Assessment Act 1915. The Act ensures that any refund of such income tax paid by the Commissioner before the commencement of this Act is deemed lawful, as if the value had been exempt from income tax. Furthermore, it validates any omissions from assessments where the paid-up value of such shares was not included, and it allows for the Commissioner to accept alternative payments if the High Court had previously ruled that the inclusion of these shares in the assessment was lawful.
Scope and Application
The Income Tax Assessment (Bonus Shares) Act 1926 applies to cases where companies have distributed shares to their members or shareholders out of profits on which income tax has already been paid. The Act addresses the treatment of these shares under the Income Tax Assessment Act 1915, particularly focusing on the validation of refunds of income tax that may have been paid on the paid-up value of such shares, as well as omissions from assessments. It is applicable to entities that have distributed shares from taxed profits prior to 1 July 1921, and it validates the Commissioner's actions in refunding or omitting to assess income tax on these distributions. The Act extends its jurisdictional reach across the Commonwealth of Australia and seeks to rectify situations where income tax was incorrectly applied to the distribution of bonus shares. The Act does not specify any exclusions or exemptions, nor does it outline thresholds, but it does provide mechanisms for the Commissioner to rectify previous assessments and refunds concerning these distributions.
Key Provisions
The Income Tax Assessment (Bonus Shares) Act 1926, as enacted, consists of several key provisions. Firstly, Section 3 of the Act validates any refunds made by the Commissioner of Taxation prior to the commencement of the Act, in cases where the paid-up value of shares distributed out of taxed profits has been included in an assessment under the Income Tax Assessment Act 1915 and income tax has been paid on that value. Essentially, this means that any refunds made by the Commissioner before the Act's commencement are deemed to be lawful, as if the value of the shares had been exempt from income tax. Secondly, Section 4 validates any omissions from assessments, where the paid-up value of shares distributed out of taxed profits has been omitted from an assessment under the Income Tax Assessment Act. These omissions are deemed to be lawful, as if the value had been exempt from income tax.
The Act imposes certain obligations and requirements on the parties it governs. Companies and shareholders must ensure that the value of shares distributed out of taxed profits is accurately assessed for income tax purposes. If the Commissioner has included the paid-up value of such shares in an assessment, the company or shareholder must cooperate in paying the income tax, unless a refund has been made or the value has been lawfully omitted from the assessment. Furthermore, if the High Court has decided that the value of shares, including those distributed, has been lawfully included in an assessment, the Commissioner may still accept, as payment of the income tax, the amount which would be payable if the paid-up value of the shares were omitted from the assessment.
In terms of offences, penalties, or consequences for breach, the Act itself does not explicitly outline any criminal or civil penalties for non-compliance with its provisions. However, non-compliance with the Income Tax Assessment Act 1915, which the Income Tax Assessment (Bonus Shares) Act 1926 seeks to validate, may result in penalties under that Act. These penalties may include fines, imprisonment, or both, depending on the nature and severity of the breach. Additionally, taxpayers who fail to comply with the Income Tax Assessment Act 1915 may be subject to interest and penalties on any unpaid tax, as well as potential legal action by the Commissioner of Taxation.