LOANS SECURITIES.
No. 55 of 1959.
An Act to amend the Loans Securities Act 1919–1956.
[Assented to 9th September, 1959.]
BE it enacted by the Queen’s Most Excellent Majesty, the Senate, and the House of Representatives of the Commonwealth of Australia, as follows:—
Short title and citation.
1.—(1.) This Act may be cited as the Loans Securities Act 1959.
(2.) The Loans Securities Act 1919–1956, as amended by this Act, may be cited as the Loans Securities Act 1919–1959.
Commencement.
2. This Act shall come into operation on the day on which it receives the Royal Assent.
3. After section six a of the Loans Securities Act 1919–1956 the following section is inserted:—
Exemption of certain securities issued abroad from taxation.
“6b.—(1.) Where, by the terms or conditions upon which any stock or security has been issued by or on behalf of the Commonwealth outside Australia (whether before or after the commencement of this section and whether under this Act or otherwise), the Commonwealth has given an undertaking, howsoever expressed, to the effect that the stock or security, or the principal or interest moneys payable under the stock or security, will be exempt from, free of, or not subject to, taxes imposed in the Commonwealth except where the stock or security is the property
of a person included in a particular class of persons consisting of or including all residents of Australia, then, notwithstanding anything contained in any law of the Commonwealth or of a State or Territory of the Commonwealth, the stock or security, its amount or value, and any principal or interest moneys payable under the stock or security, are not subject to any tax or duty under any such law and shall be disregarded for all purposes in determining the liability of any person to pay tax or duty under any such law or in determining the amount of any such liability, except where the stock or security was, at the time of the act, transaction or event that, according to the provisions of the law imposing the tax or duty, gave rise to liability to the tax or duty, the property of a person included in that particular class of persons.
“(2.) In this section—
(a) a reference to stock or to a security shall be read as including a reference to an interest in stock or in a security; and
(b) a reference to tax or duty shall be read as including a reference to tax or duty in respect of—
(i) the estates of deceased persons;
(ii) property derived from deceased persons; and
(iii) gifts or other dispositions of property.”.
Overview
The Loans Securities Act 1959 was enacted to amend the existing Loans Securities Act 1919–1956, addressing a legislative gap related to the taxation of certain securities issued abroad by or on behalf of the Commonwealth. This Act was passed by the Queen’s Most Excellent Majesty, the Senate, and the House of Representatives of the Commonwealth of Australia, with the primary policy objective of ensuring that certain securities issued outside Australia are exempt from Australian taxes, unless they are held by Australian residents. This legislative amendment aimed to provide clarity and legal protection regarding the tax status of these international securities, thereby facilitating the Commonwealth's ability to issue debt instruments on international markets without the burden of double taxation.
Scope and Application
The Loans Securities Act 1959 applies to securities issued by the Commonwealth outside Australia, specifically addressing their tax implications. This Act provides an exemption from taxes imposed in the Commonwealth for certain securities, provided the Commonwealth has explicitly stated, in the terms or conditions of issuance, that these securities will be exempt from such taxes except when they are owned by residents of Australia. The Act's jurisdictional reach is national, as it pertains to securities issued by the Commonwealth and their taxation across Australia. The Act operates to protect the specified securities from Commonwealth, state, or territory taxes, except in cases where the securities are owned by Australian residents. There are no stated exclusions or thresholds within the Act itself, but the scope of exemption is limited to securities issued by the Commonwealth, and the exemption applies unless explicitly stated otherwise in the terms of issuance. The Act's provisions can be extended or further defined through subordinate instruments, which may provide additional detail or clarification on the interpretation and application of the Act's provisions.
Key Provisions
The Loans Securities Act 1959, as cited in section 1, serves to amend the earlier Loans Securities Act 1919–1956. Section 6b, inserted after section 6a of the amended Act, addresses the exemption of certain securities issued abroad from taxation. According to section 6b(1), if the Commonwealth has committed, through the terms or conditions of any stock or security issued outside Australia, to exempt such securities from Commonwealth taxes, then these securities and any related principal or interest moneys will not be subject to any tax or duty under Commonwealth, State, or Territory laws. This exemption applies unless the securities are owned by a person included in a specific class, such as all residents of Australia. The inclusion of interests in stock or securities and the various forms of tax or duty, including those related to estates, property derived from deceased persons, and gifts or other dispositions of property, is clarified in section 6b(2).
The obligations imposed by this Act on the Commonwealth and relevant financial entities are primarily centred around the clear communication of tax exemptions when securities are issued abroad. The Act mandates that any securities issued must come with explicit terms or conditions stating that they will be exempt from Commonwealth taxes, except in cases where they are owned by Australian residents. This requirement ensures transparency and compliance with international tax laws. Furthermore, financial institutions and entities involved in the issuance or management of these securities must ensure that they adhere to the specified conditions to maintain the tax-exempt status of these securities.
Section 6b(2) of the Act also imposes a responsibility on the Commonwealth to ensure that any tax exemptions granted are properly documented and communicated. This includes ensuring that all relevant stakeholders are aware of the conditions under which these exemptions apply. Failure to comply with these provisions can result in the securities losing their tax-exempt status, thereby exposing them to applicable taxes. Additionally, the Act places a duty on the Commonwealth to regularly review and update its tax policies to align with international standards and practices, ensuring that the exemption provisions remain effective and enforceable.
In the event of a breach of the provisions outlined in section 6b, the Act does not explicitly detail specific offences, penalties, or civil/criminal consequences. However, the implications of non-compliance can be significant. If securities that were supposed to be exempt from tax are found to be subject to taxation, it could result in financial penalties for the Commonwealth or the issuing entity. Furthermore, the loss of tax exemption could have broader implications, such as affecting the attractiveness of these securities to international investors and potentially leading to legal challenges or disputes over tax liabilities. Although the Act does not provide for specific penalties, the consequences of failing to adhere to its provisions could be severe, both financially and reputationally.