{"id":"C1935A00050","name":"Income Tax Act 1935","slug":"income-tax-act-1935","collection":"act","jurisdiction":"commonwealth","status":"repealed","isInForce":false,"actNumber":"50 of 1935","makingDate":null,"administeringDepartment":null,"currentVersion":{"id":3747,"registerId":"commonwealth-C1935A00050-current","compilationNumber":null,"startDate":"2026-03-30","status":"Repealed","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Income Tax Act 1935","content":"INCOME TAX.\n\nNo. 50 of 1935.\n\nAn Act to impose Taxes upon Incomes.\n\n\\[Assented to 3rd December, 1935.\\]\n\nBE it enacted by the King’s Most Excellent Majesty, the Senate, and the House of Representatives of the Commonwealth of Australia, as follows:—\n\nShort title.\n\n1. This Act may be cited as the Income Tax Act 1935.\n\nIncorporation.\n\n2. The Income Tax Assessment Act 1922–1934 shall be incorporated and read as one with this Act.\n\nImposition of income tax.\n\n3. Income tax is imposed at the rates declared in this Act.\n\nRates of income tax.\n\n4.—(1.) The rate of income tax in respect of income from personal exertion shall be as set out in the First Schedule to this Act.\n\n(2.) The rate of income tax in respect of income derived from property shall be as set out in the Second Schedule to this Act.\n\n(3.) The rates of income tax in respect of a taxable income derived partly from personal exertion and partly from property shall be as set out in the Third Schedule to this Act.\n\n(4.) Notwithstanding anything contained in the last three preceding sub-sections, where the amount of income tax which a person would, apart from this sub-section, be liable to pay is less than Ten shillings, the income tax payable by that person shall be Ten shillings.\n\n(5.) The rate of income tax payable by a trustee shall be as set out in the Fourth Schedule to this Act.\n\n(6.) Subject to sub-section (5.) of this section, the rates of income tax payable by a company shall be as set out in the Fifth Schedule to this Act.\n\n(7.) The rate of income tax payable by an individually owned partnership shall be as set out in the Sixth Schedule to this Act.\n\n(8.) The rate of income tax payable by a severally owned partnership shall be as set out in the Seventh Schedule to this Act.\n\nFurther tax on Income from property.\n\n5.—(1.) In addition to any income tax payable under the preceding provisions of this Act, there shall be payable upon the taxable income derived by any person—\n\n(a) from property ;\n\n(b) by way of interest, dividends, rents or royalties, whether derived from personal exertion or from property ; and\n\n(c) in the course of carrying on a business, where the income is of such a class that if derived otherwise than in the course of carrying on a business, it would be income from property,\n\n \n\na further income tax of five per centum of the amount of that taxable income.\n\n(2.) Where income tax is payable by a company under this section, income tax shall not be payable under this section by a member or shareholder of that company upon that part of his taxable income attributable to income derived by him in consequence of the distribution by that company to its members or shareholders of the income or any part thereof upon which tax is so payable by that company or in consequence of a succession of such distributions through another company or through other companies of that income or any part thereof.\n\n(3.) For the purposes of the last preceding sub-section, the part of the taxable income of a member or shareholder of a company which is attributable to income derived by him in consequence of the distribution specified in that sub-section, shall be so much of the part of the dividends included in the taxable income of the member or shareholder (as that part is defined by sub-section (3.) of section sixteen ab of the Income Tax Assessment Act 1922–1934), as bears to that part of the dividends so included, the same proportion as the gross amount of the income derived by the member or shareholder from the company in consequence of the distribution specified in the last preceding sub-section, bears to the gross amount of all income derived during the year of income, by that member or shareholder from dividends.\n\n(4.) Sub-sections (2.) to (13.) inclusive of section thirteen of the Income Tax Assessment Act 1922–1934 shall not apply to tax payable under the provisions of this section.\n\nLevy of income tax.\n\n6.—(1.) Income tax shall be levied and paid for the financial year beginning on the first day of July, One thousand nine hundred and thirty-five.\n\n(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 thirty-five made prior to the passing of the Act for the levying and payment of income tax for the financial year beginning on the first day of July, One thousand nine hundred and thirty-six.\n\nTHE SCHEDULES.\n\nFIRST SCHEDULE.\n\nRate of Tax upon Income Derived from Personal Exertion.\n\n```html\n

For the purposes of this Schedule—T=taxable income in pounds.

If the taxable income does not exceed £6,900, the rate of tax for every pound of taxable income shall be

\"\"

If the taxable income exceeds £6,900, the rate of tax for every pound of taxable income up to and including £6,900 shall be

\"\"

the rate of tax for every pound of taxable income in excess of £6,900 shall be

76.5 pence.

\n```\n\n \n\nSECOND SCHEDULE.\n\nRate of Tax upon Income Derived from Property.\n\n```html\n

For the purposes of this Schedule—T = taxable income in pounds.

If the taxable income does not exceed £500, the rate of tax for every pound of taxable income shall be

\"\"

If the taxable income exceeds £500 but does not exceed £1,500. the rate of tax for every pound of taxable income shall be

\"\"

If the taxable income, exceeds £1,500 but does not exceed £3,700, the rate of tax for every pound of taxable income shall be

\"\"

If the taxable income exceeds £3,700, the rate of tax for every pound of taxable income up to and including £3,700 shall be

\"\"

the rate of tax for every pound of taxable income in excess of £3,700 shall be

90 pence.

\n```\n\n——\n\nTHIRD SCHEDULE.\n\nRates of Tax in Respect of Taxable Income Derived Partly from Personal Exertion and Partly from Property.\n\n(a) For every pound 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.\n\n(b) For every pound 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.\n\n——\n\nFOURTH SCHEDULE.\n\nRate of Tax Payable by a Trustee.\n\nFor every pound of the taxable income in respect of which a trustee is liable to be separately assessed and to pay tax, the rate of tax shall be the rate which would be payable under the First, Second or Third Schedules, as the case requires, if one individual were liable to be separately assessed and to pay tax on that taxable income.\n\n——\n\nFIFTH SCHEDULE.\n\nRates of Tax Payable by a Company.\n\n(a) Subject to the last preceding Schedule, for every pound of the taxable income of a company, the rate of tax shall be 12 pence.\n\n(b) For every pound of interest paid or credited by a 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 12 pence.\n\n——\n\nSIXTH SCHEDULE.\n\nRate of Tax Payable by an Individually owned Partnership.\n\nIndividually owned partnerships other than Trusts which are partnerships.\n\nFor every pound of the taxable income of an individually owned partnership, the rate of tax shall be determined as follows:—\n\n(a) from the total amount of tax which would be payable by the member specified under sub-section (2.) of section twenty-nine of the Income Tax Assessment Act 1922–1934 if the taxable income of the partnership were added to his own taxable income, subtract the amount of tax actually payable by him in respect of his own taxable income ; and\n\n(b) divide the amount obtained by the application of the last preceding paragraph by the number of pounds in the taxable income of the partnership.\n\nTrusts which are individually owned partnerships.\n\nFor every pound of the taxable income of a trust which is an individually owned partnership, the rate of tax shall be determined as follows:—\n\n(a) from the amount of tax which would be payable by the person by whom the trust was created if the taxable income of the partnership were added to his own taxable income, subtract the amount of tax actually payable by him in respect of his own taxable income ; and\n\n(b) divide the amount obtained by the application of the last preceding paragraph by the number of pounds in the taxable income of the partnership.\n\n——\n\nSEVENTH SCHEDULE.\n\nRate or Tax Payable by a Severally Owned Partnership.\n\nFor every pound of the taxable income of a severally owned partnership, the rate of tax shall be determined as follows:—\n\n(a) compute the total of the amounts of tax that would be payable by the several members specified under sub-section (2.) of section twenty-nine of the Income Tax Assessment Act 1922–1934, if the severally owned partnership were a partnership (other than a severally owned partnership) between those members with equal interests;\n\n(b) from the total tax obtained by the application of the last preceding paragraph subtract the total of the amounts of tax actually payable by those several members on their own taxable incomes ; and\n\n(c) divide the difference obtained by the application of the last preceding paragraph by the number of pounds in the taxable income of the partnership.","sortOrder":0}],"analysis":{"summary":{"complexity_score":5,"scope_assessment":{"changed":false,"description":"This Act is narrow and faithful to its original purpose: imposing income tax and declaring the rates at which it is to be levied for the 1935–36 financial year. It does not stray into areas beyond rate-setting and levy. All substantive assessment machinery is deliberately left to the incorporated Assessment Act. The scope is exactly what the title and preamble promise — no more, no less."},"complexity_factors":["Seven separate rate schedules (Schedules 1–7), each with distinct formulas and income brackets, requiring readers to navigate across multiple documents","Blended/mixed income calculation in the Third Schedule requires hypothetical 'what if' computations across two other schedules simultaneously","Partnership rate calculation (Sixth and Seventh Schedules) involves multi-step arithmetic using reference members' personal tax positions, creating dependency chains","Extensive cross-referencing to the Income Tax Assessment Act 1922–1934, meaning the Act cannot be understood in isolation — critical defined terms and operative provisions live elsewhere","Section 5(3) contains a dense proportionality formula linking a shareholder's taxable dividend income to the company's distributed income through nested references to another Act","The 5% property income surcharge in section 5 interacts with the standard rate schedules in a way that requires readers to layer two separate calculations","Pre-decimal currency (pounds, shillings, pence) adds interpretive friction for modern readers and reflects a now-obsolete monetary framework","Key rate formulas in Schedules 1 and 2 are expressed as mathematical images (not reproduced as text), making the Act partially unreadable without access to the original printed document"],"plain_english_summary":"## What This Law Does\n\nThe **Income Tax Act 1935** is a Commonwealth law that **officially imposes income tax** on Australians and sets out the **rates** at which that tax must be paid. Think of it as the law that turns the government's power to collect income tax into an actual bill you have to pay.\n\nIt works hand-in-hand with the *Income Tax Assessment Act 1922–1934*, which is the bigger, more detailed law that defines what counts as income, who has to lodge a return, and how tax is calculated. This Act doesn't repeat all of that — it simply plugs in the **rates** (the percentages or pence-per-pound figures) that apply for the 1935–36 financial year.\n\n---\n\n## Who It Affects\n\n- **Ordinary individuals** earning wages or salaries (called \"income from personal exertion\")\n- **Investors and landlords** earning money from property, interest, dividends, rents, or royalties (\"income from property\")\n- **Companies**, taxed at a flat rate of 12 pence per pound (equivalent to a flat percentage)\n- **Trustees** (people who manage money or assets on behalf of others), taxed as if they were an individual\n- **Partnerships** — with different rules depending on whether the partnership is \"individually owned\" (one person effectively controls it) or \"severally owned\" (multiple people have separate interests in it)\n\n---\n\n## Key Features\n\n- **Different rates for different income types:** Income you earn by working is taxed differently from income you earn by owning things (property, shares, etc.). Property income was taxed more heavily — reflecting the era's philosophy that \"unearned\" income should bear a greater burden.\n- **A minimum tax floor:** If your calculated tax bill comes to less than **ten shillings**, you still have to pay ten shillings. No one gets away with paying nothing.\n- **An extra 5% tax on property income:** On top of the standard rates, there's a surcharge (an additional charge) of 5% on income from property, interest, dividends, rents, and royalties. This applied whether you were an individual or a company.\n- **Double-tax protection for shareholders:** If a company already paid the 5% property surcharge on its profits, the shareholders who receive those profits as dividends won't be taxed on that same money under the surcharge again — avoiding \"double taxation\" (being taxed twice on the same income).\n- **Progressive rate structure:** The more you earn, the higher the rate — a graduated scale that increases with income, expressed in pence per pound (the pre-decimal currency of the time).\n- **Mixed income:** If your income comes from both work and property, a blended rate is calculated proportionally across both sources.\n\n---\n\n## Why It Matters\n\nThis Act is a **founding piece** of Australia's income tax architecture. It demonstrates the Commonwealth's early approach to taxation — distinguishing sharply between income from labour and income from wealth, and taxing property income more heavily. While long superseded, it established structural principles (progressive rates, entity-specific rules, integration with an assessment Act) that echoed through Australian tax law for decades."},"issue_detection":{"absurdities":[{"type":"impossible_compliance","section":"Section 4(4)","severity":"medium","reasoning":"Sub-section 4(4) states that where the tax that 'a person would...be liable to pay' is less than Ten shillings, the payable amount becomes Ten shillings. This is expressed as a floor on a calculated liability, but it catches the case where liability is nil (nil is less than Ten shillings). The Act provides no mechanism or exemption for a person with zero assessable income to escape this minimum, creating a de facto poll tax that sits in tension with the Act's own framing of tax as being on 'income'.","confidence":0.72,"description":"The minimum tax floor of Ten shillings creates an impossible compliance situation for taxpayers whose calculated liability is zero. A person with no taxable income, or whose deductions eliminate all liability, would nonetheless owe Ten shillings — meaning the Act imposes a tax on persons who have no taxable income as defined."},{"type":"retroactive_impossibility","section":"Section 6(2)","severity":"high","reasoning":"Section 6(2) states the Act 'shall also apply to all assessments for financial years subsequent to that beginning on the first day of July, 1935 made prior to the passing of the Act for the levying and payment of income tax for the financial year beginning on the first day of July, 1936.' This means assessments for future financial years, made under some other authority before the 1936–37 Act is passed, are retrospectively governed by this 1935 Act. Those assessments were made without reference to this Act's rates, yet this provision purports to impose this Act's rates on them after the fact. Taxpayers and administrators would have had no way of knowing at the time of assessment which rates applied.","confidence":0.78,"description":"Section 6(2) purports to apply this Act retroactively to assessments already made for financial years after 1935–36 but before the 1936–37 levy Act is passed — assessments that could not legally have been made under this Act at the time they were issued, creating a retroactive impossibility."},{"type":"circular_definition","section":"Third Schedule","severity":"low","reasoning":"The Third Schedule directs the reader to compute what tax 'would be payable under the First Schedule if the total taxable income...were derived exclusively from personal exertion' and similarly for the Second Schedule. However, section 4(3) directs the reader to the Third Schedule for mixed income, while sections 4(1) and 4(2) are expressed as applying only to purely personal exertion or purely property income respectively. In practice this works, but the Third Schedule implicitly assumes those single-source schedules would yield unambiguous standalone results, which they do since they contain their own rate formulas. The circularity risk is low but the drafting creates unnecessary interpretive tension.","confidence":0.45,"description":"The Third Schedule's blended rate methodology is circular: it requires computing hypothetical tax under the First and Second Schedules on the total income, but those Schedules themselves cross-reference the Third Schedule for mixed-income situations, creating a potential definitional loop."},{"type":"circular_definition","section":"Fifth Schedule (a) and Fourth Schedule","severity":"medium","reasoning":"Section 4(5) imposes trustee tax at the Fourth Schedule rate. Section 4(6) imposes company tax at the Fifth Schedule rate, 'subject to sub-section (5.)'. The Fifth Schedule itself says 'subject to the last preceding Schedule' (Fourth Schedule). A company trustee therefore falls under both sub-sections 4(5) and 4(6). The Fourth Schedule rate is determined as though 'one individual were liable' under the First, Second or Third Schedules — but a company is not an individual and cannot have personal exertion income. The rate-determination mechanism breaks down entirely for corporate trustees.","confidence":0.82,"description":"The Fifth Schedule opens with 'Subject to the last preceding Schedule' (i.e. the Fourth Schedule — trustees), yet the Fourth Schedule rate is itself defined by reference to the First, Second or Third Schedules. A company acting as trustee is thus subjected to a circular rate-determination: the Fifth Schedule defers to the Fourth, and the Fourth defers back to individual-income schedules, with no resolution for which Schedule ultimately governs a corporate trustee."},{"type":"impossible_compliance","section":"Sixth Schedule (Trusts which are individually owned partnerships)","severity":"high","reasoning":"The Sixth Schedule requires subtracting the settlor's actual tax from a hypothetical inflated liability. If the settlor has died (a common situation for testamentary trusts), has no Australian taxable income (so 'tax actually payable' is zero but the hypothetical addition still requires knowing their income), or simply cannot be identified, there is no fallback mechanism. The Act provides no alternative computation, leaving the trustee in an impossible position with no lawful rate to apply.","confidence":0.88,"description":"The rate for a trust that is an individually owned partnership is pegged to the tax payable by 'the person by whom the trust was created' — but if the settlor is deceased, non-resident, or cannot be identified, the entire rate-computation mechanism is rendered inoperative and compliance becomes impossible."},{"type":"impossible_compliance","section":"Seventh Schedule","severity":"high","reasoning":"Step (b) of the Seventh Schedule subtracts the members' actual total tax from the hypothetical equal-share total tax. If the members individually earn high incomes and the partnership income is small, their actual taxes (on their own incomes) could exceed what would be payable under the equal-share hypothetical (where partnership income is split and may attract lower marginal rates than each member's actual income). The result of step (b) is negative, and dividing a negative number by the pounds of partnership income produces a negative rate per pound — meaning the partnership receives a tax credit rather than paying tax. No provision addresses this scenario.","confidence":0.85,"description":"The Seventh Schedule computes the rate for a severally owned partnership by hypothetically treating it as an equal-share ordinary partnership, then dividing by actual income — but if the several members' equal-share hypothetical produces a lower total tax than their actual individual taxes, the formula yields a negative rate, which is mathematically absurd and legally unworkable."},{"type":"other","section":"Section 5(1) read with Section 4(2)","severity":"medium","reasoning":"Section 5(1) says 'a further income tax of five per centum of the amount of that taxable income' — so it is 5% of the income, not 5% of the tax. This means it operates as an additional flat rate of 5 pence per pound on top of the Schedule 2 rate. While arithmetically calculable, the legislative structure is confusing because section 5 is titled 'Further tax' but imposes what is effectively a rate surcharge not reflected in the rate schedules themselves, making the Schedule 2 rates facially incomplete and potentially misleading to compliant taxpayers trying to calculate their total liability from the Schedules alone.","confidence":0.65,"description":"Section 5 imposes an additional 5% tax on property income 'in addition to any income tax payable under the preceding provisions.' However, section 4(2) already sets the rate for property income via the Second Schedule. It is impossible to determine whether the 5% is applied to the taxable income amount or to the tax already calculated, and the Act uses both 'rate' and 'amount' language inconsistently across the two provisions."}],"contradictions":[{"severity":"high","section_a":"Section 4(5)","section_b":"Section 4(6)","confidence":0.83,"description":"Section 4(5) imposes trustee tax rates under the Fourth Schedule and section 4(6) imposes company tax rates under the Fifth Schedule 'subject to sub-section (5.)'. For a company acting as trustee, both sub-sections apply simultaneously and the Act does not resolve which takes precedence — the 'subject to' language in 4(6) implies 4(5) wins, but the Fifth Schedule's own 'subject to the last preceding Schedule' creates the same ambiguity at the schedule level without any tiebreaker for the rate applicable to the company qua company versus qua trustee."},{"severity":"medium","section_a":"Section 4(4)","section_b":"Section 4(1) / Section 4(2) / Section 4(3)","confidence":0.75,"description":"Sections 4(1)–(3) establish that income tax shall be imposed 'at the rates declared in this Act' (per section 3) via the Schedules, which are structured as rates per pound of taxable income. Section 4(4) overrides those rates by imposing a flat minimum of Ten shillings regardless of the calculated rate, effectively substituting a lump sum for a rate-based calculation. This contradicts the fundamental architecture of sections 4(1)–(3) and section 3, which contemplate only rate-based taxation."},{"severity":"medium","section_a":"Section 5(4)","section_b":"Section 5(2) and Section 5(3)","confidence":0.7,"description":"Section 5(4) disapplies sub-sections (2)–(13) of section 13 of the Income Tax Assessment Act 1922–1934 in respect of tax under section 5. However, section 5(2) and 5(3) create their own dividend-attribution relief scheme for the section 5 further tax. If the excluded provisions of the 1922–1934 Act include any machinery provisions necessary to give effect to the distribution calculations referenced in section 5(3) (such as definitions of 'dividends included in taxable income' or 'gross amount'), section 5(4) may inadvertently disable the very computational tools that section 5(3) relies upon."},{"severity":"low","section_a":"Third Schedule (a)","section_b":"Third Schedule (b)","confidence":0.6,"description":"The Third Schedule computes a separate rate for personal exertion income (using First Schedule hypothetical) and a separate rate for property income (using Second Schedule hypothetical), both applied to their respective portions of actual income. Because the two hypothetical calculations use the total taxable income as the base but apply different progressive schedule formulas, the sum of the two resulting tax amounts will not in general equal what either Schedule alone would produce — and may produce a total effective burden either higher or lower than a single-source taxpayer at the same income level, creating horizontal inequity baked into the legislative formula itself."},{"severity":"high","section_a":"Section 6(1)","section_b":"Section 6(2)","confidence":0.76,"description":"Section 6(1) levies income tax for the financial year beginning 1 July 1935. Section 6(2) extends the Act to assessments for subsequent financial years made before the 1936–37 levy Act is passed. This creates a direct conflict: section 6(1) confines the levy to 1935–36, while section 6(2) purports to extend it to later years without a fresh levy Act — arguably circumventing the constitutional requirement that taxation be imposed by a valid appropriation/levy for each year."}]}},"importantCases":[],"_links":{"self":"/api/acts/income-tax-act-1935","history":"/api/acts/income-tax-act-1935/history","analysis":"/api/acts/income-tax-act-1935/analysis","conflicts":"/api/acts/income-tax-act-1935/conflicts","importantCases":"/api/acts/income-tax-act-1935/important-cases","documents":"/api/acts/income-tax-act-1935/documents"}}