{"id":"C1937A00018","name":"Income Tax Act 1937","slug":"income-tax-act-1937","collection":"act","jurisdiction":"commonwealth","status":"repealed","isInForce":false,"actNumber":"18 of 1937","makingDate":null,"administeringDepartment":null,"currentVersion":{"id":3871,"registerId":"commonwealth-C1937A00018-current","compilationNumber":null,"startDate":"2026-03-30","status":"Repealed","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Income Tax Act 1937","content":"INCOME TAX.\n\nNo. 18 of 1937.\n\nAn Act to impose a Tax upon Incomes.\n\n\\[Assented to 13th September, 1937.\\]\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 1937.\n\n  \n\nIncorporation.\n\n2. The Income Tax Assessment Act 1936–1937 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 a taxable income derived 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 a taxable 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.) The rate or rates of income tax in respect of a taxable income to which Division 16 of Part III. of the Income Tax Assessment Act 1936–1937 applies shall be as set out in the Fourth Schedule to this Act.\n\n(5.) The rate or rates of income tax in respect of a taxable income in any case where sub-section (1.) of section eighty-six of the Income Tax Assessment Act 1936–1937 applies shall be as set out in the Fifth Schedule to this Act.\n\n(6.) Notwithstanding anything contained in the last five 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(7.) The rate or rates of income tax payable by a trustee shall be as set out in the Sixth Schedule to this Act.\n\n(8.) Subject to sub-section (7.) of this section, the rates of income tax payable by a company shall be as set out in the Seventh Schedule to this Act.\n\nLevy of income tax.\n\n5.—(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-seven.\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-seven 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-eight.\n\nTHE SCHEDULES.\n\nFIRST SCHEDULE.\n\nRate of Tax in Respect of Taxable Income Derived from Personal Exertion.\n\nFor the purposes of this Schedule T = taxable income in pounds.\n\n| If the taxable income does not exceed £6,900, the rate of tax for every pound of taxable income shall be |     |\n| -------------------------------------------------------------------------------------------------------- | --- |\n\n  \n\nThe Schedules—continued.\n\n| 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 |              |\n| --------------------------------------------------------------------------------------------------------------------------- | ------------ |\n| and                                                                                                                         |              |\n| the rate of tax for every pound of taxable income in excess of £6,900 shall be                                              | 68.85 pence. |\n\nSECOND SCHEDULE.\n\nRate of Tax in Respect of Taxable Income Derived from Property.\n\nFor the purposes of this Schedule—T = taxable income in pounds.\n\n| If the taxable income does not exceed £500, the rate of tax for every pound of taxable income shall be                      |           |\n| --------------------------------------------------------------------------------------------------------------------------- | --------- |\n| If the taxable income exceeds £500 but does not exceed £1,500, the rate of tax for every pound of taxable income shall be   |           |\n| 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 |           |\n| 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 |           |\n| and                                                                                                                         |           |\n| the rate of tax for every pound of taxable income in excess of £3,700 shall be                                              | 81 pence. |\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\nFOURTH SCHEDULE.\n\nRates of Tax by reference to an Average Income.\n\n(a) For every pound of the taxable income derived from personal exertion by a taxpayer to whose income Division 16 of Part III. of the Income Tax Assessment Act 1936–1937 is applied, the rate of tax shall be ascertained by dividing the tax that would be payable under the First Schedule upon a taxable income from personal exertion equal to his average income, by that average income.\n\n  \n\nThe Schedules—continued.\n\n(b) For every pound of taxable income derived by him from property the rate of tax shall be ascertained by dividing the tax that would be payable under the Second Schedule upon a taxable income from property equal to his average income, by that average income.\n\nFIFTH SCHEDULE.\n\nRate of Tax by reference to a Notional Income.\n\n(a) For every pound of the actual taxable income from personal exertion of a taxpayer deriving a notional income, as specified by sub-section (1.) of section eighty-six of the Income Tax Assessment Act 1936–1937 the rate of tax shell be the amount obtained by dividing the tax that would be payable under the First Schedule upon a taxable income from personal exertion equal to his notional income, by that notional income.\n\n(b) For every pound of the actual taxable income from property of a taxpayer deriving a notional income, as specified by sub-section (1.) of section eighty-six of the Income Tax Assessment Act 1936–1937, the rate of tax shall be the amount obtained by dividing the tax that would be payable under the Second Schedule upon a taxable income from property equal to his notional income, by that notional income.\n\nSIXTH SCHEDULE.\n\nRates of Tax Payable by a Trustee.\n\nFor every pound of the taxable income in respect of which a trustee is liable, pursuant to either section ninety-eight or section ninety-nine of the Income Tax Assessment Act 1936–1937, to be assessed and to pay tax, the rate of tax shall be the rate which would be payable under the First, Second, Third, Fourth or Fifth Schedules, as the case requires, if one individual were liable to be assessed and to pay tax on that taxable income.\n\nSEVENTH 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 One shilling.\n\n(b) For every pound of interest in respect of which a company is liable, pursuant to sub-section (1.) of section one hundred and twenty-five of the Income Tax Assessment Act 1936–1937 to pay income tax, the rate of tax shall be One shilling.","sortOrder":0}],"analysis":{"issue_detection":{"absurdities":[{"type":"impossible_compliance","section":"Section 4(6)","severity":"high","reasoning":"Sub-section 4(6) imposes a minimum tax of Ten shillings where the tax 'which a person would, apart from this sub-section, be liable to pay is less than Ten shillings.' However, the First, Second, Fourth and Fifth Schedules as reproduced contain no actual rate figures — the formula cells are blank. With no calculable rate, every taxpayer's liability prior to applying s4(6) is effectively indeterminate or zero, meaning s4(6) would universally apply. This renders the elaborate multi-schedule rate structure in ss(1)–(5) meaningless, as the minimum floor does all the work.","confidence":0.85,"description":"The minimum tax floor of Ten shillings overrides the rates set in sub-sections (1)–(5), but those sub-sections contain no actual rate values in the First through Fifth Schedules — the rate cells in the Schedules are blank. A taxpayer whose calculated liability is zero (because no rate is specified) would still be forced to pay Ten shillings, meaning the minimum floor effectively operates as the only operative rate for most taxpayers."},{"type":"impossible_compliance","section":"First Schedule","severity":"high","reasoning":"Section 3 states that 'income tax is imposed at the rates declared in this Act.' Section 4(1) directs that rates shall be 'as set out in the First Schedule.' The First Schedule table has two rows describing income brackets but the corresponding rate column is blank for the sub-£6,900 bracket and for the sub-£6,900 portion of the over-£6,900 bracket. Only the excess-over-£6,900 rate (68.85 pence) is stated. Without a rate for the base bracket, the tax cannot be computed for the overwhelming majority of taxpayers, and every cross-referencing Schedule (Third, Fourth, Fifth, Sixth) is equally broken.","confidence":0.95,"description":"The First Schedule purports to set rates of income tax for taxable incomes not exceeding £6,900 and exceeding £6,900, but the rate formula cells for both brackets are entirely blank. No rate is actually declared for any income level below £6,900, making it impossible to calculate any tax liability under s4(1) or any Schedule that cross-references the First Schedule (Third, Fourth, Fifth, Sixth)."},{"type":"impossible_compliance","section":"Second Schedule","severity":"high","reasoning":"Four of five rate entries in the Second Schedule table are blank. A taxpayer with property income in any bracket below £3,700 faces a literally incalculable tax bill. The Third, Fourth, Fifth and Sixth Schedules all cross-reference the Second Schedule, propagating this defect throughout the entire rate structure.","confidence":0.95,"description":"Similarly to the First Schedule, the Second Schedule sets out four income brackets for property income but provides actual rate figures for only one — the excess over £3,700 rate of 81 pence. The rate cells for incomes not exceeding £500, £500–£1,500, £1,500–£3,700, and the up-to-£3,700 portion of the top bracket are all blank, making it impossible to calculate tax under s4(2) or any Schedule cross-referencing the Second Schedule."},{"type":"impossible_compliance","section":"Third Schedule","severity":"high","reasoning":"The Third Schedule is entirely derivative — it operates only by reference to computed outputs from the First and Second Schedules. Since those Schedules are missing their rate data, the Third Schedule's formula cannot yield any meaningful result. Every taxpayer with mixed income sources faces an incalculable liability.","confidence":0.9,"description":"The Third Schedule calculates blended rates by dividing the tax that 'would be payable under the First Schedule' (personal exertion component) and the tax 'that would be payable under the Second Schedule' (property component) by total taxable income. Because the First and Second Schedules contain no operative rates, this formula produces a division-by-zero-equivalent result: 0/T or an indeterminate numerator divided by T. The Schedule is therefore wholly inoperable."},{"type":"other","section":"Fifth Schedule","severity":"low","reasoning":"Paragraph (a) of the Fifth Schedule reads 'the rate of tax shell be the amount obtained by dividing…' This is plainly a typographical substitution of 'shell' for 'shall.' While courts would likely read this as 'shall,' it is a defect in the enacted text and could technically be argued as a failure to validly impose a rate.","confidence":0.98,"description":"The Fifth Schedule contains a typographical error ('the rate of tax shell be') which, while not a logical absurdity, renders the provision ambiguous as a matter of legal drafting — 'shell' has no operative legal meaning and is not a defined term."},{"type":"self_contradicting","section":"Section 4(6)","severity":"medium","reasoning":"Section 3 authorises imposition of tax 'at the rates declared in this Act.' Section 4(6) imposes a fixed quantum (Ten shillings) rather than a rate per pound of taxable income, which is the structure used throughout every other sub-section and Schedule. A fixed floor amount is not a 'rate' in the conventional sense, creating a possible argument that it exceeds the authority granted by s3.","confidence":0.75,"description":"The minimum tax floor of Ten shillings is expressed as an absolute amount, not a rate — yet s4(6) is located within a section titled 'Rates of income tax.' Section 3 states that 'income tax is imposed at the rates declared in this Act,' implying only rate-based impositions are authorised. A flat minimum amount is not a 'rate,' raising a question as to whether Parliament validly imposed it under the charging mechanism established by s3."},{"type":"retroactive_impossibility","section":"Section 5(2)","severity":"medium","reasoning":"The operative period of s5(2) is defined by reference to an event — the passing of a future Act — that had not yet occurred when this Act was assented to. Taxpayers and administrators cannot know with certainty at any given moment whether this Act still applies to subsequent-year assessments, because that depends on whether the 1938 Act has been passed. This creates a window of uncertainty and potential double-application or lacuna depending on timing.","confidence":0.8,"description":"Section 5(2) applies this Act to assessments for financial years subsequent to 1937–38 '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-eight.' This creates a retroactive impossibility: assessments for future financial years (post-1937) are made subject to this Act, but only until the next year's Act is passed — meaning the precise scope of this Act's application cannot be known until that future Act exists."},{"type":"other","section":"Seventh Schedule, paragraph (a)","severity":"low","reasoning":"The Sixth Schedule deals exclusively with trustee assessments. A company is not a trustee in the ordinary sense. The 'subject to the last preceding Schedule' caveat in the Seventh Schedule appears to have no practical operation and creates confusion about whether there is some scenario in which a company's rate would be determined by the Sixth Schedule rather than the Seventh.","confidence":0.7,"description":"The Seventh Schedule (a) states it is '[s]ubject to the last preceding Schedule,' i.e., the Sixth Schedule (trustee rates). However, s4(8) states that company rates are set out in the Seventh Schedule '[s]ubject to sub-section (7),' which concerns trustee rates. The Seventh Schedule's self-described subordination to the Sixth Schedule is therefore consistent with s4(8), but the Sixth Schedule contains no provision that actually overrides or varies company tax — it applies only to trustees assessed under ss98 or 99 of the Assessment Act. The 'subject to' qualification in the Seventh Schedule is therefore either superfluous or misleading."}],"contradictions":[{"severity":"medium","section_a":"Section 3","section_b":"Section 4(6)","confidence":0.75,"description":"Section 3 provides that income tax is imposed 'at the rates declared in this Act,' establishing that the charging mechanism is exclusively rate-based. Section 4(6) imposes a fixed minimum quantum of Ten shillings — not a rate — overriding the rate-based calculation where it would yield a lesser amount. A fixed monetary floor is not a 'rate' per pound of taxable income and arguably contradicts the rate-only charging authority established by s3."},{"severity":"low","section_a":"Section 4(7)","section_b":"Section 4(8) and Seventh Schedule (a)","confidence":0.7,"description":"Section 4(7) says trustee rates 'shall be as set out in the Sixth Schedule.' Section 4(8) says company rates shall be as set out in the Seventh Schedule 'subject to sub-section (7).' The Seventh Schedule (a) then describes itself as 'subject to the last preceding Schedule' (the Sixth). This creates a circular dependency: the Seventh Schedule defers to the Sixth, the Sixth applies to trustees, and s4(8) defers to s4(7) for trustees — but companies are not trustees. The result is that s4(8)'s 'subject to' qualification and the Seventh Schedule's identical qualification have no discernible operative content, yet together they imply an overriding scenario that never actually arises, potentially misleading readers into thinking the company rate can be displaced."},{"severity":"high","section_a":"Section 4(1)–(5) and First–Fifth Schedules","section_b":"Section 4(6)","confidence":0.85,"description":"Sub-sections 4(1)–(5) establish that tax rates are set out in the Schedules, implying those Schedules alone determine liability. Sub-section 4(6) then states that 'notwithstanding anything contained in the last five preceding sub-sections,' if the resulting tax is less than Ten shillings, the tax payable is Ten shillings. Because the First and Second Schedules contain no operative rate figures (the cells are blank), the calculated tax under ss(1)–(5) is effectively zero or indeterminate for all taxpayers — meaning s4(6) universally overrides ss(1)–(5) and becomes the sole operative charging provision, directly contradicting the intent of ss(1)–(5) to impose graduated rates."},{"severity":"high","section_a":"First Schedule (sub-£6,900 rate: blank)","section_b":"First Schedule (over-£6,900 excess rate: 68.85 pence)","confidence":0.95,"description":"The First Schedule provides a specific rate of 68.85 pence per pound for income exceeding £6,900, but provides no rate for income up to £6,900 (including the up-to-£6,900 portion of higher incomes). This means the marginal rate for the first £6,900 is unknown, making it impossible to calculate the total tax on any income over £6,900 — you cannot add 68.85 pence on the excess to an unknown base amount. The internal arithmetic of the Schedule is self-defeating."}]},"summary":{"complexity_score":4,"scope_assessment":{"changed":false,"description":"This Act does exactly what its title and preamble promise — it imposes income tax by declaring rates for the 1937–38 financial year. It has not grown beyond its original purpose. It is a standalone annual rates Act, a common legislative pattern of the era where the assessment machinery and the rate-setting were kept in separate statutes. All seven schedules are directly and exclusively concerned with setting tax rates for income, consistent with the Act's stated object."},"complexity_factors":["Short Act (5 operative sections) with substantive detail delegated across seven schedules, requiring readers to cross-reference between them","Heavy reliance on an external statute — the Income Tax Assessment Act 1936–1937 — for all definitions and assessment machinery, making the Act impossible to fully understand in isolation","Multiple conditional rate-setting mechanisms (averaging via 'average income' in Schedule 4 and 'notional income' in Schedule 5) that require understanding of specific provisions in the Assessment Act (Division 16 of Part III and s.86)","Seven distinct tax schedules each with their own logic and income brackets, some involving formula-based rate calculations rather than simple flat figures","Rate tables appear to be partially illegible/missing formula values in Schedules 1 and 2 (likely due to document formatting loss), adding interpretive difficulty","Minimum tax floor rule in s.4(6) operates as an override on all preceding sub-sections, requiring readers to check it against every other rate calculation","Pre-decimal currency (pounds, shillings, pence) adds a layer of mental translation for modern readers","Interaction between Schedules 6 and 7 (trustee rates cross-referencing Schedules 1–5; Schedule 7 explicitly made 'subject to' Schedule 6) creates a dependency chain"],"plain_english_summary":"## Income Tax Act 1937 — Plain English Summary\n\nThis is one of Australia's earliest federal income tax laws. In short, it does one job: **it sets the tax rates that Australians and companies must pay on their income for the 1937–38 financial year** (and any gap period before the next year's tax act kicks in).\n\n---\n\n### What does it actually do?\n\nThe Act itself is short — the heavy lifting on *how* income is calculated and assessed is done separately by the **Income Tax Assessment Act 1936–1937** (think of that as the rulebook; this Act is the price list). These two laws are designed to be read together as one.\n\nThe Act sets out **seven different rate schedules** (tables), covering different types of taxpayers and income:\n\n- **Schedule 1 — Personal exertion income** (e.g. wages, salary, fees for work): A sliding scale applies. Once your income exceeds £6,900, every pound above that is taxed at a flat rate of 68.85 pence in the pound (roughly 29%).\n- **Schedule 2 — Property income** (e.g. rent, dividends, investments): Four income brackets apply, with the top rate of 81 pence in the pound (roughly 34%) kicking in above £3,700 — notably higher than the rate on earned income, and at a much lower threshold.\n- **Schedule 3 — Mixed income** (earned *and* investment): A blended rate is calculated by working out what you'd pay under each of the first two schedules separately, then applying those rates proportionally.\n- **Schedule 4 — Averaging (irregular income)**: For taxpayers whose income fluctuates significantly year to year (covered by a special provision in the Assessment Act), the tax rate is worked out by reference to their *average* income over time — so a bumper year doesn't unfairly spike their tax.\n- **Schedule 5 — Notional income**: A similar averaging concept for taxpayers with a calculated \"notional\" (theoretical) income under a specific provision of the Assessment Act — the rate is based on that notional figure, not their actual income.\n- **Schedule 6 — Trustees**: A trustee (someone managing assets on behalf of others) is taxed as if they were a single individual, using whichever of the first five schedules applies.\n- **Schedule 7 — Companies**: A flat rate of **one shilling per pound** (5%) applies to all company taxable income, including certain interest payments.\n\n---\n\n### A notable minimum tax rule\nIf a person's tax bill would come to **less than ten shillings**, they must still pay a minimum of **ten shillings**. No one gets away for free.\n\n---\n\n### Who does this affect?\n- **Individual workers and earners** (via Schedules 1–5)\n- **Investors and property owners** (via Schedule 2)\n- **Trustees** managing estates or trusts (Schedule 6)\n- **Companies** operating in Australia (Schedule 7)\n\n---\n\n### Why does it matter?\nThis Act is a historical cornerstone of Australia's federal tax system. It reflects a deliberate policy choice of the era: **property income was taxed at higher rates than income from work**, and at lower income thresholds — the opposite of modern instincts. It also shows that averaging mechanisms to protect people with irregular incomes were built into the system from very early on."}},"importantCases":[],"_links":{"self":"/api/acts/income-tax-act-1937","history":"/api/acts/income-tax-act-1937/history","analysis":"/api/acts/income-tax-act-1937/analysis","conflicts":"/api/acts/income-tax-act-1937/conflicts","importantCases":"/api/acts/income-tax-act-1937/important-cases","documents":"/api/acts/income-tax-act-1937/documents"}}