Income Tax Act 1935

Key Features

• 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.
• 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.
• 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.
• 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).
• 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).
• Mixed income: If your income comes from both work and property, a blended rate is calculated proportionally across both sources.

Why It Matters

This 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 While long superseded, it established structural principles (progressive rates, entity-specific rules, integration with an assessment Act) that echoed through Australian tax law for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.