This Act has been repealed and is no longer in force. It is retained for historical reference.
Jurisdiction
Commonwealth
Act Number
18 of 1937
Collection
act
Plain English Summary
4/10 complexity
Income Tax Act 1937 — Plain English Summary
This 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).
What does it actually do?
The 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.
The Act sets out seven different rate schedules (tables), covering different types of taxpayers and income:
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%).
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.
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.
Sourced from the Federal Register of Legislation (legislation.gov.au), CC BY 4.0.
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.
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.
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.
Schedule 7 — Companies: A flat rate of one shilling per pound (5%) applies to all company taxable income, including certain interest payments.
A notable minimum tax rule
If 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.
Who does this affect?
Individual workers and earners (via Schedules 1–5)
Investors and property owners (via Schedule 2)
Trustees managing estates or trusts (Schedule 6)
Companies operating in Australia (Schedule 7)
Why does it matter?
This 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.