§ Sir J. BUTCHERasked the Chancellor of the Exchequer whether Income Tax at the rate of 6s. in the £ is deducted from the dividends on the railway superannuation funds out of which pensions are paid to superannuated railway servants; and whether the whole or some part of this Income Tax is repaid to the fund?
§ Mr. BALDWINThe income from the investments of a superannuation fund is liable to Income Tax at the standard rate of 6s. in the £, like any other income of this nature. On payment of pensions, however, tax is deductible at a like rate and is therefore not borne by the superannuation fund to the extent that the pensions are paid out of the investment income of the fund. Where Income Tax is deducted from a pension at the standard rate of 6s. in the £ the pensioner can of course claim any repayment of tax to which he may be entitled by reference to the amount of his total income. In order to save separate claims for repayment by individual pensioners, the Inland Revenue Department has made an arrangement with many pension funds, under which tax is deducted from the pensions only to the extent of the pensioner's net liability. The Department subsequently repays or allows to the fund an amount representing the difference between the tax at the full rate on the amount distributed in pensions and 1539W the aggregate liability of the pensioners in respect of their pensions. I may add that the question of the liability of superannuation funds to Income Tax has been one of the matters which have been engaging the attention of the Royal Commission on the Income Tax, whose Report will, it is anticipated, be shortly available.