The Bank Notes Tax Act 1910 was an Act of the Parliament of Australia which imposed a prohibitive tax on banknotes issued by banks in Australia. The Act was enacted in October 1910 by the Fisher Labour Government under Section 51 (xii) of the Constitution of Australia that gives the Commonwealth Parliament the power to legislate with respect to “currency, coinage, and legal tender” and the taxing power.
The Act imposed an annual tax of 10% on "all bank notes issued or re-issued by any bank in the Commonwealth after the commencement of this Act and not redeemed." Thé tax commenced in March 1911.
In September 1910, the federal government had passed the Australian Notes Act 1910 which introduced an Australian national currency, the Australian pound, and, as part of the scheme, the objective of the Bank Notes Tax Act was to end the use of private currency in Australia, which it had achieved. The Bank Notes Tax Act was repealed by the Commonwealth Bank Act 1945, enacted by the Chifley Labor Government, which instead imposed a fine for issuing a private currency. S.44(1) of the Reserve Bank Act 1959 now prohibits private and state currencies.
|Bank Notes Tax Act 1910|
Private currency issued by the City Bank of Sydney c. 1900
|Parliament of Australia|
|Date assented to||10 October 1910|
|Date repealed||21 August 1945|
The Australian Notes Act 1910 was an Act of the Parliament of Australia which introduced an Australian national currency, the Australian pound. The Act was enacted on 16 September 1910 by the Fisher Labour Government under Section 51 (xii) of the Constitution of Australia that gives the Commonwealth Parliament the power to legislate with respect to “currency, coinage, and legal tender.”
The Act gave control over the issue of Australian notes to the Commonwealth Treasury and prohibited the circulation of state notes and withdrew their status as legal tender. The Bank Notes Tax Act 1910, enacted in October of that year imposed a prohibitive tax on banknotes issued by banks in Australia by imposing an annual tax of 10% on "all bank notes issued or re-issued by any bank in the Commonwealth after the commencement of this Act and not redeemed," which effectively ended the use of private currency in Australia.
For the next three years, some of the earlier private banknotes were overprinted by the Treasury as a temporary measure and circulated as Australian banknotes until new designs were ready for Australia's first federal government-issued banknotes, which commenced in 1913. Blank note forms of 16 banks were supplied to the Australian Government in 1911 to be overprinted as redeemable in gold and issued as the first Commonwealth notes.
The Australian Notes Act 1910 was repealed on 14 December 1920 by the Commonwealth Bank Act 1920, which gave note issuing authority to the Commonwealth Bank. In 1960, responsibility for note printing passed to the Reserve Bank of Australia (RBA). The RBA has been producing Australia's polymer banknotes since 1988. Its note printing branch was corporatised in July 1998, as Note Printing Australia, which is a now a wholly owned subsidiary of the RBA.
S.44(1) of the Reserve Bank Act 1959 now prohibits private and state currencies. The section prohibits any person or a State from issuing "a bill or note for the payment of money payable to bearer on demand and intended for circulation." In 1976, Wickrema Weerasooria published an article which suggested that the issuing of bank cheques violated s.44(1), to which some banks responded that bank cheques were printed with the words "not negotiable" on them, marking them as not intended for circulation and thus did not violate the statute.Australian Taxation Office
The Australian Taxation Office (ATO) is an Australian government statutory agency and the principal revenue collection body for the Australian government. The ATO has responsibility for administering the Australian federal taxation system, superannuation legislation, and other associated matters. Responsibility for the operations of the ATO are within the portfolio of the federal Treasurer.
As the Australian government's principal revenue collection body, the ATO collects income tax, goods and services tax (GST) and other federal taxes. The ATO also has responsibility for managing the Australian Business Register, delivering the Higher Education Loan Program, delivering many Australian government payments and administering key components of Australia's superannuation system.Australian dollar
The Australian dollar (sign: $; code: AUD) is the currency of Australia (including its external territories Christmas Island, Cocos (Keeling) Islands, and Norfolk Island), and of three independent Pacific Island states, specifically Kiribati, Nauru, and Tuvalu. It was introduced on 14 February 1966 when the pre-decimal Australian pound, with subunits of shillings and pence, was replaced by the new decimal currency, the Australian dollar.
Within Australia, it is almost always abbreviated with the dollar sign ($), with A$ or AU$ sometimes used to distinguish it from other dollar-denominated currencies. It is subdivided into 100 cents.
In 2016, the Australian dollar was the fifth most traded currency in world foreign exchange markets, accounting for 6.9% of the world's daily share (down from 8.6% in 2013) behind the United States dollar, the European Union's euro, the Japanese yen and the United Kingdom's pound sterling. The Australian dollar is popular with currency traders, because of the comparatively high interest rates in Australia, the relative freedom of the foreign exchange market from government intervention, the general stability of Australia's economy and political system, and the prevailing view that the Australian dollar offers diversification benefits in a portfolio containing the major world currencies, especially because of its greater exposure to Asian economies and the commodities cycle.The Australian dollar was legal tender of Papua New Guinea until 1 January 1976, when the Papua New Guinean kina became the sole legal tender there.Banking in Australia
Banking in Australia is dominated by four major banks: Commonwealth Bank of Australia, Westpac Banking Corporation, Australia and New Zealand Banking Group, and National Australia Bank. There are several smaller banks with a presence throughout the country, and a large number of other financial institutions, such as credit unions, building societies and mutual banks, which provide limited banking-type services and are described as authorised deposit-taking Institutions. Many large foreign banks have a presence, but few have a retail banking presence. The central bank is the Reserve Bank of Australia (RBA). Since 2008 the Australian government has guaranteed deposits up to $250,000 per customer per institution against banking failure.Banks require a bank licence under the Banking Act 1959. Foreign banks require a licence to operate through a branch in Australia, and Australian-incorporated foreign bank subsidiaries. Complying Religious Charitable Development Funds (RCDFs) are exempt from the licence requirement.Australia has a sophisticated, competitive and profitable financial sector and a strong regulatory system. For the 10 years ended mid-2013, the Commonwealth Bank was ranked first in Bloomberg Riskless Return Ranking a risk-adjusted 18%. Westpac Bank was in fourth place with 11% and ANZ Bank was in seventh place with 8.7%. The four major banks are among the world’s largest banks by market capitalisation and all rank in the top 25 globally for safest banks. They are also some of the most profitable in the world. Australia’s financial services sector is the largest contributor to the national economy, contributing around $140 billion to GDP a year. It is a major driver of economic growth and employs 450,000 people.Banknotes of the Australian pound
Banknotes of the Australian pound were first issued by numerous private banks in Australia, starting with the Bank of New South Wales in 1817. Acceptance of private bank notes was not made compulsory by legal tender laws but they were widely used and accepted. The Queensland government issued treasury notes (1866–1869) and banknotes (1893–1910), which were legal tender in Queensland. The New South Wales government issued a limited series of Treasury Notes in 1893.In 1910, the Commonwealth passed the Australian Notes Act of 1910 to initiate banking and currency reform. The Act stipulated that six months after the date of passage (16 September 1910), private banks could no longer issue any form of money, and that any note or instrument issued by a State Bank would no longer be considered legal tender. The Act further established the powers of the Commonwealth to issue, re-issue, and cancel Australian notes. The Act also established denominations, legal tender status, and the amount of gold coin held in reserve to secure the issues. On 10 October 1910 (prior to the effective date of the Notes Act), a Bank Notes Tax Act 1910 imposed a "Ten pounds per centum" tax on all issued or re-issued bank notes. A third currency reform act was passed on 22 December 1911 establishing the Commonwealth Bank. The Commonwealth Bank Act of 1911 specifically stated that the Bank was not to issue bills or notes for circulation. The Australian Treasury issued banknotes until a 1920 amendment to the Commonwealth Bank Act of 1911. The amendment established a note-issuing department within the bank which assumed those responsibilities previously held by the Treasury.On 14 February 1966 the Australian pound was replaced by a decimal currency, the Australian dollar, which was divided into one hundred cents.Legal tender
Legal tender is a medium of payment recognized by a legal system to be valid for meeting a financial obligation. Paper currency and coins are common forms of legal tender in many countries. Legal tender is variously defined in different jurisdictions. Formally, it is anything which when offered in payment extinguishes the debt. Thus, personal cheques, credit cards, and similar non-cash methods of payment are not usually legal tender. The law does not relieve the debt obligation until payment is tendered. Coins and banknotes are usually defined as legal tender. Some jurisdictions may forbid or restrict payment made other than by legal tender. For example, such a law might outlaw the use of foreign coins and bank notes or require a license to perform financial transactions in a foreign currency.
Generally, designation of a particular form of money as legal tender means "that the designated money is valid payment for all debts unless there is a specific agreement to the contrary". In some jurisdictions legal tender can be refused as payment if no debt exists prior to the time of payment (where the obligation to pay may arise at the same time as the offer of payment). For example, vending machines and transport staff do not have to accept the largest denomination of banknote. Shopkeepers may reject large banknotes: this is covered by the legal concept known as invitation to treat.The right, in many jurisdictions, of a trader to refuse to do business with any person, means a purchaser may not insist on making a purchase and so declaring a legal tender in law, as anything other than an offered payment for debts already incurred would not be effective.
Under U.S. federal law, cash in U.S. dollars is a valid and legal offer of payment for antecedent debts when tendered to a creditor. By contrast, federal statutes do not require that someone who is not a pre-existing creditor must accept currency or coins as payment for goods or services. Private businesses may formulate their own policies on whether to accept cash unless state law requires otherwise.List of Acts of the Parliament of Australia
This is an incomplete list of Acts of the Parliament of Australia.Private currency
A private currency is a currency issued by a private entity, be it an individual, a commercial business, a nonprofit or decentralized common enterprise. It is often contrasted with fiat currency issued by governments or central banks. In many countries, the issuance of private paper currencies and/or the minting of metal coins intended to be used as currency may even be a criminal act such as in the United States (18 U.S. Code § 486). Digital cryptocurrency is sometimes treated differently; for example, this is legal in the United States but illegal in a few countries (mainly in West Asia and North Africa).
Today, there are over four thousand privately issued currencies in more than 35 countries. These include commercial trade exchanges that use barter credits as units of exchange, private gold and silver exchanges, local paper money, computerized systems of credits and debits, and digital currencies in circulation, such as digital gold currency.Reserve Bank of Australia
The Reserve Bank of Australia (RBA) is the country's central bank and banknote issuing authority. It has had that role since 14 January 1960, when the Reserve Bank Act 1959 removed the central banking functions from the Commonwealth Bank.The bank has the responsibility of providing services to the Government of Australia in addition to also providing services to other central banks and official institutions. It currently consists of the Payments System Board, which governs the payments system policy of the bank, and the Reserve Bank Board, which governs all other monetary and banking policies of the bank.Both boards consist of members of both the bank, the Treasury, other Australian government agencies, and leaders of other institutions that are part of the economy. The structure of the Reserve Bank Board has remained consistent ever since 1951, with the exception of the change in the number of members of the board. The governor of the Reserve Bank of Australia is appointed by the Treasurer and chairs both the Payment Systems and Reserve Bank Boards and when there are disagreements between both boards, the governor resolves them.From the middle of the 19th century into the 1890s, the prospects of a national bank forming grew. In 1911, the Commonwealth Bank was established, but did not have the authority to print notes, which was a power that was still reserved to the Treasury. A movement toward reestablishing the gold standard occurred after World War I, with John Garvan leading various boards in contracting the money supply on the route to doing so, and the gold standard was instituted for both the British pound sterling and the Australian pound in 1925.During the Great Depression, the Australian pound became devalued, no longer worth the same as the pound sterling, and formally departed from the gold standard with the Commonwealth Bank Act of 1932. Legislation in 1945 led to regulation of private banks which H.C. Coombs was opposed to, and when he became governor in 1949, he gave them more overall control over their institutions. When the monetary authorities implemented the advice of Coombs to have a flexible interest rate, it allowed the bank to rely more on open market operations. In 1980 the issue of short-term government bonds – Treasury notes of 13 and 26 weeks duration – changed from a tap system, in which the price was set, to a tender system in which the volume of stock was set and the price determined by the market. Soon afterwards the tender system was extended to the issue of longer-term government bonds.
The float of the Australian dollar happened in 1983, around the same period of time that the financial system in Australia was deregulated. Administration of the banks was transferred in 1998 from the bank to the Australian Prudential Regulation Authority and the Payments System Board was created, while the bank was given power within the board in the same year. The current governor of the Reserve Bank is Philip Lowe, who succeeded Glenn Stevens as governor on 18 September 2016.Section 51(xii) of the Constitution of Australia
Section 51 (xii) is a subsection of Section 51 of the Constitution of Australia that gives the Commonwealth Parliament the right to legislate with respect to “currency, coinage, and legal tender.”
Generally, powers in section 51 of the Constitution of Australia can also be legislated on by the states, although Commonwealth law will prevail in cases of inconsistency. However, the currency power must be read in conjunction with other parts of the Constitution of Australia. Section 115 of the Constitution establishes “a state shall not coin money, nor make anything but gold or silver coin a legal tender in the payment of debts”. This section effectively makes the concurrent power in section 51(xii) exclusive to the Commonwealth.
Despite this, coins of the Australian pound were not introduced until 1910, when the Australian Notes Act 1910 was enacted. From 1901 to 1910 the states could not issue tender and the Commonwealth had not issued tender, so private currency was used as the common medium of exchange whilst the British pound sterling was the national unit of account.Taxation in Australia
Income taxes are the most significant form of taxation in Australia, and collected by the federal government through the Australian Taxation Office. Australian GST revenue is collected by the Federal government, and then paid to the states under a distribution formula determined by the Commonwealth Grants Commission.
Australia maintains a relatively low tax burden in comparison with other wealthy, developed nations, at 27.8% of GDP in 2018.