House of Representatives
10 October 1922

8th Parliament · 2nd Session



Mr. Speaker (Hon. Sir Elliot Johnson) took the chair at 11 a.m., and read prayers.

page 3439

HOUR OF MEETING

Motion (by Mr. Hughes) agreed to -

Thatthe House, at its rising, adjourn until 11 o’clock a.m. to-morrow.

page 3439

QUESTION

SUGAR BALANCE-SHEETS

Mr CHARLTON:
HUNTER, NEW SOUTH WALES

– The Minister for Trade and Customs promised, when we were discussing the sugar question, that he would present to the House separate annual balance-sheets for a period of seven years.Will he be able to do so before the end of the Session?

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– The honorable member has forestalled me by a day or so. The balance-sheets will be presented before the House is prorogued.

page 3439

QUESTION

SANDY BAY RIFLE RANGE

Mr LAIRD SMITH:
DENISON, TASMANIA

– A little time ago I submitted to the Minister for Defence some papers relating to the sale of the rifle range at Sandy Bay, Hobart. Has the honorable gentleman any statement to make on the matter ?

Mr GREENE:
RICHMOND, NEW SOUTH WALES · LP; NAT from 1917

– An officer is to go to Tasmania specially to look into and report on the whole matter.

page 3439

QUESTION

MEAT INDUSTRY

Mr HIGGS:
CAPRICORNIA, QUEENSLAND

– Has the Minister for Trade and Customs seen the report of a method of raking a levy for the purposes of. an organizationto assist the meat industry?

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– I have read in the press a statement on the subject, emanating from Sydney, though I do not know exactly from what source. The method of financing the proposed organization of the Australian meat industry has not yet been definitely determined. It will be for the Australian Meat Council, when formed, to determine its own method of raising funds. That will be the business of the Council alone. The Government will not interfere in the matter.

page 3440

QUESTION

PAN-PACIFIC CONFERENCE

Mr FENTON:
MARIBYRNONG, VICTORIA

– I understand that Canada, Siberia, China, Japan, the French Pacific Colonies, Australia, New Zealand, Java, and the Dutch East Indies have accepted invitations to attend a Pan-Pacific Conference, which is to meet in Honolulu on the 25th of this month, and I, therefore, ask the Prime Minister what is the nature of the Conference, and who will be Australia’s representative there?

Mr HUGHES:
Prime Minister · BENDIGO, VICTORIA · NAT

– I know nothing about the Conference, but I shall make inquiries regarding it.

page 3440

QUESTION

COMMONWEALTH PUBLIC SERVICE

Mr MACKAY:
LILLEY, QUEENSLAND

– HastheMinister for Defence seen the figures published in the Age which contrast the growth of the Commonwealth Public Service with that of the Public Service of Great Britain?

Mr GREENE:
RICHMOND, NEW SOUTH WALES · LP; NAT from 1917

– Yes. So far as my Department is concerned, they grossly and deliberately misrepresent the facts, and I think that remark is true of the whole comparison. In comparing the Defence expenditure of the two countries, the figures given for Great Britain include only the central administrations of the Admiralty, the War Office, and the Air Ministry, while those given for Australia include every employee of the Defence Department, even the workpeople in the Small Arms Ammunition Factory, the Small Arms Factory, the Harness Factory, the Clothing Factory, and the Woollen Factory.

Mr Laird Smith:

– Even to the charwomen.

Mr GREENE:
RICHMOND, NEW SOUTH WALES · LP; NAT from 1917

– Every person under the control of the Department. They take in all the men on our vessels, including the whole of our Naval and Military Forces - every sailor, soldier, and airman that we possess, even the Naval Citizen Forces to the number of 2,507, are included.. According to the Age, the Commonwealth Defence Department contains 34,000 employees, and that of Great Britain only 145,000. But had a fair comparison been made, like being compared with like, Australia would have been shown to have in her Defence Department only 9,784 per sons, and Great Britain 392,978. In this latter comparison I leave out the employees in our factories, because I have no means of ascertaining how many are employed in the dockyards, arsenals, and other similar establishments in Great Britain, but which must number many thousands. The comparison in the Age is a gross and wilful misrepresentation of the facts.

page 3440

QUESTION

IMMIGRATION

Alleged Supportof Prime Minister for Westralian Scheme

Mr ATKINSON:
WILMOT, TASMANIA

– Is the Prime Minister aware that it has been reported that a Mr. Manning states that Mr. Hughes is backing a scheme to place 10,000 English families in the north-west ofWestern Australia in order that they may supply cheap meat and fruit to Great Britain? Is there any truth in the statement ? Can the Prime Minister give the House any information on the matter?

Mr HUGHES:
NAT

– I can. It is exactly the same scheme that was presented to me for. the first time last night about 11 o’clock. I denied the statement then; I now deny it again, and I will, if necessary, deny it before the cock crows, a third time.

page 3440

QUESTION

NEW ZEALAND TARIFF RECIPROCITY

Mr BOWDEN:
NEPEAN, NEW SOUTH WALES

-Has the Minister for Trade and Customs come to a final arrangement in connexion with Tariff reciprocity with New Zealand?

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– A few remaining items, which might be termed bargaining items, in connexion with the New Zealand Tariff, have been the subject of cables between the New Zealand Minister and the Commonwealth Minister for Trade and Customs. I regret to say that we have not been able to reach a conclusion. If we were prepared to make a concession, which I consider unreasonable at this juncture, we might conclude the matter at once. I shall probably have to ask the House before we rise to give authority to conclude the negotiations, and, if necessary, for legislationto give effect to what is proposed. At this juncture I feel that the matter can only be concluded by our yielding something which I am not at present prepared to consent to.

page 3441

PARLIAMENTARY ALLOWANCE BILL

Mr ROBERT COOK:
INDI, VICTORIA · VFU; CP from 1920

– Seeing that Parliament is about to rise, and that the session has only a few more days to run, is it the intention of the Prime Minister to bring down a Bill for the reduction of the salaries of members of this Parliament as promised in the GovernorGeneral’sSpeech ?

Mr HUGHES:
NAT

– I will bring it down, and I shall look with confidence for the support that, one can see,is eagerly straining at the leash in every direction. When does the honorable member suggest that I should bring down the measure? He seems to be ready for it now, and if he pleases I will submit it at once. The measure will be brought down and it will be got through.

Mr WEST:
EAST SYDNEY, NEW SOUTH WALES

– Is it a fact that the Prime Minister attended a banquet in the Melbourne Town Hall last night? If so, didhe take any exception to the remarks of the gentleman who proposed the toast of the Commonwealth Parliament, and, in doing so, stated that the Prime Minister and other members of this Parliament have the itch?

Mr HUGHES:

– I did not go to the Town Hall last night at all. The expression which the gentleman to whom the honorable member refers used, earlier in the day, was cacoethesloquendi.

Mr West:

– I have not that disease.

page 3441

QUESTION

FRUIT INDUSTRY

Mission to Great Britain

Mr.HIGGS. - I understand that the Government have been trying for some time to assist the fruit industry, and I wish to know, from the Minister for Trade and Customs, what are the results of their efforts in that direction. I am informed that it is proposed to appoint a mission to the Old Country in the interests of the industry. Has the mission been appointed; and, if so, who are the members of it?

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– The Government have been giving the closest attention to the question of assisting the fruit industry in every direction. One of these is along the lines the honorable member has indicated, namely, the sending of a mission to the United Kingdom, and the members of the mission have been selected. They are Mr. W. B. Chaffey, Mr. McDougall, and Mr. Meares, of New South Wales. The Commonwealth and State Governments have joined in sending the mission in an effort to acquire a larger share of the trade in the British market, which, of course, is our best market. The Commonwealth Government have undertaken to defray 50 per cent. of the expenditure involved, which has been limited inhe whole to £6,000, and the State Governments will pay the balance between them on a population basis. The mission will leave early next month, and it is hoped that it will secure its objects. As to the other assistance proposed for the industry, in the event of the establishment of a voluntary Pool, the management of which the Commonwealth Government must approve, the Government have offered to guarantee the Commonwealth Bank against, an advance of 75 per cent. of the value of processed fruit. Pinal negotiations on this proposal have not yet been reached, but during the present week further conferences on the matter are to be held.

page 3441

QUESTION

SHIPBUILDING

Lightships for South Australia

Mr MAKIN:
HINDMARSH, SOUTH AUSTRALIA

asked the Prime Minister, upon notice -

  1. Whether the Government have arrived at any decision regarding thebuilding of lightships for the Navigation Department of South Australia?
  2. If not, when will this matter receive consideration ?
  3. If favorable consideration has been afforded the representations of the delegation that waited upon him recently concerning the above matter, when may the calling of tenders be expected?
Mr HUGHES:
NAT

– The matter of building lighthouse steamers for the Commonwealth Light-house Branch in South Australia will be dealt with when a suitable opportunity presents itself, and the representations that have been made on the subject will receive careful consideration.

page 3442

QUESTION

RAILWAY EXTENSION: OODNADATTA TO ALICE SPRINGS

Mr MAKIN:

asked the Prime Minister, upon notice -

What steps does the Government propose to take, and when, to give effect to the proposal to extend the northern system of railway from Oodnadatta to Alice Springs, as recommended by the Parliamentary Public Works Committee ?

Mr HUGHES:
NAT

– This matter comes within the province of my colleague, the Minister for Works and Railways, who, I understand, is prepared to furnish a reply to the question.

Mr RICHARD FOSTER:
Minister for Works and Railways · WAKEFIELD, SOUTH AUSTRALIA · NAT

– The report of the Public Works Committee is still in the hands of the Government Printer - when it comes to hand it will receive consideration.

page 3442

QUESTION

MANDATED TERRITORIES

administration.

Mr MAKIN:

asked the Prime Minister, upon notive -

Whether he will place on the table of the House a report submitted to him by A. W. W Winstone concerning the administration of the Mandated Territories?

Mr HUGHES:
NAT

– No report hasbeen received from Mr. Winstone, but letters of complaint have been received. We cannot interfere with Courts of Justice. I should like to say,supplementingthis official reply, that if the honorable member is interested I shall be pleased to show him the correspondence.

page 3442

INCOME TAX ASSESSMENT BILL

In Committee (Consideration resumed from 9th October, vide page 3390) :

Clause 14 - (1.) The following incomes, revenues and fundsshall be exempt from income tax: -

The revenue of a municipal corpora tion or other local governing body or ofa public authority;

the income of a society registered under a Friendly Societies Act of the Commonwealth or a State and not carried on for the purposes of profit or gain to the individual members thereof ;

the income of a trade union or of an association of employers or employees registered under any Act of the Commonwealth or a State relating to the settlement of industrial disputes;

the income of a religious, scientific, charitable or public educational institution;

the income derived from the bonds, debentures, stock or other securities of the Commonwealth issued for the purpose of Commonwealth War Loans the interest on which is declared by the prospectus to be free from Commonwealth income tax;

the income of a provident, benefit or superannuation fund established for the benefit of the employees in any business or class of business and the income of a fund established by any will or instrument of trust for public charitable purposes if the Commissioner is satisfied, that the particular fund is being applied to the purposes for which it was established;

the salary of the Governor-General and the salaries of the Governors of the States;

the official salaries of foreign consuls and the trade commissioners of any part of the British Dominions;

pensions paid under the Australian Soldiers’ Repatriation Act 1920-

1921;

Mr PROWSE:
Swan

.- I suggest to the Treasurer (Mr. Bruce) that he should add to sub-clause 2 the words, “ or other exempt income.” I make this suggestion in order to facilitate business. I do not wish to discuss the matter, since I think the honorable gentleman recognises the object I have in view.

Mr Watt:

– But the income in this case is specified.

Mr PROWSE:

– Could not other exempt income be included ?

Mr Watt:

– It is included.

Mr Bruce:

– The sub-clause merely deals with such income when it is in the hands of the shareholders.

Mr BOWDEN:
Nepean

– I suggest to the Treasurer (Mr. Bruce) that he might very well add to paragraph j of sub-clause 1 which provides for the exemption of the incomes of certain funds and institutions the words, “ or of any sport or recreation declared by the Minister to be of public benefit.” I make this suggestion to meet the point raised by the honorable member for Parramatta (Mr. Pratten) in regard to the taxation of the incomes of the New South Wales and Victorian Cricket Associations.

Mr Watt:

– Racing might be said to be “ of public benefit.”

Mr BOWDEN:

– But most of the racing clubs make a profit.

Mr Bruce:

– A lot of them do not.

Mr BOWDEN:

– I do not know whether the Treasurercould meet in any other way the object I have in view. The New South Wales and Victorian Cricket Associations are now taxed on any profits made in connexion with matches held under their auspices. When an English Cricket Eleven visits Australia, a certain amount of profit is made, and is spent during years in which there are no international matches. The InterState matches, as a rule, do not pay.

Mr Fenton:

– Surely Inter-State matches such as those between Victoria and New South Wales pay ? I could understand a match between Victoria and say, Tasmania, not paying, but some of the other Inter-State matches ought to yield a profit.

Mr BOWDEN:

– Taking the whole of the Inter-State matches in any one year they seldom pay. They usually result in a loss, and that loss is made good out of the profits derived from the international matches. When these Associations have any surplus funds they distribute them amongst the various clubs to help them in forming or improving their grounds. No profit is distributed amongst shareholders, so that in the circumstances the imposition of income tax simply reduces the amount that could be used in the direction I have mentioned, and is to that extent a limitation of sport. By means of the entertainments tax we get a certain amount of revenue from the Cricket Associations.

Mr WEST:
East Sydney

.- I desire to bring under the notice of the Treasurer. (Mr. Bruce) the position of the Sydney Trades Hall and Literary Institute, which was built and is supported out of the funds raised by the Eight Hours Demonstration Committee. There is no possibility of any dividend being paid by either the Hall or the Library Committee. The Library is for purely reference purposes, and is perhaps one of the best of its kind in Australia, yet income tax has to be paid by the Trades Hall and the Literary Institute. There are thirteen trades halls in Australia, but that in Sydney is the only one which pays income tax. The income tax paid last year amounted to£490. The Taxation Commissioner says that he has no option but to impose the tax in respect of the income of these institutions since the money is handed over to the Trades Hall and Literary Institute Committee by the Eight Hours Demonstration Committee and then goes back to the trustees of the land or the mortgagee. I endeavoured last year to induce the then Treasurer (Sir Joseph Cook) to meet this case, but owing either to his stupidity or my own, or perhaps because of a little dullness on each side, I could not make him understand what I wanted. If the funds of the Cricket Associations are to be exempt, surely those of the Sydney Trades Hall and Library, which are carried on in the public interest, should be treated in the same way. The present debt on the Trades Hall and Literary Institute is between £17,000 and £18,000. The object of the Institute, as the name implies, is a good one. I cannot get the Commissioner to agree to exemption of its income from taxation. He states that there is a provision in the Act that makes payment of the tax compulsory, but he realizes that the position is an anomalous one.

Mr PRATTEN:
Parramatta

. -I desire to give notice of an amendment which I think had better be considered in connexion with clause 23, which relates to deductions. The amendment is to add to the deductions there set out the following new paragraph: -

In the case of an athletic sportingbody or association not carried on for the purpose of profit or gain to the individual members thereof, sums proved to the satisfaction of the

Commissioner (whose decision shall be final) to have been expended for the purpose of promoting improvement or development of the sport.

I think that such an amendment would meet the wishes of the honorable member for Nepean (Mr. Bowden).

Mr Fenton:

– You think it would be better as a deduction than as an exemption ?

Mr PRATTEN:

– Yes. As pointed out by the honorable member for Nepean, such bodies as the cricketing associations of the various States should not have their income regarded as profit, because it is obtained principally in the form of receipts from big cricket matches. It is all used for the furtherance of the game, and the upkeep of the various grounds used for the sport.

Mr Foley:

– Is not all the money raised at football matches devoted to the upkeep of the game?

Mr PRATTEN:

– Professional footballers receive some of the money. Sofar as my knowledge extends, there is no individualwho gets any profit out of the game of cricket. I suggest to the Treasurer that the discussion on my amendment should take place when clause 23 is being considered.

Mr BLUNDELL:
Adelaide

– Will the clause, as it now stands, exempt swimming associations and life saving societies ?

Mr Bruce:

– Not if there is any profit attached.

Mr BLUNDELL:

– The whole of the proceeds from displays held by these bodies is devoted to prizes, medals and certificates. There is no personal gain by any individual members of the organizations. The whole of the money raised by such exhibitions is devoted to the promotion of the art of natation, and the awakening of interest in life-saving methods. Honorable members will realize that the teaching of young people to swim is a most laudable object.

Mr Atkinson:

– Do any of these bodies pay income tax at present?

Mr BLUNDELL:

– I believe so. They are performing a great service to the community, and it is not fair that their income should be taxed. I do not know whether such bodies would be covered by the amendment of which the honorable member for Parramatta has given notice.

Mr Maxwell:

– The same principle is involved .

Mr BLUNDELL:

– Does not the Treasurer think that these bodies should be exempt from taxation?

Mr MAKIN:
Hindmarsh

.- I desire to supplement the representations made by the honorable member for Adelaide. I was very much surprised to hear that the proceeds of exhibitions by swimming and life-saving societies were subject to Federal taxation. In my opinion there is no form of entertainment that is more deserving of favorable consideration at the hands of Parliament. These bodies are rendering a distinct service to the community, and the value of that service has been proved on numerous occasions when the lives of people have been in danger. Every inducement should be offered to young people to acquire the art of natation. I hope that the Treasurer will be able to give an assurance that in future the Government will forgo any taxation with respect to these clubs or societies.

Mr LAIRD SMITH:
Denison

– Does the Treasurer think it practicable to discriminate between cricket and football associations? I cannot see the difference between one and the other, for a purpose of this kind, and I should like to know whether the Minister has consulted his officers on the point.

Mr BELL:
Darwin

.- I support honorable members who ask that clubs who carry on sport for the benefit of sport itself, and do not distribute profits to individuals, shall be exempt from taxation.

Mr Foley:

– Any class of sport?

Mr BELL:

– Yes. I recognise that it is difficult to discriminate between sporting bodies. Some distribute profits to individuals, who areprof essionals, and in other ways for the benefits of members. I see no reason, however, why these profits should be taxed at the source; and this really is the question we were discussing yesterday. If profits are distributed to individuals, why not follow the profits, and taxthe individuals as we do in the case of companies?

Mr Pratten:

– There are no profits qua profits. The money received should properly be called receipts, not profits.

Mr BELL:

– I agree with the honorable member ; and where there are no profits distributed for the benefit of individuals, there is no reason why these pro- fits or receipts should be taxed, especially as already pointed out bythe honorable member for Nepean (Mr. Bowden), they are already taxed through the Entertainments Tax Act. If we tax these so-called profits, we really draw too much from the receipts of sporting bodies. Why should it be necessary to tax these sporting bodies at all, since in regard to companies we have decided not to tax at the source, but to tax the individuals who derive benefits from the distribution?

Mr BRUCE:
Treasurer · Flinders · NAT

– I shall deal first with the point raised by the honorable member for Swan (Mr. Prowse) with regard to exempt income. I do not think there is any difficulty in this respect, or any necessity to insert further words. Sub-clause 2 of clause 1 4 deals fully with income that is derived by way of interest on certain specified securities, and it is made perfectly clear that the income is exempt when it comes into the hands of the shareholder. According to clause 16, which deals with what is considered as assessable income, ex-Australian profits are removed out of the sphere of taxation in the hands of the shareholders. The point as to accretions of capital in the hands of a company is raised by clause 16, and I propose to submit an amendment which I think will meet the position. As to sporting associations, the honorable member for Parramatta (Mr. Pratten) proposes to deal with them under another clause as a matter of deductions. There has been, however, considerable discussion, and I think I ought to say a word or two now in regard to the suggestions made. The Government cannot accept any amendment, because we do not take the view that sporting associations are so essential, or require such encouragement in this country, that special provision must be made for their exemption under an Income Tax Assessment Bill. The sporting instinct is fully developed in this country, and sporting associations receive all the necessary support from the community; indeed, some of our critics say we have gone a great deal too far in this direction. This Bill does, in fact, exempt the incomes of certain associations formed with other objects than that of sport. We provide that societies or associations established for musical purposes, or for the encourage ment of science, art, and literature, and not carried on for profit, shall be exempt.

Mr Blundell:

– Are life-saving and swimming clubs not scientific?

Mr BRUCE:

– If the honorable member can bring such clubs within the definition of “ science,” he need not bother aboutmaking any amendment in the Bill. Such associations as I have just referred to are considered by the Government as necessary and worthy of assistance and encouragement in Australia; but in regard to sport, we take an entirely different view. The Government are not prepared to make a specific exemption in the case of sporting associations. This question was considered by the Royal Commission, particularly with regard to the case of the New South Wales Cricket Association referred to by the honorable member for Nepean (Mr. Bowden) and the honorable member for Parramatta. After considering the matter, the Royal Commission came to the conclusion that they were unable to see sufficient grounds for recommending the exemption of any such body. The Commissioners, in their report, say -

It will be noted that no associations whose principal object is the encouragement of sport are at present included in the exempt list, and we are unable to see any sufficient grounds for recommending the inclusion of any such body.

Mr Pratten:

– As exemptions, not for deductions.

Mr BRUCE:

– I shall deal with the question of deductions directly. The question now is whether these sporting associations should be exempt from income tax, as are societies for the promotion of art, science, and literature. The Royal Commission also dealt with the point raised by the honorable member for Darwin (Mr. Bell) that these sporting associations already pay the entertainments tax. The report of the Royal Commission says -

A side issue introduced into the question is that the public pays Entertainments Tax upon entrance money to such cricket matches. This, however, does not appear to us to affect the question. The amount obtained through the Entertainments Tax is paid by individuals, and the association is merely the channel through which the amount of tax reaches the taxation authorities. Not at any stage does the amount so paid enter into the real revenue of the association.

The Government do not see any necessity for the specific exemption of associations for the promotion of sport. Then it should be remembered that these sporting associations and clubs are all entitled to the fullest deductions from their revenue in respect -of expenses. Therefore, I quarrel with the honorable member for Parramatta when he says that “ profits “ is not an applicable word to apply in the case of such associations, for, in my view, what remains after paying expenses is profits. A cricket club is entitled to deduct from its revenue every expense incurred in the upkeep of the ground, payment of servants, and so forth, and all that can possibly be taxed is the surplus of revenue over the outgoings.

Mr Bell:

– Are associations in the same position as clubs?

Mr BRUCE:

– Associations are very nearly in the same position; but an association which has ten constituent clubs, and at the end of the year distributes a surplus of income to those clubs, is not liable for any tax on the amounts thus distributed.

Mr Watt:

– They are taxed only on their undistributed profits.

Mr BRUCE:

– Yes, like any other corporation.

Mr Pratten:

– The New South Wales Cricket Association is a corporate body not trading for profit.

Mr Watt:

– The remark applies just the same.

Mr BRUCE:

– Just the same. An association is not taxed if it distributes these amounts to its constituent members. I can tell the honorable member for Parramatta how the trouble arises, and why these associations regard their position as particularly hard. There are triennial visits by English cricket teams, and on these occasions the large profits made are not wholly distributed to the constituent members, as a portion is retained by the association. It is upon that portion that the tax is levied.

Mr Bowden:

– They do not distribute it all in one year.

Mr BRUCE:

– That is so. I do not think the Committee are deliberately going to say that it is to be the policy of the National Parliament to exempt such associations, as it must be admitted that no differentiation can be made between sporting associations not actually carrying on for profit and those which do. I cannot see, neither can the Government, that it is essential for this Parliament, in the National interest, to extend this exemption to associations established for the purpose of the promotion of sport, even though not conducted for the profit of the members.

Mr FENTON:

– I suppose the same would apply to football associations which distribute their profits to clubs.

Mr BRUCE:

– Whatever is distributed is not taxed, but only that which is retained, as is done in connexion with corporations.

The honorable member for East Sydney (Mr. West) mentioned the taxation of funds raised for the purpose of conducting libraries, and although we all have a great deal of sympathy with such laudable and worthy objects, the Government cannot see their way clear to grant an exemption in connexion with the funds raised in this instance, I understand, by the Trades Hall in Sydney. I would point out, however, that in this measure, and under the existing Act, specific exemption is allowed on incomes derived by a trade union, or an association of employers or’ employees, registered under any Act of the Commonwealth, or a State, relating to the settlement’ of industrial disputes.

Mr Watt:

– It is very doubtful whether that should be continued.

Mr BRUCE:

– It may be questionable, but the provision cannot be extended in the direction indicated, because other claims in respect of institutions equally laudable might then be submitted.

Mr BOWDEN:
Nepean

.- I had been in conversation with the honorable member for Parramatta (Mr. Pratten), and understood that it was his intention to move in this matter, but as the honorable member was temporarily absent from the chamber, I moved in the direction he suggested. If, however, he prefers to submit, an amendment on the clause relating to deductions, rather than the one relating to exemptions, I am prepared to withdraw my amendment.

Mr Pratten:

– I would like the clause relating to deductions clarified.

Mr BLUNDELL:
Adelaide

.- In order to test the feeling of the Committee, I move -

That the following paragraph he inserted after paragraph I : - ” (m) The income of any society or association established for the teaching of swimming, or for the purposes of encouraging swimming and lifo saving, and not carried on for the purposes of profit or gain of individual members thereof.

When speaking previously I pointed out that swimming associations are formed for teaching swimming and engaging in life-saving practice, and are performing a public service in the interests of the whole community, free of cost to those who benefit. Everybody will admit that an association of men who give their time, including Saturday afternoons and evenings, for teaching young boys and girls to swim, is performing a great service to the community. I think it will be admitted that the members of such associations are performing a duty the value of which cannot be overestimated. It is true that these associations conduct swimming and life-saving displays, at which a charge is made for admission. That is the only revenue which they derive, apart from any small amounts they are able to collect from individual members, or others who may give donations.

Mr Watt:

– Do they pay much income taxation at present?

Mr BLUNDELL:

– I do not know, but the work they are performing cannot be classified as sport. Teaching is conducted and displays are held with the object of educating those desirous of learning, and the Treasurer (Mr. Bruce) and the Committee might agree to the exemption I have suggested. The members of the association in South Australia, at any rate, do not receive one penny for their services, and although it is true that a charge is made for admission to big Inter-State swimming demonstrations, the profits derived have been distributed between the various societies in the different States to assist them in carrying ou their valuable work.

Mr WATT:
Balaclava

.- I am interested in the proposal of the honorable member for Adelaide for two reasons. First of all, I have the honour to I represent an electorate which includes the most salubrious foreshore in the Southern hemisphere.

Sir GRANVILLE RYRIE:
NORTH SYDNEY, NEW SOUTH WALES · LP; NAT from 1917

– What of Manly?

Mr WATT:

– I am not surprised that those honorable members who represent electorates in which such places as Manly and Glenelg are situated should challenge the statement, but I say, not facetiously, but earnestly, that one can travel over both hemispheres without finding anything which equals the shores of Port Phillip Bay, which are included in my electorate, and that of the honorable member for Fawkner (Mr. Maxwell). There is another reason, and it is this: I am associated with the Victorian Lifesaving Society, and I agree, to a large extent, with the remarks of the honorable member for Adelaide (Mr. Blundell) that life-saving demonstrations are of great educational value to the community. I have never heard of these societies asking for exemption from taxation; they do not seek any favours from the Government. They do not ask to be included in a pool, as they have one of their own. They stand up to whatever small taxation has been inflicted on them, and I venture to think that if the Treasurer conferred with his officers he would find that this taxation could not be discovered without a microscope.

Mr Bruce:

– It ‘is very small.

Mr WATT:

– It is a very small yield indeed, and that being the case there is no substantial grievance suffered by the clubs, to which the honorable member for Adelaide (Mr. Blundell) has drawn attention - those engaged in life-saving and aquatic education as distinct from those partaking in the common pastime of sport. The Treasurer has voiced on broad and acceptable lines the view that Parliament has always taken, namely, that it is wrong to grant exemption to sporting organizations while we do not extend it to a largenumber of highly beneficial operations in this country. It is arguable, even admitting the full force of the contentions of the honorable member for x Adelaide as to the value of life-saving education, whether a great number of other athletic pursuits are not of equal, or at least of considerable, value te the community. It is hard to draw the line between, on the one hand, sports and pastimes which are of eminent value to the individual, and therefore of lifegiving and strength-giving power to the manhood of the nation, and, on the other hand, the enjoyments of the people. One man may like swimming, another may like horse racing, a third may like boxing, and although some portions of these sports, which contribute to the enjoyment of the people, are run by individuals for the purpose of gain, they are not all. I hope that the Committee will support the Treasurer on broad, general lines, and feel that no substantial suffering is inflicted upon the innocent and educational sports to which the honorable member for Adelaide has referred.

Amendment negatived.

Clause agreed to.

Clause 15 agreed to.

Clause 16 -

The assessable income of any person shall include -

profits derived from any trade or business and converted into stockintrade or added to the capital of or in any way invested in the trade or business:

Provided that for the purpose of computing such profits the value of all live stock . . . and trading stock . . . shallbe taken into account:

For the purposes of this paragraph “ Value “ means -

in the case of trading stock (not being live stock) - the actual cost price or market selling value of each article of trading stock, or the price at which each article of trading stock can be replaced, at the option of the taxpayer;

in the case of a member, shareholder, depositor or debenture-holder of a company which derives income from a source in Australia or of a company which is a shareholder in a company which derives income from a source in Australia -

dividends, bonuses or profits (but not including a reversionary bonus issued on a policy of life assurance), credited, paid or distri- buted to the member or shareholder from any profit derived from any source by the company :

the face value of shares dis tributed by a company to its members or shareholders in consequence of the capitalization of the whole or any part of the profits of the company which it is liable to include in its return for the purposes of its current assessment :

Provided that nothing in this section shall render liable to taxation the value of shares issued by a company to its members or shareholders in consequence of the capitalization of any other of its profits;

money derived by way of royalty or bonuses, and premiums, fines, or foregifts, or consideration in the nature of premiums, fines, or foregifts demanded and given in connexion with leasehold estates, and the amount of any payment received by a lessee upon the assignment or transfer of a lease to another person after deducting therefrom -

the part (if any) which, in the opinion of the Commissioner, is properly attributable to the transfer of any tangible assets belonging to the lessee; and

so much of any fine, premium, or foregift paid by the lessee or any amount paid by the lessee for the assignment or transfer of the lease as, in the opinion of the Commissioner, is properly attributable to the period of the lease unexpired at the time of the assignment or transfer by the lessee :

Provided that this paragraph shall not apply to the proceeds of the sale, transfer or assignment of the lease of a mining property (other than coal mining) where the Commissioner is satisfied that the lease has been sold, assigned or transferred.

Mr WATT:
Balaclava

.- I urge upon the Treasurer (Mr. Bruce), in regard to the alternative methods of valuing stock, the necessity of making his declared intention quite clear by inserting the words “ in respect of each article “.

Mr Bruce:

– I have no objection. It would clarify the intention of the clause to do so.

Mr WATT:

– It would be well to do so, because it would allow the taxpayer to do, for the purpose of income taxation, what he does for balance-sheet purposes, namely, to give a value to every line of goods.

Amendment (by Mr. Bruce) agreed to -

That in paragraph (a), sub-paragraph (ii), after the word “taxpayer,” the words “in respect of each article” be added.

Mr BOWDEN:
Nepean

.- I move -

That in paragraph (b), sub-paragraph (i), after the word “distributed”, the words “by the company “ be inserted.

I suggest this amendment in order to prevent any question arising as to whether dividends made by a liquidator are liable to taxation.

Mr WATT:
Balaclava

.- I was about to urge upon the Treasurer (Mr. Bruce) the same view. The insertion of the words suggested would create no difficulty from the stand-point of the Commissioner of Taxation, and at the same time would remove all doubt as to whether capital profits or profits distributed in the form of dividends by a liquidator should be taxed.

Mr PRATTEN:
Parramatta

.- I doubt whether the amendment suggested will cover the whole position. It is true that the clause, as now drafted, is somewhat ambiguous, and may possibly be construed by the Commissioner of Taxation as permission to tax capital.

Mr Watt:

– An amendment circulated by the Treasurer will prevent that.

Mr PRATTEN:

– If that is so, I support the amendment moved by the honorable member for Nepean (Mr. Bowden).

Mr BRUCE:
Treasurer · Flinders · NAT

– Although I have a good deal of sympathy for the amendment, I can see difficulties in the way of accepting it. As the Bill stands, there might be a little trouble in regard to the distributions made out of capital; but that will be overcome by an amendment which I shall move directly.

Mr Bowden:

– Even in the case of distribution by liquidators ?

Mr BRUCE:

– They will be covered; but only in regard to the distribution of capital assets. If my amendment should not do so, I am prepared to alter it. I have no desire to tax a distribution of capital assets, however they may come about. If a liquidator could distribute assets to the shareholders of a company, and if those assets were exempt from taxation, it would be possible for persons who are not as respectable as they might bo to make a practice of winding up a company and distributing accumulated profits without getting them taxed. That would be an impossible thing for the Government to agree to.

Mr McWilliams:

– A company could only be wound up once.

Mr BRUCE:

– That is not so; the class of people to whom I have referred could make a habit of it, and have a winding-up every two years. An amendment which I intend to move later will, I think, overcome the possibility of capital assets being taxed in a liquidation.. We have no desire to do that, but we want to tax all profits that are entitled to be taxed.

Mr WATT:
Balaclava

.-I would suggest to the honorable member for Nepean (Mr. Bowden) that, in view of the statement by the Treasurer (Mr. Bruce) that the amendment which he proposes to introduce at a later stage to deal with another phase of capital profits will be adjusted so as to meet the case of even a liquidator’s distribution of capital profits, without opening the door any wider than it ought to be opened, the amendment might be withdrawn.

Amendment, by leave, withdrawn.

Mr PARKER MOLONEY:
HUME, NEW SOUTH WALES · ALP

.- I move-

That in paragraph (b), sub-paragraph (i), the words “ any profit derived from any source by the company “ be left out, with a view to insert in lieu thereof the words “ assessable income.”

A man in business ought not to be taxed on the realization price of the business, but only on the profits made out of the business. If an individual or a company has held land for ten years, and has made profits out of it during that time, and then sells it, that individual or company ought not to be taxed on the price realized for it, but on any profits made out of it.

Mr BRUCE:
Treasurer · Flinders · NAT

– The pointraised by the honorable member for Hume (Mr. Parker Moloney) is one which I shall deal with later, but in fairness to him I will -make it quite clear how far I propose to go. If I accepted the amendment which he has moved, it would be a little more farreaching in its effect than the amendment which I shall move myself. The difficulty which the honorable gentleman is trying to get over is that a company might in a certain year dispose of a property, which is capital, at a profit, and that profit would be an accretion to capital. If the company paid a dividend, part or the whole of which came out of the profit on the sale of the property, it would be taxed. In the hands of a company there is no question but that the accretion to capital is not taxable, but when it reaches the hands of the shareholders it becomes taxable. Let me explain the reason why the Bill was framed with that provision. We have a tremendous number of complexities in our Income Tax Act. We do two things in order to try to give absolute justice. Where a company pays a dividend, part of which is derived from profits earned outside Australia, we exempt from taxation those profits in the hands of the company, and we give to the individual shareholder in his own income tax payments a proportionate exemption based upon the proportion of the profits earned overseas and in Australia. In the case of a dividend which is paid partly out of interest upon Commonwealth non-taxable securities, we give the same exemption to both the company and the shareholder. In doing that great administrative difficulty is involved. In every case where a company pays any dividends out of profits earned outside of Australia, the portions of its profits earned outside and inside Australia have to .be determined, and the proportion applied to every individual taxpayer’s income tax assessment. The same procedure has to be followed in respect of any part of a dividend that is paid out of interest upon Commonwealth nontaxable securities. We might have a company with 3,000 or 5,000 shareholders, and it might earn profits both inside and outside Australia. The non-Australian portion of its business might be a. very small fraction of the whole. Let us suppose it was a tenth, although, unfortunately, these fractions never fall into those happy decimals, but are always most complicated. When the fraction has been arrived at, it has to be followed into the 3,000 or 5,000 returns from the share- holders. A man’s dividend might only amount to £5, but he would have to be allowed an exemption. If the company had also paid part of its dividend out of interest on Australian non-taxable securities, which might only represent £1,000 out of £100,000, it must again be followed through every taxpayer’s assessment, and the man who receives his £5 dividend would have another appalling fraction worked out to determine the dividend he should be taxed upon. If the amendment proposed by the honorable gentleman were agreed to, it would introduce another complication of that character. It would mean that every time a company paid the smallest fraction of its dividends out of an accretion of capital arising out of a profit on the sale of a capital asset, we would have to do another of these sums and follow a complicated fraction through thousands upon thousands of taxpayers’ returns. The cost would be very great, and I suggest that it would be almost a hopeless straining after equity. We propose to give the exemption on any part of the profits retained in the hands of the company, and we would willingly give it to the shareholders if there was not this appalling administrative difficulty in the way. There is one justification, 1 think, for taxing the shareholders, and it is based upon the principle of capacity to pay. I have listened to many arguments in regard to bonus shares, and the one which carried the most force was that the holder of a bonus share has received nothing except a piece of paper, and that he has. no capacity to pay. But in the circumstances with which the amendment deals, the shareholder has every capacity to pay ; he has received the dividend, the money has reached him, and the Commissioner only asks for a small proportion of it. Therefore, there is nothing to be said in favour of inserting this proposed extra refinement of equity. But, to meet the position without creating those appalling administrative difficulties which I have indicated, I shall later propose an amendment, under which, where a company pays a dividend or bonus, wholly and exclusively out of profits arising from the sale, of capital assets, the member or shareholder shall not be liable to taxation on that dividend or bonus. That will go a long way to meet the trouble which the mover of the amend- ment has mentioned. I ask him to be content with that, and not press his amendment, in view of the grave and serious difficulties that it would create.

Amendment negatived.

Mr WATT:
Balaclava

.- Before the Treasurer moves a further amendment,I should like to draw attention to a matter that arises out of the proviso to paragraphb : -

Provided that where a company derives income from a source in Australia and from a source outside Australia, a taxpayer shall only be taxable on so much of the dividend as bears to the whole dividend the same proportion that the profits derived by the company from a source in Australia bears to the total profits of the company.

The proviso states the theory of the law, but not the practice. I know, as the Treasurer probably does, that the assessment of companies having head-quarters in Australia and doing business in other countries, is one of the most ticklish problems of companies’ taxation. Judging from conversations I have had with him, the Commissioner feels bound by law and practice to administer the existing section, which the proviso repeats, in a way that I think is very unjust to individuals and companies who are reaching out for this beneficial trade, and, in many instances, is destructive of their efforts in that direction. I am not prepared to move an amendment, because that could only be done after consultation with the accountant mind that has been dealing with these issues; and I have not been able to do that.

Mr Bruce:

– The right honorable member is dealing with the determination of what is and what is not a profit made in Australia.

Mr WATT:

– Yes. Let me illustrate the point by this instance : A manufacturing company doing business in Australia exports goods to New Zealand. In the Dominion it has to make an income tax return, upon which it is assessed, and pays, on what the New Zealand assessment regards as a substantial profit, a very heavy rate. If the company were not taxed on that portion of its profits which has been assessed in New Zealand, when it is included in the Australian balance-sheet, all would be well; but the Australian assessment includes the great bulk of the amount that was assessed and taxed in New Zealand, and thus over a considerable area of its profits, the company pays taxation twice.

Mr Bruce:

– That could only be avoided by a reciprocal agreement.

Mr WATT:

– That would be very hard to get. We have already a reciprocal Tariff agreement, and if we asked for a reciprocal taxation arrangement New Zealand would object that it meant a loss to it and an advantage to us. We should have to pay for this reciprocity very heavily.

Mr West:

– Does not New Zealand tax onthe difference between the invoice price and the selling price?

Mr WATT:

-New Zealand has its own methods. It will be found that the bulk of the profit on these transactions is levied upon twice - by the New Zealand Government and by the Commonwealth Government.

Mr West:

– I thought that the Commonwealth only taxed up to the invoice price of goods exported.

Mr WATT:

– No; if we did that there would be no objection. I think the Commissioner would be willing to accept a proposition which, whilst safeguarding the revenue, would give justice to exporting houses.

Mr Pratten:

– I understand that the procedure is based upon the Commissioner’s reading of the law rather than upon the wording of it.

Mr WATT:

– I am not prepared to argue that. It would not be fair to say that the Commissioner is taking too rigid a view of the law. The Act should be altered and some practice adopted which, instead of penalizing those engaged in this trade, would invite them to embark upon it. I urge the Treasurer to see if he cannot insert some amendment satisfactory to the Commissioner which will stop, as far as possible, this objectionable practice of double taxation, or if it cannot be stopped altogether, delimit it by Statute law in a way which will bind the Commissioner. The matter is well worthy of the Treasurer’s personal attention in consultation with the Commissioner and his assessing officers, because this is a trade that may, in the future, mean a great deal to the prosperity of Australia.

Mr PROWSE:
Swan

.- The Treasurer (Mr. Bruce) has referred to bonus shares as not being a possession upon which one could realize. A great deal of heart-burning arises in regard to another form of assets which has hitherto been included by the Federal Taxation Commissioner, viz., the equity in perishable stock. The equity in Wool and Wheat Pools are other assets over which the owner has no control whatever. The wheat is entirely out of the hands of its owner and under the control of the Commonwealth, which might hold it for ten years. During that period of control the owner does not commence to enjoy the money, and his equity is an unknown quantity. Could not the Treasurer insert a clause to provide that the tax would only be levied upon realization? It is only right that the Government should not enjoy its income until the producer himself is in that happy position. We have had distinct evidence of hardship in connexion with this particular matter. Tho Commissioner may estimate the equity in a property of a taxpayer who, however, may not realize the amount of the Commissioner’s estimate, ‘but because of the estimate the taxpayer’s income is increased, and under the graduated scale he may be called upon to pay a very heavy tax. If subsequently it is discovered that he has not been able to realize the amount of the estimate he is entitled to a refund, but unfortunately this refund is at a lower rate of the income. I ask the Treasurer in all sincerity to help the primary producers in this matter. The recent revision of the Tariff waa in the interests of the primary producers, and this is another way in which some consideration may be shown to them. Much of the produce that would he involved in the consideration© of this problem is perishable. In some cases it may be fruit. Owing to unforeseen circumstances it may become rotten before it can be marketed, and though the Department makes a refund it is, as I have shown, on a lower rate, and the taxpayer suffers a serious injustice.

Mr Maxwell:

– Would not the refund be the amount paid?

Mr PROWSE:

– No. That is where the inequity - of the present practice lies. The Treasurer will know what is in my mind. There may be a certain equity in a pool, amounting to £2,000, which results in an assessable income being increased from £4,000 to £6,000, and the rate of tax increased from 14d. to 30d. in the £1. Suppose that estimate of £2,000 equity is not realized, and a refund has to be made in the following year when the profit may only be £1,000. Well, the tax on £1,00C is only a few pence in the £1, and so the refund would simply be deducted at that rate. The Department may have collected at the rate of 40d., and may refund, possibly, at lid. The system is unjust. It would be infinitely better if there were some provision in the Bill to allow of assessments being made on realization. The same position arises in connexion with the 10 per cent, retention money in wool. As honorable members well know, when the appraisers set to work to appraise the wool, on a basis of 15$d. per lb., they allowed for possible mistakes, in appraisement, and, accordingly, held back 10 per cent, as a safeguard. Is it unreasonable to ask that the Government should wait for the tax until that 10 per cent, is actually in the hands of the taxpayers?

Mr Livingston:

– It might never get there.

Mr PROWSE:

– That is the whole position. It would be a convenience to taxpayers if in items like these the collection of the tax were allowed to remain in abeyance until the taxpayer himself was in enjoyment of the wealth upon which he has been assessed. But, no; according to the practice of the Department it is seized upon, and in many cases the application of the law works a cruel injustice upon the taxpayer.

Mr STEWART:
Wimmera

– I rise to support the view stated by the honorable member for Swan (Mr. Prowse). The point he has raised is a burning question amongst primary producers. We do not object to being taxed upon income that we may have received, but we certainly object to this practice of levying taxation upon revenue that we have not actually received. I understand, upon inquiry from the Taxation Department, that the difficulty in the way is that the Act lavs down the prin-circle that income tax must be paid within the year that the produce u grown, but I impress upon the Treasurer (Mr. Bruce) the necessity for some alteration in the existing state of affairs. As primary producers we go to the expense of producing wheat and wool or any other commodity, and it is unjust that we should be taxed in respect of any portion of it upon its prospective value. I think the Treasurer clearly understands the point I am endeavouring to make, and on behalf of the primary producers, I ask him to see if, in consultation with the officers of the Department, some more equitable scheme cannot be devised than that we have had imposed upon us during the past few years.

Mr FLEMING:
Robertson

– I understand that the honorable member for Franklin (Mr. McWilliams) has already intimated his intention of submitting certain amendments with regard to income taxation on live stock, which we shall have an opportunity of considering later. Meanwhile I support the arguments put forward by the honorable member for Swan. (Mr. Prowse) and the honorable member for Wimmera (Mr. Stewart). We object to the practice of the Department requiring us to furnish returns showing the produce on hand. The wool-grower, for example, has to show what wool is on hand, and likewise the grain-grower, what grain may be in store, although in a number of instances the taxpayer knows that, owing to deterioration, he will never realize the estimate. The practice of the Department is grossly unfair. A deduction might be allowed later on for the actual loss of material, but we do not get a reduction in the rate, and I hope that the Treasurer will find it possible to cut out of the schedule altogether produce that is carried over. Produce carried over cannot be dealt with in the way that capital can be handled. A man carries over his produce from one year to the next with the object of realizing on it in the following years. If he is able to realize the Commonwealth gets the benefit of the tax upon it, and when he does not it is not fair that he should be taxed in respect of it.

Mr Bruce:

– Does the honorable member advocate dealing with it on a cash basis ?

Mr FLEMING:

– That is practically what I suggest. When a man realizes on his produce, let him pay income tax upon it, but do not ask him to pay, as the Department now does, upon a great body of produce on which he does not realize at all.

Mr Prowse:

– Markets fall.

Mr FLEMING:

– In addition to that, deterioration of produce sometimes takes place. In many ways a primary producer is hit most unfairly under the provision to which I refer, and for which so far as I can see there is no reason. I ask only for justice for the man who produces those tilings. He is quite prepared to pay income tax in respect of them when he realizes, but he feels it is unjust that he should be called upon to pay the actual tax upon them, and at the higher rate, when he does not realize upon them at all.

Mr McWILLIAMS:
Franklin

– I am sure that the Treasurer (Mr. Bruce) will recognise the injustice of the case that I propose to put before him, and which has to do with the taxation of the retention moneys in connexion with the Wool Pool. In thousands of cases all over Australia the notes in respect of such moneys are held by the banks or by the auctioneers who have made advances to the persons concerned, and if they had been distributed the actual recipients would not have been liable to pay income tax in respect of them. Their losses have been so great that they would be exempt. As it is, although they have had to lodge with the bank or others who are financing them their retention notes, they are called upon to pay income tax in respect of such moneys.

Mr Bruce:

– I do not quite followthe honorable member. Does he suggest that the retention moneys in respect of wool should not be taxed at all?

Mr McWILLIAMS:

– What I say is that the recipient or person entitled to such moneys should pay income tax in respect of them only when he actually receives them. Those in charge of the Wool Pool said, very properly, “ We will retain 10 per cent. of the proceeds to provide for mistakes or errors,” and because of that the Commissioner taxes the money so retained whether it is really taxable or not.

Mr Bruce:

-I cannot follow the honorable member. This money, had it been distributed originally instead of being retained, would have been liable to taxation as income in exactly the same way as any other income we are now proposing to

Mr McWILLIAMS:

– No, because, in many thousands of cases, the persons entitled to it would nothave been liable to pay any income tax whatever. Their losses, as I have said, have been so great that had the money been paid to them at once, instead of being retained, they would not have been called upon to pay income tax in respect of it. As it is, they are called upon to pay, because this money is taxable at the source.

Mr Bruce:

– Retention moneys taxable at the source? Surely not.

Mr McWILLIAMS:

– If the Treasurer will give me his assurance that it is not so I will accept it.

Mr Bruce:

– The complaint that is being made is that we are following this money back into the year when the produce to which it relates was put into the Pool.

Mr McWILLIAMS:

– That point was raised by the honorable member for Swan (Mr. Prowse) ; but the point I am putting forward is that this money is taxable at its source, and that on distribution a. certain percentage will be taxed.

Mr Bruce:

– At what rate?

Mr McWILLIAMS:

– At the rate applicable to the whole amount received for such produce, which, in some cases, would involve a large sum.

Mr Bruce:

– This is all news to me.

Mr McWILLIAMS:

– I am merely stating what I have been informed, but if the Treasurer says that the position is not as I have stated it I shall accept his assurance.

Mr Bruce:

– I have just consulted my officers, and they have no more idea of such a thing being done than I have. I should be amazed beyond words if there was the slightest ground for what the honorable member has said, as to these retention moneys being taxable at the source, at the rate applicable to the total amount.

Mr McWILLIAMS:

– Then I accept the honorable gentleman’s assurance that that is not so.

Mr BELL:
Darwin

. -While we are considering this clause I think it fight to bring up the question which has already been raised incidentally, as to whether values of produce, held by or stored, should be taxed before the produce has been actually realized upon, as is the case at the present time, or whether such produce should be taxed on a cash basis. My view is that it should not be taxable until it has been realized upon, and. the cash is in the handsof the producer who has to pay income tax. I pass by the objection of the Treasurer of the day that he could not estimate the revenue if this were done. There is, no doubt, difficulty in that regard; but I am pleading the case of the producer of, say, grain, hay, or live-stock, who, although he does not sell, has to send in returns showing the quantities he has produced, and the value, and who, upon that value, is taxed. In very many cases a man who has not realized upon his produce has not the money to pay the tax.

Mr Bowden:

– What about a manufacturer who makes goods for stock. Is he not in the same position ?

Mr BELL:

– Exactly the same. I do not see why we should not adopt the system of taxation on a cash basis. We rear stock or grow grain and estimate its value; during the year we may lose the whole of our produce, and, in any case we are only supposing that at some future date it will have a taxable value. For the time being it has notaxable value, because it is worth nothing until it is realized. If the producer is taxed on the estimated value, and in the meantime the stock deteriorates, there is, so far as I understand, no way by which he can get a refund, or otherwise be relieved.

Mr Bruce:

– It only reduces the amount he has to bring into account.

Mr BELL:

– But a producer who has paid taxes on, say, £500 worth of stock, the natural increase of his herd, may lose the whole of it. and I do not see in what way he can be relieved. I have been the victim of that sort of thing on various occasions, though not to the extent of losing the whole of my produce; and if any one can show me how I can get a refund, or be relieved under such circumstances, I shall be very glad. At present so far as I know, the law provides no relief; and I do not see why we should not defer the liability to taxationuntil the producer has the money in his pocket, or in the bank. In some seasons a surplus of some commodity is held over by the producer in the hope that he will be able to sell it to better advantage in the future. He is compelled by the Commissioner to value that produce at the market rate at the time, but if all the production of that season were put on the market at once, the value would be reduced considerably. There might be no market at all for some products, and still the producer has to pay tax on the estimated value. That is unfair, and a great hardship on the producer, who has no money to pay the tax, or even on which to live, and has to get an overdraft. Many of us have to pay on so-called assets which we do not possess, because we have not realized. One objection to the suggestion that we should pay on a cash basis is that there would be an accumulation of profits for a number of years, and the taxpayer would be compelled to pay at a very high rate in one season. But if, under the law as established by this amending Bill, the income is averaged over a period of years for the purpose of fixing the rate, I can see no further objection from the point of view I have just mentioned. I have thought a good deal about this matter, and have discussed it with various authorities, and I have not heard any good reason why we should not defer the liability to be taxed until we have realized on the products of any one season.

Mr BRUCE:
Treasurer · Flinders · NAT

– The questions raised now are very wide, but I should first like do deal with two side questions - those having reference to wheat equities and wool retention moneys. The Commissioner has brought wheat equities to account in the year in whichthe wheat is put into the Pool. Where it is the case that the certificate received is saleable without restriction, there is no very serious hardship, but where there is restriction, as I understand is the case in Western Australia., the position is a little more difficult. What we have to remember throughout this discussion about wheat equities, for example, is that they have to be brought to account at the time the wheat is put into the Pool, or the cash brought to account at the time it is received.

Mr Stewart:

– That is all we desire.

Mr BRUCE:

– The difficulty in doing what the honorable member says is all he desires is that a man is taxable in each year upon his income for that year, and that income is interpreted to mean the profit that he has made. But throughout our income tax law we have adopted the system of bringing the year’s assets to account. Presently we shall deal with the question as to whether these assets should be so brought to account - that is the broad question raised by the honorable member for Robertson (Mr. Fleming). At the moment, whether honorable members agree with it or not, profit is arrived at by bringing to account the assets at the end of the year, and the wheat- equity is undoubtedly an asset; it is the same as wool which may be on hand, but has not been realized ; the same as if the wheat that the certificate represents was still in possession of the producer. Both of these are brought to account in the year of production, and, to be logical, the year when the equity should be brought to account is the year when it is put into the Pool - the year of production.

Mr Fleming:

– Oh, no!

Mr BRUCE:

– There are certain people who advocate that the tax should only be paid when the money for the produce sold is received.

Mr Stewart:

– I am one of those people !

Mr BRUCE:

– At the present time I am pointing out to the Committee that that is not the basis on which our taxation laws are framed and administered.

Mr Stewart:

– It should be.

Mr BRUCE:

– We shall deal with that question in a moment; I am at present dealing with the question of wheat equities on the basis of which the law is now framed and administered, and trying to point out that if we accept that basis the proper year to bring the equities to account is the year when the wheat is produced.

Mr Stewart:

– That is very logical!

Mr BRUCE:

– I thinkhonorable members will agree that that is the position; they may discuss afterwards whether that be the Tight way or not. At present I confine myself to an endeavour to show that where there is a graduated system of taxation, and the amount of income in one year determines the rate, we have to determine the year when every single thing should be brought to account ; and on the existing basis that year is the year of production. Therefore, under the existing system, the proper practice is to bring the wheat certificate to account in the year of production, so that the rate of tax paid will be the sameas that paid by a man who holds his wheat or his wool and has to bring it to account. That is the only point I wish to make with regard to wheat; I shall deal in a moment or two with thequestion whether the present method is right or wrong. With regard to wool retention moneys the position is that those amounts are deferred payments,and all that hasto be determined is what is the proper year to include them in income. Nobody is suggesting that those amounts should be entirely exempt from income tax - the question is what is the proper year to bring them to account. From the point of view of theDepartment, and from my point of view, I would rather lump the amount into each assessment, and have done with all the trouble. But, surely, if we are to give justice, which we strain and overstrain to give, the proper year, again, to bring these retention moneys to account is the year in respect of which they were earned.

Sitting suspended from 1 to 2.30 p.m.

Mr BRUCE:

– I was dealing with the two specific cases which have been raised, and which turn, to some extent, on the question of values to be taken, particularly in respect to the assets of primary producers. I have tried to show that if we have to bring wheatequities and wool retention moneys to account on our present basis of assessing for income tax, the proper and logical thing to do is to bring them to account in the year of production.

Now I come to a very much broader question, namely, the basis upon which income tax should be assessed, dealing particularly with the position of primary producers. There are several sides to this question, but there are some broad advocates who go the whole way and say that lie proper basis of assessment for the primary producer is the cash basis. They hold that he should pay only in respect of actual moneys received in the year of receipt, and that there should be no bringing to account of assets at the end of each accounting period. Those honorable members who advocate that method have some supportoutside this Chamber, but it is very limited indeed.

Mr Fleming:

– Oh, no!

Mr BRUCE:

– I say it advisedly, because I am certain that no one in this community has had the views of the primary producer put before him more often or in more detail than I have had in the past six months.

Mr Stewart:

– The system has its advocates outside the ranks of the primary producers.

Mr BRUCE:

– I will deal with that point in a second. I have heard the views of a great number, and for the moment I will confine the issue to the primary producers. I claim that, for every advocate of the system of a cash basis, there are ten who advocate the system of bringing assets to account at the end of every year.

Mr Bell:

– Is the Treasurer not expressing the views of the big pastoralists?

Mr BRUCE:

– No. I think I can say, with perfect justice, that I am expressing the general view of most classes.

Now, dealing with the two different bases, we must always remember that if we do not bring a thing to account at the end of its production, whether it be wool, wheat, or natural increase, we have no entry on our debit side against the value of that wool, wheat, or natural increase when it comes to be sold; and the inevitable result is that when a period of prosperity follows a period of difficulty, and large sales are effected at satisfactory prices, the incidence of the income tax upon the individual concerned is excessively hard.

Mr Prowse:

-Would the individuals not regulate that in their sales?

Mr BRUCE:

– They can do nothing of the kind. Sales are directed mostly by necessity and opportunity.

Mr Prowse:

– Only in some cases.

Mr BRUCE:

– I agree that the man who has big capital resources behind him can choose his moment to sell; but the small man with no resources is governed only by necessity, and those who are a little more fortunate are governed by opportunity. The individual whose case wehave to consider is the one who has to sellthrough necessity. In Queensland, a great number of people welcomed the adoption of the cash basis system; but now they wish they had never heard of it, and would willingly part with it. Only yesterday the honorable member for Maranoa (Mr. Hunter) pointed out the very facts which I am now indicating, and suggested what seemed to me an almost brutal method, namely, that we should give taxpayers the option, and let them learn by bitter experience that a cash basis would be disastrous to them. But the course suggested by the honorable member is not the duty of a taxing authority. The duty of the State is to try to devise what appears to be the most equitable basis upon which taxation can be levied.

Mr Stewart:

– We are all seeking that.

Mr BRUCE:

– I agree that there are differences of opinion as to which is the most equitable basis to adopt.

Mr Bell:

– Any basis adopted has different effects upon different sets of people.

Mr BRUCE:

– Where the State sees very grave danger of inequity to any class of taxpayers by imposing a basis of taxation, it has no right to allow the tax to be assessed in that way.As I was responsible for advising the Cabinet as to which system should be adopted, I felt the gravest doubt with regard to the application of a cash basis, not because it might prove detrimental to the revenue, but because it was likely to be dangerous to the individual taxpayer. I could not recommend such a system.

Coming now to the method of bringing to account at the end of every taxing period, it is sometimes said that it causes very grave inequities in its application, and from the way in which examples are quoted it might be supposed that when a man has brought something to account, and then sells, it is no benefit to him at the time of bringing it to account. Take the case of natural increase, upon which there has been some discussion. Having brought it to account as is required to be done at the end of the taxing period of production, and in that way having increased one’s assets against his debits, when the new taxing period is commenced it is brought to account as a debit, or as a setoff against the individual’s assets in that year. It. is very naturally pointed out that some of the assets thus brought to account may subsequently never be realized upon, owing to drought and its consequent mortality; but as against that position it must be remembered that at the beginning of the accounting period in which that asset is lost, the individual had brought into account the value of his natural increase as a debit, and as it has disappeared in the period he has no corresponding asset to bring into account at the end of the year. Thus he is relieved to a very substantial extent from the results that follow upon any disaster that has fallen upon him.

Mr Prowse:

– But he will have paid tax upon something upon which ho has realized nothing.

Mr BRUCE:

– I agree, but in the subsequent period in which, because his assets have disappeared, he has not an opportunity of realizing, he is allowed to show those assets as a debit against the amount which he had taken into account as assets at the end of the period.

Mr Prowse:

– But probably in a year of low values.

Mr BRUCE:

– The honorable member . is shifting his ground.

Mr Prowse:

-The taxpayer pays tax on something which he has never enjoyed. I can show cases where thousands of pounds have been paid in income tax upon calves not one of which have lived.

Mr BRUCE:

– The honorable member is quoting a case which is very often put forward, but if he does bring it forward he should, in fairness, go on to point out that in the year following the period in which the calves were brought to account their owner would show as a debit the value upon which he had had to pay tax in respect of them. Thus he would have that asset on his debit side, and, having lost it, he would not have to bring it to account on his credit side. Consequently any profits he might have made in other directions would be reduced by the debit he was allowed to bring in in respect of the tax already paid in the previous year. I have no desire to overstate the case, but I want to show that there is something to be said on both sides of the question in relation to this method of bringing to account at the end of every taxing period. It has been suggested that natural increase regarded as a specific item is an accretion to capital, and should not be brought to account. At least, that point has not been raised to-day, but it has been put to me. I think the contention is improper and unjustifiable. Natural increase is a trading asset that has been created, and can be sold, and, therefore, should certainly be brought to account. The proposals which the Government are now submitting in regard to this very difficult question of how we are to bring natural increase to account in no sense meet the case of those who are advocating a cash basis for income tax assessment by primary producers, but I think they very fairly meet the difficulties stated by those who, although they are prepared to accept the annual bringing to account of assets, nevertheless consider that they have suffered considerable hardship by the basis hitherto adopted. There are three modes of bringing natural increase to account. One is that we should bring it to account at market value. This deals with the point raised by the honorable member for Grampians (Mr. Jowett”), who asked why there was any distinction between trading stock, which is not live-stock, and live-stock. The difficulty in regard to assessing at market value is that it is practically impossible to work out what is the market value for natural increase in a continent with the extent of Australia, and containing se many people placed in such widely varying circumstances. The next suggestion is that we should bring natural increase to account at any value the owner cares to put upon’ it. The third suggestion is that there should be a prescribed value by the Department. The last system is that which now exists. ° “

Mr Fleming:

– But there is n range allowed.

Mr BRUCE:

– No. A prescribed value is fixed by the Department. After giving a very great deal of attention to this very difficult problem and getting all the assistance I could, I was faced with the difficulty that each school of thought seemed to advocate a different thing and heartily condemned the ideas of every other school. Eventually, as a compromise, this system was devised, and I think it more or less meets the position. We are maintaining the prescribed value, bub instead of fixing only one value, we axe allowing a maximum value and a minimum value; the latter will be a quarter of the maximum, which, when gazetted, will probably be something lessthan the existing value. Between the maximum and the minimum, the taxpayer may select his own value, but after he has made a selection,, he must stick to it. I think that is a fair compromise between all the ideas which are held by different classes of taxpayers, and is a reasonable solution of a very difficult problem.

Mr Stewart:

– Does the Treasurer mean that the taxpayer must throughout the subsequent years stick to the valuation he has made?

Mr BRUCE:

– Yes. The honorable member will realize that if a man were not compelled to adhere to his original value, he could, by varying his valuation every year, show that he had made neither a gain nor a loss. This applies only to natural increase of stock. Purchases will be brought to account at the purchase price, if they can be identified. I admit quite frankly that the basis contained in the Bill does not meet the claims of those who say that only the cash basis should be employed, but I think it is in accord with the views of the great bulk of the primary producers. With regard to valuations generally, a cash basis in connexion with all businesses is quite impracticable, and I know of none who suggest that this basis should be taken for income assessment in business generally throughout the Commonwealth. The Government have tried to solve a very difficult problem by dealing with natural increase of live stock on the basis indicated, and by dealing with trading stock on the three different bases set out in the Bill. That, with the amendment which I have proposed at the suggestion of the honorable member for Balaclava (Mr. Watt), gives a reasonable and fair basis of valuation.

Mr PROWSE:
Swan

– I have listened very carefully to the remarks of the Treasurer regarding the bringing to account of the natural increase of live stock. The honorable gentleman has expressed a great deal of sympathy with the small farmers, and he must know the long hours they work and the little time they have in which to keep proper accounts. They can, however, operate on a cash basis. They can regulate their accounts of purchases and sales by their bankbooks, and they would be relieved of a tremendous amount of worry and unnecessary labour if they could be assessed on the actual receipts from their produce. Primary products are, to a large extent, intangible assets. The taxation law is being revised ostensibly in the interests of the primary producers, but it is remarkable that the amendments axe more for the benefit of other than primary producers. The Bill seems to be designed to protect the rights of companiesand other big interests, and when we, who represent the primary producer, ask for consideration for. him, the Treasurer tries to make it appear that we do not know what we are talking about. The terrible graduation of rates and the forcing of the primary producer to bring to account intangible assets in the shape of perishable products, such as potatoes and fruit, place an intolerable burden upon the taxpayer. Often he has not commenced to enjoy the income upon which he is taxed, and he has to borrow money with which to pay his taxes. The Government will not wait for its money until the primary producer has been paid for his produce. The Treasurer said that if that were done the farmer would put himself in “ Queerstreet” by showing too many sales in one assessable year ; but the farmer has control of his affairs, and he can regulate his sales as the growths occur. It is suggested that if his expected receipts have been over-estimated, if the market falls, or if the weevils or mice get into his wheat, a deduction may be made in his next year’s return; but already the farmer has paid his taxation in hard cash on an income which he has not enjoyed.

Mr Bruce:

– The honorable member will admit that the taxpayer gets back something in the following year.

Mr PROWSE:

– The Deputy Commissioner of Taxation in Western Australia made a desperate attempt last year to inflate the accounts of primary producers in a way that meant the payment of many thousands of pounds of taxation upon stock which they had never realized. Not only were there the ordinary profits on sales, but, in addition, a lot of dividends from Pools had come into that year; and, in order to make the incomes bigger, the Commissioner looked forward by estimating the equity in the unsold wheat. When taxation is made burdensome in this way, the Government cannot be said to be acting in the interests of primary production.

Mr Bruce:

– The honorable member is unfair in suggesting improper reasons for the Deputy Commissioner’s action.

Mr PROWSE:

– I know that the assessments were made on a cash basis in previous years, and equity in unrealized assets was not brought into account. But as soon. as the Commonwealth and the State agreed to collect through the one authority, the Deputy Commissioner in Perth, presumably acting under instructions from the Commissioner, brought equity into account in connexion with both Commonwealth and State taxation. Whatever might be his motive for loading up the incomes for that year, I know that an intolerable and unjust burden was placed upon the primary producers, who had to pay a vastly increased amount oftaxation. We are told that if the equity was not realized in the year of assessment a claim for a refund could be made. Last year was pretty good, but the refund might be taken off a year of losses in which no income tax would be paid, and already the farmer may have paid 30d. to 40d. in the £1 in respect of an income of which he had not enjoyed a farthing. Farmers do not employ accountants to keep their books, but they are as straightforward as are other people in the community. As arule, they practically allow the banker to regulate their affairs. I know of instances in which men brought into account assets that were not taxable and the Department did not inform them of their mistake, but collected upon what was really not true income for the year.

Mr Bruce:

– If the honorable member is suggesting that the Department deliberately and improperly took taxation that was not due and did not inform the taxpayer, he is making a statement that is quite wrongand very improper.

Mr PROWSE:

– I can bring instances under the notice of the Treasurer. The officials seem to assume that the taxpayer is trying to rob the Department, and they spend a tremendous amount of money in queries into this, that, andthe other thing. The partnership in which I am interested, with a turnover of £14,000 or £15,000, entered in its return an amount of £5 for postage and telegrams for the whole year. Some nincompoop in the State Taxation Department struck out that amount and wrote, One pound only allowed.” That is the sort of thing that the taxpayer has to contend with. If sympathy existed between the citizens and their servants in the Department this trouble would be avoided.

Mr Bell:

– Did the honorable member keep anaccount of his postage and telegrams ?

Mr PROWSE:

– No; £5 was the amount we estimated.

Mr Bell:

– Why did you not keep an account? You are worse than the farmers.

Mr PROWSE:

– We are farmers; and it is very difficult to enter up1s. 6d. or1s. every time one goes to the postoffice to lodge a telegram, or 2d. every time one posts a letter. I know of no trading concern with a similar turnover that could go through a year on an allowance of £5 for postage and telegrams. Of course, when I drew attention to this item, the £5 was reinstated. The trouble is that the primary producers pay taxation on income before they get it. The farmers have not been conceded the simple average for which they asked. We are asking that simpler methods of taxation shall be adopted in the taxation of primary producers. The present system is so complicated that they have to employ accountants to make out their returns, and the fees so paid by them very often amount to more than they have to pay by way of income tax. They are obliged to employ accountants because of the great difficulty involved in bringing into account the intangible items to which I have referred.

Mr Pratten:

– A very large proportion of the farmers do not pay any income tax.

Mr PROWSE:

– But they have to go to the trouble of furnishing returns. Some of them would almost prefer to go to gaol for a week rather than undertake the laborious work of preparing these returns. I hope that the Treasurer will at least concede something to the primary producers. He has absolutely turned down everything for which we have asked.

Mr Maxwell:

– That is absurd.

Mr PROWSE:

– I will withdraw that statement; it is, perhaps, too sweeping. I should pay great respect to views expressed by the Treasurer in regard to the business of a warehouse or company; but surely, since I have had to keep farming books for about a quarter of a century, I ought to be able to speak with authority of the inconvenience to which farmers are subjected owing to the tremendous amount of accounting work they have to do in order to comply with the requirements of the Taxation Department. I doubt whether it would be advisable to apply the cash-basis system generally; but if it were applied to the primary producing interests it would save them much worry, and would not result in any loss of revenue to the Department. Sooner or later they have to realize on their produce, and whenever it is disposed of the money so obtained will be brought into account. The difficulty to which I have referred is experienced also in regard to the 10 per cent. retention money. I received from the Department not long ago a query note as to the wool retention money I had received. My accounts had closed on the 30th June, and I did not receive the retention money until 30th September following. The Department asked me why I had not accounted for it. I replied that I had not received it until three months after the closing of my accounts, but that the retention money for the previous year had been accounted for in the last return, and that the amount in question would be accounted for in my return for the following year. At the time that my accounts closed I had not received the money in question, and did not know whether or not I would Deceive it, since this 10 per cent. is retained by the Wool Pool to cover mistakes. The Department was satisfied with the explanation; but I read in the press that the Commissioner proposes to re-open all accounts in respect of the last three years. There are said to be about 150,000 wool-growers in the Commonwealth, so that if this re-opening of accounts is to extend over three years the Department will have to deal with something like 800,000 assessments. That, we are told, must be done in the interests of economy !

Mr Bruce:

– For the sake, not of economy, but of equity.

Mr PROWSE:

– I wish the Department would endeavour to give us equity in other directions. The 10 per cent. retained by the Wool Pool from time to time has been returned with remarkable regularity every year.

Mr Bruce:

– I shall be very pleased to discuss the matter with the honorable member ; but it does not arise out of thi. clause, and we can do nothing with regard to it in the Bill itself.

Mr PROWSE:

– The Treasurer himself referred to it, and it comes within the question that has been raised with respect to the treatment of stock and produce held over. The honorable gentleman would save a lot of time by granting some of the concessions for which we have asked. By doing so he would go a long way in the direction of simplifying the returns to be prepared by the man on the land, who has not the time that a city business man has to make out returns covering the whole ramifications of his industry.

Mr LIVINGSTON:
Barker

.- Having listened to the lengthy remarks just made by the honorable member for Swan (Mr. Prowse), I am not surprised that the Treasurer (Mr. Bruce) should be showing signs of weariness. The honorable gentleman is anxious, I know, to hear the views of every honorable member who has a knowledge of this particular business. He is in a very difficult position in dealing with the question of the taxation of live stock on hand and produce carried over, and it is our duty to give him every possible assistance. I invite his attention to the position of those who three years ago paid £3 per head for their calves, whereas calves to-day are worth only about £1 per head. Then, again, three years ago lambs were worth comparatively nothing, whereas to-day they are fetching a big price. Is a man to be taxed over the three years’ period on the basis of the present-day value of his live stock t If so, the position will be very serious. What, again, is to be done in respect of the valuation of crossbred wool, which a good many small farmers are growing? I know of several farmers who have had their crossbred wool in their sheds for the last two years, and have not even baled it. How can such wool be brought into account? No one knows what it will realize. The same may be said with respect to wheat that hae been stacked in various parts of the country, and, in many cases, has been ruined by weevils. Still another case calling for attention is that of the cattle men. A little while ago magnificent beef all over the Commonwealth was practically going to waste. There was no market for it until the Government recently came to the rescue of the industry, with the result that the position has been somewhat improved. I hope that the Treasurer will not call upon any taxpayer to pay income tax in respect of stock or produce he has in hand until he has actually realized upon it. When a taxpayer has sold his produce and got the cash he can pay. The honorable member for Swan (Mr. Prowse) twitted the Treasurer with being better able to deal with the business of a warehouse than with the business of the primary producer; but I know that the honorable gentleman has sufficient intelligence to enable him to appreciate the position of the primary producer. It is undoubtedly a difficult one. In my own electorate, in the early part of this season, hundreds of acres of potatoes were not even dug up, because the price obtainable for them was only £2 10s. per ton - a price that would not pay for bagging. Six months later potatoes were fetching £10 per ton in the market. How is the Department to deal with these variations in prices? If the Treasurer doe3 not protect the producers, the producers will not protect him and his Department. Barley last year was realizing 6s. or 7s. per bushel; to-day it is worth only about half that price. Thousands of bushels of barley are stacked. How can the farmer who has large quantities of barley on hand pay income tax in respect of it until he has realized upon it? It would be wrong to tax him on the basis of last year’s prices. Milk is also greatly decreased in price. No Treasurer could properly assess the primary producers in respect of stock held over. The Department should wait until such stock is realized, when the owners will be able to furnish a proper statement of their income. I hope that the Treasurer will deal very carefully with this matter, and that he will agree that taxpayers should not be called upon to pay income tax in respect of stock or produce on which they have not yet realized. When such stock or produce has been sold, the owners will be proud to pay income tax in respect of it. In conclusion, I congratulate the Treasurer on the information with which he has supplied us in regard to this Bill, and am pleased to tell him that throughout the country he is looked upon with the greatest respect.

Mr BRUCE:
Treasurer · Flinders · NAT

– We have had a very full discussion on this vital and important question, and I think I must now submit the amendment which I announced earlier in the day, providing for the addition of a proviso to paragraph b, subparagraph i. In order to meet the point raised by the right honorable member for Balaclava (Mr. Watt) with regard- to the case of distribution by the liquidator of a company out of capital assets, I am slightly amending the proposed amendment as printed and circulated. I move -

That after sub-paragraph (i) of paragraph (b) the following proviso be inserted : - “Provided also that where a dividend or bonus is paid wholly and exclusively out of the profits arising from the sole of capital assets, a member or shareholder shall not be liable to tax on that dividend or bonus:

Earlier in the day_ I explained this matter very fully. I think I have met the objection which has been raised, and, therefore, shall not discuss it further’.

Amendment agreed to.

Amendment (by Mr. Bruce) prosposed -

That the word “ profits “, first occurring in paragraph (i>), sub-clause (ii), be left out, with a view to insert in lieu thereof the words “ assessable income “.

Mr BOWDEN:
Nepean

.- T should like to know exactly what is the effect of this sub-clause. I have read it carefully, and yet., I am scarcely able to get “ the hang of it.” Does it apply only to current year’s profits?

Mr BRUCE:
Treasurer · Flinders · NAT

– The effect of the sub-clause is to exclude all distributions in the shape of bonus shares, with one exception; that is, we will not allow a company to take advantage of the provision with regard to bonus shares to evade all taxation on its profits. We allow exemption in respect of bonus shares provided the income has been brought to account as nondistributable and the company’s flat Tate of tax has been paid on it. Once the income has been brought to account, and the tax has been paid, then bonus shares may be issued. All that the ‘clause does is to see that a dishonest company does not take advantage of the provision with regard to bonus shares, .and avoid taxation by capitalizing and issuing its profits in the form of bonus shares.

Mr Pratten:

– The clause protects the revenue?

Mr BRUCE:

– Yes.

Mr FLEMING:
Robertson

.- 1 move - _

That the following new paragraph be inserted after paragraph (b) : - “ (bo) for the purposes of computing profits, perishable products or live stock shall not be token into account until realized upon “.

I do not desire to traverse all the arguments that have been placed before the Committee, -because there already has been much discussion on this measure. 1 I do wish, however, to reply to some of the statements made a moment ago by the Treasurer (Mr. Bruce). The whole of the argument of the honorable member in connexion with the taxation of live stock is the argument of the dealer as against the breeder. He has told us that there are two distinct schools of thought in connexion with livestock and the natural increase; and there are simply because there are two distinct types of men on the land.

Mr Bruce:

– That is not the distinction I was referring to.

Mr FLEMING:

– There is the breeder, who is the mainstay and the backbone of the industry, and there ib the dealer. To the dealer the natural increase is of no moment; he buys in the cheapest market, aggregates his stock, and sells it in large numbers in the dearest market. Naturally he does not care in the least whether or not the natural increase is taken into account; his whole concern is as to how he buys and sells, and he has no interest in the other phase of the matter, and he naturally advocates that system of taxation which he thinks best “suits his book.” But the breeder is the man responsible for the upkeep of the whole industry. Very often, under present conditions, he pays tax oi» what he has never realized on, and ho never gets a refund of tax paid in connexion with stock lost. I admit that the Treasurer is correct when he says that the breeder balances this to a certain extent in his subsequent returns; but he has paid on what he has never realized. He is out of pocket, and often has to pay higher rates than he would if he had been allowed to pay on a cash basis.

Mr Bruce:

– It is the other way.

Mr FLEMING:

– In odd cases it operates the other way, and the dealer is the man in whose favour it operates as the Act now stands. We, however, who are practical men, and have been through the mill - who have actually raised stock and grown produce - know the ins and outs of the industry; and all who speak with practical experience are in favour of the elimination of taxation on natural increase. The man who is only a dealer is quite .prepared to let things stand as they are - he does not feel the actual inequity of the system; but we who have bred stock and seen it die, who have grown crops and seen them destroyed, and who have paid tax in many cases on produce on which we have never realized, know the incidence and how it “hits” us. There are many cases of men in Australia who are tired out and are going off the land because of this unfair incidence of taxation. The Treasurer may think that that is an overstatement of the case, but I can assure him from actual experience that it is a fact. Only last week I had a letter from one of the biggest graziers in New South Wales, whom I have known all my life, and he says that unless the system of taxation is altered he will have to give up his grazing properties as unprofitable. This man, I may say, is one of the shrewdest in New South Wales ; and no doubt the position is serious. It is not only the big man- who suffers, the small man suffers even more. A man raises a few head of stock, pays income tax on them, and then they die. Possibly this man grows a quantity of hay on which he also pays income tax, although he gets no return, because he only raised it for the use of the stock which have died. He pays taxation, not only on what he has not realized on, but really on what he has never had. There is another point with which I wish to deal. Some time ago, before the present Treasurer took office, I submitted a case to his predecessor (Sir Joseph Cook). That case I now desire to place before the present Treasurer in order to show what hardship is inflicted on many men who are developing Australia. When a man realizes on a freehold property, he is not taxed on the price which he obtains for it; if he makes a profit, it is regarded as aggregation of capital, because he can invest it in another direction, and pay income tax on tic income thus derived. ‘If, however, a man has a leasehold in the back country, which, after years of effort, he has improved, and he realizes on it, he is taxed on the actual profit he makes, although it is spread over a term of years. I have here a communication which gives the facts of the case to which I have referred, and shows the gross unfairness of the position -

The facts are that O’Mullane after numerous reserves saved the sum of £300, and on the 1.6th February, 1911, was the successful balloter for settlement lease No.- 1911/1 of ‘ 5,739 acres situate in the parish of Benbarba, county of Caidmurra, land district of Moree. In passing, we might state that this land had previously been offered by the Grown for selection as a scrub lease, and nobody would take it on, and at the time of selection was heavily infested with prickly pear, and, altogether, was in a very bad state. O’Mullane, by dint of terrifically hard work, by not spending a shilling, and by taking stock on agistment, managed to improve the place very considerably during the first six years of his residence, during which time he borrowed £500 at 10 per cent. In about 1917 O’Mullane’s brother came to his rescue, and lent him the sum of £2,000 with which to buy a few stock to pay off the 10 per cent, mortgage, and effect some further improvements to the lands. Up till this time O’Mullane had never had the money to. buy any stock of his own to put on the lands. From 1917 onwards O’Mullane did pretty well, and continued to heavily improve the place, and on the 24th May, 1919, he sold the said settlement lease lands to one P. C. Lyons, for the sum of £1 10s. per acre, or a total sum of £8,607 10s. This sale was completed on the 7th August, 1919, when the property was transferred to the purchaser, and by him mortgaged back to secure half of the purchase money, repayable on the 7th August, 1924, with interest at 4* per cent.; of the half purchase money, namely, £4,300, which was paid in cash, O’Mullane only received £2,018 18s. 5d., the balance being paid to his mortgagees. O’Mullane has now been assessed by the Deputy Commissioner of Taxation for this State in the sum of £5,S32, said to be the profit made by 0’Mull anc on the sale of his settlement lease, and is arrived at by deducting £2,770, representing tho value of the improvements from the total purchase moneys, viz., £8,608. The tax in respect of this .amount which is now claimed is £1,597 14s.

We might say that O’Mullane sold this land in 1919, not because he was tired of work, but because he strained his heart working on the property, and had to sell it, because prickly pear lands are no good unless the boss can, and does, work.

Now, the Taxation Commissioner contends that a settlement lessee is a lessee within the meaning of sub-section (d) of section 14 of the Income Tax Assessment Act 1915 to 1918, as amended by section 8 of the Act No. 18 of 1918, and it is on the strength of this construction of the section in question that the assessment in question has been made. -So far as wo arc aware, there is no section in the Federal Income Tax Acts to provide .the profits on the sale of real estate shall be deemed to be income, although such a provision has been specially made in regard to State income tax for this State. In any case, however, the said Act provides that the profit on the sale of real estate was only applied where the real estate has been sold within five years of its acquisition, that is to say, is designed purely to make the income of land speculators liable to income tax. There is not, however, any like provision in the Federal Income Tax Acts, and if it had been the intention of the Federal Legislature to make the profits on the >sale of real estate taxable as income, we submit that a special clause to that effect would have been inserted in the Federal Acts. However, there is no such section in the Federal Acts, and, consequently, a man may deal with hundreds of thousands of pounds’ worth of freehold or secured land (as opposed to leased lands), and, no matter what profit is made on those dealings, he is not liable to pay Federal income tax in respect of the protit. For these reasons, it seems to us monstrous to think that the Legislature ever intended to treat the profits of the small selector as income while letting the dealer, whether small or large, in freeholds or secured tenures, go scot free.

Mr Watt:

– He does pay, though.

Mr FLEMING:

-!- In answer to the honorable member for Balaclava, I may mention that this communication is from, a firm of lawyers of very high repute, and I know from experience that what that firm says is very often true. The letter proceeds -

Following out the above reasoning, the most peculiar anomaly about this particular case is that if O’Mullane had converted his settlement lease (as ‘he had a right to do under section 184, et seq., of the Crown Lands Consolidation Act 1913) into ‘conditionallypurchased lands prior to selling to Lyons, then he could not have been called upon to pay one shilling income tax, because, in case of .such conversion, he would have then been a selector of conditionally-purchased lands instead of a selector of settlement lease lands, although the land would have still been the same, and his ‘ profit the same. Could such a position as that ever have been intended by the Legislature? We think not.

I have quoted this case at length, because I happen to know the vendor and the purchaser, and because the former placed the facts before me some two years ago. I then submitted them to the ex-Treasurer (Sir Joseph Cook), but this man has received no relief. The present Treasurer will agree that the man is placed in a manifestly unfair position. He went on to a property which was useless - practically worthless - and at the end of five years’ work, he sold for £8,608. He had borrowed something over £2,000, and his improvements cost him about £3,000; so that at theo finish he actually drew only £2,018- for eight years’ hard work, showing an income of only about £250 a year. Yet he is called upon by the Commissioner to pay taxation amounting to £1,597 14s. on the £2,018. That is the sort of thing that is operating under the present income tax law, and I see nothing in the Bill before us that will do away with these anomalies and difficulties. We ought to provide that when a man takes up a leasehold, improves _it, and sells it, he should not be called upon to pay tax on the profit of the sale, or, at any rate, he should not be called upon to pay on the profit of the sale as one year’s income; the taxation should at least be spread over the years he has spent in developing the property. In a case such as that to which I have just referred, a mau cannot expect to earn from the land anything more than will just keep him going; and when he comes to sell, it is grossly unfair to treat the profit of the sale as income earned in the year of the sale, and, therefore, taxable. Then, again, however right it may be in theory, the method of assessing and taxing natural increase works harshly in practice. If the Department would wait until the producer had realized on that natural increase, the latter would be in a position to pay. I know from experience the gross injustice of the present practice. Of the iniquities of our taxation law, it is the greatest, and it is having the effect of driving men off the land.

Mr STEWART:
Wimmera

.- I do not wish to labour this matter, or to repeat what has been already said ; but I would impress on the Committee that dissatisfaction with the present method of assessing natural increase assets is widespread. The statement of the Treasurer, that under the Act this method is the only one possible, may be correct ; but the Act should be amended to allow of the assessment of natural increase on a cash sales basis. The Australian climate is notoriously fickle. We have periods of good years followed by periods of bad years. A stock-owner may have a largo natural increase in one year, and the following year may be so dry as to make the stock unsaleable and put him to great expense in keeping it alive. But he is taxed on it just when it is of least value to him, and when it is least convenient for him to pay taxation. The term “ capacity to pay “ has been used a great deal, but this is a case of incapacity to pay. Primary products are largely perishable, and the method of assessing natural increase which is distinctly perishable should be altered. It is true, as the Treasurer has said, that an allowance is subsequently made, but that allowance is insufficient. Although the man on the land pays taxation on the natural increase of his land, he does not get back a cent of whathe has paid. Furthermore, no allowance is made to him on account of the interest which he may have been charged on money borrowed to pay the tax. I do not think it would be of much good to ask the present Treasurer for consideration in regard to this interest, but I hope that the amendment providing for an alteration of the method of assessing the value of primary produce will be supported, not only by the representatives of the primary producers in this House, but also by members representing city constituencies. They should do this as a matter of justice. The present system is undoubtedly unjust, and although I have listened attentively to the speeches of those who have spoken during the debate, and particularly to that of the Treasurer, I have not heard any argument against the proposed alteration of the law. We have had no clear statement why the alteration should not be made. The Treasurer, or some other opponent of the amendment, should put before us some definite objection to it.

Mr BRUCE:
Treasurer · Flinders · NAT

– I have spoken at some length on the proposal to take a cash basis for assessing certain classes of property for income tax, and I do not propose to repeat what I have said on the subject, but

I wish to correct what I consider to be a wrong impression left in the minds of the Committee by the honoable member for Robertson (Mr. Fleming), who drew a distinction between the breeders and the dealers. It should be made known that the breeders are as much divided in opinion on this subject as any other class of the community.

Mr Stewart:

– They are not divided in this, that they consider the present method objectionable.

Mr BRUCE:

– A great number of breeders say that it is the best that could be adopted.

Mr Watt:

– Is that the present method, or the proposed method ?

Mr BRUCE:

– The proposed method, which provides for a variation between a minimum and a maximum. The honorable member for Robertson spoke also of the taxation of premiums paid for the transfer of leases. When a premium is paid for the transfer of an ordinary city lease or the like, it is, I think, acknowledged that it should be assessed for income taxation. But difficulty arises in respect of transfers of developmental leases by men who are doing pioneer work. The most difficult classes of leases to deal with in this connexion are Crown leases. Income taxation in respect of those leases is wrapped up almost inextricably with land taxation. I have devoted a good deal of attention to this very difficult matter, which has defied the wits and efforts of every Treasurer since 1915. A Royal Commission made certain recommendations about it, but no action was taken by the Treasurer of the day upon them. The subject has now been referred to a Taxation Commission, and I had hoped to have their views on it, so that some provision to deal with these leases might be embodied in the Bill. But, unfortunately, the Commission has not yet made a recommendation, and until I know its views, I do not feel able to deal with the whole question. It is a question which must be dealt with equitably, and care must be taken not to interfere unnecessarily with those who are doing developmental work in the back country. I am sorry that I cannot, at the moment, make a concrete and definite proposal; but, as I am not able to deal with the question as a whole, I am not prepared to deal with it piecemeal by considering cases which, to my mind, are not so urgent as those connected with the transfer of big develop- mentalleases.

Mr CUNNINGHAM:
Gwydir

– I am pleased at the evidence of the death-bed repentance of the members of the Country party afforded by the submission of this amendment. On the 8th December last I moved an amendment of similar effect, and had the members of the Country party then been as solicitous for thewelfare of the primary producers as they are now, on the eve of an election, it would now be in operation. It was carried in the first instance, but it was afterwards rescinded, and six members of the Country party voted for it. The members of that party were, at the time, too concerned about keeping the present Nationalist Government in power to make even a show of strength; but if they had then done sothe Government would, no doubt, have given way. Thehonorable member for Franklin (Mr. McWilliams) said that he looked upon my amendment as being of considerable importance so far as stock-owners were concerned, and spoke of the incidence of the tax as simply brutal.

Mr McWilliams:

– I think I voted for the amendment.

Mr CUNNINGHAM:

– The honorable member was a shining example to his party. The Leader of the party (Dr. Earle Page)-

The CHAIRMAN:

– The honorable member is not in order. He is discussing a matter not before the Chair

Mr CUNNINGHAM:

– The effect of the two proposals is the same. My amendmentdealt with the method of taxing the value of natural increas in stock and certainly traversed the ground which is covered by the amendment now under consideration.

The CHAIRMAN:

– The honorable member is in order in making casual allusions to. his previous amendment, but he is not in order in referring to the honorable members who voted for it.

Mr CUNNINGHAM:

– It is now too late to bring forward an amendment such as this in the dying hours of Parliament, when the Government do not care whether they go out this week or next week.

The CHAIRMAN:

– The honorable member must discuss the amendment.

Mr CUNNINGHAM:

– I am giving reasons why it is futile for the honorable member for Robertson to bring forward his proposal at such a late stage in the life of this Parliament.

Mr Stewart:

– This is the best electioneering speech we have heard upon this Bill.

Mr CUNNINGHAM:

– No doubt the honorable member for Robertson made a very good speech with a view to the fact that he would soon be before his electors, when, of course, he will try to justify his change of front upon this question.

The CHAIRMAN:

– Order !

Mr Fleming:

– I rise to a point of order.

The CHAIRMAN:

– I have already called the honorable member to order.

Mr Fleming:

– I rise to make a personal explanation. The honorable member is misrepresenting me.

The CHAIRMAN:

– The honorable member for Robertson may not interrupt another honorable member’s remarks for the purpose of making a personal explanation. .

Mr CUNNINGHAM:

– The attitude adopted by honorable members on this very important question is inexplicable. They had opportunities to do something effective in the past.

Mr Watt:

– How is the honorable member on this amendment?

Mr CUNNINGHAM:

– I shall support it, and I am only sorry that the gentlemen who stand behind it to-day did not support me twelve months ago when I moved in the same direction. Had they done so taxpayers would not have had to pay as they have been compelled to do owing to the incidence of this brutal method of taxing, as it has been described by the honorable member for Franklin (Mr. McWilliams).

The CHAIRMAN:

– Order !

Mr CUNNINGHAM:

– I indorse what the honorablemember for Robertson has said in regard to the hardship meted out to primary producers. We know very well that if a man started out with a thousand head of sheep, lost 500 of them by drought and raised 400 lambs from the survivors, he would finish up with a smaller number than he had at the beginning of the year, but nevertheless he would be obliged to pay income tax on the natural increase just as if he had lost no sheep during the period. I put forward this argument on the last occasion, and I was supported by honorable members of the Country party on the argumentative side of the case, but when it came to a vote they either voted against me or absented themselves from the Chamber. I would like to put on record the division list on that occasion.

The CHAIRMAN:

– Order ! I have called the honorable member to order on several occasions, and I warn him now that if he does not obey the ruling of the Chair I shall call upon him to discontinue his speech.

Mr CUNNINGHAM:

– On that occasion thehonorable member for Wilmot (Mr. Atkinson) voted against my amendment, and so did the honorable member for Indi (Mr. Robert Cook).

The CHAIRMAN:

– I direct the honorable member to discontinue his speech.

Question - That the words proposed to be inserted be so inserted (Mr. Fleming’s amendment) - put. The Committee divided.

AYES: 23

NOES: 25

Majority …… . 2

AYES

NOES

Question so resolved in the negative.

Amendment negatived.

Mr PROWSE:
Swan

.- I desire to move-

That in paragraph (d), sub-paragraph (i), the words “ in the opinion of the Commissioner “ be left out.

This paragraph provides that -

Money derived by way of royalty or bonuses and premiums, fines, or foregifts, or consideration in the nature of premiums, fines or foregifts demanded and given in connexion with leasehold estates, and the amount of any pay ment received by a lessee upon the assignment or transfer of a lease to another person, after deducting therefrom -

The part(if any) which, in the opinion of the Commissioner, is properly attributable to the transfer of any tangible assets belonging to the lessee; and

So much of any fine, premium, or foregift paid by the lessee, or any amount paid by the lessee for the assignment or transfer of the lease as, in the opinion of the Commissioner, is properly attributable to the period of the lease unexpired at the time of assignment or transfer by the lessee.

The paragraph proposes to place too much power in the hands of the Commissioner in this regard. If my amendment is agreed to, I shall also move to have the words “in the opinion of the Commissioner “ left out of sub-paragraph ii.

Mr Bruce:

– I accept that amendment.

Mr FLEMING:
Robertson

.- I have another amendment to submit in regard to that portion of the clause which I have just been unsuccessful in amending. I want to make it optional whether the natural increase be taken on fixed values or upon realized values. The Treasurer has told us that there is a division of opinion as to which method should be adopted, and I think it would be perfectly fair and just if we allowed raisers of stock to adopt whichever method they prefer so long as they maintain it all through. The Bill amends the values placed upon stock, and owners are given a range in which they can fix their values, but once having fixed upon certain values, they are obliged to adhere to them all through. I want the same position to be applied to the option.

The CHAIRMAN:

– Is not the amendment which the honorable member proposes to submit practically the same as that already disposed of?

Mr FLEMING:

– No; my previous amendment made it mandatory that the natural increaseshould only be taxed when its value was realized upon.

Mr Watt:

– If the honorable member seeks to amend the same part of the clause which he previously sought to amend, is he not too late now, seeing that the Minister has agreed to accept an amendment moved by the honorable member for Swan to a later part of the clause ?

The CHAIRMAN:

– The amendment of the honorable member forSwan has not beenput from the Chair.

Mr FLEMING:

– I admit that there are two schools of thought amongst stockowners as to whether the basis of valuation should be cashor a fixed value, and I think the amendment I shall propose would meet the requirements of all stockraisers, as well as the fruit-growers, farmers, and other men engaged in primary production. I move -

That after sub-paragraph (iii) of paragraph

  1. the following paragraph be inserted : - “ (bc) It shall be optional whether natural increase betaken into account at fixed value or when realized upon.”
Mr BRUCE:
Treasurer · Flinders · NAT

– This question has been discussed at very great length, and we have heard the views of honorable members upon two different systems of arriving at a basis for assessment of primary producers. The basis that is proposed in the Bill requires that natural increase of stock shall be brought to account at the end of every period. That system is in accordance with the general basis for assessment for income tax for every class of taxpayers in the community. If the compelling of primary producers to bring their live stock to account every year placed upon them a burden of taxation which was not placed upon other people, we would require to carefully consider whether we should not provide for alternative systems. But the proposal in the Bill does not place the primary producer in an unfair position as compared with the rest of the community. Under the amended proposal, he may value his natural increase of stock at any figure between the minimum and the maximum prescribed. He may bring it to account at whatever figure he thinks reasonable and proper. If he brings it to account at the maximum figure his income tax will be increased in that year, but the amount of taxation he will pay on subsequent realization will be reduced. If, on the other hand, he brings the stock to account at a low figure, he will pay a small taxation in the first year of assessment and heavier taxation when the stock is realized. We have been told that the primary producer may never realize upon the stock which he has to bring to account, but a great number of other people in the community never realize upon assets which they bring to account, and upon which they are taxed. Practically every trader in the community during the last few years has paid income tax on assets brought to account as if he had a very large income; but when those assets were realized they did not have the value which was placed upon them when first brought to account, and the owner has made a substantial loss in respect of them.

Mr Fleming:

– The primary producers bear the loss of depreciation in addition to dead loss.

Mr BRUCE:

– All persons, whether engaged in primary production or trade, are in the same position. The value of the stock decreases, but the owner has been taxed upon an assumed income, arrived at by placing a valuation upon the assets. When the assets are realized it is found that certain income taxation in respect of them should not have been paid. The averaging system has been introduced for the purpose of trying to minimize the effects of a disaster of that kind, and it will aid the primary producer as much as anybody else. Unless the primary producer is asked to bring his assets to account in a way which unfairly differentiates between him and other taxpayers, there is no reason why we should have two bases for arriving at income tax liability for different classes in the community. We must either insist that assets be brought to account at valuation in determining what the profits are or take the cash basis, levying income tax only upon the actual surplus of revenue over outgoings. Already our system of assessment is complicated, and many honorable members do not hesitate to unfavorably contrast the cost of taxation collection with the cost of collection by other authorities. If the proposal to provide optional bases of bringing stock to account were adopted another complication would be introduced, and there would be an enormous increase in administrative costs. For those reasons I cannot accept the amendment. I hope the honorable member will not press it, and that the Committee will agree to the one basis for assessment, which I suggest is reasonable for all classes.

Mr STEWART:
Wimmera

.- The Treasurer stated that the positions of primary producers and manufacturers, in regard to unrealized assets, were parallel. I was surprised to hear such an argument from the honorable gentleman. The two positions are entirely different. It is perfectly true that both classes suffer a depreciation of assets, but, in addition to that depreciation, the stock-raiser suffers a total disappearance of his assets through circumstances entirely beyond his control.

Mr MATHEWS:
Melbourne Ports

– We have been told that the stock-owners are taxed on assets that may never be realized - that the stock may die, or the crops be ruined by the elements. To a city dweller such taxation seems unfair. I have heard the same complaint for years, and have never heard from any Treasurer a satisfactory refutation or solution of it. I desire to vote fairly upon the amendment, and I seek some enlightenment. Will the Treasurer say that the reason for not agreeing to the proposal put forward by the Country party is that the farmer could easily falsify his accounts if he were not compelled to take into account all his stock? What are the reasons for not acceding to what seems to be a very fair request? I do not think that the Government should levy taxation upon an income that is never enjoyed. I voted last time against the Government because I regard it as our duty to defeat the Government whenever we get the chance. But one likes to know the merits of a case. For their own sake, the Government might explain why they insist upon taxing people upon assets which have not been realized.

Mr WATT:
Balaclava

.- The honorable member for Melbourne Porte is evidently in dire distress, and needs a helping hand. The Government should immediately respond to his appeal, and explain why the system of valuing stock was first introduced into income taxation. Before proceeding to discuss that matter, I ask for consideration of the method of proposing the amendment now before the Committee. The honorable member for Robertson (Mr. Fleming) has proposed to introduce matters relating to the valuation of live stock after sub-paragraph iii of paragraphb. Paragraphb has nothing whatever to do with live stock. It deals with company propositions. Its first sub-paragraph deals with dividends, bonuses, or profits; its second with bonus shares, and its third with the interest paid to debenture-holders. Paragraph a, which we have passed, deals with the valuation of live stock, and sets out that the valuation must be as prescribed for the first time. If the Committee assents to the proposition submitted by the honorable member it will make the Bill a rare joke, since we shall have in a sub-clause dealing with bonus shares and debentures a reference to live stock.

Mr GREENE:
RICHMOND, NEW SOUTH WALES · LP; NAT from 1917

– And the amendment, ifagreed to, would be particularly governed by paragraphb.

Mr WATT:

– Yes. The paragraph in which it is proposed to insert the amendment has nothing whatever to do with the primary producer as an individual. Whatever benefit there is in the honorable member’s remedial proposition would apply only to a member of a company.

Mr West:

– Members of companies are interested in natural increases.

Mr WATT:

– But the honorable member for Robertson is endeavouring to deal with the whole problem of the man on the land, and it is only here and there that we have companies dealing with such matters. The primary producer is an individualist who likes to have his own land and his own stock.

Mr Gabb:

– Then let us put him in another paddock, so far as this amendment is concerned.

Mr WATT:

– The amendment ought to run in another paddock where there is more grass for it. Apart altogether from the merits of the honorable member’s amendment, it seems to me that he has moved to insert it in a most awkward and unfortunate part of the clause. To insert it at the point proposed by him would be to demonstrate the principle, but not to produce any effect. The Treasurer is not obliged to find a way out of the forest for wandering members, and the honorable member for Robertson knows his way about sufficiently well to be able to find in the Bill the proper place for an amendment of this kind.

May I now refer briefly to the merits of the amendment, and deal with it on lines somewhat different from those adopted by the Treasurer. An ordinary trader in his income tax schedule has to bring into account the stockwith which his year started, and the stock with which his year closed. Those two factors govern, in some cases, mightily, and always, to some extent, the question of whether or not be has made a profit, and is assessable for income tax purposes. That goes without argument. The law must contain such a provision. If it did not, and if a man could start with stock to the value of £ 1,000 at the beginning of the year, and finish the year with £5,000 worth of stock, without accounting in any way for the visible improvement in his stock to the extent of £4,000, the law would be faulty. And go we say that every trader, whether he is a manufacturer, an importer, or an exporter, must account for the stock with which he starts his year, the stock with which he finishes his year, and all the other factors that go to make up the assessable amount for the year. If he does not take stock at the beginning and the end of the year, it is impossible to say what profit he has made. The primary producer, whether he is a farmer growing potatoes or grain, or whether he has live stock that has increased in number by purchase or by natural increase, has to do exactly the same thing. The whole object of making such a provision was to put on an equal footing all income taxpayers, whether they handle live stock or trading stock. The onus of proof must rest always on the man or the class of men who seek exemption from that requirement, which, to my mind, is the fairest requirement of any system of direct taxation levied on income. It is true that under the old system with which we are all familiar, a great deal of hardship was sometimes inflicted upon certain classes of our live-stock owners because the valuation was an extremely high figure, and if an increase, let us say, of 50 calves or 100 lambs were registered in a given schedule, and those animals died, the owner had to pay income tax in respect of them as if they had lived on and increased in value. He got no refund if they died. It was extremely difficult for the State to say it was dealing fairly with these men. But after this matter has been analyzed most carefully and impartially by the Royal Commission, and analyzed, I think, to finality, the Treasurer now comes along and says, “ Very well, we will give holders of live stock no exemption from bringing their stock into account at the end of the year, but we will give them the fairest possible basis of valuation at which we can arrive. They may adopt any one of three courses which have been devised.” They may make their own valuation.

Mr Stewart:

– The minimum must be one-fourth of the maximum.

Mr Bruce:

– The maximum would be about the present prescribed value.

Mr WATT:

– What is the prescribed maximum value of lambs? If it were 10s. the owner could take the value of his lambs at 2s. 6d. per head at the beginning and end of the year, and from year to year the man who did that would be treated as fairly as the State could possibly treat an income taxpayer who dealt in or bred live stock.

Mr Bruce:

– The figures are not finalized; but it is proposed so far as lambs are concerned that the minimum shall be 2s.6d. and the maximum 10s.

Mr WATT:

– That is actually the hypothesis on which I am working. The maximum for lambs the Treasurer tells us is 10s., and I am dealing with the case of a man who takes the value of his lambs as being one-fourth that amount.

Mr Bruce:

– The suggestion as to cattle is that the minimum shall be 10s. per head, and the maximum 40s. per head.

Mr WATT:

– So that if this Bill is passed, a given owner in making up his return will say, “ I am going to take all my increases in cattle at 10s. per head,” and every year, both at the beginning and atthe end, he must keep to that valuation of 10s. per head.

Mr Bruce:

– That is correct.

Mr WATT:

– Surely that is about as low a valuation as the State could insist upon. Without some such valuation we should differentiate, I think, in a completely unjustifiable way between the owner of live stock-in-trade and the owner of ordinary stock-in-trade.

Mr Stewart:

– The one class of stock is perishable and the other is not.

Mr WATT:

– Many classes of stock, other than live stock, are perishable.

Mr PARKER MOLONEY:
HUME, NEW SOUTH WALES · ALP

– But there is a great difference between merchandise and live stock.

Mr WATT:

– In respect of some classes of merchandise that is so.

Mr Fenton:

– Supposing one-half of a man’s live stock that have been so valued died?

Mr WATT:

– The honorable member is familiar with the dairying districts of Victoria and with the dairy-cattle trade. If half the increase of 100 in a given schedule died, that would increase the valuation of 10s. to £1. Surely, with such a provision as this a man is perfectly safe. If he takes a low valuation he can lose little or nothing. The Treasurer said that apart from the three alternatives there is another outside course which can be pursued theoretically, and that is the course of not bringing such stock into account until it has been sold or, in other words, working on a cash basis. If that course is to” be adopted in respect of live stock why should it not be followed in regard to everything else?

Mr West:

– It should be.

Mr WATT:

– Very well. Take the case of a big continental merchant, who starts a year with £500,000 worth of stock, and closes it with £750,000, but shows no profit except what has passed into his stock. Such a man might say to the Commissioner, “ I have made no profit, and will not have any until I realize.”

Mr Prowse:

– 13ut his stock would not die.

Mr WATT:

– That is not the point at this stage. The honorable member insists upon harping on the one string, apparently unmindful of the fact that there are other strings on which tunes may be played.

Mr Fleming:

– Wc do not mind paying on the stock we buy.

Mr WATT:

– That goes without saying.

Mr Fleming:

– It is the same with the merchant.

Mr WATT:

– There is no sanctity associated with an animal that one breeds, any more than there is in respect of an animal that one buys. Both are liable to die.

Mr Prowse:

– The owner is allowed to deduct the cost of producing his lambs.

Mr WATT:

– Legitimate reductions in accordance with this measure are allowed, but if we allowed an owner of live stock to bring his live stock into account for income tax purposes only when it had been sold, then, according to my mind, we should have to do something on the same lines for owners of other kinds of stock, and that would mean the dislocation of the whole income tax system.

Mr West:

– Why not take into account the amount over and above the taxpayer’s expenditure? Put it that way.

Mr WATT:

– The honorable member is suggesting the cash basis. If we say that receipts and outgoings shall be the only matters of which the income tax law shall take cognisance, then we scrap this Bill. If we did that, we should absolutely scrap practically every clause of the Bill, and would say “ Henceforth we will not deal with the ledger, but only with the cash book of the taxpayer.”

Mr West:

– I believe it is the fairest system.

Mr WATT:

– If the honorable member applied his clairvoyant “ X “ ray mind to this problem, he would probably come to another conclusion.

Mr West:

– Do not go too far in describing my mind.

Mr WATT:

– The honorable member doubts my description; I doubt it myself. I shall withdraw the words “ X ray “. Honorable members must recognise that if we were to take into account only receipts and outgoings, then all the vast increases of wealth that are occurring in the producing, mercantile, and manufacturing interests would not be brought into account until they had been turned over and the profits registered by actual payments. The income tax system provides differently. It provides, in effect, that in each year, from 1st July to 30th June, we shall bring into account the whole trading of the nation, and that whatever profits are made by people whose incomes are above a certain figure must be rendered in the schedules for that year. In ascertaining the profits made by them in that year, we take into account the increases in the value of the things they bought and still hold. Although the)’ may not -have realized on them, and although it is doubtful whether they will get the full price they expect to obtain for them., they have to bring them into account on the stock-taking valuation. I would not tear up the income tax law by putting everything on a cash basis. I prefer to keep all taxpayers on the same basis, unless hardship amounting to injury can be shown in respect of the owners of live stock. The Treasurer has endeavoured to meet the irksomeness of the past system and the injustice of it, if” it did work injustice, and I think his proposition deserves a trial. If it is given a trial, the live stock owners of Australia will, I think, appreciate it, and will not ask for a change. The honorable member for Maranoa (Mr. Hunter) has dealt with this question authoritatively from the stand-point of the Queensland experience. Whether he said it in this House or not, he has said elsewhere that if you were to ask the stock-owners whether they would go on the cash basis, not one in twenty would accept the suggestion.

Mr Hunter:

– Not one in three hundred !

Mr Bell:

– I venture to say they would.

Mr WATT:

– The honorable member for Darwin (Mr. Bell) speaks for the southern part of Australia, while the honorable member for Maranoa speaks for the wide areas of Northern Queensland ; and here we have the clash to which the Treasurer referred.

Mr GREENE:
RICHMOND, NEW SOUTH WALES · LP; NAT from 1917

– There is the further point, that probably in dealing on a cash basis, in both cases- more income tax would have to be paid,

Mr WATT:

– I think that is so. These shrewd Queensland men whom the honorable member for Hunter represents, and who are anxious to pay as little taxation as possible, would sooner have that kind of option. I think that broadly on principle, and from the stand-point of expediency, ifc is proper to reject the amendment, and keep to the principles of the Bill and the alternatives to be prescribed by the Government later.

Mr HUNTER:
Maranoa

.- I spoke on this subject yesterday, and I have no desire to repeat myself. One thing I did say yesterday - that the Treasurer should give- people the option. I know from practical experience that if they exercise the option they will only have themselves to blame.. and will be very sorry aftel wards. At the same time they have been crying out for something they have not got, and they will not be satisfied until th’ey get it, no matter how sorry they may subsequently be.. Many points have been touched on, and I should like to refer to what it costs to produce a beast. We were told that cattle were to be taken at a valuation of from 10s. to £2. Every business man likes to take stock at least at. what the stock cost ; if we reckon a beast at the very least, to cost 16s. a year to produce, in four years there has to be calculated four times 16s. At the end of three years there has been three times 16s. spent, and the beast may be sold for £10, but the profit is not £10, but only £10 less £2 8s., or £7 12s. If a cash basis’ be adopted, a tax has to be paid on the entire amount of £10, and there is no escape. On a cash basis the only debits are purchases and the sales are credits; and I can give an instance where a man would make a huge loss, and yet have to pay on a huge credit. In the boom in Queensland a few years ago, a man may (have paid £10,000 for cattle in April; and we must remember that in the first year he has a debit of £10,000. In the following April he may have had no rain for nine months, and he sells £10,000 worth of cattle for £5,000. Although he has made the huge loss of £5,000, he will, on a cash basis, have to pay income tax ‘ on a profit of £5,000. In the case of a man who does not deal, there is an advantage. If we take the price of cattle at £8, he would, on a cash basis, have to pay on a profit of £8 per head, whereas on the’ other basis, the first year he would pay on £3 a head, but in the following year only on the difference, that is, £5 per head. With a graduated scheme, it is much better to pay two income taxes, one on, say, £3,000, and another on £5,000, than one income tax on £8,000.

Mr Bell:

– The averaging system gets over that.

Mr HUNTER:

– I am speaking from a professional point of view, and I cannot vote contrary to the way in which I advise my clients. Out of 300 clients on my books, there is only one who adopted the other method, and he has’ suffered accordingly. There are men whom you cannot convince of the injustice that is being done to themselves. From the point of view of the income tax authorities it would be a great convenience if there was’ not this stock schedule at the end of the income tax return, for it takes up a tremendous amount of time in its checking. That is the reason, I suppose, that there are so many men like myself malting a living, because people find the preparation of the schedule so difficult. It cannot be said that in his proposal the Treasurer is shirking work in this regard; but, as I have said, people are continually crying out, and I should advise giving them the option, with an intimation that they can neverchange. I think that if that were done we should in two or three years find them asking for an amendment *of the Act. As to the amendment before us, the grown stock at the beginning of the year will be taken in, but not the natural increase. Inside three years, in the case of sheep, the grown stock will have been either sold or be dead. In three years time the people who neglected to bring in their increase of stock, would be on a cash basis ; and there would arise the old argument as to whether that is the best.

Question - That the words proposed to be inserted be so inserted (Mr. Fleming’s amendment) - put. The Committee divided.

AYES: 26

NOES: 0

AYES

NOES

Mr BOWDEN:
Nepean

– I feel very strongly in regard to the position of lease-holders, but in view of the statement made by the Treasurer (Mr. Bruce) that the whole matter will come up for reconsideration as soon as the report from the Commission has been re-

The part (if any) which, in the opinion of the Commissioner, is properly attributable to the transfer of any tangible assets belonging to. the lessee; and so much of any fine, premium or foregift paid by the lessee, or any amount paid by the lessee for the assignment or transfer of the lease, as, in the opinion of the Commissioner, is properly attributable to ‘ the period of the lease unexpired at the time of the assignment or transfer by the lessee.

If a man had paid a bonus of £10,000 for a ten years’ lease, and five years of the ten had expired, in bringing in his costs he would put down only the proportion of the bonus relating to the unexpired period, which would be £5,000. But in many cases, the lessee has worked up the good-will, and no credit for that is given. A business may have a return of £50 a week this year, and five years hence its return may be £500 a week. I have a case very similar to that. Yet good-will is not taken into consideration, while the actual bonus paid for the lease is decreased in proportion as the period of the lease has diminished. The bonus received for the good-will is taken into account less the amount originally paid for goodwill. I understood that an arrangement was to be made in respect of transfers of this character for giving credit for the value of good-will; but no such arrangement seems to be contained in the BillTherefore, I ask the Treasurer whether there is a provision dealing with the goodwill of businesses which are transferred with leaseholds?

Mr. BRUCE (Flinders- Treasurer) T4.501. - The Bill does not provide for good-will, and allows only for the exclusion of tangible assets. The question, arises almost wholly in connexion with transfers affecting hotels. The view taken is that the value of an hotel business depends to a great extent on the position of the premises in which it is carried on. When a man purchases the lease of hotel premises, he is really purchasing the business, and it is not reasonable, as I see the position, that the premium which is paid, which is a premium for the right to conduct the business on the site transferred in the lease, should not be brought to account. This is really a payment for prospective profits to be made during the balance of the lease on the site transferred. To make an allowance for goodwill every time, thus reducing the taxable amount, would not be just or right. Under the clause only tangible assets can be excluded, and the premium would be included.

Mr.FLEMING (Robertson) [4.53]. Do leasessuch as I spoke of earlier in the afternoon come under the clause?

Mr Bruce:

– I think that this is the only clause dealing with leases.

Mr FLEMING:

– Does the Treasurer propose to do anything to meet the cases thatI have put before the Committee?

Mr Bruce:

– No; they are not being dealt with.

Mr FLEMING:

– ThenI again ask the Treasurer to do something for these cases. Severe hardship is now being inflicted on a class which deserves well of the community. The honorable gentleman has admitted this afternoon that a man who goes into the back country to take up inferior land, or land in a bad condition, and by strenuous and prolonged toil, and the use of his brains, makes of it an asset of value to himself and to Australia, should be considered. It is certainly extremely hard that such men should be penalized. But at the present time large areas in the western district of New South Wales and in the south-western district of Queensland are going to ruin because men are not prepared to expend years of effort there only to lose the results of their labours in taxation. Every year prickly pear is. spreading over thousands of acres in New South Wales and in Queensland.

Mr Jowett:

– The area of prickly pear country is increasing at the rate of 1,000,000 acres per annum.

Mr FLEMING:

– I have been through pear-infested country, and I know that it will be brought into use again only by the offer of substantial rewards. I have known such country to cost £24 an acre to clear, and then not prove worth the expenditure. A lot of country in New South Wales and in Queensland is worth £3 or £4 an acre when cleared, and other country is. worth from £2 to £3 an acre, but, without the offer of incentives, men will not be got to take up that land. It would not pay any man to hire others to clear it. To use it profitably, a man must clear it with his own labour, putting in years of solid work in the hope that, at the end, he may have made an asset sufficiently valuable to keep him. No one who has not seen the prickly pear country can realizehow fast the pest is destroying our land. Twenty-five years ago I rode through much of the country now covered with pear. Hundreds of thousands of acres of that land were then as good sheep country as ever there was in Australia; but to-day most of it is useless. I implore the Treasurer to do something to reduce the hardships of those who take up country like this. We should give men real inducements to bring back land to a productive condition.

Mr BRUCE:
Treasurer. · Flinders · NAT

– I have very great sympathy with the pioneers of this country, but, as I said earlier in the afternoon, this matter cannot be dealt with piecemeal. It has to be dealt with on a broad basis, and ina manner that will give absolutely fair treatment to those who are developing the land. I cannot deal with it now, because I have not yet the necessary information. If I am to be responsible much longer for the Taxation Department, I shallpropose something definite; and, if I do not continue responsible for the Department, my successor will find a great accumulation of information which should substantially assist him in the task he will have to face.

Dr EARLE PAGE:
COWPER, NEW SOUTH WALES · FSU; CP from 1920

.- I wish to add to what has been said by the honorable member for Robertson (Mr. Fleming) about the hardships of lessees in the back country. The intention of the original Act was not, I take it, to tax transfers of homestead leases, settlement leases, and the like, in the way that transfers of hotel leases and similar transfers are taxed. The land laws of Australia are very complicated, and the conditions of settlement have been varied by many Governments. The Treasurer would do well to exempt transfers of settlement leases. During the régime of the last Labour Government in New South Wales, land which originally could be taken up as conditionally-purchased land could only be taken up under the tenure of homestead leases. When a man who held a conditional purchase taken up in 1909 sold it, any profit he might make on the sale as the result of his labour inimproving the lands was not regarded as income, but was: regarded as capital. But the man who sold a homestead lease taken up after, 1stJanuary, 1910, was mulcted on the profit made out of the transaction as if it were incomefor one year, althoughthe increase in value wasentirely due to his personal exertions. Thesame argument applies to settlement leases of whichthe case mentioned by thehonorable member forRobertson (Mr. Fleming) is typical. Last year the Treasurer at the time (Sir Joseph Coot) made aspecific exemption in regard to miningleases with which the classes of leases we now seek to exempt are onall fours; and if our wish is acceded to, immediate relief will be given to a most deserving class of settler.

Mr Bruce:

– The Royal Commission hasreported inregard to mining leases, but has not yetreported onthe other matter. It isthe onlythingf or which I am now waiting.

Mr Watkins:

– Ifthe amendment is notmade at this stage,it willnot be made for the next two or three years.

Dr.EARLE PAGE.- That isthe difficulty. The Department nowstands or falls uponthewording of the Act, and I want to protect these menin respect of the present year’s assessment. I know that it isalmost impossible to makean alteration without recasting the whole of theclause,but I should like the Treasurer to give me the assurance that he willhave a clause prepared for consideration on the recommittal of this Bill so that we may have a vote upon the question beforethe Bill finally leaves the Committee stage.

Mr FLEMING:
Robertson

.- We are not asking for anything unreasonable. It is impossible for the Treasurer, or any other man who has not seen the prickly-pear country, to realize whatan amendment would meanto the men who areattempting to keep back the ravages of a pest which accounts for the loss of 1,000,000 acres of productive land every year.

Mr Bruce:

– If the honorable member frames an amendment later on, he knows as well as I do that steps can be taken elsewhere tohave the matter ventilated. Itis hardly fair for him to ask me to deal with it now when we all knowthat this Bill must go through. For weeks past, honorable members have been aware that the Bill was coming forward. At any rate, if the honorable member has not an amendment prepared, he might take theordinary stepof having it dealt with elsewhere without askingme to recommit the clause for the purpose.

Mr FLEMING:

– I am satisfied if the Treasurerexpresses his intention of supporting areasonable amendmentinthis direction.

Mr.Bruce.- I can hardly dothat. I mustfirst see what the honorablemember proposes.I may say that I am quite prepared to consideranything he puts forward. {: .speaker-KFC} ##### Mr FLEMING: -- Sympathetically? {: .speaker-F4B} ##### Mr Bruce: -- Certainly . Mr.FLEMING. - Thereis nothingso dangerous to Australian productionat the presenttime as this prickly-pear problem.We must give to the men who are tackling thisclass of countryanopportunity of makingsomethingout oftheir land. At present they cannot do so, and theresult is that valuable country isgoingout of productioneveryyear. How- ever, withthe assurance of the Treasurer that he will give the matter sympathetic consideration, I am prepared to let it pass inthe meantime. I have no desire to prevent the passage ofthe Bill, because,on the whole, although there is a good deal of room for improvement, it certainly doestake somesteps in the required direction of placing taxationin Australia on a sound basis. {: #debate-13-s49 .speaker-JRH} ##### Mr BOWDEN:
NEPEAN, NEW SOUTH WALES · ANTI-SOC; NAT from 1919 . -I move - >That in paragraph(d), sub-paragraph (i), the word "tangible" be left out. This paragraph refers to good-will,and apparently, the word " tangible " hasbeen inserted in thisBill for a specific purpose. {: .speaker-F4B} ##### Mr Bruce: -- Yes, in order to meet certain cases. Mr.BOWDEN. - There are several cases pending inregard to this very point, and if this provision had any retrospective effect they might be prejudiced. Mr.Bruce. - There is no retrospective effect about this provision. {: .speaker-JRH} ##### Mr BOWDEN: -- There are some assessments which have not yet been made. However, I wish to bring under the notice of the Committee one case which has cropped up quite recently. A man bought for£3,000 ahotel businesswith a ten years'lease to run. Thetakings of that hotel were£50 a week. In five years' time he had so worked up the trade that the takings were £500 a week> and he sold out for £15,000. The Income Tax Office brought into one year's account the whole of that £15,000 as income. The only deduction .they allowed in connexion with his lease was half of the premium he had paid. They said that as five, years of the 10 years' lease he had acquired foi £3,000 had gone they would allow £1,500 fo represent the value of the premium for ihe unexpired period of the lease he had not utilized. Thus, they deducted £1,500 from the £15,000, at which the hotelkeeper sold out, and they regarded the balance as the premium received by him for a 'five years' lease of the premises. They cut out the good-will altogether. The asset really purchased was the goodwill of that .property, and was not the fact that the purchaser would still have a five years' lease to run. It was ridiculous for the Taxation Commissioner fo contend that any one would (pay £15,000 for a five years' lease, as compared 'with a sum of £3,000 which had been paid five years previously for a ten yoars' lease of the same premises, unless, of course, in the meantime the value of the good-will of the property had materially increased. The Department adopt the policy of allowing good-will to be taken into account in all businesses other than hotels. {: .speaker-K1J} ##### Mr Pratten: -- Good-will is regarded as accretion of capital. {: .speaker-JRH} ##### Mr BOWDEN: -- Yes, but in order to cover not only the hotelkeeper, but also the "grocer and softgoodsman, this little word " tangible " has now been inserted in the Bill, putting out of court altogether any question of the good-will of a business being taken into account. It is quite an easy matter to ascertain the good-will of any (business. The usual practice in Melbourne and Sydney is to estimate it at three years' profits. To cut out all consideration paid for such good-will in respect of all transfers- and sales of businesses is totally unfair, and really amounts to levying a tax on an accretion of capital. The working of the old provision was hard enough, but the insertion of the word " tangible " will make a very big alteration in regard to the manner in which the Taxation Department will administer this clause in future. Therefore, I ask the Committee to agree to my amendment, and leave it out. {: #debate-13-s50 .speaker-K1J} ##### Mr PRATTEN:
Parramatta I support the amendment moved by the honorable member for Nepean **(Mr. Bowden).** To those of us who have taken an interest in the incidence of income taxation, it is apparent that if the clause is not amended as desired, the opinion of the Commissioner of Taxation will be that good-will must be taxed in any circumstances as a profit, and in the year in which it is paid. Any person who has had the benefit of securing an accretion of good-will over a number of years must realize that whatever increase of his capital is due to the sale of such good-will is really, and in truth, what I have said it is, namely, an increase of capital, and not income which is taxable under the Act. It has been said that the Commissioner treats different businesses in different ways. That is to say, he treats the good-will of some businesses as an accretion of capital, and in other cases he regards it as income derived during the year of payment. The clause goes on to specifically omit good-will in mining businesses, and the good -will of a business that is converted into shares, and I think that if the word " tangible " were omitted it would give a little fairer play to many cases deserving of consideration. After all, in certain circumstances the good-will of a business may mean everything in the world to an owner. It may mean a small competence to him. Its investment may enable him to live in comfort after thirty or forty years of work, and I do think that the opinion of the Com> missioner should be further narrowed by the insertion of the word " tangible." Goodness knows, we give him discretion enough. Of all the Commonwealth public servants the Commissioner of Taxation has the greatest power, and I do not wish that power further increased by the inclusion of the word " tangible." {: #debate-13-s51 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT .- The word " tangible " has been inserted because every sale of the lease of a hotel premises has exemption from taxation on the ground that it is a sale of good-will only, whilst sales of pastoral and other leases to which no good-will is attached do not get that exemption. It is considered that the payment is in respect of the future and anticipated profits over a certain number of years, and the purchaser is entitled to amortize the price he has paid for those profits. If he can do that and no taxation is to be paid by the vendor, the whole transaction. escapes taxation. In order to prevent that, the word " tangible " has been introduced. If I accepted the amendment, that particular class of business would be removed completely from the area of taxation, whilst sales of other leases to which no good-will was attached would be taxable. Amendment negatived. Amendment (by **Mr. Bruce)** agreed to *-* >That in paragraph (d), sub-paragraph (ii), the words " in the opinion of the Commissioner " be omitted. {: #debate-13-s52 .speaker-KYI} ##### Mr PROWSE:
Swan -- I move - >That in the proviso to paragraph (d) the words " the Commissioner is satisfied that " be omitted. The sale, transfer, or assignment of a lease is a fact that can be ascertained, and the Commissioner's satisfaction should not be involved in a question of fact. The less responsibilities we throw upon the Commissioner the better for him and the community at large. {: #debate-13-s53 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- The honorable member for Swan is a little unreasonable in proposing this amendment, because the discretion which is thrown upon the Commissioner by the proviso as printed must be thrown upon somebody, namely, to determine whether the lease has been sold, assigned, or transferred "to a *bonâ fide* prospector, or by a person, partnership, syndicate, or company who or which does not make a business of buying and selling mining properties, &c." If the discretion given to the Commissioner were struck out the proviso would be meaningless. I fully share the general feeling against discretion being left to the Commissioner where that can be avoided, not because I have any doubt as to his ability or fairness, but because I am totally opposed to Acts of Parliament throwing upon some official the responsibility to determine questions. But in regard to the matter with which the proviso deals it is essential that somebody shall determine certain facts. Amendment negatived. Clause further amended verbally, and agreed to. Clauses 17 to 20 agreed to. Clause 21 - {: type="1" start="1"} 0. Where in any year a company has not distributed to its members or shareholders at least two-thirds of its taxable income, the Commissioner shall determine whether a sum or a further sum could reasonably have been distributed by the company to them. 1. In addition to any other facts which the Commissioner may consider in exercising the powers conferred upon him by sub-section (1) of this section the Commissioner shall take into consideration the fact of the retention by the company of taxable income for the following purposes: - {: #debate-13-s54 .speaker-JRH} ##### Mr BOWDEN:
Nepean .- I move - >That after the word " year," line 1, the following words be inserted : - " or within a reasonable time thereafter." Many companies do not declare dividends in the same year as that in which they have been earned. The dividend is declared at the annual meeting, and is distributed in the year following that in which it was earned. {: #debate-13-s55 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- The clause is intended to provide what the honorable member has suggested, and if he will withdraw his amendment I shall have the drafting of the clause examined. If it does not mean that a company which made its distribution in the ordinary way after its accounts were made up and the annual meeting was held, would be on perfectly safe ground, I shall have an amendment proposed in another place. {: .speaker-JRH} ##### Mr Bowden: -- I accept the Treasurer's suggestion. I think he might also consider the addition of the words " for such year " after the word " company " in the last line of sub-clause 1. Amendment, by leave, withdrawn. {: #debate-13-s56 .speaker-JOS} ##### Mr BELL:
Darwin .- Cannot the Treasurer agree to make a concession to co-operative companies under this clause similar to that which was agreed to by the Committee yesterday? Take the case of a co-operative company which sells goods to its own members, and, possibly, to others, andmakes a profit of, say, £500 on the transactions of the year. It does not distribute that £500 amongst any of its shareholders, but retains it as a trading asset. It takes the profit, in a sense, into its reserves, and it really becomes capital, because the company finds it necessary for the purposes of its trade to have a larger capital. If that £500 were taxed as profits, it would be very hard on such a company. It seems to me that it would not secure the benefit that would go to other companies under this clause, where two-thirds of the profits are distributed and the remaining one-third may not be taxed. In the case of the company to which I have referred, none of the profits would be distributed. {: .speaker-F4B} ##### Mr Bruce: -- A further distribution is required only if the Commissioner sodetermines, and there is a right of appeal to the Appeal Board. There is no possibility of a co-operative company which deals with its money in the way suggested by the honorable member being taxed. If it were it would have the right of appeal. {: .speaker-JOS} ##### Mr BELL: -- That is an assurance that I was seeking from the Treasurer, and I am very glad to have it. I was afraid that under this clause a small profit of £400 or £500 made by a company, such as I have mentioned, and not distributed by it, might be taxed. {: .speaker-F4B} ##### Mr Bruce: -- The honorable member need not have the slightest apprehension as to that. {: #debate-13-s57 .speaker-K1J} ##### Mr PRATTEN:
Parramatta -- It should not be within the province of the Commissioner to delay coming to a conclusion in respect of the matter dealt wish in sub-clause 1. I suggest to the Treasurer that he add the words, " Provided that any determination by the Commissioner shall be made not later than six months- {: .speaker-F4B} ##### Mr Bruce: -- May I interrupt the honorable member? Ihave circulated an amendment very much on those lines. {: .speaker-K1J} ##### Mr PRATTEN: -- I have not seen it. {: #debate-13-s58 .speaker-KYI} ##### Mr PROWSE:
Swan -- Will the Treasurer amend sub-clause 1 by substituting " one-half " for " two-thirds ", or give us some other modification of the provision? I think it would be for the good of the country in many cases if more could be distributed. {: #debate-13-s59 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT . - I knowfairly well the facts which the honorable member has in mind in proposing that this amount should be reduced, but I am afraid I cannot see my way to accept the proposal that " 50 per cent." should be substituted for the words " twothirds." The main difficulty is that no distinction is made between companies. A small private company of two individuals is just as much a company as is a great joint-stock enterprise. In the case of any large joint-stock enterprise, I do not think the honorable member need have the slightest fear that anything in excessof 50 per cent. is likely to be levied on. But in respect of somesmall companies we have to safeguard ourselves, and to see that unscrupulous people do not make use of this provision to attempt to defraud the revenue and to avoid their proper obligations. In view of that fact, I cannot consent to reduce the amount of 66 per cent. that is fixed in the Bill, and to take out of the purview of the Commissioner altogether any one who distributes a less amount. I can assure the honorable member, however, that there is no intention of hounding people and preventing them from creating proper reserves to promote the stability and future expansion of their businesses. Having in mind the difficulty that the honorable member feels, and the fact that there is a very great distinction in many cases between taxable and distributable income, I proposelater on to move an amendment which will make one of the specific facts that have to be taken into consideration in the determination of whether or not a proper distribution has been made, the relationship between distributable and taxable income. Provided that full consideration is given to that point, I do not think that many people in the community will take exception to the provisionremaining at 66 per cent. and not 50 per cent. I think that many have grave apprehensions in regard to the provision as to 66 per cent. of the taxable income if the relationship of taxable and distributable income is not borne in mind. {: .speaker-KYI} ##### Mr Prowse: -- I will give way again. {: .speaker-K1J} ##### Mr Pratten: -- The 66 per cent. is not an arbitrary distribution. {: .speaker-F4B} ##### Mr BRUCE: -- Certainly not.Ifa companyhas distributed that amount there cannot even be an inquiry as to whether it is sufficient or insufficient. {: .speaker-K1J} ##### Mr Pratten: -- Nor can a company be compelled in any circumstances to distribute more? {: .speaker-F4B} ##### Mr BRUCE: -- No. If a company has distributed anything less than 66 per cent. the matter will be open to review; but thereis no certainty that such a company will be made to distribute more than it has done. Where a company has distributed anything less than 66 per cent., it is merely brought within the ambit of consideration; if it has distributed 66 per cent. it istaken beyond that ambit. {: .speaker-K1J} ##### Mr Pratten: -- And the circumstances of the company would be considered? {: .speaker-F4B} ##### Mr BRUCE: -- Certainly. I propose now to move- Mr.Watt. - Would the honorable gentleman accept a suggestion with regard to the word " reasonable," in subclause 1? {: .speaker-F4B} ##### Mr BRUCE: -- I have already explained to the Committee what the clear intention is. I have undertaken to look into the clause, and, if necessary, to redraft it. {: .speaker-KXG} ##### Mr Watt: -- Very well. {: .speaker-F4B} ##### Mr BRUCE: -- I move - >That after the words " further subclause (1), the words " (not exceeding the excess of two-thirds of the taxable income, of the company over the amount distributed by it to its members or shareholders) " be inserted. I submit this amendment for the reason that after the clause had been drafted certain doubts were expressed that if a company distributed only 65 per cent., and so brought itself within the purview of the Commissioner'sconsideration, the Commissioner might then be able to say that it should distribute 70 per cent., 80 per cent., or 90 per cent., whereas in the case of a company that had been sufficiently astute to distribute exactly 66 per cent. no further action could be taken. I am proposing to insert these words merely to indicate that the power of the Commssioner to order a distribution is limited to the same amount as would have taken the company wholly out of his consideration. Amendment agreed to. {: #debate-13-s60 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- I move - >That the following words be added to subclause ( 1 ) : - " Such determination in the case of any financial year prior to that beginning on the first day of July, One thousand nine hundred and twenty-two, to be made not later than the thirtieth day of June, One thousand nine hundred and twenty-three, and in the case of other financial years within six months after the date of the issue to the company of its ordinary assessment." This amendment is very much on the lines of that which the honorable member for Parramatta **(Mr. Pratten)** was suggesting when I interrupted him a few minutes ago. These words are being inserted so as to give finality with regard to all previous years. The matter of the distribution, so far as previous years are concerned, has to be determined during the current financial year. For future years it will have to be determined within six months of the issue of the assessment to the company. I think that that will give a measure of finality, which is very necessary in connexion with the. penal clause of this character. Amendment agreed to. Amendment (by **Mr. Bruce)** proposed - >That after the word "consideration", subclause (3), the following words be inserted: - " the relation 'between the distributable income of the company and its taxable income and". {: #debate-13-s61 .speaker-KXG} ##### Mr WATT:
Balaclava .- The spirit of this amendment appears to be perfectly right, but it is difficult to say precisely what its effect will be if it is unsympathetically interpreted. The Commission might take into consideration the difference, which is in some cases very large, between the distributive and taxable income and the income a company is entitled to, retain. The Treasurer might at some subsequent stage of the Bill, here or elsewhere, make this a little more definite. The honorable gentleman will understand precisely what I mean. I do not wish to make the task of the Commissioner harder, but I desire that certainty which he aimsat as the result of the amendments to the clause. If, on consideration, the honorable gentleman can do this, he will clear up a matter which is very important to the trading community. {: .speaker-F4B} ##### Mr Bruce: -- I will give the matter consideration. {: #debate-13-s62 .speaker-K1J} ##### Mr PRATTEN:
Parramatta -- The Treasurer will realize that the distributive part of the income to which we set a maximum of 63 per cent., plus possible heavy income taxation, would absorb the greater part of the money that companies undercertain circumstances wish to place to reserve. Instead of the remaining 33 per cent. going to reserve, most of it will have to be paid in taxation, unless some limit be placed to the powers of the Commissioner. Amendment agreed to. {: #debate-13-s63 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- I move - >That the following new sub-clause be added: - "(b) Where in any year by virtue of subsection (2) of section 16 of the Income Tax Assessment Act 1915, or of that sub-section, as amended by the Income Tax Assessment > >Act 1918, any part of the income of a company not actually distributed has been deemed to be distributed to any member or shareholder of the company, his taxable income shall be reduced - > >by one-third of the total amount of the income of the company actually distributed to him and of the income of the company so deemed to be distributed to him; or > >by the amount of the income of the company so deemed to be distributed to him, whichever is the less;and the Commissioner shall refund to him the tax overpaid. The difficulty with regard to this clause I indicated in my second-reading speech. Certain people have been assessed under what is known as the old section 16 (2), and there are others who have not yet been assessed, but whosecases are under consideration. Under section 16 (2) the Commissioner had no option, if he determined that sufficient had not been distributed, but to say that the whole 100 per cent. of the profits must be distributed - must be deemed to have been distributed, and the shareholders must pay tax on their proportion. The difficulty we were faced with was that if the cases not yet finalized were to be dealt with under the new Bill, then, in justice, the old cases would have to be reopened and treated in the same way. To get over the difficulty of reopening the cases, reconsidering them and making a new determination, which would have been a very laborious task, to say the least, I propose this amendment, the purpose of which is to administer what is reasonable, even if it be somewhat rough, justice.It is proposed in all cases that have been dealt with, instead of the full 100 per cent. which has been required to be distributed, 63 per cent. should be substituted. {: .speaker-KXG} ##### Mr Watt: -- And refunded to the individual taxpayer? {: .speaker-F4B} ##### Mr BRUCE: -- So far as the individual taxpayer is concerned, who was assessed in regard to the amount that it was found should have been distributed, he will get a. refund of what he has overpaid. But whereas formerly 100 per cent. was deemed to have been distributed, it will now be 66 per cent. As to the cases which have not yet been settled, they will be determined under the provisions of this Bill. {: #debate-13-s64 .speaker-JRH} ##### Mr BOWDEN:
Nepean .- Does the Treasurer propose to give the shareholder any remedy against the company in cases where the tax has been col lected from him instead of from the company ? {: .speaker-F4B} ##### Mr Bruce: -- It has all been collected from the shareholder under the old Act. The shareholder is the man who will get relief. {: .speaker-JRH} ##### Mr BOWDEN: -- That is, he will get back one-third of the amount he paid, and as to the remaining two- thirds must take his own action, for, so far as I see, no remedy is provided in the Bill. Is there any power given to get from the company the tax that has been paid by the shareholder? {: .speaker-F4B} ##### Mr Bruce: -- No. {: .speaker-JRH} ##### Mr BOWDEN: -- I take it that the old assessments not yet paid will be a charge against the company, and not against the shareholder. Amendment agreed to. {: #debate-13-s65 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- I move - >That the following words be added to new sub-clause (6) just added - "and the company shall repay tothe Commissioner the tax previously refunded to it or dealt with as it directed in respect of the total amount of income tobe excluded from the assessments of the shareholders of the company under this sub-section." The company will now have to pay back to the Commissioner the amount that was refunded to it at the time that the assessment was made on the individual. I think I can make the position clear in a few words. This unfortunate transaction took place in this way : The company had undistributed profits on which it had paid the company rate of tax. The Commissioner suddenly came in and said that these profits were no longer undistributed, but had been distributed, and he went to the taxpayer and got the tax from him at the appropriate rate. But the company was entitled to relief for what it had paid ; and the company having got relief, we are entitled to get our share of the money back into our hands. That is all the amendment does. It puts the position as it was before the company was deemed to have distributed this one-third. This matter appears a little complicated, but really it is very simple if honorable members take it quietly. Amendment agreed to. {: #debate-13-s66 .speaker-F4B} ##### Mr BRUCE:
Treasurer · FLINDERS, VICTORIA · NAT; UAP from 1931 -- I move - >That the following new sub-clause be added: - " (7) This section shall also apply to all assessments hereafter to bemade in respect of any financial year prior to that beginning on the first day of July, One thousand nine hundred and twenty-two." This is inserted to clear up any possible doubt as to the basis on which those assessments for previous years not yet dealt with are to be dealt with. Amendment agreed to. Clause, as amended, agreed to. Clause 22 - >In connexion with income derived from mining operations (other than coal mining) carried on in Australia, thefollowing provisions shall apply : - > >the return required by this Act to be made by the person deriving the income in the first place shall show the total income so derived during the financial year in respect of which the return is compiled; > >the capital expended by the person carrying on the mining operations in necessary plant and development of a mining property from which income has been received (less the distributed and undistributed income derived by that person prior to the financial year for which income tax is being levied) shall be divided by the estimated number of years during which payable mining operations may beexpected to continue under normal conditions, and the quotient thus obtained shall, in addition to any other deduction allowed by. this Act, be deducted from the income; > >as an alternative to the deduction allowable by the last preceding paragraph, there shall, at the option of the taxpayer, be deducted so much of the income of the financial year as is expended in that year for development or is appropriated for development (the cost of which is not deductible under section 23 of this Act), and for new plant. {: #debate-13-s67 .speaker-KYI} ##### Mr PROWSE:
Swan .- I notice that in sub-clauses *a* andb, the words " financial year " are used. Is there any substantial reason why "accounting period " should not be substituted? {: .speaker-F4B} ##### Mr Bruce: -- I see no objection to the substitution of " accounting period " in sub-clause *a.* In the case of sub-clauseb I may point out that income tax is not levied for an accounting period, but for the financial year of theCommonwealth. {: .speaker-KYI} ##### Mr PROWSE: -But are there not certain people whose financial year is accepted as the financial year of the Commonwealth ? {: #debate-13-s68 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- I quite agree as to that, I but it appears to me that an alteration in the case of sub-clause *b* is unnecessary. However, I shall look into the matter. I think it will help the honorable member if I suggest that it is in sub-clause *c,* and not in sub-clause *b,* where the substitution of the words " accounting period " may be necessary. I move - >That in sub-clauses (a) and (c) the words "financial year" be left out with a view to. insert in lieu thereof the words " accounting period." Amendment agreed to. Clause, as amended, agreed to. Clause 23 - {: type="1" start="1"} 0. In calculating the taxable income of a taxpayer the total assessable income derived by the taxpayer from all sources in Australia shall be taken as a basis, and from it there shall be deducted - {: type="a" start="a"} 0. all losses and outgoings (not being in the nature of losses and outgoings of capital) including commission, discount, travelling expenses and interest, actually incurred in gaining or producing the assessable income. 1. all rates and taxes (including State and Federal land taxes and State income tax and war-time profits tax) actually paid in Australia by the taxpayer during the year in which the income was derived, but not including any tax paid under this Act: Provided that when a taxpayer receives a refund of the whole or any part of any of the taxes mentioned in this paragraph the amount of the refund shall be brought into account as incomein the year in which the refundis received; {: type="a" start="h"} 0. (ii) gifts exceeding Five pounds each made, during the year in which the income was derived, to public charitable institutions in Australia, if the gifts are verified to the satisfaction of the Commissioner; 1. the sum of Thirty pounds in respect of each child who is under the age of sixteen years at the beginning of the financial year in which the income was received, wholly maintained by any taxpayer who is not an absentee; {: #debate-13-s69 .speaker-JRH} ##### Mr BOWDEN:
Nepean .- Amongst the deductions under the old Act were commission, discount, travelling expenses, interest, and expenses actually incurred in gaining or producing the assessable income. I notice that in the Bill the words "and expenses " after the word " interest " are omitted. {: .speaker-KXG} ##### Mr Watt: -- But the word " outgoing " is now -used. {: .speaker-F4B} ##### Mr Bruce: -- I can assure the honorable member for Nepean that- there is nothing vicious -underlying the change. We are proposing to exempt the same expenses. {: #debate-13-s70 .speaker-KXG} ##### Mr WATT:
Balaclava . -Sub clause *b* and the proviso show that it is clearly not intended to allow a deduction in respect of the Federal income tax. But the Federal income tax is mentioned, and any refund got in connexion with it would therefore be credited. I suggest that, after the word " paragraph," the words " other than the Federal income tax ". be .inserted to make the matter clear. {: #debate-13-s71 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- There is a prior -amendment. I move - >That the words "'and war-time profits tax", paragraph (ft), be left out. This amendment is proposed because the war-time profits tax has lapsed. There may be collections going on, but deductions ure allowable in respect of the year when the tax was incurred. The words are quite unnecessary. Amendment agreed to. Amendment (by **Mr. Watt)** agreed to - >That after .the word "paragraph" in the proviso to .paragraph (-6) .the words "other than Federal income tax" be inserted. {: #debate-13-s72 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- I move - >That paragraph (e) be omitted with a view to insert in lieu thereof the following paragraph .- " (e) such sum as the Commissioner thinks .just and reasonable as representing the diminished value per centum by wear, and tear during the year in which the income was derived of any machinery, implements, utensils, rolling-stock and articles used by the taxpayer for the purpose of producing income; such wear and tear not being of a kind that may be made good by repairs : > >Provided that where a deduction has been allowed under paragraph (d) of this section, the Commissioner shall take into consideration the sum allowed -under that paragraph in determining .the sum to be allowed under this paragraph : > >Provided further that where in any business income is set apart by the taxpayer by .way of a fund to cover depreciation under any of the headings mentioned in this paragraph. the amount so set apart for the year in which the income was derived shall, subject to the approval of the Commissioner, be the sum to be deducted for depreciation." The adoption of the amendment will mean the restoration of the old provision regarding depreciation. The provision in the Bill was designed to liberalize the allowable deductions in respect of depreciation, and was the subject of most careful thought. It is only fair to mention that it was the Commissioner who pressed for the liberalizing of the deductions allowed for depreciation. The provision was framed to deal with the o'bsolescence of assets generally ; but many representations have been made to me about it, and the opinion generally expressed has been that if the (basis now in operation, which is clearly understood, were altered, it would greatly inconvenience many taxpayers. On the other hand, I have had no strong .representations in support of our new liberalizing provision. Therefore, at -the request of a great number of taxpayers, and to meet their convenience, I have moved to substitute the old basis of depreciation for the new. {: #debate-13-s73 .speaker-K1J} ##### Mr PRATTEN:
Parramatta .- I agree with the Treasurer that from the manufacturer's point of view the provision now in the law is, on the balance, an improvement on that proposed in the Bill. I agree, too, that manufacturers have become familiar with the practice of the Commissioner in regard to depreciation of plant and .machinery. If the Commissioner desires to liberalize the deductions allowed for depreciation and wear and tear, he has now power to do so under the Act, which allows him a discretion to do what is just and reasonable. So far as my experience of .the working of the provision in regard to depreciation goes - and I have had many representations made to .me on -the subject, particularly in the early years of the Act - the Commissioner errs on the mean side. I know that the maximum depreciation he allows .on machinery that can have a life of only ten years is '5 per cent, per annum., though, according to my arithmetic, it would require a generation at that rate to pay for it. As machinery is used more and more, and as so many developments have taken place in regard 'to it, I suggest, to "the Treasurer that, in the interest of proficient manufacturing, the deductions allowable for depreciation should be liberalized. Our manufacturers should have no temptation to continue in use machinery practically obsolete. Every encouragement should be given to them to bring their plant up to date. Many firms write off10 per cent., and in some cases 15 per cent., on their machinery annually, and replace that machinery long before it is worn out, because it is becoming obsolete. Yet the Commissioner allows a deduction of only 5 per cent. in respect of it for depreciation. It may be argued that the cost of repairs can be deducted; but in view of the fact that it is constantly preached to us that progress in manufacturing is to be made, not by keeping down wages, but by increasing the efficiency of processes, this matter of depreciation should receive more liberal treatment from the Commissioner. {: #debate-13-s74 .speaker-JRH} ##### Mr BOWDEN:
Nepean .- I should like to know whether it would be possible to amend the provision which the Treasurer seeks to substitute for that in the Bill. There is a general desire to include beasts of burden used in connexion with businesses among the assets on which depreciation may be allowed. {: #debate-13-s75 .speaker-JOS} ##### Mr BELL:
Darwin -- I was going to mention the matter spoken of by the honorable member for Nepean **(Mr. Bowden).** I would suggest the insertion after the words " rolling stock " of the word's " animals used as beasts of burden and working beasts." Those assets are excluded in the previous clause and should be included here. The value of beasts of burden obviously depreciates from year to year, and can be as easily allowed for as the depreciation in the value ofmachinery. {: #debate-13-s76 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT .-I do not think that I need reply to the criticism of the honorable member for Parramatta **(Mr. Pratten),** because if the Commissioner has taken too narrow a view of the allowance which should be made for depreciation of machinery - I donot admit that he has - there can be an appeal to an Appeal Board, and the result of such an appeal may be to obtain a more liberal allowance. {: .speaker-K1J} ##### Mr Pratten: -- There has only recently been the opportunity of appeal. {: .speaker-F4B} ##### Mr BRUCE: -- Yes. I do not wish to be taken as admitting, for one instant, that the Commissioner has taken an unfair view. As to the point raised by the honorable member for Nepean. **(Mr. Bowden),** it has been the practice of the Department to make an allowance for depreciation of the value of beasts of burden and working beasts. I suggest that he should allow me to look further into his proposal, with a view to giving proper effect to it. {: #debate-13-s77 .speaker-KFF} ##### Mr FOLEY:
Kalgoorlie .- I agree with the honorable member for Parramatta **(Mr. Pratten)** that hitherto the Commissioner has taken a narrow view regarding the allowance to be made for depreciation of machinery. Manufacturers have not been allowed to deduct more than 5 per cent. for depreciation of machinery. When speaking on the second reading of the Bill, I mentioned a case in point. The Minister thinks that the value of the machinery can be taken into consideration. But if he says, as he did by letter to me, that the law need not be amended in order to give relief to a certain taxpayer, I can see no way out if the taxpayer is to rely on the opinion of the Commissioner as to what is a reasonable amount to allow. Amendment agreed to. {: #debate-13-s78 .speaker-KYI} ##### Mr PROWSE:
Swan .- I am anxious to know why the deduction in respect to gifts to charitable institutions is limited to sums exceeding. £5. I should imagine that, in many cases, ten gifts of £1 each would be more acceptable than one gift of £5. Will the Treasurer explain why the limitation is made ? {: #debate-13-s79 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- It would be almost impossible to administer a provision which allowed all gifts to be included in the deductions capable of being claimed by taxpayers. I think the figure provided in the Act is very low, but I have left it asI found it. {: #debate-13-s80 .speaker-K1J} ##### Mr PRATTEN:
Parramatta -- The. amount of £5 was fixed in the last Bill in another place for the reasons just given by the Treasurer **(Mr. Bruce),** namely, that if single gifts of one guinea each could be discriminately deducted, the saving effected to the taxpayer would not becommensurate withthe extra work entailed on the Taxation Commissioner's office. Any one who has had very much experience in connexion with public movements will regard the scopeof the paragraph dealing with this deduction as being very narrow and as being possibly liable to restrict donations to very many estimable public and benevolent institutions that are outside the narrow ambit laid down in the paragraph. I should like to see some extension or widening of the provision which, while not bringing about any considerable sacrifice of revenue, would invite generous donors to make the gifts to this or that charity without suffering the infliction of having to pay income tax upon them. In my personal experience the Commissioner's definition of this provision is extremely narrow. {: #debate-13-s81 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- I do not agree with the contention of the honorable member for Parramatta **(Mr. Pratten)** that this provision should he widened; in fact, this particular class of deduction is one that should not be extended in any way. The paragraph was first inserted in the Act at a time of the war when we were all burning with patrioticfervour. {: .speaker-KXG} ##### Mr Watt: -- Hear, hear! {: .speaker-F4B} ##### Mr BRUCE: -- And when, possibly, Parliament was a little inclined to allow its sympathies to run away with it. But having found the provision already made, I have not, on this occasion, suggested its deletion. However, I certainly do not think that it should be extended. {: .speaker-KXG} ##### Mr Watt: -- Some of the States allow deductions for gifts to charities purely. {: .speaker-F4B} ##### Mr BRUCE: -- When people have spent their income in a particular way, which I trust gives them every satisfaction, as it should, if itis in the direction of generous gifts to charitable causes, they are a little too inclined to think that the State should subsidize them for so doing. The other day a gentleman saidthat he would give £25,000 to a particular institution, but he only proposed to burst into this generosity if he was freed from the payment of income tax. I looked up his case and found that the Commonwealth would be paying nearly half the gift. I have not the figures with me now, but, broadly speaking, if he had an income of £30,000 and kept £5,000 for himself, which ought to be adequate for any ordinary person to live on, and if he gave away the remainder of his income in the direction indicated he would, on the figures I worked out, have given about £14,000 and the Commonwealth would have given about £11,000. I have grave doubts as to whether people are entitled to be exempted from the payment of income tax in respect to gifts which one presumes are made willingly and with pleasure, and for which I understand a great reward is expected at a later period. At any rate, it is a principle which should not be extended. {: #debate-13-s82 .speaker-JXA} ##### Mr CHARLTON:
Hunter .- The Treasurer **(Mr. Bruce)** is right in saying that this provision was inserted in the Act in an emergency during tie war. Previously, no exemption was allowed in respect of charitable gifts. {: .speaker-KXG} ##### Mr Watt: -- Previously, the Commonwealth had no Income Tax Act. {: .speaker-JXA} ##### Mr CHARLTON: -- That is quite right, but I do not think that we would have inserted a provision of this kind if it had not been for the war. When we passed the provision many organizations were collecting funds for war purposes, and in order to encourage gifts to those funds the provision was put in the Bill. {: .speaker-KXG} ##### Mr Watt: -- There was a special clause accompanying it in respect of Repatriation Funds. {: .speaker-JXA} ##### Mr CHARLTON: -- I do not wish to push my view on the matter, but I think the time has arrived when we should strike out this exemption. Many people do not include gifts to charitable bodies in their taxation returns, and I do not think that a man who makes a gift of a large sum of money to a charitable organization has any justification for expecting to be exempted from the payment of income tax upon it. As the Treasurer has just pointed out, gifts could be made for the purpose of so reducing a man's income as to bring him to a lower rate of tax. I hope that there will be no extension of the principle. {: #debate-13-s83 .speaker-KZA} ##### Mr WEST:
East Sydney .- I have come to the conclusion that a large number of people give gifts to charities for the sake of securing advertisement, and I move - >That paragraph (h), sub-paragraph (ii), be left out. Question - That the sub-paragraph be omitted - put. The Committee divided. AYES: 13 NOES: 29 Majority . . . . 16 AYES NOES Question so resolved in the negative. Amendment negatived. *Sitting suspended from 6.34 to8 p.m.* **Mr. Bruce.** - Yes. {: #debate-13-s84 .speaker-KFF} ##### Mr FOLEY:
Kalgoorlie .- Paragraph *i* allows the deduction of calls paid to companies mining in Australia for " gold, silver, base metals or rare minerals." Would asbestos be included in rare minerals? {: .speaker-F4B} ##### Mr Bruce: -- I should say that it would not. {: .speaker-KFF} ##### Mr FOLEY: -- Asbestos mining is just now coming into its own. Many mines throughout Australia are being worked for asbestos, and the Australian product is now being largely used instead of the imported asbestos, for the manufacture of ceilings, roofings, &c. If asbestos mining is not included in this provision it should be. {: #debate-13-s85 .speaker-K1J} ##### Mr PRATTEN:
Parramatta -- I indorse the remarks of the honorable member for Kalgoorlie. The Commissioner may or may not include asbestos in rare minerals, but I think molybdenite and wolfram are certainly included. For the sake of the develop ment of the important industry of asbestos mining, I should like the Treasurer to make provision for the inclusion of asbestos amongst the rare minerals. The existing Act permits, in addition to the deduction allowable in paragraph? of the Bill, of a deduction of " 5 per cent. of the total amount paid in the year in which the income was derived in respect of calls on the shares of a company carrying on operations in Australia." The encouragement of enterprises in connexion with' other industries is just as important as is the encouragement of mining. I can see no reason for the deduction of calls paid to mining companies, but if that concession is to be allowed the provision in the existing Act should be retained in its entirety, so that deductions may be made in respect of calls paid to companies engaged in the development of manufacturing and other industries. I should like to hear from the Treasurer whether there is any special reason why the deduction in mining calls is retained. {: #debate-13-s86 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- This provision is designed to give relief in respect of enterprises which are of a very hazardous nature, but are essential to the development of the continent and the ascertainment of the full extent of our national wealth as yet undiscovered and undeveloped. The relief is limited to companies engaged in mining for " gold, silver, base metals and rare minerals." I could never see any justification for the old provision allowing a deduction of 5 per cent. of the calls paid to any company formed for any sort of development. I do not know whether or not asbestos falls within the category of " rare minerals." If it does, obviously calls paid to companies engaged in mining for asbestos will be exempt. I ask the honorable member for Kalgoorlie **(Mr. Foley)** to allow this matter to stand over, so that I may ascertain how asbestos is classified, and to what extent it is essential, in the interests of the Commonwealth as a whole, that the mining of this metal should be aided by means of this Bill. If my inquiries show that exemption should be given in respect of calls paid to companies mining for asbestos, I will undertake to see that an amendment to that effect is proposed. {: #debate-13-s87 .speaker-JXA} ##### Mr CHARLTON:
Hunter .- Paragraph *k* allows a deduction of £30 in respect of each child under the age of sixteen years. When -the amount was, in,creased from' £26 in December last, I. protested that the deduction was still toosmall. This Parliament' should. . give reasonable- relief, to- those- people who- have large? .families^ and: I cannot understand why the Commonwealth should be less liberal than the State of New South. Wales-, which allows a deduction, of' £50 fair each child, whilst Great Britain allows, a. deduction, of £40 from earned income, and1 £36 from unearned income. We talk a. great deal about' immigration, but the Commonwealth could have noi better immigrant than the. -Australian' baby. We should, do what is; possible to. give- parents, an. opportunity to rear1 families in. reasonable comfort. The high- cost- of living,, the. low general, exemption, of £200!, and the small deduction allowable for each, child under- sixteen years' of age, make it impossible' foc the- majority of parents to1 properly provide for large- families. We are not offering' the inducements that we should offer to people to rear' larger families. Most parents are desirous, of. giving a good start in life to the children whom they bring into the world, arid when the income of' the head of the household, is insufficient to- permit the rearing and education of a large family, in- accordance, with) that - policy", parents limit their burden in- proportion' to their financial capacity. If: the Commonwealth! can afford) to* spend £250,000 on' immigration, itf sorely can afford: to. make a more generous' allowance: for Australian-born children. I have- also held the opinion, fori a considerable time that the law should allow some- deduction in respect of adults' wholly maintained by the taxpayer. There' aire, many men and women in poor circumstances who are- maintaining afather, a mother, or1 some other dependent' relative) but the law makes no allowance for responsibilities of that kind. I do- not intend to- move any ' amendment in regard to that matter, but I suggest, that it is one worthy of the consideration' of the Government and the Committee. I move - >That, in paragraph (fc) the word " Thirty " be; omitted, with "a view to inserting " Sixty ',' in lieu thereof. {: .speaker-JOS} ##### Mr Bell: -- The honorable member isasking for too- big an allowance, and lie will not get it. {: .speaker-JXA} ##### Mr CHARLTON: -- If my amendment is. defeated I shall be prepared, to support any other amendment that proposes a< reasonable, deduction. {: .speaker-JRH} ##### Mr Bowden: -- Make the amount £50 for each child. {: .speaker-JXA} ##### Mr CHARLTON: -- I shall adhere to the amendment I have moved,, and if it' is defeated I shall support any other amendment that, is moved' to liberalize the Bill' in this direction.. {: #debate-13-s88 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- A proposal to increase the deduction allowed, in respect of children must of necessity, appeal to every ona in) the community; but, whilst we- are' all desirous of doing' what is reasonable in that direction, there is a limit to the deductions that can be allowed under the income tax laws if we are to obtain the revenue necessary for the requirements of the ordinary services of the Commonwealth. This question of the deduction to be allowed in respect of children, has received full consideration. It was dealt with by the Taxation Commission, which, made a certain recommendation. The Leader of the Opposition **(Mr. Charlton)** has referred to the deduction which is allowed in Great Britain, and also to that allowed under the New South Wales Act, but he has not referred to the deductions allowed in the other Australian States. He has selected, for- the purposes of his argument the State in which a deduction of £50 is allowed'. I would remind him- of the position in the other States. The Taxation Commission embodied in its report the provisions of all the State Acts. It set's out that in New South Wales a. deduction, of £50 in respect of' each dependent child' under' eighteen) years- of age.- is permitted. In Victoria, at the time1 of the presentation of the Commission's, report, no deduction in respect of children was allowed', but a Bill then drafted provided for a deduction of £26 in respect of each dependent child under sixteen years of age.. Under the< Queensland Act, there is a deduction of £26 in- respect of each dependent child. under1- sixteen years of; age: if the taxpayer's income does not exceed £800; so- that Queensland is very much less generous than lis the Commonwealth. Under- the South Australian Act a deduction of .£15 in respect of each dependent child under fifteen years of age is allowed if the taxpayer's income does, not exceed £550. In Western Australia there- is- a deduction, of £26- for each, dependent child under sixteen- years of age* while Tasmania allows a deduction of 6s. from: the tax for each dependent child' under -sixteen years of age, if the taxpayer's income is under £-350. With the exception of that allowed by the State of New South Wales, the deduction allowed by the Commonwealth is far more generous than that permitted under any of the State Acts. {: .speaker-KEV} ##### Mr Fenton: -- What about the deduction allowed in Great Britain? {: .speaker-F4B} ##### Mr BRUCE: -- Britain's position is very different from our own. The '"Royal Commission recommended a deduction -of £30 for each child under, sixteen years of age. The recommendation was embodied in the .amending. Bill passed last December, and is included in the measure now before us. I would remind ' honorable members that, under this Bill, .something more has been done. The general exemption has been lifted from £156 to £200, so that a married .man's income is exempt up to £200 .and he is .allowed 'a deduction of £30 in respect of «ach child. This question of granting a larger deduction in respect of children was considered very carefully by the Government before they brought in the measure now before us. It was taken into account in connexion with the proposal to increase the general exemption to £200. We gave full consideration to two proposals - (1) That the general exemption should remain where it was in respect of both , single and married men, and that ,an increase should be made in the deduction for children, or (2) that the general exemption should be raised. The decision of the Cabinet was in favour of raising .the .general exemption to £200. By raising it to £200 we have probably done very much more than would have been suggested with regard to the deduction for children had we left the general exemption, at £156. What we are proposing is, I think, far more generous than anything that would have been proposed in respect of the deduction for children ' had we allowed the exemption Ito remain at £156. The Committee is now invited to add to what has been given. I suggestto the Committee that too' much is being asked. I agree that the attitude of the Leader of the Opposition towards this measure has throughout been consistent, but he has not been worried by any particular sense of responsibility, in regard to the janan ces of the country, lt is easy to make proposals of this kind, which .must of necessity command the sympathy of all honorable members, but I suggest at is 'hardly fair to try to increase the deduction in -respect of children when the general- exemption has been raised to £200. {: .speaker-KXG} ##### Mr Watt: -- Can the Treasurer -tell us what 'amount would be involved in lifting the deduction .to the extent of £10 .per child-? {: .speaker-F4B} ##### Mr BRUCE: -- No; but I can give the Committee some figures that will help them -in arriving at a proper calculation. When the deduction was lifted from £26 to £30 it involved a loss of revenue amounting to about £.40,000. On the basis of those figures, to raise it -from £30 to £35 would cost about another £45,000, land to raise it from £35 to £40 per child would cost an additional £50,000. The point I wish to stress is that the deduction we are now giving was recommended by the .Royal Commission, and that the question of a still further deduction was considered by the Cabinet. Instead of raising the deduction beyond £30, we .'have done something which will probably .give greater relief than would have been afforded -a man with children had we left the general exemption where it was and raised the deduction for .children.. .The reason that the Cabinet decided to raise 'the general .exemption instead of - increasing the deduction for children was that, by raising the general exemption, the administrative costs would be very materially reduced. Had we raised the deduction for children and left the general exemption where it was we should still, have been faced with the necessity of handling and considering a great mass of income tax returns of which we are now free. {: .speaker-KXG} ##### Mr Watt: -- Does not the Treasurer^ averaging proposition, as embodied in this Bill, cancel the decrease in cost of administration which he secured by lifting the exemption? {: .speaker-F4B} ##### Mr BRUCE: -- Certainly. The reason that justifies the .absorbing in that way of .the expenditure so saved is that the averaging system is an attempt - an attempt with which some .people may not agree - tpi place the burden of taxation more equitably upon the shoulders of the taxpayers. {: .speaker-C7E} ##### Dr EARLE PAGE:
COWPER, NEW SOUTH WALES · FSU; CP from 1920 -- -ls this not an attempt to place it more equitably upon the shoulders of people with families ? {: .speaker-F4B} ##### Mr BRUCE: -- Quite so. We have raised ' the general exemption, and the burden is' now more equitably 'borne than it was. Having observed a fundamental principle' of taxation - the principle that you should try to collect your, revenue with a minimum of cost - it seems to me that so long as we are giving reasonable equity the Committee would go too far if, superimposed on the additional relief we have given, it endeavoured to increase the deduction in respect of children. I would ask honorable members not to be carried away by their sympathetic feelings with respect to this particular point. It is an easy appeal, and an easy cry to raise. We, as legislators, however, have a great responsibility, and are not entitled to respond to sentimental cries that appeal to us, and arouse in us the desire to do things which in our saner, moments we would not consider to be justifiable. For these reasons I appeal to the Committee to accept the basis of deduction per child which was embodied in the amending Bill passed last December - an increase on the former deduction - and which is again repeated in this measure. I have just been handed the figures for which the right honorable member for Balaclava **(Mr. Watt)** asked. To raise the deduction for children from £30 to £35 would mean a loss of revenue amounting to £45,000; to raise it from £30 to £40 would involve a loss of revenue amounting to £95,000, and to raise it from £30 to £52 would mean a loss of revenue amounting to £220,000. {: .speaker-JPC} ##### Sir Robert Best: -- And the Government has already sacrificed £600,000 in revenue. {: .speaker-F4B} ##### Mr BRUCE: -- It should be borne in mind, as mentioned by the honorable member for Kooyong **(Sir Robert Best),** that in this Bill there is relief to the taxpayers, included amongst whom are all who would benefit by an increased deduction for children, amounting to £600,000. {: .speaker-K1J} ##### Mr Pratten: -- What would we save if we decreased the general exemption in the case of single men, from £200 to £150? {: .speaker-F4B} ##### Mr BRUCE: -- I cannot give the honorable member the exact figures, but I can tell him that the additional revenue which would thus be gained would to a great extent be lost to the Commonwealth bv reason of the additional expenditure we should incur in collecting, since we should have to consider and handle the returns of all single men whose incomes ranged between £150 and £200. {: #debate-13-s89 .speaker-KX9} ##### Mr WATKINS:
Newcastle .- We have heard a lot from the Treasurer **(Mr. Bruce)** as to the loss of revenue which would be involved in raising the deduction allowed in respect of Australianborn children; but I would remind the Committee that the honorable gentleman is a member of a Government that is spending on immigration considerably more than the loss that would be so incurred. We are often told that our best immigrant is the Australian -born child; but when we show a desire to encourage in a small way the rearing of such immigrants, we are met with a " poor mouth " on the part of the Government, who declare that they cannot afford the money. It must be remembered that, at the same time, the Government can find money to help to bring children from other parts of the world. We are told that to raise the exemption to £52 will result in a loss 'of revenue amounting to £220,000. But who is going to get the benefit of the remission ? Not the men and women of this country who would rather nurse dogs than children. Those who will get the benefit are the average citizens, who believe that married life means what it was intended for. It seems to me that we might as well have left the whole matter of income taxation to the Royal Commission. Every time an honorable member proposes what he deems to be an improvement in the Bill he is referred to the opinions expressed in the report of the Royal Commission. {: .speaker-KV8} ##### Mr Stewart: -- What is the good of appointing a. Royal Commission if we do not take notice of its recommendations? {: .speaker-KX9} ##### Mr WATKINS: -- The honorable member is right, but if we are to be what we are supposed to be - representatives of the people - we have a right to form a judgment of our own. ' The Treasurer has referred to the general exemption of £200 under the income tax law, but I remind the honorable gentleman that that exemption is not like those under the State income tax laws. The States have a clean-cut exemption, but ours is a diminishing quantity. For every £3 a man earns over £200 he loses £1 of exemption. {: .speaker-KYD} ##### Mr Poynton: -- The exemption goes up to incomes of £800. {: .speaker-KX9} ##### Mr WATKINS: -- That is before the exemption is entirely wiped out; but every £3 earned over £4 per week means a loss of £1 in the exemption. In New South Wales, the State exemption, what- over it is, applies to all, and does not diminish, in the round-about way adopted in Commonwealth legislation. {: .speaker-KXG} ##### Mr Watt: -- The object of- shading off the exemption is to catch men who reach the higher incomes - a policy that has always been urged by the honorable member's party. {: .speaker-KX9} ##### Mr WATKINS: -- The *Hansard* records will show that when the honorable gentleman who interjects was Treasurer, and the present Leader of the Opposition **(Mr. Charlton)** raised this point, the honorable gentleman would not admit that the diminishing exemption would work in the way it has done. {: .speaker-KXG} ##### Mr Watt: -- I am talking of shading off the exemption. {: .speaker-KX9} ##### Mr WATKINS: -- I do not knew that this exemption represents a fair way of imposing taxation; in my view, if there is an exemption, it should be' a proper exemption. I hope the Treasurer sees that the time has come when the present exemption of £30 might well be increased in order to afford some assistance to people who are trying to rear families in Australia. {: #debate-13-s90 .speaker-KDZ} ##### Mr JOWETT:
Grampians .- I trust I shall not be accused of raising this question, or of taking part in a discussion on it, merely because we are on the eve of an election. On referring to *Hansard,* I found that one of the first speeches I delivered on becoming a member of this House was on the same subject. On 15th May, 1918, **Mr. Pigott** and myself brought the matter under notice {: .speaker-KXG} ##### Mr Watt: -- I remember your eloquent speech! {: .speaker-KDZ} ##### Mr JOWETT: -- I thank the honorable member very much. We were, however, defeated in our efforts on that occasion, when we asked that the exemption be raised from £26 to £52. On the next occasion that presented itself, 8th October, 1918, I again introduced the subject, and submitted an exactly similar amendment, but was defeated. I am glad, however, that .as a result of the discussion created by such amendments, greater prominence has been given to the subject. {: .speaker-KXG} ##### Mr Watt: -- Your thunder has been stolen ! {: .speaker-KDZ} ##### Mr JOWETT: -- I have no regrets on that score. I do not care from what quarter such a proposal is made, I intend to support it. Had I not happened to be called out for a moment I should, myself, have submitted a similar amend ment. The exemption for children has now been increased from £26 to £30; and I shall support my honorable friends opposite in making it as large as possible under this Bill. Twice have I moved that it be raised to £52, and I am quite prepared to support an exemption of £60. This is the gravest question that has ever been brought before any Legislature in Australia. An adequate increase of our population is absolutely dependent on the attitude' which the. community generally, including this Legislature, adopts towards the two conditions of life - one known as single blessedness, and the other as married happiness. I am a warm supporter of the immigration of people of British blood; and I am certain that there is no necessity to take steps to import people of other races. There are tens of thousands of men, women, and children in Great Britain who would make magnificent settlers in this country - so many are there who are perfectly ready to come that I feel sure we should not be able to provide sufficient ships to carry them. But in addition to immigration we must take every opportunity presented by a measure such as this, which, however indirectly, may tend to increase our native-born population. The question of making proper allowances to people who are prepared to undertake tha difficulties and responsibilities of parentage has never, I believe, been adequately considered by this Chamber. Owing to the increase in the cost of living since the beginning of the war, it has become more and more difficult for married people to bring up their children in the way they ought to be brought up, and there has been created a much wider gulf between the cost to a single person of living iii comfort and happiness and the cost to married people. The income now required to support a family in comfort is much larger than it was some years ago, as compared with the incomenecessary to support a single person. The result is that people who decide to get married, and who, in the natura] course of events, are blessed with children, find themselves at a great disadvantage; and the Legislature should endeavour to remove every obstacle from their path. This Bill presents one means by which those obstacles can, to a certain extent, be removed. In my view it is not a question of whether it will cost £50,000, £90,000, or £200,000. Within this very month we have proposed to make taxation remissions amounting to over £3,000,000. When those remissions were being considered, the very first to claim attention should have been the remissions to people who are undertaking to bring up families in this country. Itseems to me, however, that it is only at the last moment that anything of the kind has been thought of. Having remitted taxation amounting to over £3,000,000 we may surely spend £50,000 or£90,000 in making the most important remission of all. I feel most strongly on this subject I have voted foranexemption of £52 before, and Ishall support the largest exemption that the Committee is prepared to accept. {: #debate-13-s91 .speaker-KZA} ##### Mr WEST:
East Sydney .- No one will accuse me of not taking part in discussionson this question when it hasbeen before honorable members on previous occasions. The Treasurer tonight is labouring very hard; indeed, he reminds meof a man who is endeavouring to push a heavy wheelbarrow up a hill, and finds that he cannot do so without assistance. The honorable gentleman talks about sentiment; but what sentiment influencedhim when, inhis Budget speech, he proposed to relieve 20 per cent. of the people of this country of £1,900,000 of taxation? He has no hesitation in taking £3,500,000 from Trust Funds to relieve gentlemen who are connected with publiccompanies, who, during the whole of this debate on taxation, have been watching and endeavouring to obtain more relief for themselves and their friends. It is not the wealthy section of the community that has the large families. Those best able to keep children have the fewest. If the Treasurer had to live on the basic wage of £3 18s. a week fixed in New South Wales, and had a family of six children, he would view very differently the proposal to increase the deduction for children, and would not have made the speech that we have heard from him. Iknow that if he and I together took the public platform on thisquestion, I would have the audience withme. Reference was made to the New South Wales law. There the exemption is £250, with a deduction of £50 for each child. In that State a Government with humanitarian ideals has been in power. The population of New South Wales is increasing rapidly, past Governments having laid the foundation of a prosperity that has increased by leaps and bounds. 1 do not worry much about those who are well off ; it is what Blatchford calls the "bottom dog," those who have not too much of this world's goods, whose interests need guarding in a matter of this kind. The Treasurer's concern was not for the " bottom dog " when he reduced the income tax by 10 per cent., which means that a man who formerly had to pay £1,000 in income taxation cannow give £100 to his wife as a present for jewellery or other expenses. The honorable , gentleman has forgotten thosewho have tostruggle for a living, and are not in constantemployment. It is they who needa deduction of £30 for eachchild. It is the men and women who are rearinglarge familiesfor whom we shouldhave most consideration. I know what it means tobring up a large family because Ihad as manyas ten children. Australiais under ademocratic form ofgovernment, and the people's interests should be studied. It should not be necessary to put up a fight on behalf of an increased deductionfor children. The man witha wife and family of sevenoreight children contributes proportionately much more to the revenue than is contributed by theman with only a wifeand achildor two. When income taxation was first imposed in1842, itsobjectwas toobtain revenue from those whowere in a position to contribute to the needs of the State, but the ordinary man with a family of four or five is not in a position to pay income tax, and it was never intended that his income should be taxed. In the Budget, the Treasurer promised reductions of taxation on behalf of classeswhich can well afford to pay. On the Taxation Commission, of which we heard so much, there was not a representative ofLabour. {: .speaker-C7E} ##### Dr EARLE PAGE:
COWPER, NEW SOUTH WALES · FSU; CP from 1920 -- Yes; **Mr. Duffy.** {: .speaker-KNH} ##### Mr Mathews: -- And a very fine fellow, too. {: .speaker-KZA} ##### Mr WEST: -- If he opposedthe increasing of the deduction for childrenhe made a mistake. I understood from the Treasurer that the Commission , is in favour of the present deduction. In America,a deduction of £50 is allowed for each child, and there is an exemption of £500. Therethey understandhowto make income taxationequitable. The deduction originally provided for in the Commonwealth Income Tax Act was made low because, at the time, the country was at war. {: .speaker-KXG} ##### Mr Watt: -- The Labour party, in framing that measure, provided for a deduction of only £13 for each child. {: .speaker-KZA} ##### Mr WEST: -- Many of us objected that that deduction was too small; but we were reminded that the country was at war, and that a heavier burden of taxation had, therefore, to beimposed than would be proper in peace times. Circumstances must govern the imposition of taxation. Thus it was that we came to propose an exemption of £156 and a deduction of £13 for each child. We have been called disloyalists; but we were loyal enough to impose heavy burdens on our own class during, the war time, and should be commended for what we did. It should not be a reflection on us that the deduction for children we proposed was small. {: .speaker-KXG} ##### Mr Watt: -- My remark was meant, not as a reflection, but as a reminder. {: .speaker-KZA} ##### Mr WEST: -- Some of those sitting near the right honorable member regarded it as a reflection on us. During the consideration of the Bill in Committee, I have been surprised to note the keen watchfulness of the Treasurer and the supporters of the Ministry on behalf of public companies, wealthy squatters, and other wealthy persons; the interests of the rich could not have been more safeguarded. I think that it ismy duty to safeguard the interests of the poor. My life has been a strenuous one, but I am still full of vigour, and ready to champion the class from which I have sprung. Environment makes character, and the poor cannot get any one to represent them better than a member of their own class. The Treasurer talks about the burden of taxation, but after all the bouquetthrowing he benefits 75 per cent. of the people by remitting their taxation to the extent of £600,000, and benefits the other 25 per cent. by remitting taxation affecting them to the extent of £2,000,000. Apparently it will devolve upon honorable members of the Labour party, when they get on the other side of the Chamber, to see that justice is done to taxpayers with families; but I think that the Treasurer should mark his period of office by agreeing tothe proposal put forward from this side. If he would do so his memory would be kept green, because he would be doing something that would give satisfaction to the masses. {: #debate-13-s92 .speaker-C7E} ##### Dr EARLE PAGE:
COWPER, NEW SOUTH WALES · FSU; CP from 1920 .- While the Treasurer **(Mr. Bruce)** was speaking, it seemed to me there was running through his speech the refrain, " Children have no votes." He advised the Committee not to be led away by sentimental] reasons. As a matter of fact, almost every exemption provided for by the Treasurer in the Bill has a good solid reason in the shape of votes behind it. The incidence of taxation largely determines where people live and what theydo it also largely determines the character of the population. Therefore, the Treasurer should have given consideration to the raising of the deduction for children before agreeing to raise the exemption in the case of single men. The best immigrants Australia can have are the kiddies born here, and with the many calls that modern society makes upon the purse of the breadwinner, it is often a difficult matter for families to live in decent comfort. Men in my profession are able to judge where the shoe pinches in the household better than most men are able to do, and, speaking with that knowledge, I claim that the first remission of taxation should be in regard to those persons who have families. Last year I said that I would support the Leader of the Opposition **(Mr. Charlton)** upon this matter; but when it was pointed out by the then Minister for Trade and Customs **(Mr. Greene)** that, by agreeing to the amendment the honorable member had submitted the revenue would be reduced to the extent of £200,000 or £300,000, and it was already over £2,000,000 short, I supported the Government. However, we found that, although we had saved £200,000 or £300,000 by rejecting the honorable member's proposal and taking the money from the parents of children, the Government, despite their promise to effect economies, spent £1,000,000 more than Parliament voted for them. In these circumstances, and as exemptions are being made in other directions which are not so vital, Ihave no hesitation to-night in saying that I shall support the amendment moved by the Leader of the Opposition **(Mr. Charlton).** If there is to be any remission of taxation, he has indicated the direction in whichwe should make a start, and I shall do my best to see that it does start there. {: #debate-13-s93 .speaker-K4M} ##### Mr ROBERT COOK:
INDI, VICTORIA · VFU; CP from 1920 .- We want to do simple justice in this matter. Although I cannot see my way clear to support a deduction to the extent of £60 for each child, I think that the Treasurer might compromise by fixing the amount at £40. Under the proposal of the Leader of the Opposition **(Mr. Charlton)** a man with three children and a salary of £7 5s. a week would escape the payment of income tax. If the deduction were fixed at £40 for each child, a man with a family of three children and a salary of £6 5s. per week would escape the payment of income tax. Therefore, I think a deduction of £40 would be reasonable. I regard £30 as altogether too small a deduction to make, in view of what it costs to rear a family. No honorable member would care to keep a child on less than £40 per annum. {: #debate-13-s94 .speaker-KRD} ##### Mr McGRATH:
Ballarat .- It is refreshing to find that the Country party are coming into line with the Labour party at this eleventh hour. {: .speaker-L4X} ##### Mr PARKER MOLONEY:
HUME, NEW SOUTH WALES · ALP -- Not all of them. {: .speaker-KRD} ##### Mr McGRATH: -- No,not all of them. It is a fact that nine out of ten of them voted against us in this matter last session. {: .speaker-JSC} ##### Mr Brennan: -- Do not say anything now, or they may divide again. {: .speaker-KRD} ##### Mr McGRATH: -- We can see that an election is not far off when we find the Leader of the Country party **(Dr. Earle Page)** standing up to-night and supporting the amendment submitted by the Leader of the Opposition **(Mr. Charlton).** {: .speaker-C7E} ##### Dr EARLE PAGE:
COWPER, NEW SOUTH WALES · FSU; CP from 1920 -- I supported it last year. {: .speaker-KRD} ##### Mr McGRATH: -- But other members of the honorable member's party did not. When the Treasurer tells us in his Budget that the Government propose to remit £2,000,000 of the taxation paid by the wealthy classes of Australia, and that it is proposed to spend £200,000 or £300,000 per annum on immigration, there should be no hesitation in giving some relief to those people who are already in this country, and who have families. As a matter of fact, I believe that the general exemption should be raised to £300. A young Australian soldier who was wounded on several occasions married in London and brought his bride to Australia. The couple are living at Malvem, 3½ miles out of Melbourne. The husband earns £200 per annum. They pay £1 2s. 6d. per week for two rooms and the use of a kitchen, 10s. per week for their furniture which they have bought on time payment, and about 10s, per week for debts incurred in other ways. They were kind to me when I was in London, and I have asked them on several occasions to come up to the House and have tea with me, but they tell me that they cannot afford to make more than one trip per fortnight to Melbourne. Yet these are the people we are asking to pay income tax. Can we imagine a couple in such circumstances having children? {: .speaker-KDZ} ##### Mr Jowett: -- We could imagine that all right. {: .speaker-KRD} ##### Mr McGRATH: -- It is all very well for the honorable member, with his millions of acres, to talk in this way, but there is no doubt that this couple are financially embarrassed. The Government speak of spending £10,000,000 upon introducing people from abroad ; yet many of our people are in very straitened circumstances. The Leader of the Opposition **(Mr. Charlton)** proposes to give some relief to those people by, in the first place, increasing the allowance for each child to £60. When the Treasurer is able to relieve the wealthy classes of £2,000,000 of taxation, I appeal to him not to listen to the honorable member for Balaclava when he asks that everybody should be interested in taxation, and that there should be no exemptions. It is very easy for the honorable member and those similarly situated to speak of no exemptions. {: .speaker-KXG} ##### Mr Watt: -- I have never spoken of no exemptions. {: .speaker-KRD} ##### Mr McGRATH: -- A mother with two or three children and a husband earning about £4 per week, which is about the average wage to-day, has a serious problem in making both ends meet. We ask that people of this class should be given a little consideration. I think they should be absolutely exempt from taxation. If an increase of population is essential, make living easier forthe people who have families. I am heartily in accord with the proposed increase of the allowance to £60, and I hope that later the Committee will agree to increase the general exemption to £300. {: #debate-13-s95 .speaker-JOS} ##### Mr BELL:
Darwin .- I certainlythink that one of the first remissions of taxation should be in favour of those who have families to rear; but the allowance should be based upon the reasonable cost of maintaining a child. The proposed allowance of £60 is too high, for it does not necessarily cost that amount to maintain one child, or £120 to maintain two children, in reasonable comfort for the year. I look upon an allowance of 15s. per week for the maintenance of a child as reasonable, and I shall be prepared to support the honorable member for Indi **(Mr. Robert Cook)** in making the deduction £40 in respect of each child. The amount proposed by the Leader of the Opposition is a little more than is reasonable, having regard to the cost of maintenance. {: #debate-13-s96 .speaker-K4F} ##### Mr CONSIDINE:
Barrier .- It is rather amusing to listen to honorable members opposite voicing their opinions about what is fair and reasonable for the other chap. The honorable member for Darwin told the Committee that he is quite in favour of a fair and reasonable allowance in respect of each child ; but what is fair and reasonable is to be determined by him. He is like the "good employer ' ' who is in favour of reasonable wages, provided he is the judge of what is reasonable. {: .speaker-JOS} ##### Mr Bell: -- I was not returned to this Parliament to accept the honorable member's judgment. {: .speaker-K4F} ##### Mr CONSIDINE: -- I thought the honorable member was returned to Parliament to hear the rights and wrongs of the people, and do justice, and not to vote in accordance with preconceived ideas. He is influenced by prejudice, and not by the justice of the case. Taxation is, of course, important for honorable members opposite, who devote most of their time to wrangling about its incidence. Employers will take good care that the working men and women have very little trouble with taxation. In New South Wales at the present time the basic wage is £3 18s. 6d., so that the lower-paid workers are deprived of the benefit of the £200 exemption. In other States the basic wage is approximately the same, and when the campaign that is being conducted by those who are satisfied and those who are dissatisfied with the present occupants of the Treasury bench is completed, the wages received by the working men and women will not be such as to necessitate their burning midnight oil in making out their income tax returns. I know that the great mass of the working men and women will not be benefited by a measure such as this. A certain strata of the working classes will be benefited, but they are not the great majority; they are not those who are the first to experience reductions in wages, and who find it so hard to make ends meet. The honorable member for Indi **(Mr. Robert Cook)** spoke of giving exemption to workers who are in receipt of £6 or £7 per week; but how many of the working men and women are paid that amount? {: .speaker-KHG} ##### Mr Hill: -- Those people will not be troubled with taxation. {: .speaker-K4F} ##### Mr CONSIDINE: -- Of course, they will not, but the honorable member does not seem anxious to divest himself of his " troubles " and get busy with a pick and shovel at £3 18s. 6d. per week ! {: .speaker-KHG} ##### Mr Hill: -- Ditto. {: .speaker-K4F} ##### Mr CONSIDINE: -- If the honorable member and his colleagues have their way, I shall soon have an opportunity of doing that. In my pre-parliamentary days, neither I nor my mates were troubled with income tax returns, but we were troubled by the honorable member and his friends, who tried to reduce our wages, although they did not constitute a taxable income. I fail to see that taxation is a burning question amongst working men and women. Of course, it is a matter of great concern to honorable members who represent the various conflicting commercial, manufacturing, and agrarian interests, which to-day are proposing to form new parties to further their respective selfish ends. The capitalistic press in Melbourne is tellingus that politics are merely a reflection of the struggle between the steel interests and certain manufacturing interests represented by honorable members opposite. We saw something of that struggle in connexion with the war-time profits tax, when various groups were trying to shift the burden of the tax on to the shoulders of each other. We can well understand why honorable members get so heated in their discussion of the rights and wrongs of taxation. As I have pointed out before, and shall do again, the working men and women are not concerned about getting exemption from income taxation, because it is not theTaxation Department that robs them; they are robbed in the> fields-, the factories, the mines, and the workshops. Their concern is to stop1 robbery at thepoint of production. However, I intend to support the amendment, moved by theLeader of the Opposition, because it will benefit, certain sections of the working classes - those who are already enjoying certain advantages in comparison with, other working men and women. Later, I shall propose a further allowance to a married man who is wholly maintaining relatives other than his children. Single men wholly maintaining a pa-rent or parents are allowed a deduction, but a married man who also is maintaining his parents receives no 'consideration, ex>cept in respect of his children. When a taxpayer is supporting a parent or parents wholly dependent upon him, he should be allowed' the deduction that is permitted' in respect of children. I propose later on to move the insertion of the words " and /or parent," so that the paragraph, if amended as proposed, will them read, - The sum of sixty pounds in respect of each child who is under the age of sixteen years at the beginning of the financial year in which the- income was received and/or a parent wholly maintained by any taxpayer who is not an absentee, shall be allowed as a deduction from income. We have heard a lot from the Ministerial side as to " common justice," and I think that honorable members will agree that as an act of common justice the amendment I have foreshadowed should be agreed to. If it is right that a. deduction, should be allowed" a taxpayer in respect of the children whom he is maintaining, then it must appeal with added force to honorable members that if such a taxpayer has the additional burden of maintaining an aged parent who is absolutely dependent upon him, he should be- allowed a similar deduction in respect of that parent. If honorable members opposite1 are really desirous of reducing the burden of taxationimposed upon these people - if their professed desire to increase the deduction in respect of children- is not a mere electioneering cry - then they will support the further amendment of which I have given notice. . . **Mr. Considine.** {: #debate-13-s97 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT [9.33).. - This question has been discussed at considerable length, and many views' have been expressed, but I am inclined to think that all who have spoken, are not- quite clear as to the exact meaning of this proposal. If the deduction is increased to £60 per child it means tha* a. married man with two children will not be liable to taxation- unless his income1 is more than £320 per annum. {: .speaker-KLL} ##### Mr Makin: -- And quite right, too. {: .speaker-F4B} ##### Mr BRUCE: -- Some honorable members take that view, but it seems to me that such an exemption would be far too high, and much in excess of what is required to meet the ordinary necessities of a man before he is brought within the income tax area. The Leader of the- Country party **(Dr. Earle Page),** for some reason that I cannot fathom, prefaced his remarks by suggesting on my part an absolute want of good faith in the proposal I had put forward. I may have many sins, but I do not know that want of good faith is an outstanding one. The honorable member said that, underlying my observations with respect to this amendment, there was the thought that children have no votes. Such a statement was. a little unprovoked, and quite uncalled for; but, since the honorable member has made that suggestion against me, I. think I am quite fair in making a counter suggestion' against him,. I would remind him that while children may have no votes, their parents have. There is probably no more burning question throughout Australia than that as to the extent of the, deduction from income tax that should be1 allowed in respect of. children. An honorable member with an eye to the elections could not 'take up- a more- popular cry than that of " increase the deduction for children." The Leader of the Country party's suggestion that my attitude in opposing the amendment to increase the deduction was governed by a desire to please the electors, and that I was quite ruthless in respect of matters that would not affect votes certainly shows a very fundamental misconception of the whole position. If I were desirous of putting forward something that would appeal ,to the electors as a whole I could not do better than propose to increase the deduction for children. If we are- going to impute motives - I suggest it is wholly undesirable, although when, one is attacked in that way. one is driven to reply in a similar strain - I would point out that last December, when such a horrible thing as a general election was not near at hand, the honorable member declared that he would not, and he did not, vote for a proposal then submitted by the Leader of the Opposition to increase to £60 the deduction for children. Now that a general election is close at hand, he has changed bis attitude. Mr.Prowse. - That is not the reason hegave for his change of attitude. {: .speaker-F4B} ##### Mr BRUCE: -- He gave a most plausible reason, which suggested, I think, that hehad been looking up what he actually said when the amending Bill was before uslast December,and wasendeavouring to safeguard himself. {: .speaker-KXG} ##### Mr Watt: -- The honorable member knows, does he not, that imitation is still the sincerest form of flattery ? {: .speaker-F4B} ##### Mr BRUCE: -- I shall deal with that point in amoment. The Leader of the Country party said last December that he could not vote to raise the deduction from £30 to £60; per child, because, having regard to the then state of our finances, we could not afford the lossof revenue that such an amendment would involve. Had my modesty permitted, I might have suggested, in reply to him this evening, that . probably the reason he was now prepared to vote for such an amendment was that I had so improved the financial position that we could afford the loss of revenuethat it would entail. Thehonorable member put forward the amazing explanation of his presentattitude that, after all, we were so reckless and were wasting so much money that it did not matter much whether or not a. further sum was wasted. That was the substance of his explanation, and I think honorable members will agree with me that it is wholly insufficient. The right honorablemember for Balaclava **(Mr. Watt)** has said that imitation is still the sincerest form of flattery. Underlying that statement, no doubt, is the suggestion that if the Leader of the Country party is going to attribute motives to me I might very well respond in the same way. {: .speaker-KXG} ##### Mr Watt: -- Not at all. {: .speaker-F4B} ##### Mr BRUCE: -- I do not want to do, anything of the kind. Coming back to the question immediately before the Chair, I maintain the position I took up originally, that the deduction proposed by the Government taken in conjunction with the fact that we have raised the general exemption to £200, is reasonable and proper. I realize, however, that at times we are met with an expression of opinion that cannot be overlooked, and that thegeneral opinion of the Committee is that some further concession should be given to taxpayers with children. The Government cannot for one moment entertainthe amendment moved by the Leader of theOpposition, providing that thedeductionshall be raised to £60per child. Such an increase is quite out of the question, and would be extremely unfair to the general body of taxpayers. In addition, theloss of revenue which it would involve is more than we could contemplate, when taken in conjunction with our generalfinancial proposals for the year. Inorder, however, tomeet the wishes of the Committee, as so freely expressed,and without in any way receding from the position that its original proposition is reasonable and fair,the Government is prepared to raise the deduction from £30 to £39, which isequal to 15s. per week for each child. The Government is anxious to meet the wishes of the Committee, but it cannot agree to any greater deduction than £39 per child. {: #debate-13-s98 .speaker-JPV} ##### Mr BLAKELEY:
Darling .- It is most extraordinary that the Treasurer **(Mr. Bruce)** should, without any soliciting from the House, be so prodigal towards a certain section of the community. But, of course, the soliciting of 'that section is not done in the chamber; there is no necessity for the wealthy section to which I refer to do their lobbying here, seeing that it can be done through the organizations which control the Government. The Treasurer came down to this House with a proposal to afford taxation relief amounting to £2,100,000 to a certainsection of the community. Not one penny of that relief so granted helps the particular class which the amendment now before ushas in view. We are not now concerned about the wealthy with large families - the wealthy can bear the brunt. {: .speaker-KRD} ##### Mr McGrath: -- It is extremely hard to find the wealthy with large families. {: .speaker-JPV} ##### Mr BLAKELEY: -- It is not popular or fashionable for the wealthy to have large families, and it is left to the poorer classes of the community to populate this and every other country. When the Government, through its Treasurer, throws its millions of relief about, at least a portion should find its way to the workers in order to lighten the burden of taxation they now bear. The worker with three or four children pays very highly indeed towards the upkeep of the country; if he did not pay one penny in income tax, he would pay considerably more than is paid by many who pay income tax, because of the tolls which are made on the clothing he and his family wear, the food they consume, and everything they use. When £100,000 has been thrown to one section, £500,000 to another, £750,000 to another, and so on, by way of relief from taxation, we find the Treasurer on this occasion degenerating into a miserly huckster, who says, " Well, if you put it that way I will give you another 3d., but if you are very pressing I might make it 5d., or if the numbers are against me I might even bo so generous as to make it 6d. !'' He now throws to the Committee 15s. - " are there any more offers on 15s.?" On the one hand we see £2,100,000 given to one section of the community, and £9 offered to another section. That is a sort of discrimination to which only the representative of the Government could give effect. The Government have given a £5,000 exemption in the case of the unimproved land values tax, an exemption which is enjoyed by the large landholder, whether he be worth £1,000,000 or £10,000,000. {: .speaker-KNF} ##### Mr GREENE:
RICHMOND, NEW SOUTH WALES · LP; NAT from 1917 -- It was the Labour party who did that! {: .speaker-JPV} ##### Mr BLAKELEY: -- What we did in the case of land taxation we are prepared to do in the case of an income tax deduction for children. We are prepared to do the fair thing by the workers of this country. It may be interesting to know that this is not the first time the Labour party has endeavoured to afford this relief to a very deserving section of the community. On the 8th December, 1921, the present Leaden of the Opposition **(Mr. Charlton),** when an Income Tax Bill was under consideration, moved that the deduction allowable for each child should be £60. The honorable members who voted against that proposal were : Messrs. Atkinson, Bamford, Bayley, Bell, Blundell, Bowden, Bruce, Cameron, Robert Cook, Corser, Foley, Richard Foster, Francis, Gibson, Greene, Gregory, Groom, Higgs, Hill, Hughes, Hunter, Jackson, Hector Lamond, Lister, Marks, Marr, Maxwell, McWilliams, Earle Page, Poynton, Prowse, Rodgers, Ryrie, Laird Smith, Watt, Wienholt, Wise, Mackay, and W. H. Story. {: #debate-13-s99 .speaker-JWY} ##### The CHAIRMAN (Hon J M Chanter:
RIVERINA, NEW SOUTH WALES -- How does the honorable member propose to connect that with the amendment before the Chair? {: #debate-13-s100 .speaker-JPV} ##### Mr BLAKELEY: -- I propose to show that this question was discussed on a previous occasion, and that a similar proposal was then defeated. I propose further to show that the taunt cannot be thrown at this party that the proposal is made now as a vote-catching cry. {: #debate-13-s101 .speaker-10000} ##### The CHAIRMAN: -- It is not in order to reflect on any vote given in this Chamber, and I have already called other honorable members to order for doing so. {: .speaker-JPV} ##### Mr BLAKELEY: -- I do not see how by any reasoning, sir, you can say that I am reflecting on any vote given in this House. What I say is that the fact that in that division list there appear, as supporting the proposal, the names of Messrs. Anstey, Blakeley, Charlton, Considine, Cunningham, Fenton, Gabb- {: .speaker-10000} ##### The CHAIRMAN: -- I must ask the honorable member not to continue that line of argument. {: .speaker-JPV} ##### Mr BLAKELEY: -- I hope, **Mr. Chanter,** that you are not going to prevent me making my speech. {: .speaker-10000} ##### The CHAIRMAN: -- I have called other honorable members to order for the same thing. {: .speaker-JPV} ##### Mr BLAKELEY: -- Then I shall say that the whole of the members of the Labour party, without exception, together with the honorable member for Wimmera **(Mr. Stewart),** the only member of the Country party to do so voted for the £60 deduction. Not one member or supporter of the Government voted for that proposal, and it is no reflection to say that. I hope that the Treasurer will relieve that section of the community on whose behalf I am now speaking, in the same way as he afforded relief to the wealthy. {: .speaker-KNF} ##### Mr GREENE:
RICHMOND, NEW SOUTH WALES · LP; NAT from 1917 -- **Mr. Chanter,** if the Committee decides to omit the word "Thirty," will it be open to move that the words "Thirty-nine" be substituted? {: .speaker-10000} ##### The CHAIRMAN: -- Yes. Question - that the word " Thirty " be left out - resolved in the affirmative. {: .speaker-KNF} ##### Mr GREENE:
RICHMOND, NEW SOUTH WALES · LP; NAT from 1917 -- I desire to move that the words " Thirty-nine " be inserted in the place of "Thirty." Mr.riley. - The amendment by the Leader of the Opposition to insert the word " Sixty " has precedence. {: .speaker-KDZ} ##### Mr Jowett: -- And I may point out that I have handed in a motion that the words " Fifty-two " be substituted. {: .speaker-10000} ##### The CHAIRMAN: -- The usual practice when a blank has been created is, in the case of an amendment of this kind, to submit the highest figure first to the Committee. Amendment (by **Mr. Fenton)** put - That the word " Sixty " be inserted. The Committee divided. AYES: 21 NOES: 31 Majority . . . . 10 AYES NOES Question so resolved in the negative. {: #debate-13-s102 .speaker-KDZ} ##### Mr JOWETT:
Grampians .- I move - That the words " Fifty- two " be inserted. I have chosen the figure £52 because, on the 8th October, 1921, when a similar Bill was before us, I moved that that be the deduction for each child. Question - That the words proposed to be inserted be so inserted - put. The Committee divided. AYES: 23 NOES: 31 Majority . . . . 8 AYES NOES Question so resolved in the negative. Amendment negatived. Motion (by **Mr. McGrath)** proposed - That the words "Forty-five" be inserted. {: #debate-13-s103 .speaker-JXA} ##### Mr CHARLTON:
Hunter .- I hope that the Committee will agree to the amendment of the honorable member for Ballarat **(Mr. McGrath).** What has happened shows that the Government recognises that a deduction of £30 for each child is far too small, because a large number of members favour a higher deduction. The Treasurer now proposes to make the deduction £40 ;but £45 wouldbe a fair compromise between his original proposal, which was £30, and the deduction for which I moved, namely, £60. Question - That the words proposed to be inserted be so inserted - put. The Committee divided. AYES: 23 NOES: 31 Majority ........ . 8 AYES NOES Question so resolved in the negative. Amendment negatived. Amendment (by **Mr. Bruce)** agreed to- That the word "Forty" he inserted. {: #debate-13-s104 .speaker-K4F} ##### Mr CONSIDINE:
Barrier .- I move - That after the word " received,' sub-clause (1), paragraph (k), the words "and/or a parent" be inserted... If the amendment is carried, provision will be made for a deduction of £40 for each child and/or for a parent wholly. maintained by any taxpayer who is not an absentee. {: .speaker-JXA} ##### Mr Charlton: -- Why notsay "parent or other dependant"? A taxpayer may have a crippled brother or sister to support. Mr.CONSIDINE . -I understand that dependants have been provided for already. When I mentioned this matter previously I thought that the Treasurer would reply to what I had said, but he did not do so. I do not know whether he failed to hear what I said, or whether he did not think the matter worthy of his attention, but I ask him now to give it every consideration. The present position is a real grievance to a number of persons who are supporting their aged parents. The single man is relieved of income tax to the extent to which he supports a dependant, but when he marries and has the additional responsibilities of keeping a family, the Taxation Department does not recognise the fact that he has the continued burden of supporting his aged parent. The Treasurer has seen fit to lighten the burdens of those with families by increasing the deduction allowed in respect of each child. If he extended this provision and allowed a deduction in respect of an aged and dependent parent the charge of electioneering tactics made by the Leader of the Country party **(Dr. Earle Page)** to which the Minister appeared so sensitive would not apply. Those people who support their parents may not be very numerous, but I do not think politicians are keen enough to keep a list of them. Every argument used in favour of relieving the taxpayer by increasing the deduction in respect of children applies with equal force to the adoption of the amendment I submit. {: #debate-13-s105 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- I heard everything that the honorable member said when he was speaking previously about this amendment, and it was not from lack of courtesy or interest that I failed to reply to him. The honorable member had indicated that he proposed to move his amendment at a subsequent stage. However, I cannot accept it. The deductions allowed are very generous indeed, and have been further liberalized in regard to children. The honorable member states that every argument used in favour of increasing the deduction in respect of children could be applied with equal force in respect of dependent fathers or mothers,but as a matter of fact we could apply the argument in respect ofall those who support others to an extent that would entirely exempt them from taxation. The making of a deduction in the case of children is a feature of income tax legislation all over the world, but this is not a time for us to experiment in respect of further deductions under our income tax law. Question - That the words proposed to be inserted be so inserted (Mr. Con- sidine's amendment) - put. The Committee divided. AYES: 13 NOES: 34 Majority . . . . 21 AYES NOES Question so resolvedin the negative. Amendment negatived. {: #debate-13-s106 .speaker-KEV} ##### Mr FENTON:
Maribyrnong -- I move - >That in sub-clause (1) the following new paragraph be inserted : - " (o) Any taxpayer (whose income does not exceed Eight hundred pounds per annum) shall be allowed by the Commissioner of Taxation as a deduction from bis income any sum or sums of money paidto any legallyqualified medical practitioner, public orprivate hospital, nurse or chemist, in respect of the illness of or any operation upon the taxpayer or his wife, orany member of his family under the age of twenty-one years, and in addition in the event of the death of the wife of the taxpayer or of the death of any member of his family undertheage oftwentyone years, any sum of money not exceeding thirty pounds paid to any undertaker for funeral and burial expenses." I ask the Treasurer to follow the example of the Victorian State Parliament.Mr. Lawson, Premier of Victoria, said in regard to a similar proposal in the State Legislature on 14th September, 1921 - >The honorable member for Fitzroy secured the insertion of an amendment that allows certain deductions for medical expenses, and the honorable memberfor Williamstown moved anamendment allowing deductions for friendly societies. Ihave had the resolution ofthe Committee reviewed and put into legal form, and I propose,subject to the concurrence of honorablemembers, to substitute this amendment for the form in which the amendment now appears. Iintend to make one addition. I have provided,in regard to the deductionfor funeralexpenses, that theamountshall not exceed £20. That covers all ordinary funerals. I propose the following: - Then followed a clause worded exactly like the amendment Ihave proposed, except that the amount was £20, instead of £30. It is quite aserious matter for a man with a limited income when sickness overtakeshim or his family, involving a costof £20 or £30 for one or two consultations, and probablyhospital expenses as well. I met lastweek a man who is ina small way of business a considerable distance from amedical man. He hadto sendhis wife to a hospital, and the expenses would amount to between £20 and £30. Knowing his circumstances, I realized the difficulty he wouldhave in finding that money. Theson of another taxpayer had tobe operated on; he was in hospital for three weeks, and the expenses amounted to £73 10s. It is fair to ask that a taxpayer whose income is less than £800 should be allowed to deduct from his income medical expenses, hospital fees, and funeral expenses. {: #debate-13-s107 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- Cases of illness and death naturally excite our sympathy, butthe exemptions provided in this Billare already very large, and there must be a limit to them. The position of the Commonwealth is very different from that of Victoria. This Bill gives much more generous exemptions than does the Victorian Act, and allows of the possibility of a man making provision for the vicissitudes of life.I know it is very difficult for men with small incomes to do that, but this Bill provides more opportunity in that way than does the Victorian taxation law. {: .speaker-JUV} ##### Mr McWilliams: -- The taxpayer has to pay both State and Federal taxes. {: .speaker-F4B} ##### Mr BRUCE: -- That is so; but we have tried to arrange our taxation in a way that is just and equitable. The exemptions which this Bill provides are just and equitable. Whilst the vicissitudes of life are hard to meet and are very distressing to those whom they overtake, it is impossible in an income tax system, although possibly desirable, to provide that a man who experiences any misfortune shall receive special treatment. Although I have the very greatest sympathy with those for whom relief is sought in this amendment, I cannot see my way to agree to its incorporation in the Bill. {: #debate-13-s108 .speaker-KYI} ##### Mr PROWSE:
Swan .- Whilst I should like to be able to support the amendment, there is not the same need for it as there is for a provision granting some relief to those who do not enjoy the convenience and advantage of adjacency to medical attendance. In the great centres of population thereare lodges and societies which men may join for a small quarterly fee, and medical attention may be obtained cheaply through those channels. I am more concerned about the people in the outback portions of the Commonwealth, and I understand that recently the income tax law in Western Australia was altered to provide that the medical expenses of people in remoter portions of the State should be deductible from their incomes. If people are to be induced to go into the country, and if women are to bear children there, special consideration must be given to them. {: .speaker-KEV} ##### Mr Fenton: -- My amendment applies to all people. {: .speaker-KYI} ##### Mr PROWSE: -- Yes; but in the back-blocks the nearest doctor may be 20 miles, and even 100 miles, distant. Medical fees in the city may be a mere bagatelle, but the doctor in the country, although subsidized by the State, has to charge big fees because his patients are not numerous. {: .speaker-F4B} ##### Mr Bruce: -My information is that the Western Australian Act does not differentiate between residents in different parts of the country. {: .speaker-KYI} ##### Mr PROWSE: -- That may be so. A man wrote to me on 22nd August - >My wife had to undergo a serious operation during 1921, and I applied to the Deputy Federal Commissioner of Taxation, at Perth, for a deduction for the amount of cost of operation and expenses attendant thereto, and in reply was told that medical expenses were not allowable deductions, and I think that as they are not " expenses " they ought to be " deductions " as in my case the amount was over £90. An expense of that kind is a big burden to a struggling settler. Not only has he to pay the medical bills, but he is inconvenienced by being deprived of the assistance of his help-mate. Then he is told that he must find the money somewhere, and the Taxation Department will not help him. I wrote to the Federal Commissioner on the subject; and this is the cold-blooded reply I received - *Re* J. T. . . . Narrogin, W.A. The Income Tax Assessment Act does not permit any deduction in respect of medical expenses incurred by a taxpayer in respect of himself or his family. The Royal Commission on Taxation has not made any recommendation for the allowance of such deductions. {: .speaker-F4B} ##### Mr Bruce: -- In fairness, I must again point out that what the Commissioner states is what the law provides. It is not fair to describe the Commissioner's reply as " cold-blooded." {: #debate-13-s109 .speaker-KYI} ##### Mr PROWSE: -- Even allowing that the Commissioner is doing his duty by administering the Act, he does not seem to have made any recommendation on this subject to the Royal Commission on Taxation. Yet this is one of the disabilities retarding the development of the country. Few women can be persuaded to go out-back, and those who do are in continuous dread of illness overtaking themselves or their children when they are so distant from medical practitioners. In cases such as that I have mentioned, an allowance should be made, no matter what the cost. If the amendment now before the Committee is not carried, I shall propose a further amendment, to the effect that sums paid in respect of medical attendance, where the taxpayer resides not less than two miles from a medical practitioner, be included in the allowable deductions. Question - That proposed new paragraph o (Mr. Fenton's amendment) be inserted - put. The Committee divided. AYES: 18 NOES: 26 Majority.....8 AYES NOES Question so resolved in the negative. Amendment negatived. {: #debate-13-s110 .speaker-KEV} ##### Mr FENTON:
Maribyrnong -- I move - >That the following new paragraph be added to sub-clause (1) : - " (p) Any taxpayer who removes from one State to another in search of employment or to follow his usual occupation or business, and incurs expense for railway or steamer fares, shall be allowed as a deduction any sum or sums of money paid by him in respect of such fares either for himself, his wife, and any member of his family under the age of twenty-one years, and also in addition any moneys paid for railway or steamer freights for the removal of his household furniture, goods, chattels, and effects." I hope that this amendment will meet with a better reception than that with which the Committee has just dealt. This amendment, like that which has just been rejected, has the most humane intentions. It is designed to relieve a very desirable class of the community, and I hope the Treasurer will give favorable consideration to it. I suppose he takes the stand that since the deduction for children has been increased, and other amendments have been effected in the Bill as introduced by him, he cannot agree to any further concessions; but I think he might very reasonably accept this proposition. {: .speaker-F4B} ##### Mr Bruce: -- I cannot accept this amendment. It is impossible for honorable members to realize how far-reaching would be its effect. Question put. The Committee divided. AYES: 11 NOES: 26 Majority . . . . 15 AYES NOES Question so resolved in the negative. Amendment negatived. {: #debate-13-s111 .speaker-K1J} ##### Mr PRATTEN:
Parramatta -- I have given notice of an addition to the clause of a new paragraph, *oo.* The honorable member for Swan **(Mr. Prowse)** desires to move an amendment in connexion with medical expenses, and I wish to know which of our amendments should .tate precedence ? {: #debate-13-s112 .speaker-10000} ##### The CHAIRMAN: -- I do not know what amendment the honorable member proposes- or what amendment the honorable member .for. Swan proposes. {: .speaker-KYI} ##### Mr Prowse: -- On a point of order I suggest that the amendment of which I have .given notice for a new paragraph *o,* should take precedence of the amendment of the honorable member for Parramatta. If the honorable member's amendment is given precedence, I should like to know when mine should be moved ? {: .speaker-K1J} ##### Mr PRATTEN: -- I have marked my amendment *,'.... ,,* because I have understood that an amendment marked " *o "* has just been dealt with by the Committee, -on the motion of the honorable member for Maribyrnong **(Mr. Fenton).** I move - >That the following new paragraph be added to sub-clause (1) : - " (00) In the case of an athletic sporting body or association not carried on for the purpose of .profit or gain to the individual members thereof, sums, proved to the satisfaction of the Commissioner, whose decision shall be final, to have been expended .for .the purpose of promoting and improving the development of sport." {: .speaker-10000} ##### The CHAIRMAN: -- If the honorable member will permit me, what I have to say may shorten the proceedings. Having regard .to the terms in which he has stated his proposed amendment, I am of opinion that it would not be in order. Earlier in the sitting we dealt with an amendment proposed by the honorable member for Adelaide concerning a society or association established for the teaching of swimming, or for the purpose of encouraging swimming. That amendment was rejected on division. The honorable member's proposed amendmentrefers to an athletic, sporting body, and I am of opinion that to carry it would .be to reverse the decision which the Committee has already arrived at. I may be wrong, but I consider that swimming is an athletic sport. {: .speaker-JRH} ##### Mr Bowden: -- On a point of order, T remind you, sir, that I had intended to move in the direction in which the honorable member for Parramatta now desires to move at an earlier stage of the consideration of the measure, and by arrangement with the Treasurer I withdrew my amendment in order that an amendment dealing with this particular matter might be moved at this stage, {: .speaker-10000} ##### The CHAIRMAN: -- The honorable member will see that the Committee has already negatived the amendment submitted by the honorable member for Adelaide, and in .the circumstances it would appear to me that the only course now open to honorable members who .are interested in this particular question is to ask for a recommittal of the clause. {: .speaker-JRH} ##### Mr Bowden: -- If the honorable member for Parramatta would except swimming clubs from his amendment it would be in order. {: .speaker-10000} ##### The CHAIRMAN: -- If the honorable member alters his proposed amendment to bring it into comformity with the rules -of the House, I shall have no objection to receiving it. {: #debate-13-s113 .speaker-K1J} ##### Mr PRATTEN:
Parramatta -- I shall adopt that course. .1 now move - >That the following new paragraph be added to sub-clause (1) : - " (00) in the case of on athletic sporting body or association not carried on for .the purpose of profit or gain to the individual members thereof, and not being a swimming or life-saving body or association, <sums, .proved to the satisfaction of the Commissioner (whose decision shall be .final), to have been expended for -the purpose of promoting and improving or development of the sport." I wish on this clause to discuss the advisability of getting a little more liberal treatment for the amateur sporting bodies throughout the Commonwealth who make no profit out of sport. Their income is spent in the development of the game or sport in which they are concerned, without any profit to any one, and by virtue of voluntary assistance all round. The dictionary defines an " athlete " -.as ' vigorous in body and mind.'1' " Athletic " is defined as " strong, vigorous, muscular," and Bacon, very many years ago, described athletics as -the -art of activity. My personal knowledge in regard to this matter is confined to the New South Wales Cricket Association and its operations. I am given to understand that promises have been made to this association, by .Ministers in the present Government, .and by .leading Nationalist supporters, to support an ;amendment of this Income .Tax Assessment Bill, which will exclude the operations of the Cricket Association . from the Bill. I believe that -we are all somewhat sympathetic to the grand -old game of cricket. The operations of athletic associations are carried on for the training of the young, the improvement of games, subsidies to parks and ovals reserved for the games, payments towards the erection of pavilions, and in a dozen other directions for the improvement and encouragement of, healthy outdoor sport. Seeing that no profit is made, I think that these associations might well come under this exemption clause. I hope the Committee will give the amendment sympathetic consideration and support, I amhopeful that the Treasurer, in view of all the circumstances of the case, and of the facts I have given, will, at all events, take a more generous view than that taken by the Income Tax Commissioner. {: #debate-13-s114 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- I am afraid I cannot accept the amendment of the honorable member. The whole question of the exemption of sporting bodies was fully discussed earlier in the day, and I do not think any advantage would be gained by my repeating what I then said. I therefore content myself by indicating, on behalf of the Government, that I cannot accept the amendment. Question put. The Committee divided. AYES: 14 NOES: 21 Majority . . . . 7 AYES NOES Question so resolved in the negative. Amendment negatived. {: #debate-13-s115 .speaker-KYI} ##### Mr PROWSE:
Swan -- I move - >That the following new paragraph be added to sub-clause (1): - " (ooo) Sums paid in respect of medical attendance where the taxpayer resides not less than five miles from a medical practitioner." I think that this amendment will introduce a principle that will be helpful to the country. No citizen can avoid employing a medical practitioner when any member of his family is ill; and in the country districts there is special need for the deduction of expenses incurred in this way. The principle is not new, for it has been adopted in other countries. In Western Australia medical men have been subsidized in order to induce them to reside amongst the people in the backblocks; but even with the subsidy, they have to charge very heavy fees, because the distances are so great. In the case to which I have already referred, a settler had to send his wife a long distance for an operation. The medical expenses amounted to £90, but the item was regarded as a non-deductible one. There was hardship enough in this man having his wife ill and away from home, but when he was prevented from allowing that item as a legitimate part of his expenditure, it was enough to make the individual feel that he was not a citizen of his own country. {: .speaker-KRD} ##### Mr McGrath: -- I call attention to the state of the Committee.[Quorum *formed.]* {: .speaker-KYI} ##### Mr PROWSE: -- I am not in favour of the Government spoon-feeding the people, because that would lead to a loss of the virility that characterized the early settlers of Australia, but my proposed amendment is not inconsistent with that sentiment. We should certainly give encouragement to womenfolk to go into the back-blocks, and help their husbands to develop the country. Such expenses as those incurred in doctors' fees are unavoidable, and surely they should be deductible when accompanied by receipts from medical men. {: #debate-13-s116 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- I cannot accept the amendment. We have dealt with the question of medical expenses, and there are insurmountable difficulties in differentiating between the various classes in the community. Amendment negatived. Clause, as amended, agreed to. Clause 24 - {: type="1" start="1"} 0. In the case of a person (other than a company or an absentee) there shall be deducted, in addition to the sums set forth in the last preceding section, the sum of Two hundred pounds less One pound for every Three pounds by which the income exceeds Two hundred pounds. {: #debate-13-s117 .speaker-JXA} ##### Mr CHARLTON:
Hunter .- This clause deals with the general exemption. I never agreed to the exemption being fixed at £200. I thought at the time that it should be £250, and the purchasing power of money has decreased in the meantime to such an extent that 32s. would now be required to represent the purchasing power of £1 at the time when the exemption was fixed at £200. There is justification for a much higher exemption than is now provided for. I am not going to ask the Committee to make it £300, but it is fair that a married man should have an allowance for his wife. In Great Britain, the married man has an exemption of £150 for himself, £100 for his wife, £40 for the eldest child, if under sixteen years of age, and £36 for each of the remaining children. That means) an exemption, in. the case of a man with a wife and three children, much higher than that provided in this Bill, even with the concession granted in the form of the children's allowance. I move - >That all the words after "pounds", line6, be left out, with a view to insert, in lieu thereof the words " with a further deduction of One hundred pounds in the case of a married man." That would leave single men with an exemption of £200, and would give married men an extra allowance of £100. {: #debate-13-s118 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- I am afraid I cannot agree to that. I do not think I need go at very great length into the question of an exemption with respect to the wife. We have discussed at some length the general question of exemption, as well as the deductions to be made in respect of children and other dependants, so that there is very little remaining to be said on the subject. With regard to the second part of the proposal, to abolish the provision which reduces the exemption by £1 for every £3 by which the taxpayer's in come exceeds the amount of the exemption, the Government cannot consider it; if for no other reason, because of the loss of revenue it would involve. I have not the figures with me now, but my recollection is that to give every taxpayer an exemption of £200 would mean a loss of revenue of something like £1,500,000 per annum, which is a loss that we could not contemplate. Question - That the amendment be agreed to - put. The Committee divided. AYES: 9 NOES: 21 Majority . . . . 12 AYES NOES Question so resolved in the negative. Amendment negatived. Clause agreed to. Clauses 25 to 27 agreed to. Clause 28- (1)When any business which is carried on in Australia is controlled principally by persons resident outside Australia, and it appears to the Commissioner that the business produces either no taxable income or less than the ordinary taxable income which might be expected to arise from that business, the person carrying on the business in Australia shall be assessable and chargeable with income tax on . such percentage of the total receipts (whether, cash or credit) of the business, us the Commissioner in his judgment thinks proper. {: #debate-13-s119 .speaker-KXG} ##### Mr WATT:
Balaclava! -- I think that representations have been made to the Treasurer regarding this important clause. It is apparently intended to catch a number of companies domiciled overseas which are thought to be evading their proper taxation in this country; but in doing that it will hit certain honest persons. I have, therefore, an amendment to suggest which, without weakening the clause, would provide for the proper treatment of those doing legitimate business* in Australia. {: .speaker-K4F} ##### Mr Considine: -- I draw attention to the state of the Committee. *[Quorum formed.]* {: .speaker-KXG} ##### Mr WATT: -- The arrangement or proposal I have in mind could be applied in two ways, one of which is by adding after the words "income tax" some such words as these : ' ' As agent for the parties resident outside Australia." The effect ot,that would be that instead of the Commissioner being able to tax at any figure he thinks proper, the particular person doing business with the overseas company would be taxed as agent, and he could pass on the taxation. If that is not done, it will be an impediment to certain classes of* businesses that are in every sense desirable. Another way of overcoming the difficulty would be by adding a proviso to clause 28 somewhat in this form - >Provided this section shall not apply in cases where commodities dealt in are charged by person's outside Australia at prices approximately the same at which persons in Australia carrying on similar businesses can purchase from residents from outside Australia the same class of commodities. There is a large jute trade direct with India growing up in Australia in which fanners, sugar-producers, and wool-pack users are interested, and it is done on a. very narrow margin. I think 1 per cent, would be regarded as a heavy commission in tho trade. Under this clause, if it is not amended, businesses may be regarded as "fakes," and heavy taxation, equivalent to, perhaps, 5 per cent, on the turnover, might be imposed. This would mean stopping the trade, and would interrupt all the ordinary channels merely with the desire to capture some other people who are evading taxation under present conditions. Although I am not moving in the direction indicated, I am hopeful that now the Treasurer has had the matter brought under his notice he will be prepared to accept either of the two suggestions I have mentioned in order to effect a desired alteration. **Mr. BOWDEN** (Nepean) [11.363 - An amendment could ba made in this clause to provide that an agent or person shall only be personally liable to the ex- ° tent provided in clauses 91 and 92. {: #debate-13-s120 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- This is a difficult question to handle effectively. We all know that there are alleged cases where certain large interests, in order to avoid payment of taxation in Australia, arrange the price at which they sell to their representatives here in such a way that whilst there is a substantial profit upon the transaction none of the profit is derived in Australia, and the companies are not called upon to contribute taxation. This provision was designed to defeat that object, and, as the fight honorable member for Balaclava **(Mr. Watt)** has pointed out, this clause should not operate to the detriment of the legitimate trade. No one desires that that should happen, but in trying to insure that legitimate traders will not ' be interfered with in any way. we have to be very careful not to exclude those who are deliberately arranging their business in order to avoid their obligations. In regard to the first suggestion of the right honorable member for Balaclava, that the agents here .should only be responsible for any sums they have in hand belonging to their principal and should have the right of recourse against their principal, I may say that I do not think the matter can be dealt with in that way. There is no right we can give to an agent against his representative overseas; he must look to the law where his principal is. If we limit the obligation of the agent to .the amount that may be in his possession belonging to his principal we are going to be faced with the difficulty that the principal will proceed to arrange his financial business in exactly the same way as he has done in regard to his profits. That would also apply to the suggestion of the honorable member for Nepean **(Mr. Bowden).** We must leave it to the representative here to make his own arrangements to insure that he is indemnified against any taxation levied on his principal. The position is so serious, and the possibility of avoiding legitimate obligations so great, that we. are justified in throwing the responsibility upon the representatives in Australia to make arrangements to safeguard their interests. The other side of the question has been dealt with in the amendment suggested, and it seems that the two relate to different phases. The second presents some difficulty if accepted in the form submitted, because we would always have to establish that it was not possible for other people to purchase goods of a similar character at approximately the same price. That difficulty would be very serious and real, because one of the principal companies which it has been suggested has so made its arrangements as to avoid its obligations in the matter of taxation is alleging and swears that the price it is charging to its representative here is the f.o.b. price at the port of shipment, and that the goods are readily purchasable by any one at that price. I have given some thought to this matter, and cannot see any remedy except in the provision which allows discretion, and I would be prepared to enlarge it to the extent of allowing such matters to be referred to the Appeal Board. {: .speaker-KXG} ##### Mr Watt: -- That would be a partial remedy. {: .speaker-F4B} ##### Mr BRUCE: -- Yes, but not, perhaps, to the extent that, some desire. In the clause as it stands, the Commissioner has discretionary power to determine what taxation should be levied, and in the case of the jute manufacturers mentioned, if the Commissioner gives what is considered an unsatisfactory . decision, an appeal could be made. I cannot accept either of the amendments suggested by the right honorable member for Balaclava, because I believe there would be grave difficulties in the way. {: #debate-13-s121 .speaker-KXG} ##### Mr WATT:
Balaclava .- The Treasurer's view isa reasonable one.He apparently knows the circumstances of the defaulting companies, and I therefore move - >That the following new sub-clause be added: - " (3) A taxpayer who is dissatisfied with the decision of the Commissionerunder this sec tion may require the Commissioner to refer his case to a Board of Appeal, and the Commissioner shall refer the case accordingly." Amendment agreed to. Clause, as amended, agreed to. Clause 29 (Partners). {: #debate-13-s122 .speaker-JXA} ##### Mr CHARLTON:
Hunter ; - Does the Treasurer **(Mr. Bruce)** intend to sit late? {: .speaker-F4B} ##### Mr Bruce: -- I am afraid we must. {: .speaker-JXA} ##### Mr CHARLTON: -- We have now been sitting continuously for thirteen hours, and, as we shall also be here late tomorrow night, it does not seem fair. {: .speaker-F4B} ##### Mr Bruce: -- I realize that; but I do not think there will necessarily be much debate on the other clauses. {: .speaker-JXA} ##### Mr CHARLTON: -- There are some on which there isconsiderable difference of opinion. One does not know what is in the mind of honorable members. We may continue sitting until the House meets to-morrow, and then, since new business can be taken after 11 o'clock to-morrow night, we may have to continue sitting all night. Does the Treasurer wish to kill honorable members? {: .speaker-F4B} ##### Mr Bruce: -- That is not my desire. {: .speaker-JXA} ##### Mr CHARLTON: -- It is only fair that progress should be reported at this stage. {: .speaker-F4B} ##### Mr Bruce: -- I am sorry, but, we must get on with the Bill. Clause agreed to. {: #debate-13-s123 .speaker-10000} ##### The CHAIRMAN: -- If it be the wish of the Committee I shall put the balance of the Bill in parts. {: .speaker-KXG} ##### Mr Watt: -- The Committee has behaved very well to the Treasurer, and he in returnhas been courteous and clear, but this Bill when it is finished will be in some respects as complicated an income tax measure as is to be found in any part of the world. Therefore, Parliament should have time to view its provisions clearly, and this cannot be done by submitting it to theCommittee in parts. Clauses 30 to 40agreed to. Clause 41 (Boards of Appeal). {: #debate-13-s124 .speaker-KXG} ##### Mr WATT:
Balaclava .- I understand that no Board of Appeal has yet been appointed. {: .speaker-F4B} ##### Mr Bruce: -- One Board has been appointed. {: .speaker-KXG} ##### Mr WATT: -- I do not know where it is functioning or its *personnel,* butI think that the Treasurer **(Mr. Bruce)** should tell the Committee broadly how he proposes to constitute these Boards, and who will sit upon them. Parliament consented to the appointment of these Boards in order to give elasticity to the Act and a sense offinality to the taxpayer, and these objects can be best achieved by appointing to the Boards men with commercial training which has been secured outside the official life of a Commonwealth Department. We are fortunate in having as Commissioner of Taxation a clear-headed, conscientious, hard-working man, and I do not agree with those honorable members who have suggested at various stages in the discussion of this Bill that **Mr. Ewing** has failed in the discharge of his public duty. {: .speaker-K1J} ##### Mr Pratten: -- I do not think that any one has suggested that. {: .speaker-KXG} ##### Mr WATT: -- Perhaps, inadvertently, the honorable member accused the Commissioner of having hurt certain interests by a too rigid interpretation of the provisions of the Act. {: .speaker-K1J} ##### Mr Pratten: -- I said that he was inclined to be too academic in his viewpoint. {: .speaker-KXG} ##### Mr WATT: -- The Commissioner of Taxation has more responsibilities than has any other man in the Commonwealth Service. {: .speaker-K1J} ##### Mr Pratten: -And he has greater power. {: .speaker-KXG} ##### Mr WATT: -- He certainly has more responsibility, because his decisions touch upon all classes of people. {: .speaker-K1J} ##### Mr Pratten: -- And he has greater discretion. {: .speaker-KXG} ##### Mr WATT: -- That I am not prepared to say, but the responsibilities and area of his activities mark him out for all sorts of criticism in the press, in Parliament, on the public platform, and elsewhere. I do not think that we should say to such a man that we consider that he has acted improperly or has been doing his duty too rigidly. Officialdom frequently gets into that position. If a man has been a long while representing the Crown as against the public in the discharge of administrative functions there is that inevitable tendency. In fact, an exceedingly strong and sympathetic man is required to take both the Crown view and the public view at the same moment. Mingled with such men as these there should be upon Appeal Boards men who arc out in the business world and know the instincts of the trading community and how the decisions of the Appeal Boards are likely to influence business adversely or favorably. If the Treasurer will tell us that men with commercial training will be appointed to Appeal Boards, I would give them almost any power, but if they are to be merely a congregation of officials who, unfortunately, have been denied the opportunity of commercial training and experience, the Boards will be correspondingly ineffective. {: #debate-13-s125 .speaker-JRH} ##### Mr BOWDEN:
Nepean .- I suggest that there should be some means by which the decisions of Appeal Boards are made known to the general public. {: .speaker-KXG} ##### Mr Watt: -- The Department should be in a position to publish such decisions regularly. {: .speaker-JRH} ##### Mr BOWDEN: -- I think it should be done. After putting in months of work on appeals the public outside have found that a decision has already been given which would have saved all that trouble. {: #debate-13-s126 .speaker-K1J} ##### Mr PRATTEN:
Parramatta -- I agree with the contention of the right honorable member for Balaclava **(Mr. Watt)** that we should couple with officials on these Appeal Boards men with wide and varied business experience. Apparently, any remarks which I have made in regard to the Commissioner of Taxation were not properly understood by my right honorable friend. I have said, and I say again, that the Commissioner has been vested by this Parliament with greater powers and greater discretion than have been intrusted to any other officer in the Commonwealth Service, and, of course, he may have had, owing to the lack of elasticity of the law, to take an academic view-point, and perhaps confine himself within a. very narrow ambit with regard to large questions concerning taxpayers and the development of industry. But I think that that view also has been held to someextent by the Treasurer **(Mr. Bruce),** because, shortly after he came into office, he found it necessary to appoint a Board of Appeal from the Commissioner's decisions. {: .speaker-F4B} ##### Mr Bruce: -- The appointment of the Board of Appeal was contemplated in. the Bill passed in December last. {: .speaker-K1J} ##### Mr PRATTEN: -- It was contemplated, but the provision was carried into effect by the Treasurer. It was recognised that the whole responsibility of the administration of the Federal Income Tax Department should not be placed wholly and solely on the shoulders of the Commissioner, and that he should be helped by Boards of Appeal. I supplement the remarks of the honorable member for Balaclava **(Mr. Watt)** in this direction, and I hope that the appointments, if they are made, and when they are made, will comprise business brains commingled "with Federal officials. If there are only officials on these Boards they will develop steadily, as the years go by, more and more " red tape." The questions involved are too big to be decided only by officials. {: #debate-13-s127 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- One Appeal Board has been constituted up to the present time. In the Act passed last December power was taken for the establishment of a. Board or Boards of Appeal, and I think the suggestion was made that there should be a Board of Appeal for each State. When I came to consider this question it appeared to me by no means certain that ' these Boards would function as .we hoped, or* would five .the results that we desired. The Government, accordingly, decided that the best course bo adopt would be to appoint one Board with the very best *personnel* we could get, to give a trial to the system. The Board was constituted, I think, in April last. It consists of **Mr. Twine,** who was the Assistant Commissioner under **Mr. Ewing,** and **Mr.** *Canning,* who was a lawyer in Western Australia, but subsequently went upon the bench and was a magistrate dealing, at the time of his appointment to the Board, exclusively with income tax matters. I made very careful inquiries with regard to **Mr. Canning,** and I got from the business community such very strong recommendations as to his capacity, and the way he was filling his office in Western Australia, that it appeared to me that he was the man for the position. When I found that the view of the commerical community was confirmed by my own officers in the Department, I had no hesitation in recommending his appointment. The third member of the Board is **Mr. Lightband,** who was an accountant with a large practice in Brisbane. The head-quarters of the Board are in Sydney, and while the head-quarters remain there it will be a travelling Board, and will go wherever its services are most urgently required. {: .speaker-KXG} ##### Mr Watt: -- Why should its headquarters be in Sydney when the central office of the Taxation Department is in Melbourne ? {: .speaker-F4B} ##### Mr BRUCE: -- Because the greatest number of cases will probably have to be dealt with in Sydney. The matter was investigated very closely, and we came to the conclusion that the balance of convenience, and the minimum of expense, would be secured by having the headquarters in Sydney. {: .speaker-K1J} ##### Mr Pratten: -- The present Board does not fit in with the suggestion- of the honorable member for Balaclava **(Mr. Watt)** in that there are no business men on it. {: .speaker-F4B} ##### Mr BRUCE: -- I venture to say that this Board comes as near to the thing desired as possible. A business man, pure and simple, would be of very slight value on a Board of this character. The Board is constituted on the best basis possible. It includes a practising accountant, a lawyer, and a Government official. The average accountant knows more about business than the honorable member or his associates. **Mr. Lightband** was an accountant in a big practice, and has a broader view and a greater knowledge than most business men. Clause agreed to. Clause, 42 agreed to. Clause 43 (Illness or suspension of chairman or member)'. {: #debate-13-s128 .speaker-KXG} ##### Mr WATT:
Balaclava .The Treasurer **(Mr. Bruce)** has not told us what salaries are paid to members of the Appeal Board. We have just sanctioned appointments for a term of seven years for the first Appeal Board. We have heard the names of the members for the first time to-night, and I think honorable members know little or nothing of their qualifications except what the Treasurer has told us. {: .speaker-KFF} ##### Mr Foley: -- **Mr. Canning** is all right. {: .speaker-KXG} ##### Mr WATT: -- I am pleased to hear that; and I was wondering whether any Western Australian or Queensland member could enlighten the Committee further on the subject. I know something of Mr: Twine; he appears to be an excellent officer. I think, however, that we should have more men of commercial training on the only Board which the Treasurer has appointed so far. **Mr.** BRUCE (Flinders- Treasurer 1 [12.1 a.m.]. - The salaries of members of the Board are £.1,500 a year each. I would ask my honorable friend to suspend his judgment upon the Board until he has made a few inquiries. Personally I was very satisfied that I had obtained such an efficient and promising Board. If the honorable gentleman will think of the difficulties surrounding the constitution of a Board of this character, he will realize how hard it is to get a Board with a strong and usefulpersonnel. The expense of these Boards is very great. Each Board will cost from £10,000 to £12,000 a year. This Board has been established for some months, and it may have had a case referred to it in the last few weeks; but when I last met the members in New South Wales they had not had a single case referred to them. {: .speaker-K1J} ##### Mr Pratten: -- Are members of the Board permanent employees of the Government and the Taxation Department? {: .speaker-F4B} ##### Mr BRUCE: -- They are appointed for a term of seven years. {: .speaker-K1J} ##### Mr Pratten: -- Obviously there is no need for any further Boards until the business which they are doing looks up. {: #debate-13-s129 .speaker-JOS} ##### Mr BELL:
Darwin .- I disagree with the suggestion that it is no use having more Boards until the business looks up. Unless this Board of Appeal can be easily reached by those taxpayers whose tax is a comparatively small one, we will not be giving what I expected would be made available to them. We know very well that not only in regard to income tax, but in various other forms of taxation, especially in the States, quite large sums in the aggregate are gathered from people because it is not worth their while to take their case to appeal or before the Law Courts. If they appealed and won the case the appeal would probably cost them more than the benefit they would derive. But that is no reason why these people should be compelled to pay a taxationwhich is not just. I know of numerous taxpayers having been assessed at a rate above that which they considered to be fair, but an appeal was not worth while, because of the cost. I had hoped that by a system of Appeal Boards dissatisfied taxpayers would be able to get redress at less expense than in the past. Obviously, if there is to be one Board only, taxpayers in various States will find that it is costly to reach that body, and probably that is the reason why more appeals have not been lodged. I shall be dissatisfied if there is to be one Board only, because it will not be easily accessible to the many dissatisfied taxpayers in Tasmania. Clause agreed to. Clauses 44 to 46 agreed to. Clause 47 - >The chairman and each of the other members of a Board shall receive such remuneration and travelling allowance as the GovernorGeneral determines, and the Consolidated Revenue Fund is, to the necessary extent, hereby appropriated accordingly. {: #debate-13-s130 .speaker-KXG} ##### Mr WATT:
Balaclava .I suggest to the Treasurer that this is too large an order to ask the Committee to pass. We have elicited, by inquiry at this late hour, the salaries paid to the present Board, and this clause governs the whole scheme by specially appropriating for the existing Board or any number of Boards considerable sums of money, the control of which will pass beyond the reach of Parliament. We are told that the existing Board is to cost from £10,000 to £12,000 per annum, and we have just heard the honorable member for Darwin **(Mr. Bell)** pleading eloquently for a Board for each State, instead of one peripatetic Board. We may have half-a-dozen of these Boards, costing the country from £60,000 to £70,000 per annum, without Parliament knowing anything at all about the cost so long as the Governor-General is prepared to sign the necessary papers on the advice of his Ministers. One never knows how the taxpayers will exercise new rights of this kind, or how the Board will invite appeals by its decisions and procedure. {: .speaker-JOS} ##### Mr Bell: -- The dissatisfied taxpayer must go to this Board of Appeal. {: .speaker-KXG} ##### Mr WATT: -- Not necessarily; but for the first time he is given certain rights of appeal to a Board. If there are to be a number of these Boards we are creating a very expensive machine. I never imagined for a moment that a single Board would cost from £10,000 to £12,000 per annum, and that there might be several such bodies. I am quite sure that if the House were sitting with its eyes open, and its ears at full cock, it would not agree to a proposition of this kind. {: #debate-13-s131 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- I agree with the honorable member for Balaclava that consideration must be given to the points he has raised. The clause is a little broad, and I will undertake to look into it and see that the provision is limited in such a way that parliamentary control over the expenditure will be maintained. {: #debate-13-s132 .speaker-KXG} ##### Mr WATT:
Balaclava -- I know the Minister cannot re-draft the clause at a moment's notice, and I suggest to him that, before the Bill disappears from this House, as this is a money provision, he need not complicate it by having an amendment made in another place, although certainly limitations ought to be imposed that will give Parliament security and suzerainty over the operation of the clause. Clause agreed to. Clauses 48 to 50 agreed to. Clause 51 (Powers of Court and Board on hearing of appeals). {: #debate-13-s133 .speaker-JRH} ##### Mr BOWDEN:
Nepean -- This seems an opportune time to revive the question of Parliament being supplied with a summary of the decisions of the Board. If any amendment is to be inserted to that effect it should be inserted here. {: .speaker-F4B} ##### Mr Bruce: -- I do not think it is necessary to make provision in the Bill; we shall provide the information which the honorable member seeks. Clause agreed to. Clauses 52 to 57 agreed to. Clause 58 (Substituted service). {: #debate-13-s134 .speaker-KJM} ##### Mr JACKSON:
Bass .Honorable members receive many complaints fromtaxpayers who have been fined for not posting their returns. I know of a young lady in Tasmania who posted her return, but the Department said that the return had not been received. If a taxpayer posts his return and it does not reach the Department, is the individual to be fined ? {: #debate-13-s135 .speaker-K6S} ##### Mr CORSER:
Wide Bay -- Often there is no acknowledgment of the receipt of returns, with the result that there is no proof that the return was submitted. Could not a post-card be sent to each taxpayer acknowledging the receipt of his return? {: .speaker-F4B} ##### Mr Bruce: -- No; the task would be too tremendous. Clause agreed to. Clauses 59 to 66 agreed to. Clause 67 (Offences). {: #debate-13-s136 .speaker-KJM} ##### Mr JACKSON:
Bass .I should like the Minister to give some assurance that there will be some relaxation of the hard and fast rule of assuming always that the Department is in the right and the individual taxpayers in the wrong. {: .speaker-F4B} ##### Mr Bruce: -- I do not agree that that is so at all. Clause agreed to. Clauses 68 to 101 agreed to. Schedule and Title agreed to. Bill reported with amendments. Motion (by **Mr. Bruce)** agreed to- That the Bill be recommitted for the recon sideration of clause 47. *In Committee* (Recommittal): Clause 47 - >The Chairman and each of the other members of a Board shall receive such remuneration and travelling allowance as the GovernorGeneral determines, and the Consolidated Revenue Fund is, to the necessary extent, hereby appropriated accordingly. {: #debate-13-s137 .speaker-F4B} ##### Mr BRUCE:
Treasurer · Flinders · NAT -- I move- That after the word " extent," line 5, the following words be inserted : - " but not exceeding the sum of Ten thousand pounds per annum." This will have the effect of limiting the business to one Board. The expenditure will be sufficient to cover the operations of one Board, but will not permit of the establishment of other Boards without the consent of Parliament. {: #debate-13-s138 .speaker-KJM} ##### Mr JACKSON:
Bass .I have no desire to delay the Committee. So far as the smaller States are concerned, there cannot be very much necessity for the appointment of a Board for each State. One Board will probably be ample for the work of the Department, at all events for the present. Amendment agreed to. Clause, as amended, agreed to. Bill reported with a further amendment. Standing Orders suspended; reports adopted. Bill read a third time. {: .page-start } page 3510 {:#debate-14} ### CUSTOMS BILL Assent reported. {: .page-start } page 3510 {:#debate-15} ### CUSTOMS TARIFF (INDUSTRIES PRESERVATION) BILL Assent reported. {: .page-start } page 3511 {:#debate-16} ### SUPERANNUATION BILL Bill returned from the Senate, with requests. {: .page-start } page 3511 {:#debate-17} ### PUBLIC SERVICE BILL Bill returned from the Senate with a message intimating that the Senate had agreed to certain amendments made by the House of Representatives, had disagreed to one, and had agreed to another with a consequential 'amendment. {: .page-start } page 3511 {:#debate-18} ### PAPERS The following papers were presented : - >Public Service Act - Seventeenth Report on the Public Service, by the Acting Commissioner. Ordered to be printed. Defence Act- Regulations Amended - Statutory Rules 1922, No. 144. Naval Defence Act. - Regulations Amended -Statutory Rules 1932, Nos. 115, 148. commonwealth: shipping {: .page-start } page 3511 {:#debate-19} ### BILL Bill presented by **Mr. Grebne,** and read a first time. {: .page-start } page 3511 {:#debate-20} ### ADJOURNMENT {:#subdebate-20-0} #### Personal Explanation Motion (by **Mr. Greene)** proposed - >That the House do now adjourn. {: #subdebate-20-0-s0 .speaker-K6S} ##### Mr CORSER:
Wide Bay -- -I wish to call attention to the fact that before the House adjourned for dinner last . evening a vote was taken, and although I voted, my name was not recorded. I desire to have the matter rectified in the *Votes and Proceedings.* {: #subdebate-20-0-s1 .speaker-KNF} ##### Mr GREENE:
Minister for Defence · RICHMOND, NEW SOUTH WALES · LP; NAT from 1917 -- All I can say with regard to the matter mentioned by the honorable member for Wide Bay is that it is very regrettable that what he has stated did happen. Apparently, there was «n even vote. The honorable member's' vote, had it been recorded, would have altered the proceedings somewhat, and also* tho records of this House. In the circumstances, I hope we shall be able to rectify the mistake in another place, and that the measure will, come back to this House later amended. Question resolved in the affirmative. House adjourned at 12.24 a.m. (Wednesday).

Cite as: Australia, House of Representatives, Debates, 10 October 1922, viewed 22 October 2017, <http://historichansard.net/hofreps/1922/19221010_reps_8_101/>.