Senate
27 November 1941

16th Parliament · 1st Session



The President (Senator the Hon. J. Cunningham) took the chair at 10.30 a.m., and read prayers.

page 1020

PRINTING COMMITTEE

Report No. 4 of the Printing Committee brought up by Senator J. B. Hayes, and - by leave - adopted.

page 1020

APPLES AND PEARS

Senator HERBERT HAYS:
TASMANIA

– A few days ago the Minister representing the Minister for Commerce undertook to make a statement as to the intentions of the Government regarding the apple and pear acquisition scheme. Will the Minister be able to make the statement as promised i

SenatorFRASER- If the Parliament rises this week, it will be impossible to make a statement on the subject in the Senate as the Government has not yet reached a decision in the matter.

page 1020

QUESTION

MILITARY TRAINING

Senator COOPER:
QUEENSLAND

asked the Minister representing the Minister for the Army, upon notice -

  1. Hashe seen the statement appearing in the Sydney Telegraph of Thursday,20th November, made by the Minister for the Army (Mr. Forde) to the effect that drastic alterations being made in the methods of drilling army recruits will turn out efficient soldiers in a week?
  2. Is this statement the considered opinion of the Government or the private opinion of the Minister? 3.Is this statement the considered opinion of the military advisers of the Government?
Senator KEANE:
Minister for Trade and Customs · VICTORIA · ALP

– The Minister for the Army has supplied the following answers : -

  1. Drill as such will, in future, play a very minor part in the training ofthe Australian soldier. What was implied in the remark by the Minister for the Army was that sufficient drill will be taught in a week to make a man efficient to carry out his sterner training for battle, and not that the reduction of the periods allotted for drill would make an efficient soldier in a week.
  2. The opinion of the Minister acting on the advice of his advisers.
  3. Yes.

page 1021

QUESTION

STRIKE AT SMALL ARMS FACTORY, LITHGOW

Senator McBRIDE:
SOUTH AUSTRALIA

asked the Minister representing the Minister for Munitions, upon notice -

  1. Will the Minister inform the Senate what was the effect on production of the recent strikeat Lithgow?
  2. Will the Minister advise the Senate what are the terms of the agreement under which a settlement of the strike was arranged?
Senator ASHLEY:
Minister for Information · NEW SOUTH WALES · ALP

– The Minister for Munitions has supplied the following answers : -

  1. Two and a half weeks’ production lost.
  2. Work resumed upon matter in dispute being referred to Conciliation Commissioner - whose decision was accepted.

page 1021

QUESTION

ROYAL AUSTRALIAN AIR FORCE

Educational Scheme

Senator ARNOLD:
NEW SOUTH WALES

asked the Minister representing the Minister for Air, upon notice -

  1. Will the Minister make available to the Senate a report on the Royal Australian Air Force Educational Scheme ?
  2. Is it a fact that a cultural educational service has been provided during the past four months by the Workers’ Educational Association for the Williamstown station?
  3. If so, will the Minister investigate the scheme, with a view to providing assistance in continuing the service, and of introducing it to other stations?
Senator CAMERON:
Minister for Aircraft Production · VICTORIA · ALP

– The Minister for Air has furnished the following answers : -

  1. It is assumed from the context of the question that a report is desired on the Royal Australian Air Force Rehabilitation Scheme - the Air Force scheme corresponding to the Army Educational Service. The generalprinciplos of this scheme have been prepared by the Air Board and approved by the Minister. The details of the implementation of the scheme are in the process of formulation and all existing administrative and other machinery will be used so far as is possible. As all the details have not yet been worked out. it is not possible at this stage to give a comprehensive report, but when these details are finalized, the report will be made available.
  2. The Workers’ Educational Association has provided a series of lectures on a wide range of subjects at the Royal Australian Air Force Station, Williamstown. These have been given approximately once a week for the last four months.
  3. The question of providing assistance to the Workers’ Educational Association in continuing the service is being given consideration in the working out of the details of the whole scheme mentioned in No. 1 above, and if experience warrants the extension of such lectures to other stations consideration will be given to such a scheme.

page 1021

POWER ALCOHOL DISTILLERIES

Senator FRASER:
Minister for External Territories · WESTERN AUSTRALIA · ALP

– On the 21st November Senator Gibson asked the reasons for the delay in choosing sites in the various States for distilleries for the manufacture of power alcohol from wheat, and why it was not possibleto furnish somebody with the necessary authority to choose the site immediately.

The Minister for Supply and Development has supplied the following answer : -

The State governments concerned were asked by the Commonwealth to investigate the question of the selection of sites for the erection of distilleries for the production of power alcohol from wheat and to make recommendations in this regard. These recommendations arc now to hand, but a final decision will not be made until all factors involved have received full consideration, and until final arrangements have been made for the construction and management of the distilleries. These matters were under discussion when the present Government assumed office, but they had not been brought to finality. The whole matter is, however, being dealt with with the object of obtaining the best arrangements from a national point of view, and it is hoped that finality will be reached shortly.

page 1021

GREENSLOPES MILITARY HOSPITAL

Senator KEANE:
ALP

– On the 21st November, Senator Foll asked when the Gleenslopes Military Hospital was likely to be available for use by the military authorities. It is anticipated that the hospital will be ready for occupation at the beginning of February next when three ward blocks, comprising 204beds, with temporary service accommodation including kitchen, storehouses, administrative block and accommodation for personnel will be available. The permanent multi-storied administrative block is scheduled for completion by the end of 1942.

page 1021

INCOME TAX ASSESSMENT BILL 1941

Second Reading

Debate resumed from the 26th Novem ber (vide page 865), on motion by Senator Keane -

That the bill be now read a second time.

Senator McLEAY (South Australia-

Those of us who have had an opportunity to study this bill have observed that, in its present form, it differs considerably from that in which it was introduced in the House of Representatives. It is desirable to draw attention to a vital amendment made in the other branch of the legislature at the suggestion of the Opposition. This is one of the most important and far-reaching income tax assessment bills that has ever been introduced in this Parliament, and the vicious attack made on the small band of fewer than 14,000 taxpayers is unwarranted. In view of the amendments already accepted by the Government, one must come to the conclusion that the bill was hurriedly prepared and ill-conceived. Were it not for the fact that the Treasurer (Mr. Chifley) has given an assurance that a representative committee will meet early in the New Year in order to investigate the incidence of the income tax on private companies and certain other taxation imposts, the Senate would not be justified in passing the measure. The first amendment submitted by the Opposition in the House of -Representatives related to dividends from ex-Australian companies. Although the Government would not agree to allow the exemption sought, it accepted another amendment, the result of which will be that income tax will be payable only in respect of dividends declared by ex-Australian companies after the 29th October, 1941. The removal of the retrospective effect of the provision was most desirable.

The second important amendment agreed to caused a good deal of contention. It related to the rate of tax applicable to the aggregate income of a husband and wife, which was out of all proportion to that applying to single persons. The retrospective application of the provision has been abandoned and other objectionable features removed. It was proposed that some action should be taken to relieve the tremendous burden that has been placed on private companies. Much publicity has been given to this matter, and as a compromise the Government has agreed that where the combined Commonwealth and State tax of companies exceeds 18s. in the £1, or 90 per cent of the taxable income, plus State income tax paid, there will be a rebate of tax. That will correct some of the outstanding anomalies which I understand are to be reviewed early next year. A paragraph in the second-reading speech of the Minister for Trade and Customs (Senator Keane), who introduced the bill in this chamber, contains the most amazing statement I .have ever heard in this Parliament in connexion with an important measure. The Minister said -

For instance, if the combined rate of tax is, say 21s. in the £1, consisting of 14s. Commonwealth tax and 7s. State tax, the Commonwealth will give relief to the extent of 2s. in the £.1 .

That still means that the unfortunate taxpayer will be responsible for the remaining 19s. in the £1. The ministerial statement continued -

It then rests with the States to rebate the remaining ls.

That is the most surprising statement that I have seen in a second-reading speech since I have been a member of this chamber. The proposed rebate will apply to companies as well as individuals.

A further amendment of importance was the concession of one-third of the rate of tax on calls paid to mining companies. Another important amendment was made in clause 19, under which private companies may elect whether they deduct taxes paid or taxes payable. That will correct an anomaly. I sincerely trust that the promised review will be made promptly, and that where anomalies exist and injustice is done to taxpayers remedies will be applied as quickly as possible.

Senator J B HAYES:
Tasmania

– I emphasize the need for an allowance in respect of depreciation which will enable mining companies, especially those engaged in tin-mining, to obtain the return of their capital as well as a small profit. When I referred to this matter during the budget debate, the Leader of the Senate (Senator Collings) said that mining companies are allowed depreciation in respect of their assets and developmental operations. I was aware of that, and fortified myself by referring to section 122 of the act, under which the allowance is made. The point that I make is, that there is no allowance in respect of the tin in the mines. A mine becomes less valuable with every ton of tin taken from it; consequently, the tin is the most valuable asset, and represents the capital of the company. I do not know whether section 122 of the act is absolutely water-tight, and whether the Commissioner is absolutely bound to observe the formula laid down. There is a method by which mining companies could be given very muchneeded relief. Under section 122, a mining company is allowed to exhaust the value of machinery by means of depreciation over the length of life of the mine. Mining companies say that if they were allowed to charge depreciation as the tin became exhausted, they would obtain more quickly the return of their capital. Portion of a letter that I have received from a company which is carrying on mining operations in Australia reads -

We are allowed for federal income tax purposes to deduct expenditure on plant and development by writing this expenditure off proportionately over the life of the mine. Would you make representations to the Government that income tax section 122 be amended so that, at the option of the taxpayer, the capital expended may be written off proportionately, not over the estimated life of the mine, but proportionately as the metal contents of the mine are won. If one-third of the metal contents of the mine are won in one year, then the act should permit one-third of the capital expenditure to bc written off b1 that year, irrespective of the life of the mine in years. Taxation without this amendment may prevent us carrying on production until all the tin in the mine which would otherwise be unpayable is won, and thus we may bc forced to leave a very large quantity of tin in the ground.

That is quite understandable. When companies charge depreciation in their accounts, they wish to be allowed to make a deduction in respect of that depreciation. The sum so charged could be returned to the shareholders, not in the form of profits, but as a refund of capital. That is what a common-sense business man would do. If a farmer purchased a lot of machinery and plant, to be paid for over a term of years - a not unusual practice - as a prudent man he would pay off the account in a good year of high prices, so that when times were bad he would be able to weather the storm. The history of mining proves that 90 per cent, of the mines are fairly rich at the commencement of operations. It is natural that a start should be made where the prospects of obtaining returns are brightest. As the workings go deeper or further afield, the mine becomes poorer, until eventually it becomes unpayable, and is closed down. If a company were allowed to charge depreciation, and thus secure the return of capital in the early stages, when the mine was rich and it had ample financial resources, it would be able to work poorer ground at a later stage of its operations. The Government might not obtain so much revenue this year, but I believe that there would not be very much difference over a period of years. Tin-mining should be encouraged. Most of the tin deposits are known. It is a valuable metal, which we cannot do without. Owing to price-fixing, the mines are at a disadvantage. I read in a newspaper this morning that one of the best authorities in Australia - at all events one of the biggest buyers - had stated that, if tin had to be imported into Australia at present, the cost would be £40 or £50 more than is being paid. Search for tin deposits should be encouraged, and when discovered they should be developed. Those who invest their capital should be allowed to get itback as quickly as possible. A lot of employment would thus be given, which otherwise would be non-existent. If a mine had a lot of capital charges to meet, it could not possibly work poor ground, as it could if only working expenses had to be met. The company which has written to me has computed that, without some relief in the direction sought, it will have to leave in the ground well over 1,000 tons of tin. When the war is over, tinned plate will be manufactured in Australia, and the industry will be able to absorb the whole of the local production of tin. I trust that the Minister will investigate the matter during the forthcoming recess. If he desires further information, I shall supply it to him, or put him in touch with those who can furnish it. The tin mines of the world are known, and they are a decreasing asset. Wherever tin exists, people should be encouraged and be given the opportunity to mine for it. The Minister might confer with the Commissioner of Taxation, in order to decide whether it is possible to increase the depreciation charge in the early stages. The companies realize that the Commissioner wishes to do what is fair. He should be given a little more discretionary power than he now possesses. Some companies may not worry about the matter, but to others it means life or death. They should be enabled to approach the Commissioner for the purpose of stating their case, and he should have the discretion to give relief where he thinks it is warranted. Tin mines are an asset to the districts in which they are worked, because they provide a good deal of employment and use a lot of stores. I hope that the Minister will be in a position early in the new year to make a helpful suggestion.

Senator FOLL:
Queensland

.- As the Leader of the Opposition (Senator McLeay) has pointed out, the Government should be extremely grateful to Opposition members in this chamber and in the House of Representatives for their constructive assistance during the discussion of its various taxation measures. As my leader has so clearly shown, it is obvious that these bills were hurriedly prepared, and were not properly digested by the Treasurer (Mr. Chifley). I can understand the reason for that; a tremendous amount of work has had to be clone, and present Ministers are new to office.

The attention of the Senate should be drawn to the different atmosphere at the close of this sessional period compared with that which characterized the close of some previous periods. The comments of members of the Opposition, both here and in the House of Representatives, have been helpful and constructive. I remember clearly that when we occupied the Government benches long speeches were frequently made by members of the Opposition concerning everything under the sun, and containing nothing constructive, with the result that bills piled up and at the end there was an unseemly rush of legislation which could not be properly considered. Because the Opposition on this occasion has been entirely constructive, we approach the end of the sessional period with bills properly considered and suitably amended in the interests of the people. The amendments have been welcomed by the Government as well as the public. The present atmosphere is much more in keeping with the dignity and usefulness of the Parliament.

I am glad that the Government has seen fit to refer certain proposals to an all-party committee, in order that any anomalies may be rectified. I have in mind particularly the position of some private companies. It has been brought to my notice that on the north coast of Queensland a private company engaged in timber production, which is well known to Senator Courtice and other Queensland senators, pays under existing conditions taxes aggregating 19s. 8d. in the. £1, and is thus left with a balance of only 4d. in the £1 with which to carry on its operations. It has to pay a flat rate of 3s. in the £1 company tax and a tax of 16s. Sd in the £1 on account of personal exertion. Although at present the products of the timber industry are in great demand, the industry is subject to great fluctuations. Senator Courtice will know that in the rainy season logs are difficult to obtain and that there is much loss through machinery being out of use. Moreover, in this industry severe damage to plant is an ever-present risk. Under existing legislation private companies are not allowed to set aside reserves which are free from tax. They should be allowed to do so, and therefore I urge that the conditions which apply to private companies should be carefully investigated. I should have spoken at greater length on this subject were it not that the Government has given an undertaking to look into it further.

I support the remarks of Senator J. B. Hayes in relation to mining and prospecting. When I was Minister for the Interior I had a good deal to do with the prospecting for oil in Australia and the surrounding territories. I know that large sums of money are necessary if the search for oil is to be conducted on anything like a proper basis and with a reasonable chance of success. Some years ago £250,000 was set aside for the payment of subsidies to companies engaged in the search, the money to be paid on the basis of £1 for every £2 expended by the prospectors. The amount was too small. The payment of a subsidy tended to encourage the flotation of companies lacking sufficient knowledge of the requirements for their efforts to be successful, and in many instances the whole of the money so advanced was lost. Except in respect to one or two companies little, if any, return was received for the money so expended. All honorable senators may not agree with me, but I am convinced that the people who are most likely to find oil in Australia, or in the adjoining territories, are those who are engaged in the search for oil in a large way. If we can encourage the large oil companies to expend their money in the search for oil, subject, of course, to proper control such as now exists owing to the greater measure of uniformity of our legislation, we are more likely to get results than if we encourage the formation of mushroom companies which have not sufficient capital to sink more than one or two bores. When the capital of these small companies becomes exhausted they cannot get any further assistance from the Government, and frequently the result is that satisfactory results are not obtained, the money expended is wasted, and the plant becomes useless. That has been our experience over a number of years. There has been a definite move by several of the larger oil companies to search for oil in Australia. In Queensland, the Shell Company of Australia Limited has taken, over a large tract of land, and has entered into an agreement with the State Government to prospect for oil on the basis that the area available to it shall diminish each year, and that should oil be found the project must be developed. The Texas Company (Australasia) Limited has floated a subsidiary company and has brought from the United States of America a geologist of considerable experience. The company is now carrying out prospecting on a fairly large scale in Western Australia. It is to be hoped that the efforts of both of these companies will be rewarded, and that oil will soon be found. It, therefore, seems a pity that the deduction which has hitherto been allowed in. respect of money expended on prospecting is to be considerably reduced. At first the Government proposed to withdraw the concession entirely, but as a result of deputations by members of the Opposition and recommendations by the all party committee that was set up, one-third of the money so expended is to be allowed as a deduction. I oan understand that an individual, or a company, which is subject to high taxation may expend money in prospecting with a view to escaping taxation, but such a position could easily be safeguarded. During the forthcoming recess the Government might well look into this matter with a view to making greater concessions to companies which are engaged in the search for oil and so encourage them to continue the search.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– This is a matter of great importance to the islands north of Australia.

Senator FOLL:

– That is so. Large sums of money have already been expended there in the search for oil. The Government has subdivided large areas into leases, and I am pleased to say that in some localities there are encouraging signs of oil. The job is difficult, due largely to the nature of the country and the lack of transport, but the companies concerned have done good work. One company has expended £1,000,000 in New Guinea, so far without result. I hope that the Government will not too greatly discourage these companies.

The decision of the Government not to honour ‘the undertaking which was given to certain bondholders who converted their holdings during the depression is most unfortunate. At that time, many thousands of bondholders voluntarily sacrificed one-third of the income derived from bonds. In many instances that sacrifice was considerable; it was especially so in the cases of those people who were entirely dependent on that interest for their livelihood. When the Premiers plan, which laid the foundation of Australia’s prosperity, was introduced, a definite undertaking was given that persons who voluntarily accepted a reduction of the interest on their bonds would not in future be subjected to additional taxes on such assets. The present Government has gone back on that undertaking, notwithstanding that after it was given the Parliament confinned it during the terms of the Lyons Administration. Honorable senators supporting the Government may say that bonds held by companies are not covered by the undertaking, but I point out that it was without qualification.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– The undertaking applied to the security rather than to the holder of it.

Senator FOLL:

– That certain securities are held by companies, and not by individuals, does not alter the undertaking in the slightest degree. The action of the present Government amounts lo the repudiation of a contract entered into by a previous government and subsequently confirmed by the Parliament. As the Leader of the Opposition (Senator McLeay) pointed out, this measure is one essentially for consideration in committee, and I shall therefore leave my further remarks until the committee stage has been reached.

Senator JAMES McLACHLAN:
SOUTH AUSTRALIA · UAP

– This bill purports to give effect to the policy of the Government as set out in the budget. In dealing with taxation proposals we have to consider, first, the means by which money shall be obtained from the people, and, secondly, the effect that the extraction of such money from them will have on the social and economic life of the community. A fundamental principle of taxation should be that all sections of the community shall bear their proper share of the burden. Taxation is a means of obtaining money from the people by compulsion; it is a form of conscription, of wealth. For that reason, the burden should be distributed evenly among the people. In criticizing the budget proposals of the Fadden Government, the Prime Minister (Mr. Curtin) said that they introduced an element of compulsion into the life of the Australian people. What a remarkable statement, when we reflect that the honorable gentleman believes in compulsory voting, compulsory unionism, compulsory education, and so on! In normal times taxation differs considerably from taxation under war conditions. We can understand a government in times of peace seeking to exclude small incomes from taxation on the ground that the money so collected is, to a great degree, expended on public works and in providing materials for the benefit of the people as a whole, and in developing trade and commerce. The position is entirely different when a nation is at war, for then the bulk of the money extracted from the people is used in ways which will best ensure the safety of the nation.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– It goes up in smoke.

Senator JAMES McLACHLAN:
SOUTH AUSTRALIA · UAP

– Yes, and so brings no return. Seeing that this money is being expended for the protection of the people as a whole, all the people should contribute, but this measure provides for sectional taxation in that it places no burden upon the bulk of the country’s wealth. The Government’s taxation measures have been treated generously by the Opposition. I have very little fault to find with them in existing circumstances. We must have the money, and somebody must pay. We are all willing to pay our share, but taxation should be spread over a wider field. The exemption of wage-earners and small salary-earners from direct taxation will not afford them that measure of relief which the Government would have us believe. If they are exempt from direct taxation, we must increase their burden of indirect taxation, besides resorting in a greater measure to what is known as finance by national bank credit. This must have the effect of increasing the cost of living, which falls most heavily upon people with small incomes, so that it is possible that they will be worse off now than if they were required to pay income tax. So long as this war continues expenditure will increase, yet the Government is, for the most part, tapping only the’ same sources of revenue as in the past. Statistics show that the greater part of the people’s income - not less than £550,000,000- is held by 70 per cent, of the population. This section did not hold anything like the same proportion before the war. The income received to-day represents, in large measure, the money taken from the wealthier classes by increased taxation and distributed in the form of wages. The Government has exempted these increased earnings from taxation, but how long can that continue? High incomes are decreasing very quickly, and low incomes are increasing at a corresponding rate. When will the Government begin to follow that money?

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– It will begin soon; it is only shamming.

Senator JAMES McLACHLAN:
SOUTH AUSTRALIA · UAP

– I think so, too. There has been much talk about rationing spending, and this is an opportunity to do it. By levying taxation on the lower incomes the Government could curtail expenditure very considerably. It has already checked the spending of the higher incomes. Expenditure is going up by leaps and bounds, and practically nothing has been done to curtail it. Several days ago I was talking to the manager of a large departmental store in Adelaide who told me that, in the toy department alone, sales had increased by nearly 60 per cent.

Senator Amour:

– What a shame! Should not the kiddies have any toys?

Senator JAMES McLACHLAN:
SOUTH AUSTRALIA · UAP

– I expected that interjection. The honorable member seeks to imply that I do not wish the children to have their toys. Every Christimas for years past I have given more to enable the kiddies in the slums to spend a happy Christmas than the honorable senator has given during his whole life.

Senator Large:

– Why not begin by removing the slums?

Senator JAMES McLACHLAN:
SOUTH AUSTRALIA · UAP

– I am prepared to join with the honorable senator in doing that, also. Retail buying has increased since August, 1939, by 35 per cent, in Sydney, 45 per cent, in Melbourne and 26 per cent, in Brisbane. The value of imports of tea, coffee and cocoa have risen during the same period from £2,800,000 to £3,500,000, silk and art goods from £3,500,000 to £4,700,000, and cotton goods from £5,400,000 to £8,800,000. I realize that price increases are partly responsible for the increased figures, but the most important factor is the increased spending power of the public. The proper way to ration spending is to increase taxation so that the people will not have the money to spend. The following is an extract from the London Financial Times: -

The budget, born of party political strife, bears a very strong imprint of its origin. “ Soaking the rich “ is everywhere the keynote. Any budget seeking to finance a large-scale war effort by mulcting the favoured few must be inflationary. Excessive reliance on direct taxation of higher incomes caused an inflationary position in Britain, and that result is even more clearly indicated in Australia, where the number of really high incomes is extremely limited.

The lowering of State income taxes is necessary if the total taxation in some ranges is not to exceed 20s. in the £1. On the other hand, a vast number of incomes under £200 remain exempt, meaning that 300,000 wageearners make no direct contribution, while 80 per cent, of the national income escapes any additional burden.

The political situation is most tempting, to sacrifice sound finance because with a slender majority the ruling party is greatly tempted to trim its policies to increase its hold on the electors. It will be regrettable if the price of greater political stability has to be disastrous financial instability.

Senator COURTICE:
Queensland

Senator James McLachlan inferred that this Government is actuated by one motive only, the desire to remain in power, and to win the votes of the people. I repudiate that suggestion. He should, in fairness, recognize that the people of Australia are prepared to hear whatever burden is necessary. We all know that this heavy taxation must have serious effects on industry. We understand that if taxation is unfair the effecton the public will be detrimental, and it is unworthy of the honorable senator to suggest that the Government, in framing these measures, is actuated merely by the desire to win votes. If the policy favoured by some honorable senators opposite had been consistently applied in Australia, we should not now have so large a population to face our present difficulties.

Senator McBride:

– That is guff !

Senator COURTICE:

– It is not. The Labour party has always advocated the establishment of secondary industries, and it is those industries which support population. We must not forget that to-day we are at war. It has been stated by responsible leaders that if we get out of this war with what we stand up in, we shall be lucky. Perhaps that is true. We realize that increased taxation will have serious reactions, and we are prepared to review our taxation legislation from time to time in the best interests of the nation. It has been claimed that a large proportion of the income of Australians is earned by 70 per cent, of the population. That may be, but the fact remains that most of those people are receiving the basic wage or less, and are, therefore, not in a position to pay direct taxation. Most of tlie workers will be paying so much indirect taxation that their contribution to the war effort will be almost as much as they can make. If we can discover a more equitable method of taxation, the Government will not hesitate to adopt it. In framing this budget, the Government has more than once acted upon suggestions from the Opposition. It has been eminently fair in its attempts to distribute the burden of taxation equitably over all sections of the community. I resent the suggestion that the Government is not seised of the importance of dealing wisely with the economic problems that confront this country. Honorable senators who lay that charge against it under-estimate the intelligence and sincerity of the Prime Minister (Mr. Curtin) and the members of his Ministry.

Senator COOPER:
Queensland

– The events of the last few days have made the need for an all-party Government more urgent than at any other time. The Treasurer (Mr. Chifley) proposes to raise in loans and collect in taxes £325,000,000 for the purposes of financing the services of this country. The taxation proposals which he outlined in his budget speech have already been found to be incomplete, and to have such repercussions on the industries of this country that a committee, representative of all the parties in this Parliament, has been set up to advise the Government as to amendments to be effected to those proposals which would make them more workable and acceptable to the people of this country. That shows more than anything else that the Government which now occupies the treasury bench is not capable of carrying on the administration of the affairs of this country alone, and that it needs the assistance of the Opposition to enable it to bring the war effort, to maximum efficiency. Senator Courtice, who spoke on behalf of the Government, said that it is seised of the importance of the responsibilities which have fallen to its lot in carrying on the Australian war effort. I remind the honorable senator however, that when the party which he represents was in Opposition, it should have been imbued with the same high principles that now govern its actions. When the supporters of the present Government were sitting on this side of the chamber and the previous Government brought down taxation proposals similar to those with which we are .now dealing, they condemned them as most obnoxious. I refer particularly to the proposal to withdraw the concessional deduction allowed to taxpayers for children in respect of whom child endowment is received. The child endowment scheme was instituted by the previous Government in order to assist those people in the community who had large families, particularly the basic-wage workers. The previous Government realized, just as does the present Government, that it was necessary to collect revenues from all possible sources in order to meet its heavy war commitments. The former Treasurer (Mr. Fadden) estimated the irreducible minimum requirement for that purpose at £217,000,000. After exploring avenues of taxation, the previous Government decided that it could not continue to allow the concessional deduction for children in respect of whom child endowment was paid. It realized, of course, that such a proposal would bear somewhat heavily upon certain taxpayers ; but it was forced to that decision by the urgency of its needs. Speaking in the House of Representatives on a Supply Bill on the 21st August last, the Minister for Supply and Development (Mr. Beasley), who was then a member of the Opposition, said -

This scheme of child endowment has proved, under examination, to be in the nature of a trick perpetrated upon the community. . . . We considered that the principle ‘ of child endowment was very important.

Every honorable senator will agree with that. He continued -

For this reason we regarded the scheme as a step forward along the path of social reform. Now we learn that, instead of making endowment payments a real benefit to the people as we believed they would be, the Government has offset the amount which the workers receive in respect of their children by disallowing the concessional taxation deductions in respect of all but the first child in any family under the a.ge of sixteen years.

Taxation is irksome enough when all is said and clone, but it is much more so when such action is taken without legal authority. I direct attention to what is being dime with regard to taxation assessments for income

Binned during the- year 1040-41. In respect of this income the Taxation Department proposes to permit concessional deductions for only one child in each family. The argument advanced by the Taxation Department in support of this action is that taxation assessments are based upon the previous year’s income. I admit that that is the general guiding principle of taxation, but its application in respect of the child endowment scheme for this year is entirely wrong. In the first place, the child endowment scheme did not come into operation until July, 1941. Therefore, even if there be any merit, in the department’s argument in favour of exclusion of the concessional allowance of £50 each for all but the first child under sixteen years of age in any family, the practice cannot equitably apply to the 1940-41 year of income, when child endowment was not paid. Why is the Government, through the Taxation Department, robbing taxpayers of their concessional rights? The child endowment scheme 1ms been rigged against the workers.

Those statements were made only two months ago by a member of the House of Representatives who, since he has been elevated to ministerial rank, has completely somersaulted in his views in regard to principles of taxation. No doubt he realizes now the urgent need of the Treasurer for securing revenue from every possible source; hut before his elevation to office in the new Ministry, he was either not fully conversant with the difficulties that faced the then Government or he deliberately exploited them for the purpose of placing himself and his party in a false position before the people. Obviously, he had one eye on the anticipated general elections. I have no wish to be offensive, but I cannot refrain from saying that at that time the members of the then Opposition had every opportunity to ascertain the actual position which confronted this .country. It is remarkable that less than three weeks after the Labour party assumed office its supporters have been able to realize all the difficulties that confront a government in securing the necessary revenues with which to prosecute the war. The present Government cannot accuse the Opposition of having failed to facilitate the passage of the measures which it has brought down. In ‘giving our assistance, in some instances we have had to reframe the measures brought down by the Government, in the interests not only of the Government, but also of the people of the country.

Senator LECKIE:
Victoria

.- My review of this bill will not occupy many minutes, because I recognize that speeches at this juncture will not achieve very much. Although the Government knows that many of the provisions of the measure are bacl, it elects to meet a bad situation by bad methods. That this criticism is justified is borne out by the fact that the Government has expressed its willingness to refer this legislation to a representative committee on taxation. The claim by Senator Courtice that the Labour party has always encouraged the establishment of industries in Australia can no longer be made with justification, because this bill will destroy them. When they are ruined, the proposal of the Government to conduct a post-mortem on them will not help very much. The Government’s attitude may be summarized thus : “ If we find that industries have been slain by the folly of the Labour party, we shall express our deepest regret.” The proposed post-mortem is the silliest suggestion that I have ever heard. If the Government is not satisfied that the measure is equitable, the doctor should be called in before the patient dies. But, obviously, the Government prefers to conduct a post-mortem on the corpse, instead of attempting to cure the patient.

It is evident to me that certain provisions of the bill have not been thoroughly examined. As the result of the operations of this measure, many private companies will be compelled to pay in tax a. sum. which exceeds their profits. In Queensland, some companies will pay taxes totalling 26s. in the £1. But that is not the worst feature. When honorable senators on this side of the chamber warned the Government of this possibility, the Minister for Trade and Customs (Senator Keane) indicated that certain concessions would be granted to them in the form of rebates. For example, if the assessment is equivalent to 21s. in the £1, the Commonwealth will allow to the company a rebate of 2s. and will beg the States to do the fair thing by allowing a rebate of ls. But the so-called concession of 3s. will be of no value to a Queensland company that is required to pay tax at the rate of 26s. in the £1. If the Government, in its innocence, believes that the States will forgo this revenue, it is making a grave mistake. I repeat that this proposal will kill many industries, and the tragedy of the situation is that the coroner who conducts the post-mortem must inevitably find : “ Industry in Australia was killed by the Labour party, which acknowledges that it made a mistake and expresses to the country and former employees it3 profound regret”.

Several anomalies arise regarding the method of computing income tax. An industrial concern possessing extensive plant is allowed only a certain proportion of depreciation. Companies, in their wisdom, always provide a larger amount than that allowed for this purpose, but the Taxation Department grants them no concession for doing so. Although many factories are now working, not eight hours, but 24 hours a day, the allowance for depreciation will not be varied. Instead of paying taxes at the rate of 21s. in the £1, some companies will pay 25s. in the £1. The Government has no conception of the needs of industry, and, I warn it that the bill will kill many private companies which form the backbone of manufacturing in Australia. Unless the taxation committee makes an early examination of the provisions of the measure, industry will suffer severe hardship.

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

in reply - I recognize the value of some of the criticism which honorable senators opposite have offered to the bill. The proposal of Senator J. B. Hayes will be investigated as soon as possible. I agree with the criticism of Senator Foll that the representative committee on taxation should examine without delay the effect of the bill upon prospecting. Senator Leckie, who prophesied that the measure will cause the demise of many private companies, will be gratified to learn that his warning will be treated as urgent, and will receive careful consideration. He will be the first to admit that the Government would not be so unwise as to risk such a possibility. It may mean that, on a closer examination of the problem, the Government will be obliged to forgo some of the revenue that it expects to obtain from this source. Honorable senators may rest assured that the anomalies which they have mentioned will be examined at an early date.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 and 2 agreed to.

Clause 3 (Officers to observe secrecy).

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– I should like the Minister for Trade and Customs (Senator Keane) to explain the purpose of this clause and the effect of the amendments that were made in it by the House of Representatives. From my interpretation of the clause, I conclude that the same cloak of secrecy will be imposed on certain officers to whom disclosures may be made, as applies to the Commissioner of Taxation or his subordinates.

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

– Section 16 of the act is designed to ensure that officers will maintain secrecy regarding information about the affairs of a taxpayer. Sub-section 4 of that section provides that information may be communicated by the taxation authorities to several other authorities who are enumerated therein. Included in those authorities is the Director-General of Health, for the purpose of the administration of any law of the Territory for the Seat of Government, which is administered by the Minister for Health. It is proposed to extend the authorization of the communication of information to the Director-General of Health, to include the purposes of the administration of any law of the Northern Territory which is administered by the Minister for Health. The proposed extension of the section is necessary for the purpose of the Northern Territory Medical Benefits Tax Ordinance 1941. Commonwealth income tax returns will be used to assess the amount of tax which is paid under that ordinance.

The amendment also corrects the description “ Territory for the Seat of Government “ and substitutes “ Australian Capital Territory “. The inclusion of the Commonwealth Prices Commissioner among those to whom taxation information may be communicated will implement a recommendation of the Joint Committee on Profits. That committee expressed the opinion that information in possession of the Commissioner of Taxation may at times prove to be useful to the Prices Commissioner in conducting his investigations. The Director-General of Health, the Prices Commissioner, and their officers, in common with other authorities to whomtaxation information may he communicated, are subject to the same obligations to maintain secrecy as are officers of the Taxation Department.

Clause agreed to.

Clauses 4 to 6 agreed to.

Clause 7 - (1.) Section forty-four of the principal act is amended: - (2.) The amendments effected by the last preceding sub-section shall not apply to any dividends paid, credited or distributed if the dividends were declared prior to the thirtieth day of October, One thousand nine hundred and forty-one.

Senator SPICER:
Victoria

.- I move -

That sub-clause (2.) be left out with a view to insert in lieu thereof the following new sub-clause: - “ (2.) The amendments effected by the last preceding sub-section shall not apply to any dividends paid, credited or distributed it the dividends -

were declared prior to the thirtieth day of October, One thousand nine hundred and forty-one; or

arc paid out of profits arising from the sale or the compulsory resumption for public purposes of assets not acquired for the purpose of resale at a profit and that sale or resumption, as the case may be, took place prior to the thirtieth day of October, One thousand nine hundred and forty-one.”

The purpose of the amendment is to prevent the retrospective operation of the amendments to the Income Tax Assessment Act, which are contained in clause 7. That clause amends section 44 of the Income Tax Assessment Act 1936-1940, and by so doing it removes the previous exemption which existed, whereby the assessable income of a shareholder did not include “ (a) dividends received from a company that does not carry on business in, or derive income from, sources in Australia, and (b) dividends paid wholly and exclusively out of one or more of the following …” One which is now excluded is profits arising from the sale or compulsory resumption for public purposes of assets not acquired for the purpose of resale at a profit. We are dealing with two proposals. We are removing, first, the exemption which applies to dividends derived from sources outside Australia; and, secondly, the exemption that previously attached to dividends paid out of what can properly be described as capital profits. In the House of Representatives the Government accepted the view that it would not be proper to apply the new law to dividends received from sources outside of Australia before the 29th October last, and the bill was amended accordingly. However, the position still remains unsatisfactory in relation to dividends paid out of capital profits.

Senator McBride:

– Out of the realization of assets.

Senator SPICER:

– Yes. The assets out of which the dividend is paid may have been realized some considerable time before the 29th October, but it may just happen that the dividend has not been declared. Dividends in such cases should be excluded from this provision. For instance, there may be two companies carrying out a transaction of this kind. One may have sold its assets and made a profit on the sale before the 29th October and declared a dividend out of that profit before that date. That dividend will be exempt under the clause as it now stands. But if another company has realized profits on the sale of capital assets before the 29th October, but happens not to have declared the dividend out of those proceeds, that dividend is taxable. The sole purpose of my amendment is to put those two cases exactly on the same basis, by excluding from the operation of this clause any dividend which is the proceeds of the realization of capital assets where the realization of those assets took place before the 29th October.

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

– I remind the honorable senator that the clause as it stands was not framed as the result of any amendment moved in the House of Representatives, nor was it submitted to the committee which inquired into certain phases of our taxation legislation. This clause will have the effect of bringing into the assessable field certain dividends paid out of ex-Australian profits, and also dividends paid out of capital profits made by companies on the disposal of capital assets, such as factory premises. It also provides that the present exemption of these dividends shall continue to apply to all dividends declared out of those profits before the 29th October last. The purpose of the amendment moved by Senator Spicer is to retain the exemption in respect of dividends paid out of capital profits made by companies prior to the 29th. October last irrespective of the date when the dividends are declared. The view taken by the Government is that no obligation rests upon companies to distribute these capital profits; and if they do so distribute them they are now aware of the taxation consequences of any such distribution. I cannot accept the amendment.

Senator SPICER:
Victoria

.- I understand that in the House of Representatives an amendment was moved to delete the whole of this clause, and that it went much further than the amendment which I am submitting. My amendment deals with the measure as it has come before us from the other chamber, and this clause as at present drafted does not avoid what I believe will be a retrospective application of this provision.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– It appears to me that the Minister (Senator Keane) is inconsistent in accepting the first proposal and rejecting the second. An amendment was accepted in the House of Representatives which enabled companies to escape tax in cases in which the distribution took place, or the dividend was declared, prior to the 29th October. Having regard to this legislation, I venture to say that there will be a number of companies declaring dividends and going into liquidation in a variety of ways in order to safeguard the position of their shareholders. However, simply because the dividend has not been declared, and that is a purely formal act, profits derived from the sale of assets before the 29 th October are to be taxed as dividends. The point made by the Minister is that no obligation rests upon com panies to declare such dividends ; but they must be declared soon or later. I do not know whether there will be many of these cases, but 1 appeal to the Minister to accept the amendment as a matter of justice. “We are aware of the experiences of preference shareholders in the past in cases of liquidation where a dividend had not been declared. For many years it was thought that because a dividend had not been declared preference shareholders were not entitled to a dividend on their capital. However, the inequity of that position has since been recognized by the courts, and the dividend, whether it is declared or not, is subject to the same preference as the preference shareholders enjoy in respect of their capital. I do not think that the loss of revenue will be very great if the amendment be accepted. In any case it simply proposes to deal out even-handed justice in such cases as have been outlined by Senator Spicer.We should not make flesh of one and fowl of another.

Question put -

That the words proposed to be left out be left out (Senator Spicer’s amendment).

The committee divided. (The Chairman - Senator Brown.)

AYES: 16

NOES: 13

Majority . . 3

AYES

NOES

Question so resolved in the affirmative.

Amendment agreed to.

Clause, as amended, agreed to.

Clause 8 (Extent of liability to tax of certain dividends).

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– The object of this clause is to repeal section 45 of the principal act, and its effect will be to deprive companies of the benefit conferred under the conversion loans floated during the last depression period. Many arguments could be used in regard to the impropriety of this proposal. It has been suggested by a gentleman for whose honour and integrity I have the greatest respect, that this immunity from further taxation was given to individual bond holders, and, the bonds having now fallen into the hands of companies, the exemption should no longer apply. That is quite an erroneous view. In what direction are we moving to-day? Having in view that immunity from taxation many companies purchased these bonds at increased ratesbelieving that the return from them would be in harmony with returns from other Government securities. I have no wish to use words which may be regarded as offensive, but to me this proposal constitutes a breach of an undertaking given by Parliament, and it will react to the detriment of this Government and subsequent administrations.

Senator Cameron:

– Similar action was taken in connexion with the gold tax.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

-We all know that, but there was some justification in that case. In regard to these bonds a solemn promise was given by the then government in its prospectus; the Prime Minister of the day pledged his word. I notice how sensitive is the present Prime Minister (Mr. Curtin) about this repeal, and I do not wonder at it. He is attempting to evade the issue by saying that the matter was in the hands of investors, but that is not the position. No matter who the investor may have ‘been, a promise was given that no further taxation would be imposed on. such bonds. If there is one thing which I would suggest to honorable senators above anything else, it is that in the interests of war finances and the finances of the Commonwealth generally, we should adhere to our promises, however onerous the circumstances may be. I do not know the currency of these bonds, but I contend that whatever the position may be, we should not break faith with the people who invested their money.

Senator Courtice:

– Probably the investors concerned will be quite willing to accept this proposal.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

-If they are prepared to forgo voluntarily the whole or part of the interest, in the same way as certain invalid and old-age pensioners in South Australia made a substantial voluntary contribution towards war funds, that is all right, but that has nothing to do with us. We should keep our own hands clean. We should not allow any government, whether it be of the political complexion of the one which is now controlling the destinies of this country, or not, to be charged with repudiation. If we do so, the people will be unable to accept the pledged word of a prime minister. I take a very serious view of this matter because of its effect upon our national finances. We should fulfil our undertakings however distasteful it may he. The time cannot be far distant when we shall be in a position to redeem these bonds.

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

.- The effect of section 45 is to provide that any portion of Commonwealth loan interest contained in a dividend shall be free of income tax to the same extent as that interest itself is free in the hands of the recipient company. The origin of section 45 may be traced to the agreement made in 1931 between the Commonwealth and the bondholders stating the terms on which bonds were to be converted. Included in that agreement was a provision that interest on the converted securities should not carry a greater rate of tax than that applying for the financial year 1930-1931. In the following year the Lyons Government inserted the provisions which it is now proposed to repeal. The incorporation of section 45 in the law was justified on the ground that it was the logical extension of the undertaking given to the bondholders when they converted their loans. It was then contended by the Government that if section 45 were not enacted the agreement with the bondholders would partly be nullified. However, the undertaking given to the bondholders applied to the interest on the loans and did not extend to dividends paid out of Commonwealth loan interest. Taxation on interest received by companies from these converted bonds does not exceed1s. 4d. in the £1, that being the rate of tax applied to companies in the financial year 1930-1931. Accordingly, a company, as the recipient of the interest, has in the past received, and will continue to receive, the advantage of the difference between the 1930-1931 rate and the ordinary company rate of taxation as well as freedom from super tax and the undistributed profits tax of1s. and 2s. in the £1 respectively. It is considered that there was no justification for the inclusion of section 45, and it is now proposed that that provision be repealed. The Royal Commission on Taxation 1932-34 recommended the repeal of the section.

Clause agreed to.

Clauses 9 to 12 agreed to.

Clause 13-

Section seventy-eight of the principal act is amended -

by omitting paragraph (d) of subsection (1.) ; and

Section proposed to be amended -

  1. The following shall . . . he allow able deductions: -

    1. Calls paid by the taxpayer in the year of income on shares owned by him in a mining company or syndicate carrying on mining operations in Australia for gold, silver, base metals, rare minerals or oil, or in any company carrying on afforestation in Australia as its principal business.
Senator ALLAN MacDONALD:
Western Australia

– I move -

That paragraph (6) be left out with a view to insert in lieu thereof the following new paragraph : - “ (b) by inserting in paragraph (d) of sub-section (1.) after the word calls ‘ the words not exceeding £50,’; and”.

The purpose of this amendment is to retain the taxation exemption in respect of those individuals who, by the payment of calls on shares, encourage those conducting small gold-mines to increase their production of gold. The amendment affects Western Australia in particular, but it also affects other States in which gold-mining is carried on. By excluding the first £50, we shall retain exemption from income tax for the individuals whom I have mentioned. I am not concerned with these people personally, but with the future of the industry. This exemption is an encouragement which hasbeen given throughout the history of the gold-mining industry. As I have pointed out on several occasions, this industry was the first to be taxed under war conditions. In Western Australia alone, the gold tax yields £1,000,000 per annum, and that money is received by the Treasury, not after a long delay following the issue of an assessment, but from month to month as the gold is won. The State Taxation Department also mulcts the industry to the extent of 4s. in the £1. Therefore, it is quite reasonable to say that the goldmining industry is already bearing an equitable share of the burden of providing revenue for Avar purposes. To discourage the industry at this stage would be fatal. The production of gold is a very important factor of our war effort.

Senator Cameron:

– The honorable senator supported the gold tax.

Senator ALLAN MacDONALD:

– I did not. Senator Cameron should be fully acquainted with the facts before making such an absurd statement. The gold-mining industry can play a major part in the rehabilitation of Australia, and contribute substantially towards the cost of the war. Only gold can help us materially to create the needed dollar exchange. The request is reasonable. The amendment which has already been foreshadowed does not go far enough. The one-third rebate might benefit the more wealthy investors. I am not interested in those people. My sole aim is to ensure that there is a continuance of encouragement to prospectors and to owners of small mines, because only by these people can the industry be continued after the larger concerns have ceased to operate. Fifteen thousand workers are at present employed in the Western Australian gold-mining industry, and we should be very careful not to whittle away any of the privileges which the industry has enjoyed in the past, and which have been the means of bringing gold production up to its present level. There is an imminent danger that the industry will deteriorate. Already, gold production in fine ounces in Western Australia has fallen considerably, and if the exemption be abolished altogether, the result may be disastrous. It is the prospectors operating in a small way and the owners of small mines who ensure the stability of the industry. The Government’s proposed rebate of tax would benefit the. wealthy shareholders. A mining investor with an income of £300 a year and who had paid £50 in calls during a year would receive a tax deduction of 16s. 7d. at the old rate, but at the new rate of tax would receive a benefit of £1 2s. 3d. The investor on an income of £5,000 a year would receive a benefit of £31 instead of £10.

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

.- The Opposition agreed with the Government that a committee should consider this matter, and a certain recommendation made by that committee is now embodied in the bill. Senator Allan MacDonald cannot have it both ways. I was amazed to hear that he intended to submit this amendment. I thought that some effort would be made to see that the understanding arrived at was honoured. Members of the Opposition held a party meeting, and must have reached an understanding with regard to the bill. With much of what Senator Allan MacDonald has said, I agree. I, too, have an interest in the mining industry, but I have to adapt my views to the facts of the case. Assuming that I was in receipt of an income of £500 per annum, and paid £50 in calls on mining shares in the course of a year, under the pre-war rates, I was allowed a tax deduction of £1 14s. 6d., but the deduction that would have been allowed under the new rates, if not amended, would have been £7 18s. 4d. If I had been in receipt of an income of £2,000 a year, and had paid £200 in calls, I should have been allowed a tax deduction of £17 under the old rates, but if the present amendment were accepted, I should be allowed a deduction of £126. I contend that that would not be equitable.

Senator Foll:

– All that the Opposition now asks is that a deduction of £50 be allowed from taxable income. A taxpayer who had paid £200 in calls would still be taxed in respect of the remaining £150.

Senator KEANE:

– The small men in the mining industry are not interested in the big “ shows “ to any great degree. Small groups of miners are not connected with companies, and seldom claim the deduction in respect of calls. The amendment of the principal act proposed in the bill would withdraw the deduction from assessable income of calls paid by a taxpayer in the year of income on shares owned by him in a mining company or syndicate carrying on mining operations in Australia for gold, silver, base metals, rare minerals or oil, or in any company carrying on afforestation in Australia as its principal business. In substitution for the deduction of those calls, it is proposed to allow a rebate of tax in respect of the calls. The provision for this rebate is included in clause 24 of the bill. I cannot accept Senator Allan MacDonald’s amendment.

Senator LECKIE:
Victoria

.- The Opposition has been upbraided by the Minister in charge of the bill (Senator Keane) for not having accepted an agreement made by a certain committee, but the Opposition was not consulted in the matter. I contend that honorable senators are entitled to arrive at an independent opinion. If I consider that an amendment of the bill is necessary, I shall try to have it amended, but I have no desire to ignore a decision reached by a committee representative of all parties.

Senator Fraser:

– I believe that the Minister was of the opinion that the Opposition had been consulted regarding the matter.

Senator LECKIE:

– I repudiate any suggestion that the Opposition has violated an agreement.

Question put -

That the words proposed to be left out be left out (Senator Allan MacDonald’s amendment).

The committee divided. (The Chairman - Senator Brown.)

AYES: 15

NOES: 13

Majority . . . . 2

AYES

NOES

Question so resolvedin the affirmative.

Amendment agreed to.

Clause, as amended, agreed to.

Clauses 14 and 15 agreed to.

Sitting suspended from 12.45 to 1.45 p.m.

Clause 16 (Income of deceased received after death).

Senator SPICER:
Victoria

.- I foreshadow an amendment of clause 30 which affects the operation of this clause. The effect of proposed new section 101a of the principal act, which is to be inserted in that act by this clause, is to impose income tax on moneys received by the trustees of a deceased person where those moneys would have been income in the hands of the deceased person had he continued to live, hut which in the hands of the trustees are capital moneys and, apart from special legislation, would not be subject to income tax. This principle arises in connexion, for example, with book debts owed to a deceased person. Had he continued to live, the payment of those debts would be income in. his hands, but by reason of his death the whole of those receipts are capital belonging to his estate. Such moneys pass to the beneficiaries of his estate who are entitled to capital, and not to beneficiaries who are entitled to income. I entirely approve of the idea that it is desirable that receipts of that kind should be taxed, and the Government has accepted an amendment of its original proposal to ensure that the tax which is imposed will attach only to the trustees, and will not be a. tax payable by the beneficiaries. If a person receives what to him is a capital payment, it would be unfair to require him to pay income tax upon the basis that it is income. Consequently, the liability for tax under the proposed new section will be limited to the liability of the trustees. It seems undesirable that a provision of that kind, which imposes a new liability on the trustee, should apply to any assessment which is made before the 1st July of next year. Under the bill as originally drafted, the proposed new section was made applicable to assessments as from the 1st July, 1941. That would mean that it would apply to receipts of this kind received by trustees between the 1st July, 1940, and the 30th June, 1941. Those moneys might have been received in estates in respect of which the trustees have already dispersed all moneys. As the liability is one which is imposed only on the trustees, it should not be imposed in circumstances in which they may not be in a position to make the necessary tax payments out of the trust moneys in their hands. For that reason, I shall move when section 30 is before us that this provision should apply only to assessments as from the 1st July, 1942. I understand that the Minister will accept that amendment.

Senator Keane:

– That is so.

Senator SPICER:

– In view of that assurance by the Minister, I shall not argue the matter further.

Clause agreed to.

Clause 17 -

Section one hundred and two of the principal act is amended -

by omitting from sub-section (2.) the words “ so much of the net income of the trust estate as is attributable to the beneficial interest” and inserting in their stead the words “ the net income of the trust estate, or so much thereof as is attributable to the beneficial interest as the case may be,”.

Amendment (by Senator Keane) agreed to -

That after the word “interest”, first occurring, the following words bo inserted: - “ which he had power so to acquire,”.

Clause, as amended, agreed to.

Clauses 18 to 23 agreed to.

Clause 24 (Rebate in respect of business income).

Senator LECKIE:
Victoria

.- In his second-reading speech the Minister (Senator Keane) cited an example in which he pointed out that if the total taxation of a company were 14s. in the £1 under the Commonwealth law, and 7s. in the £1 under the State law, a total of £1 ls. in the £1, the Commonwealth would remit 2s., making the tax 19s. in the £1, and would ask the State to give up the other ls.

Senator Fraser:

– It is not a question of asking the States to do so; it is an obligation of the State.

Senator LECKIE:

– The States are under no obligation to do so. Let us take another example, and suppose that the Commonwealth tax is 14s. in the £1 and the State tax 5s. in the £1. I should like the Minister to say whether, in such a case, the Commonwealth would remit ls., or only 8d., leaving the other 4d. to be remitted by the State. A third example is that in which the total Commonwealth and State taxes amount to 25s. in the £1. In such an instance, will the Commonwealth remit all of the money that will bring the tax back to 18s.. and if not, how much will it remit? The second example which I have cited - that in which the Commonwealth tax is 14s. and the State tax 5s. in the £1 - will be typical of many actual instances in South Australia and Victoria. The question arises whether the State will remit 4d. in the £1. It is probable that they will not be willing to do so.

Senator Fraser:

– The obligation will be on the State.

Senator LECKIE:

– The Minister should be able to say whether, in such instances, the total Commonwealth rebate will be at least 2s., or sufficient to bring the tax back to 18s. in the £1. Surely that is enough for any company to pay. [ am greatly concerned about this provision because I fear its consequences As a committee is to be appointed I imagine that this is a matter with which it will deal, but we should know what pressure the Commonwealth is likely to put upon the Stales and whether the Commonwealth will depend on the States to make a rebate.

Senator Fraser:

– The Common wealth could not compel the States to agree.

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

– The insertion of the proposed new section 160 in the principal act is designed to pro vide an abatement of income tax in any case in which the effective combined rates of Commonwealth and State taxes, including Commonwealth war-time company tax, exceed 18s. in the £1. In any such case, it is proposed that relief shall be given by the Commonwealth to the taxpayers concerned according to the proportionate weight of tax imposed respectively by the Commonwealth and the States. For example, if the combined weight of the tax on each £1 of income is 21s., composed of 14s. Commonwealth tax and 7s. State tax, the relief to be given by the Commonwealth will be 2s. on each £1.

Senator Leckie asks what the position would be if the Commonwealth tax were 14s. in the £1 and the State tax 5s. in the £1. In such a case the rebate by the Commonwealth would be 14/19ths of ls. The question of any rebate by the States will be the subject of immediate consultation with the State governments. It is left to the States to contribute their portion of the tax abatement so that the combined Commonwealth and State taxes on income will not exceed 18s. in the £1. The proposed rebate will be applicable to companies as well as to individuals.

Senator LECKIE:
Victoria

.- The Minister will see the inequity of this provision; there is no certainty that the States will fall into line. Indeed, the chances are that they will not contribute anything, in which event the companies concerned will be placed in an impossible position. Some Queensland companies will have to call on capital in order to pay the taxes on their own income. Surely that is a position which is not contemplated. We should provide that in no case shall the combined tax exceed 18s. in the £1.

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

– This is a matter for immediate reference to the committee which is to be set up, but I can say that in the event of a State refusing to do what looks to be a fair thing and the Commonwealth being unable to achieve its objective, not more than 18s. in the £1 will be taken from any company.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– In view of that statement, the States will never agree.

Senator KEANE:

– The Government thinks that they will. Two consequential amendments need to be made to this clause to bring its provisions into conformity with the amendment made a few minutes ago to clause 13.

Clause consequentially amended, and, as amended, agreed to.

Clauses 25 to 29 agreed to.

Clause 30- (1.) The amendments effected by sections four to ten (both sections inclusive), sections twelve and thirteen, paragraph (a) of section fourteen, sections fifteen, sixteen, seventeen, nineteen, twenty, twenty-four, twenty-five and twenty-eight of this act shall apply to all assessments for the financial year beginning, on the first day of July, One thousand nine hundred and forty-one and all subsequent years.

Amendment (by Senator Spicer) agreed to -

That in sub-clause 1 the word “sixteen” be- left out.

Amendment (by Senator Spicer) proposed -

That, after sub-clause (2.), the following new sub-clause be added: - “ (3.) The amendment affected by section sixteen of this act shall apply to all assessments for the financial year beginning on the first day of July, One thousand nine hundred and forty-two.”

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– 1 am pleased that the Government has agreed to ‘ accept this amendment. I do not know that it has had time to consider the full effect of clause 16 and the controversy to which it is likely to give rise. I apprehend that before long thousands of people in this country will find it necessary to alter their wills, thereby doing a good turn to a very deserving profession. I understand that this tax is to be the subject of review by a committee composed either of Ministers or of members of the House of Representatives. Honorable senators apparently will not have the privilege of giving the committee the benefit of any knowledge they may possess on the subject. Immediately upon a man’s death the Government proposes to convert what the State laws regard as capital into income for the purposes of the Income Tax Act. That will give rise to tremendous difficulties in the administration of estates by individual executors, for whom I have a great deal of sympathy. Com panies arc well advised and employ experts in their establishments; but individual executors and trustees have a somewhat lonely row to hoe with the assistance of a solicitor in order to see that they have protected themselves. I sympathize with them, because it seems a little harsh that the obligation is cast upon them and not upon the estate. I support the amendment.

Amendment agreed to.

Clause, as amended, agreed to.

Title agreed, to.

Bill reported with amendments ; report adopted.

Bill read a third time.

page 1038

FAILURE TO VOTE

Personal Explanation

The PRESIDENT (Senator the Hon J Cunningham:
WESTERN AUSTRALIA

– The Senate takes no cognizance of pairs. They are the subject of a private arrangement between honorable senators.

page 1038

INCOME TAX BILL 1941

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Keane) read a first time.

Second Reading

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

.- I move -

That the bill be now read a second time.

This bill deals with the rates of income tax to be imposed for the current financial year on individuals and companies. As regards individuals, it is estimated that the increases for which the measure provides will produce an additional £6,000,000 in a full year, and £4,500,000 during the current financial year. Amendments of the Income Tax Assessment Act which have already received the consideration of this chamber will yield a further £2,400,000 for a full year, of which £1,900,000 will be collected during this year. The total additional revenue to be obtained from individual under the Government’s income tax proposals is thus £S,400,000, of which £6,400,000 will be collected this year. The bill does not alter the rates of tax payable by individuals whose taxable incomes from personal exertion do not exceed £1,500, or whose incomes from property do not exceed £1,200. It is, however, proposed to increase the rates on incomes above those amounts. In regard to personal exertion incomes, the existing scale provides for a flat rate of tax of 16d. on taxable incomes of from £1 to £400. From that point the rate increases uniformly by one twenty-fifth of a penny for every additional £.1 of income over £400 up to £1,500. With regard to property incomes, the present scale provides for a flat rate of 20d. on each £1 of taxable incomewhere the taxable income does not exceed £400. Thereafter the rate increases progressively by one-twentieth of a penny for every additional £1 of taxable income until the taxable income reaches £1,200. As 1 have already stated, these rates will remain unaltered. In the case of personal exertion incomes, however, it is proposed to continue the progressive increase of one- twenty-fifth of a penny beyond the point of £1,500 to £2,500, where the rate of tax will be 8s. 4d. in the £1. For every £1 of taxable income in excess of £2,500 the rate will be 16s. Sd. With regard to property income the rate of progression of one-twentieth of a penny will be continued until the taxable income reaches £2,000 at which point the rate of tax will be Ss. 4d. in tha £1. For every £1 of taxable income beyond £2,000 the rate will be 16s. Sd.

Honorable senators have before them tables illustrating the effect of the proposed increases from which it will be observed that the increase of tax on incomes of £2,000 from personal exertion is small. For incomes of £3,000 the increase averages about 20 per cent, ov-r the tax at the present rates, with a small variation between States due to the deduction of State income taxes paid. At £5,000 the average increase is approximately 40 per cent., and at £10,000 about 55 per cent. This percentage addition to the tax payable at the present rates continues to increase progressively up to a limit of 66 per cent, on the highest incomes. The tables also disclose the disparity between the amount of federal income tax payable at the existing rates in the various States on equivalent incomes in tha higher ranges. This disparity is accentuated by the increases of the rates. For example, under the proposed rates an income of £5,000 from personal exertion will be subject to federal tax of £2,673 in Victoria, and only £2^,077 in Queensland. The disparity of nearly £600 is a direct result of the variation in the incidence of State income taxation in the several States, and it reflects the effect of the deductions allowed in the federal assessments for State income taxes paid.. The allowance of deductions for State taxes has a tendency to iron out the existing inequalities in the incidence of income taxation levied by the different States, as the highest federal tax is paid in the State with the lowest State taxation, and vice versa. The result of this allowance of State taxes is to bring about a greater degree of equality in the total impact of Federal and State taxation on individuals resident in the different States than would otherwise be the case. In war-time it is imperative that individuals should contribute to the nation’s finance to their full strength. To that end, those individuals who reside in tha more lightly taxed States must be prepared and content, for the duration of the war, to relinquish a good deal of tha advantage previously enjoyed by them in comparison with individuals receiving similar incomes in the more highly taxed States. The comparative equalization of the incidence of the combined Federal and State income taxation on the higher incomes, arising from the allowance of State taxes in the federal assessments, is clearly indicated in Part B of the tables circulated amongst honorable senators. The combined totals of Federal and State income taxes payable in the various States on certain specimen incomes are shown therein. At £1,000, the total tax in the highest taxing State is about 20 per cent, greater than in the lowest taxing State. On an income of £3,000, the difference is only about 3 per cent. Owing to the irregularity of the State taxation scales the difference fluctuates in the specimen incomes in excess of £3,000, but it remains at less than 6 per cent.

The limit of federal taxation on high incomes is virtually fixed by the highest taxed State; and consideration of thu weight and incidence of State taxation has been a material factor in devising the proposed federal scale. A maximum of 18s. in the £1 has been taken for the combined Federal and State taxes. Under the proposed scale the combined tax in the highest taxing State will be about 16s. in the £1 for an income of £10,000 with a limit- of 18s. for the highest income. It is recognized that in some cases in the higher ranges of income circumstances may cause the total weight of Federal and State taxation to amount to more than 18s. in the £1. As has already been explained to honorable senators in connexion with the Income Tax Assessment Bill, provision has been made in those cases for an abatement of tax which is designed to limit the total weight of taxation on income to 18s. in the £1. The Commonwealth will abate its proportion of the excess taxation over 18s., and it now rests with the States to abate the balance of the excess.

The rates of tax payable by individuals are not being otherwise altered and, for that reason, I do not propose to enter into a detailed explanation of the various clauses and schedules contained in the bill, as they do not depart from established practice. The tables circulated amongst honorable senators give a sufficiently clear indication of the taxes which will be pay- able by individuals on specimen incomes at the proposed rates, as compared with the taxes payable on similar incomes at the existing rates.

The bill also provides for an increase of the rates of ordinary income tax payable by a company from 2s. to 3s. in the £1. Companies, like individuals, must be prepared to provide more revenue for the successful prosecution of the war, and this increase is justified by reason of the extraordinary demands of war-time finance. It is estimated that the additional revenue due to this increase will amount to £4,500,000. Honorable senators will recognize the necessity for the ever-increasing expenditure on defence requirements, and will approve of the Government’s proposals which aw designed for the dual purpose of financing some portion of that expenditure, and restricting the surplus spending power available for the purchase of consumer goods of a non-essential character.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 to 7 agreed to.

Schedules 1 to 4 agreed to.

Fifth Schedule.

Senator LECKIE:
Victoria

.- I should like an explanation of the heading of the fifth schedule, which reads: “ The rates of tax by reference to a notional income “. Can the Minister (Senator Keane) explain what that means? Many people had a notion that they had an income last year; but they now have a notion that they have no income at all. In many cases, unfortunately, the latter notion would be correct. Perhaps that heading might be altered until such people find out whether their first or second notion is correct.

Schedule agreed to.

Schedules 6 and 7 agreed to.

Title agreed to.

Bill reported without requests; reporadopted.

Bill read a third time.

page 1040

ESTATE DUTY BILL 1941

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Keane) read a first time.

Second Reading

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

– I move -

That the bill be now read a’ second time.

This bill gives effect to the Government’s proposals to obtain increased revenue from estate duty. It will be remembered that the previous Government adjusted and increased the rates of estate duty in May, 1940. These rates, which are at present in force, commence at 3 per cent., which applies to all estates up to a value of £10,000, and then rise steadily to a maximum rate of 20 per cent, in respect of estates amounting to £500,000. The Government considers that further revenue can be obtained from this source without undue hardship. It proposes, therefore, to obtain this revenue by steepening the rate of progression in respect of estates in excess of £20,000. It 13 not proposed to alter the rates on estates up to this value because the Government considers that they already bear a sufficiently heavy burden. I believe that honorable senators opposite are generally in agreement with the Government on the propriety of this form nf taxation.

Honorable senators have received copies of a schedule which has been prepared in order to show the effect of the proposals of the Government upon estates in various ranges together with the death duty in the highest taxed state, and British estate and succession duties on estates in these ranges. It will be seen that no change in the present amounts of duty payable is indicated in that schedule until the estate of £30,000 in value is reached. The increase of duty for such an estate is less than £100. There will be slight increases on estates of values between £20,000 and £30,000, but. generally speaking, they are negligible. The increases are not really substantial in any range until the estate reaches a value of £100,000. I suggest, however, that no particular hardship is involved in the increase of the rate applying to estates of this and higher values.

It is expected that the additional revenue for a full year, to be derived from these increases, will amount to about £650,000; but it is not expected that any additional revenue will be derived from this source in the current financial year. This is due to the fact that the increases will apply only to the estates of persons dying after the commencement of the act, and it is not possible for the Commissioner of Taxation to issue such assessments until some months after the date of death. In this respect honorable senators will appreciate that executors and trustees require a considerable time to prepare an estate duty return. The act allows three months after death for the lodgment of the return. Necessarily, a considerable amount of examination and valuation work must bc done prior to the issue of assessments in these higher ranges.

Senator McBRIDE:
South Australia

– I do not intend to oppose the measure, but I take this opportunity to point out that since the outbreak of war we in Australia have created many records. The particular record to which, f draw attention at the moment is the fact that we are submitting to higher rates of taxes than residents in any other part of the British Empire. I have no doubt that our people are prepared to shoulder this drastic burden. At the same time, however, it is the duty of whatever Government may happen to be in power during the period of the war to ensure that these heavy impositions shall be distributed equitably. As the Minister (Senator Keane) said in his secondreading speech this form of taxation was introduced in the Commonwealth during the last war, and the rates then fixed operated up till last year. The previous Government, of which I was a member, because of the financial responsibilities confronting it, was obliged to look for additional avenues of raising revenue, and it came to the conclusion that it could justly and reasonably increase the rates of estate duty. Consequently those rate3 were increased last year to a degree sufficient to return an additional revenue of £S50,000 annually. Therefore, honorable senators will realize that the present rates are greatly in excess of those which operated since the last war up till last year. It is now proposed to steepen still further the grade on estates of higher values. I draw the attention of honorable senators to the effect of the rates of duty which it is now proposed to impose, and shall compare them with those operating in Great Britain. It will be generally admitted that for many years past the people of Great Britain, both in wartime and peace, have been subject to taxation on a scale greatly in excess of that operating in any other part of the Empire. On an estate valued at £30,000, which is admitted to be substantial, the tax in Great Britain amounts to £3,900. In Australia the duty which will be collected under this measure on an estate of the same value, combining the amount to be collected by the Commonwealth and that to be collected by the State with the highest rate of tax, will be £5,525. On an estate of £100,000 the duty in Great Britain would be £25,700, and in Australia £3S,900. A feature of this bill which was criticized in the House of Representatives, and which I think should be criticized in this chamber - I do not place the entire responsibility for this matter upon the Government because the provision to which I refer is in the original act - is the anomaly in connexion with the estates of deceased soldiers. Under the present act,, there is an exemption of all estates valued at less than £5,000, but unfortunately, should the value of an estate exceed that amount by even £1, the entire value is taxable. In Great Britain there is a standing exemption of £5,000. During, the last war, estates of deceased soldiers were entirely free from estate duty, and I think that it would have been reasonable to have retained that exemption.

Senator Keane:

– The Government has given an undertaking that the committee which has been set up to examine these proposals, will consider the matter to which the honorable senator refers.

Senator McBRIDE:

– I understand that, and I have no wish to delay the Senate, but I think it is well that I should draw the attention of honorable senators to these anomalies. In addition to the exemption of £5,000, in Great Britain the estates of deceased soldiers are subject to certain other concessions. There, it is recognized that men who risk their lives in the defence of their country cannot have the same expectation of life as those who remain at home in civil occupations.

Consequently, it was decided that the estates of deceased soldiers should have some further consideration, and a further exemption calculated on the basis of a soldier’s normal expectancy of life was granted. That exemption gives considerable relief. As an example of how the exemption works, I shall quote comparative figures for Great Britain and Australia in the case of a soldier aged 25 years. Should an estate be valued at £10,000, the duty in Australia would be £300, but in Great Britain, as the soldier’s expectancy of life is considerably less than that of a civilian, the duty amounts to only £40. Corresponding figures for an estate valued at £30,000 are £L,200 in Australia and £239 in Great Britain, and for an estate valued at £50,000, the tax in Australia is £6,000 and in Great Britain £1,435.

Senator Keane:

– Not many soldiers would be effected in Australia.

Senator McBRIDE:

– That is so. but it is the principle and not the number which concerns me.

There is another matter to which I would like to direct attention, now that these rates have become so high. Very often it is exceedingly difficult for an estate to raise sufficient money to pay estate duty, and if, owing to war conditions or for other reasons, there is a succession of deaths, it is almost impossible for an estate to meet the heavy calls made upon it. Therefore, in Great Britain, there is a system which is designed to give relief in such cases. That matter also, should be examined by the representative committee on taxation. Should the beneficiary of an estate die within a year of the previous death, a rebate of 50 per cent, is given in the estate duty. Should a second death occur within two years, the rebate is 40 per cent., three years 30 per cent., four years 20 per cent., and five years 10 per cent. That is a principle which could be very well adopted in Australia. I admit that when the value of estates is much lower than these figures, the anomalies do not loom so largely, but although we are compelled to search for every available source of revenue, it is desirable that the concessions which I have outlined, should be taken into consideration, and, if necessary, relief given.

I do not intend to oppose the bill, and I hope that it will have a speedy passage through this chamber.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without requests or debate.

page 1043

GIFT DUTY ASSESSMENT BILL 1941

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Keane) read a first time.

Second Reading

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

– I move -

That the bill be nowread a second time. This bill introduces a new type of taxation. Up to the present a serious gap has existed in the taxation system of this country owing to the absence of a measure such as this. The taxation authorities have to contend with many devices adopted by taxpayers in order to avoid obligations placed upon them by taxation acts. I am not using the word “ avoid “ in any derogatory manner, but am referring to the legal methods that can be adopted to lighten tax burdens, and of which advantage has been taken in the past by taxpayers. The measures adopted by taxpayers in their efforts to lighten the burden of taxation, are usually directed to spreading their assets nominally amongst the members of their families, and in some cases other persons who act as dummies. The means adopted are usually the creation of settlements or trusts, the formation of family companies, and gifts of assets. Income tax, estate duty, and land tax can all be avoided by such means unless some action be taken to protect the revenue. The extremely heavy weight of taxation that has had to be placed upon the community by the exigencies of the present war will increase this tendency to a dispersal of assets, and this bill is designed to assist to protect the revenue from such dispersals. The bill has two purposes - to protect the revenue, and to produce revenue. The middle course has been adopted rather than either making the bill fully protective by placing such a high duty upon gifts that taxpayers would be deterred from making them at all, or, making the bill fully revenue producing by placing such a low duty upon gifts that it would not seriously deter the making of gifts, and would produce the maximum revenue. The bill is designed to protect the revenue by having some deterrent effect, and at the same time to produce revenue. Similar measures have been adopted in New Zealand and in Queensland, and I understand, are working successfully. The Government’s proposals are modelled upon the New Zealand and Queensland legislation., and have closely followed the provisions of those acts. The bill provides that all gifts made within a period of three years shall be taken into account for the purpose of fixing the rate of duty upon any particular gift. If’ the aggregate value does not exceed £500 no duty will be payable. Exemption is also provided for small gifts, and gifts to the donor’s wife and children and other persons for maintenance and education. Retiring allowances, pensions and gratuities to employees and gifts to religious, scientific and charitable and educational institutions are exempt. Where a gift, which has been subject to duty, forms part of the estate of the deceased person, i.e., the deceased person dies within twelve months of the making of the gift, there will be a rebate of gift duty so as to ensure that the gift is not taxed twice, viz., under this legislation, and under the Estate Duty Act. That act provides for the inclusion in the estate of the deceased, of gifts made within twelve months preceding the date of death of the deceased. Returns will be lodged by donors, and assessments will be issued by the Commissioner of Taxation, who is to have the general administration of the act. Donors will have a right to object to the assessment, and if the objection concerns the value of property comprised in the gift and the donor is dissatisfied with the commissioner’s decision on the objection he will have the right to approach the Valuation Board constituted under the Land Tax Assessment Act. The donor will also have the right of reference to a Board of Review on any other questions. A right of appeal to the courts on questions of law is also provided in the bill. The scale of rates to be imposed is that adopted for the purpo. es of estate duty, and commences at 3 per cent, which applies to the aggregate value of all gifts, made within the period of three years, up to £10,000. It progresses steadily thereafter until a maximum of 27.9 per cent, is reached when the aggregate value reaches £500,000. I shall deal more fully with this aspect of the proposal when moving the second reading of the bill imposing rates of duty.

Senator SPICER:
Vietoria

.- This bill is very different in character from that originally introduced by the Government. It has been amended so much that one can scarcely recognize it as the same measure. Almost every clause has been subject to most drastic amendment, and I consider that the Government has acted wisely in accepting the amendments now incorporated in the measure. In its original form it would have completely dried up the stream of benevolence in this country, in that it was given such a wide application that it would have covered every conceivable kind of gift, even ordinary commercial transactions whereby traders released debtors from some of their debts, or did not sue for them, and allowed the period of limitation to exDire so that they could not recover them. The special committee appointed to consider the bill recommended a number of drastic amendments, and to the form in which the bill is now presented to this chamber no objection can be taken, except with regard to two features. The bill contains a provision which is intended to ensure that the tax shall attach to all gifts made on or after the 29th October. I have no objection to that. That was the day on which the Government’s intention to introduce this measure was announced, but in sub-section 3 of clause 12 the Government appeal’s to have departed from that proposal, lt is provided in that clause that where a gift is made by an instrument that requires to be registered, it shall be deemed to have been made after the commencement of this legislation, if the document is registered, or lodged for registration, after the commencement of the act. That seems to me to be a very unfair proposal. L” understand that the Government takes a favorable view of the amendment that I had intended to move, and I am prepared to accept the assurance of the Treasurer (Mr. Chifley) that he will refer it to the representative committee on taxation for further consideration, and introduce amending legislation during the first parliamentary sitting next year, if that committee so recommends.

Prior to the 29th October last, it was legal for a man to make a gift without being taxed. It was a process which, in some circumstances, involved him in liability to pay State stamp duty. No doubt there were persons, who, before the 29th October, desiring to make gifts, ascertained what the liability for stamp duty would be, and were prepared to pay it and make those gifts. Let us suppose that, before the 29th October, a person made a gift of that kind in the form of a transfer of land, and paid the stamp duty which was properly applicable, to that transaction in a State where stamp duty was payable, and handed over to the donee of the gift the transfer and the documents of title. As a matter of law, that would be a complete gift. I emphasize that statement because it is of some importance. The donor, by handing over those documents, whether the transfer were registered or not, would have completed the gift, and put it entirely beyond his power to withdraw it.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– And he could not register it.

Senator SPICER:

– According to the bill as it now stands, if the transfer were registered after the 29th October last, although the property were completely handed over before that date, he would be liable to pay the duty. It seems to me that, under this clause a liability not contemplated up to the 29th October last is imposed, and the donor would be placed in a position from which he could not escape. Regarding that part of the measure. I had drawn up a proposed amendment. Under the Administration of Probate Act in Victoria, section 1.77, it is provided that -

Any settlement of any property made on or after the Kith December, 1870, by any person containing trusts or dispositions to take effect after his death, shall, upon the death of the settlor, be registered within the prescribed time or such time as the commission may allow.

I believe that similar legislation has been passed in some of the other States. It is at least arguable that a settlement made in Victoria in, say, 1890, containing trusts or dispositions to take effect after the death of the settlor, where the settlor died after the 29th October, and the settlement requires to be registered under the Victorian legislation, will be liable for duty under this particular provision. That would thereby bring within the scope of this legislation transactions which had been completed in every real respect 30 or 40 years ago. I appeal for serious consideration of this matter. I put it forward, because I believe that there is danger of a grave injustice being done if the bill remains in the form in which it has been presented. It is all very well for those in charge of the administration of the taxation laws to include all kinds of provisions intended to cover hypothetical cases. In doing that, they frequently, perhaps, do not catch the hypothetical cases that they had in mind, but create real injustices against particular persons who have engaged in legitimate transactions. The position could be properly met by a provision in the bill to ensure that no tax would attach to any gift which, as between the donor and the donee, was completed in the practical sense prior to the 29th October last. It should not be necessary, in order to exempt the gift from duty, that it. should be lodged for registration in accordance with the section to which I have referred. In view of the undertaking which I understand the Minister (Senator Keane) will give with regard to the proposed amendments that I have drawn up, I am willing to accept his assurance in the belief that my proposals will receive the favorable considerations of the committee inquiring into certain phases of our taxation legislation.

Senator JAMES McLACHLAN:
SOUTH AUSTRALIA · UAP

– Generally, I find little to complain of in this bill. I realize that it is necessary to raise more revenue, hut I agree with Senator Spicer in his criticism of the bill. I understand that an undertaking has been given that the matter mentioned by the honorable senator will be referred to a committee on taxation and that an appropriate amendment will be introduced at a later stage.The framers of this bill appear not to understand the difference between a transfer of property and its registration. The two transactions are entirely different, and are the responsibility of separate persons. When a person disposes of a block of land to another, by sale or otherwise, and signs the transfer his responsibility ceases; thereafter the person to whom the land has been transferred must accept full responsibility for having the transfer registered. Such registration may involve the payment of stamp duty, but the donee may not be in a position to pay the stamp duty at the time, and, in consequence, the registration may not take effect immediately. I have had a good deal of experience in connexion with the transfer of properties, and I know that, in many instances, registration does not take place for a considerable time after everything else in connexion with the transfer has been concluded. The transaction becomes definite as soon as the transfer is signed. From that time the purchaser, or the donee, is liable for all rates, taxes, and other charges on the property. He is virtually the owner of the property, irrespective of whether it is registered at once or not until some months later. I imagine that there will be cases in which the registration of properties which have been transferred for some time will not be completed before the 29th October. The committee on taxation matters reported as follows : -

The committee considered the question as to whether marriage settlements should be exempt from gift duty. It was decided that there was no justification for such an exemption.

A man may make a settlement on the woman whom he expects to marry, and sign a transfer of property to her,but the lady may decide not to marry him. In such an event, the man can do nothing, although the transfer has not been registered. This is a matter which should he referred to the committee which is to inquire into certain tax imposts, and I understand that that will be done. When it comes before the committee, I hope that a proper decision will be (arrived at.

Senator HERBERT HAYS:
Tasmania

– I support the second-reading of the bill, which I am sure every honorable senator can do with confidence, seeing that itcomes before us practically as a recommendation from the special committee appointed to consider it. The bill is very different from the measure which was originally introduced in the other chamber.In submitting this legislation to an all-party committee, the Government has set an excellent precedent, and has shown a readiness to co-operate with the Opposition in the preparation of legislation with a view to its unanimous’ support by ail parties. I commend the Government for its action in conferring with the Opposition. Such conferences indicate also the willingness of the Opposition to co-operate. What has been done in this instance is an indication of what could be achieved if the principle were carried a little further, and the Government sought the co-operation of other parties in forming a national government. In its original form this legislation was ill-considered, and I am glad that representatives of the Opposition have been able to do something towards improving it. The efforts of the Opposition are; I am confident, appreciated by the Government - and on that point the Minister may have something to say later - and also by the people.

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

in reply - The Government has agreed that Senator Spicer shallbe given an undertaking that his suggested amendments will be considered by the committee which is to inquire into certain tax imposts, and that, in the next period of the Parliament in the New Year, the Government will introduce any amendments which that committee may recommend along the lines suggested by Senator Spicer.

Senator Spicer:

– Does that undertaking apply to both of my suggested amendments?

Senator KEANE:

– Yes.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 to 3 agreed to.

Clause 4 (Definitions).

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– I should like the Minister in charge of the bill to explain the meaning of the words “ including any judgment or order of any court made in default of the exercise of the power by the donee thereof “ in the definition of “ disposition of property “ in paragraph e of this clause.

Senator Keane:

– That is one of the clauses which will be referred to the committee already mentioned.

Clause agreed to.

Clauses 5 to 47 agreed to.

Title agreed to.

Bill reported without amendment; report adopted.

Bill read a third time.

page 1046

GIFT DUTY BILL 1941

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Keane) read a first time.

Second Reading

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

– I . move -

That the bill be now read a second time.

This bill imposes the rates upon gifts which will become liable for duty under the provisions of the Gift Duty Assessment Bill. That bill, when enacted will be incorporated andread as one with this measure. The rates of duty are the same as those imposed for estate duty purposes. This scale of rates has been adopted because the second main purpose of the imposition of a duty upon gifts is to protect estate duty by deterring persons from dispersing their assets amongst relatives and others while still alive. The rate will commence at 3 per cent, on gifts in excess of an aggregate value of £500 made during the statutory period of three years and up to the value of £10,000. Thereafter it increases by three one-hundredths of £1 per cent, for each £100 by which the value exceeds £10.000 until the rate of 6 per cent, is reached at £20,000. Thereafter it increases by two one-hundredths of £1 per cent, for every £100 by which the value exceeds £20,000 until the value of £120,000 is reached, where the rate is 26 per cent. Thereafter it increases by one two-hundredths of £1 per cent, for every £1,000 by which the value exceeds £120,000 until the maximum of 27.9 per cent, is reached, where the aggregate value is £500,000. Although the rates imposed under this bill follow the same scale as the rates imposed under the Estate Duty Act, the actual amounts of duty imposed upon any particular gift Will usually be less than the estate duty that would have been imposed upon the property comprised in the gift had it formed part of the estate of the donor at the time of his death. This is due to the fact that the rate of gift duty is ascertained by reference only to the aggregate value of all gifts made by the donor within the period of three years; whereas in the case of estate duty the rate depends upon the aggregate value of the whole of the donor’s assets as at the date of death. It is not likely that the donor will give away the whole of his assets before his death and within the period which permits the aggregation of gifts for the purpose of arriving at the rate to be applied thereto.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without requests or debate.

page 1047

POST AND TELEGRAPH RATES BILL 1941

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Ashley) read a first time.

Second Reading

Senator ASHLEY:
New South WalesPostmasterGeneral · ALP

– I move -

That the bill be now read a second time, f should have been far happier had this been an occasion on which I had the privilege of informing honorable senators of proposals for reducing postal and telephone rates. That, however, is an event to which I look forward in the future. In order to assist in meeting the huge expenditure with which the Com monwealth is confronted in carrying on the war activities of the nation, the Government has examined ways and means by which the postal department might be utilized for raising additional revenues. I shall now proceed to outline in detail the conclusions reached, which were referred to briefly in the speech delivered by the Minister for Trade and Customs (Senator Keane) when introducing the Estimates and Budget Papers. In normal circumstances the Government would hesitate to approve of postal charges being increased merely for the purpose of securing additional revenue; but these are not normal times, and it is considered that there is full justification for the proposals which I shall proceed to explain. Honorable senators will be interested to learn that in the United Kingdom and other Empire countries war-time increases have already been imposed in respect of charges for certain postal services with the object of securing additional revenues. The nature of the increases proposed in this bill are such that the public generally will be obliged to meet them only to the degree that they use the services provided by the postal department. The average man who writes only a few letters and has little occasion to make telephone calls will not be greatly affected by these increases, but businesses will, of course, be obliged to face a larger expenditure, according to the use they make of the services provided. The proposed increases relate only to postage and telephone charges. It is not intended to vary the telegraph tariffs or the broadcast listener’s licence-fee. The Government has decided that a war postage tax of id. for each postal article, both domestic and overseas, would form an equitable basis- for the provision of additional revenue. In this connexion it is interesting to recall that, during the last war, a postage tax which was introduced in October, 1918, was applied to all postal articles other than parcels, payment being made by means of ordinary postage stamps affixed to the articles. In regard to the domestic service, it is provided in this bill that, in the case of postal articles posted in the Commonwealth for delivery therein, a war postage charge of £d. for each postal article shall be imposed, irrespective of weight, with the following exceptions: -

  1. Articles of all classes posted by or to members of the Commonwealth Military Forces: It is intended that transmission of such mail matter shall continue at the specially reduced rates of postage which at present apply, and that the war postage tax shall not be imposed.
  2. Newspapers and periodicals posted at bulk rates of postage: It is intended in respect of such articles that the war postage charge of½d. will be payable on each unit of weight, for example, on each 20 oz. for newspapers and each 16 oz. for periodicals, calculated on the aggregate weight of the postings made at the one time.
  3. Parcels transmitted by parcels post: Only a comparatively small amount of additional revenue would be secured from the application of the tax to parcels and, in view of the competition from other parcels carrying concerns, it is conceivable that the traffic would be detrimentally affected by the imposition of the -½d. tax, especially as the rates of postage on parcels are now higher than they were during the last war. This follows the course adopted in 1918 when the war postage tax was not applied to parcels.

Coincident with the imposition of a war postage charge on domestic mail matter a. similar charge will be made on postal articles addressed to places beyond the Commonwealth, with the following exceptions : -

  1. Postal articles addressed to exmembers of the Commonwealth or Empire Forces abroad;
  2. parcels; and
  3. air mail articles addressed to other countries on which the present charge is higher than the charge for domestic air mail articles.

The rates of postage on parcels posted for delivery abroad are fixed by agreement with the countries concerned, and can not be altered without negotiations which may extend over a long period.

I have no pleasure in announcing these increases. I do not believe that a public utility, such as the Postal Department, which makes such large surpluses each year, should increase its rates ; but such an imposition is necessary in order to supplement the revenues in these difficult times. During the last war an additional postage of id. was imposed on all articles. The then Government regarded the increase as an equitable impost. Later, during the depression, a further impost of½d. for each article was imposed, bringing the postage rate up to 2d. The Government now proposes to add a further½d. for the purpose of raising additional revenue for the prosecution of the war. If increases of the postage rates were justified in 1918, and during the depression, surely the small increase proposed in this billis justified when the Government is called on to meet commitments unprecedented in the history of this country. I trust that the bill will be given a speedy passage.

Senator ALLAN MacDONALD:
Westr ern Australia

– In increasing the postage rate, as a means of supplementing its revenues, the Government is acting in concert with the Governments of other British dominions. During the last war, the Mother Country, Canada, South Africa, and almost every British dominion had recourse to this form of tax as a means of raising revenue for war purposes. I have noticed that theletters; coming from Borneo, Fiji and other countries are already bearing increased postage rates. I invite the Postmaster-General (Senator Ashley) to investigate the possibilities of increasing the attractiveness of Australian postage stamps. It isour proud boast that we are in the forefront among the nations of the world in respect of the provision of social benefits for our people, but Australia is perhaps the most backward country in the British Empire, if not in the world, in regard to the attractiveness of its postage stamps. Postage stamps afford a very cheap means of advertising Australia, but, unfortunately, the artistic quality of our postage stamps, especially the½d., 4d. and 9d. stamps, has little appeal to philatelists. Certainly it reflects no credit on the designers.

Incidentally, the issue of new postage stamps affords a simple means of raising revenue. I am informed on good authority that a complete re-issue of Australian postage stamps from the ½d. stamp to the £1 stamp would yield a profit to the Treasury of between £70,000 and £100,000. The only cost involved in such a re-issue would be for the printing of the stamps. I urge the PostmasterGeneral to give consideration to the redesigning and re-issuing of stamps of all denominations.

Question resolved in the affirmative.

Bill read a second time, and reported from committee without amendment or debate.

Third Reading

Senator ASHLEY:
Postmaster-General · New South Wales · ALP

– In moving -

That the bill be now read a third time,

I take the opportunity to assure Senator Allan MacDonald that I shall give attention to the matter which he raised on the second reading. If I remain PostmasterGeneral long enough I shall see that his suggestion is carried out.

Question resolved in the affirmative.

Bill read a third time.

page 1049

STATES GRANTS BILL 1941

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Keane) read a first time.

Second Reading

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

– 1 move- -

That the bill be now read a second time.

The purpose of the bill is to implement the recommendations contained in the eighth report of the Commonwealth Grants Commission, which was tabled in the Senate on the 17th September last, and to provide for the payment during the current financial year of special grants totalling £2,300,000 to the States of South Australia, Western Australia and Tasmania. As honorable senators are aware, the commission was set up in 1933 to inquire into and report on appli cations from States for financial assistance under section 96 of the Constitution. The recommendations of the commission for the last seven years have been approved by the Commonwealth Government and adopted by Parliament.

The grants which the commission has recommended for the year 1941-42 compared with those paid during 1940-41 are as follows : -

In assessing the grants the commission has followed the principle it laid down in its third report, viz., the grant is determined by “ the amount of help found necessary to make it possible for a claimant State, by reasonable effort, to function at a standard not appreciably below that of other States “. It should be pointed out, however, that, on this basis, the commission’s assessment for South Australia this year is £1,400,000, or £250,000 more than the commission recommends should actually be paid. This variation of the assessment is due to special factors which I shall explain.

It is important to remember that the grants recommended are based largely on the budgetary results of the States for 1939-40, the latest year for which complete information was available to the commission when it conducted its investigations. The commission also takes into consideration special conditions obtaining in years following that in respect of which the grant is assessed. Thus, in 1937-38 the grant assessed for Western Australia on the budgetary results of 1935-36 was £439,000, but a special repayable advance of £136,000 was added in order to assist the State over a difficult, period caused by severe drought. That advance of £136,000 was recovered from Western Australia in 1939-40. when the assessment was £731,000 and the amount actually paid was £595,000.

This year the commission has recommended that this procedure be reversed in the case of South Australia. The grant assessed for that State is £1,400,000, but for certain reasons which I shall give later the commission considered that this amount would be more than adequate to meet the needs of South Australia in 1941-42. Consequently, the commission has recommended that the grant to be paid this year should be £1,150,000, and that £250,000 should be withheld to be paid to South Australia in the succeeding year, when it maj’ be appropriate to the needs of the State to pay an amount greater than the assessment. The reason for this apparent reduction in the grant to South Australia is explained in the commission’s eighth report as follows: -

Tlie grant was assessed on the basis of the relative financial position of the States in 1939- 40. and it will, if approved, be paid in 1941-42. There is clear evidence of improving conditions in South Australia; and, with the growing economic stimulus created by war industries and war expenditure, it is likely that in the near future the finances of the State will further improve. Thus the grant indicated by our calculations may be in excess of actual needs in 1941-42 . . . We realize that it is unwise to forecast in these uncertain times, but it is probable that the improved situation in South Australia in 1940- 41 will lead, under our method of assessment, to a reduced grant in 1942-43. We have considered various methods by which the South Australian grant of £1,400.000 might fairly be adjusted to meet the special circumstances of the State. One method considered was that any surplus in 1941-42 arising from the increased grant should be supplied to the reduction of past revenue deficits. Another course is to defer payment of a part of the grant. On the whole we believe this latter method would best serve the interests of South Australia, and wo accordingly recommend that payment of £250,000 be deferred by the Commonwealth until the succeeding year, thus reducing the payment for 1941-42 to £1,150,000.

For the information of honorable senators, I submit the following statement showing the trend of grants in recent years : -

I shall now briefly explain the main reasons for the difference between the grants for 1940-41 and those recommended for 1941-42. lt is desirable that these differences should be clearly understood.

The grant assessed in respect of South Australia was £1,400,000, but, as I have explained, the commission recommended that £250,000 of this amount should be withheld. The amount assessed is £400,000 greater than the grant paid in 1940-41. This is due to a combination of factors. There was a considerable decline in the relative taxable capacity of the State because of drought and low prices for wool and wheat in the income year 193S-39. At the same time, collections of State taxes increased in 1939- 40 as the result, partly of the imposition of higher rates of income tax, and partly of an abnormally large increase of estate duty revenue which fluctuates considerably from year to year. The severity of taxation for 1939-40 was, therefore, relatively higher for South Australia, and, consequently, the adjustment on account of relative severity of taxation was £518,000 more favorable than for the previous year.

The grant assessed in respect of Western Australia was £630,000, which is £20,000 less than that paid in 1940-41. This reduction was due to a combination of factors. There was an increase of £117,000 in the adjustment account of the relative deficit of the State for 1939-40, but this was almost exactly offset by a decrease of £119,000 in the adjustment for severity of taxation due largely to an improvement in the relative taxable capacity of Western Australia. It should be pointed out, however, that despite this decrease, the adjustment in respect of severity of State taxation in Western Australia was £150,000 in favour of that State. A new correction appears this year under the head “ Road Debt Charges “, and it is this correction which is responsible for the reduction of the grant recommended. The commission believes that this adjustment is reasonable, and explains that it has been made because of the failure of Western Australia to bring its road finances reasonably into line with those of other States by making provision for meeting at least. some portion of the annual interest and sinking fund payments on road debt from the proceeds of motor taxation. In this connexion it is appropriate to point out that in 1939-40 and 1940-41 the Government of Western Australia introduced legislation designed to bring its road finances more into line with those of other States, but on each occasion it was rejected by the Legislative Council. This action resulted in considerable loss to the State budget. The commission considers that, in fairness to other States which use a large proportion of motor taxation to pay annual charges on road debt, this factor should not be ignored in arriving at a final assessment.

The grant recommended to Tasmania is £120,000 higher than that for last year. This increase is due mainly to the fact that the Tasmanian deficit in 1939-40, the year on which, the calculations are based, was 6s. lid. per head higher than in 1938-39, whilst the average deficit per head in the non-claimant, or “ standard “, States fell by 7s. 2d. Because of this absolute and relative increase in Tasmania’s deficit the grant was favorably affected to the extent of £169,000. An adjustment was also made in the case of Tasmania because the road finances of the State were out of line with other States. The commission’s eighth report indicates that the special problems associated with roads in Tasmania were taken into consideration in making the correction.

It may seem anomalous to honorable senators that the special grant for South Australia should be increased in a year when the financial position of that State is showing considerable improvement. It must be remembered, however, that the grants recommended for 1941-42 were based, not on the relative financial position of the States in 1940-41, but on the relative financial position of the States in 1939-40, the latest year for which complete information was available to the commission when it conducted its investigations. The commission, in paragraphs 67 to 70 and paragraph 192 of its eighth report, emphasizes that there is no escape from this procedure if grants are to be assessed on actual budgetary results. The commission believes that any attempt to assess grants on budget estimates would lead to grave error and dissatisfaction. The commission’s experience extending over eight years has shown that estimated figures are very unreliable. The commission also expresses the view that, so long as its methods are consistently applied from year to year, any apparent injustice in any particular year will be adjusted within a short period. Any possible error is not cumulative. The eighth report points out also that the commission does not adhere rigidly to the grants indicated by its basic calculations. In special circumstances, such «s I have already explained, it adjusts the calculated figures so that the grants finally recommended may be in reasonable harmony with current financial needs.

I understand that the improved position of South Australia in 1940-41, arising from war expenditure and other causes, is now being investigated by the commission and will be taken into account fully in the grant recommended for 1942-43.

The commission has commented as follows on the fact that the total of the grants recommended for 1941-42 is above that paid in recent years : -

Owing to the war and to the very large and increasing obligations of the Commonwealth, it may be suggested that special grants should not bc increased in a time of national emergency. The commission fully appreciates this point of view; but, at the same time, it must bear in mind the function it has to perform in preserving a reasonable financial balance among the States. It must always be remembered that the special grant is the basic grant designed to adjust the financial inferiority of the claimant States and to enable these States effectively to discharge their functions in the federation. If wo recommended grants below the amounts justified by a careful investigation of the relative financial position of the States, it would be tantamount, as we stated in our seventh report, to placing a discriminatory burden on the claimant States in a time of difficulty. If the pressure of war finance requires some reduction in the amount of assistance to the States it should, we believe, bc applied equitably to all States. As the commission deals only with applications from the claimant States for special grants, this is not a matter on which it has power to make any recommendation.

There is considerable evidence that the work of the commission is thorough and impartial, and that all matters affecting the “ financial needs “ of the claimant States have been investigated. The Government, therefore, believes that the amounts recommended by the commission will meet adequately the needs of the claimant States. Consequently, as in past years, the Government has decided to accept the recommendations of the commission. I commend the bill to honorable senators.

Senator McLEAY:
Leader of the Opposition · South Australia

– I take this opportunity to pay a tribute to the former Chairman of the Commonwealth Grants Commission, Sir Frederic Eggleston. Those who have had an opportunity to study the commission’s activities over a number of years, appreciate fully the splendid work which has been, done by that gentleman, and it is fitting that he should be commended for his efforts.

As a representative of one of the claimant States, it has always occurred to me that the attitude adopted by representatives of the more populous States such as New South Wales and Victoria towards these grants has been extremely reasonable. I do not remember any occasion on which an honorable senator has objected to a grant being paid to a claimant State. That is a tribute to the fair-mindedness of honorable senators.

The policy of industrial decentralization pursued by the Menzies Government will bear fruit before long, particularly in South Australia, where so much money is being spent on war requirements. The finances of the claimant States should improve to such a degree that their calls upon Commonwealth funds will be considerably reduced if not eliminated. In planning our post-war reconstruction, it is of the greatest importance that special attention should be given to the less populous States, particularly Western Australia. If the secondary industries of such States be developed a more balanced economy will result and the Commonwealth will benefit, particularly from a defence point of view.

Senator COLLETT:
Western Australia

– Any one who has studied the reports of the Commonwealth Grants Commission from year to year must be impressed with the thoroughness with which the commission has carried out its work. Any one who desires to make himself familiar with the economic struc ture of any State can readily do so by studying the commission’s reports. However, I submit that no one can be satisfied with the results which the commission has achieved, beyond the fact that it has kept the claimant States going. General satisfaction will not exist until there is a fuller recognition of the disabilities suffered by certain States, particularly Western Australia because of sparseness of population and geographical remoteness. The arguments advanced by the Commonwealth Grants Commission are perfectly logical so far as the bases upon which the commission works are correct, but an examination of these bases does not always render thom readily acceptable, and until there is an alteration of the Constitution, and perhaps of the Financial Agreement Act, nothing very definite will be achieved. The Leader of the Opposition (Senator McLeay) mentioned the development of secondary industries in Western Australia, and the effect of such development upon the economic structure of that State. I have been privileged to make a close examination of Western Australia’s potentialities in recent months, and I am convinced that given wise administration and a better understanding on the part of the Commonwealth of its duty to the less populous States, something very substantial will result. The Government has set up an Western Australian Industries Expansion Commission to survey the position and if that commission functions properly, it should achieve valuable results. I do not agree with its personnel, not because of any lack of merit on the part of its members, but because they are all public servants and are naturally restricted by the suggestions made to them by the government for which they work. There is also another factor which I think has escaped notice. These public servante are already being worked hard, and it is difficult to seu how they can carry out research activities and make a close examination of all factors affecting the development of secondary industries. Although Western Australians are not entirely satisfied I am sure that they are eery glad to have this assistance.

Senator Leckie:

– They can take it.

Senator COLLETT:

– Yes, and they have no conscious reluctance in doing so. However, at the same time they look forward to the adoption of a more suitable basis of relations with the Commonwealth.

Senator HERBERT HAYS (Tasmania) [3.55 . - In supporting this bill, 1 as a representative of one of the claimant States, am glad to see that the guiding principle in accordance with which grants are made to the States, now embodies a true federal spirit. For many years the grants were left to the judgment and discretion of Parliament, and the guiding principle then was that the economic standard of any State should be allowed to fall below that of other States. The Commonwealth Grants Commission was set up by the Lyons Government, which undertook to give effect to whatever recommendations were made. The commission is to be commended for the valuable work that it has done in an impartial way. Grants have varied from year to year with due regard to the manner in which claimant States have handled their finances, and to their standard of social services. I support the bill and commend the commission for the detailed way in which it has presented its findings thus enabling honorable senators to ascertain how the grants have been arrived at.

Senator ALLAN MacDONALD (“Western Australia) 3.58. - 1 wish to deal with the reduction of the grant to Western Australia this year. That State is the only one of the three claimant States which has suffered a reduction, and from the remarks made by the Minister for Trade and Customs (Senator Keane) when introducing the bill, one might gather the impression that the reduction was due in the main to the action of the Legislative Council of Western Australia in rejecting certain bills submitted to it by the Government of that State, in relation to motor car registration fees.

Senator Collett:

– It is misleading.

Senator ALLAN MacDONALD:

– It is definitely misleading. The reason why the Legislative Council objected to the measures referred to was to protect country municipalities and roads boards. Un like the eastern States, in Western Australia motor registration fees are levied by the various country authorities or municipalities, and are retained by them to defray the cost of the upkeep of interelectorate roads, which are used largely by metropolitan people and cross-country travellers. They also receive a proportion of the metropolitan area licence-fees collected by the State Police Department. If the State Government purloined al! of the State licence-fees, it would mean that the local governing authorities in the outlying country districts, including the mining areas, would not have sufficient local finance to enable them to keep country roads in proper repair. The Legislative Council of Western Australia prefers licence-fees to be left in the hands of the local authorities, instead of the whole of the money collected being paid into the State Treasury, with the result. I suggest, that the country districts would not see it again. The action of the Legislative Council has not had a detrimental effect on State budgets, because the State Treasurer would have to make some attempt to help to finance the local authorities in distant country centres, which are unable completely to- finance themselves.

I look forward to the time when Commonwealth grants to the claimant States will gradually disappear. Owing to the increased war-time production, I should say that the first State in which a grant will no longer need to be made will be South Australia. I take my hat off to the Government of that State for the commendable way in which it is pushing ahead with the erection of factories, and the establishment of new industries.

Senator Amour:

– That has been possible as the result of funds provided by the Commonwealth.

Senator ALLAN MacDONALD:

– But the Government of that State is to be congratulated upon its energy and capacity in seizing the opportunity to expand its secondary industries. Of the whole of the six States, South Australia has the fewest natural resources, and, therefore, is deserving of congratulation upon its increased production. I am rather envious of that State because Western Australia has not progressed nearly so rapidly. I am hoping that tha* position will be corrected, and one of the means of doing so would be to give every encouragement to the development of the natural resources of Western Australia, particularly the gold-mining industry. Owing to the fact that the State has few secondary industries, difficulty is experienced in absorbing the unemployed, but, as happened during the dark years of the depression, the unemployed were absorbed by a further expansion of goldmining. Nothing should be done to jeopardize the expansion of that industry which has done much for the State and will continue to be of valuable assistance to Australia, when accounts have to be faced during and at the termination of the war. That is one of the reasons why I took certain action in this chamber to-day. In considering future increases of taxes, the Commonwealth Government should have regard to the importance of thegold-mining industry to Western Australia. I repeat that I look forward to the time when it will be no longer necessary to provide these grants, owing to the increased prosperity of the three claimant States.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without amendment or debate.

page 1054

APPROPRIATION BILL 1941-42

Bill received from the House of Representatives.

Standing and (Sessional Orders suspended.

Bill (on motion by Senator Eraser) read a first time.

Second Reading

Senator FRASER:
Minister for External Territories · Western Australia · ALP

.- I move-

That the hill be now read a second time.

This measure provides for the appropriation of revenue for the ordinary services of the various departments. The expenditure proposals of the Government have already been dealt with in the budget debate, and it is not proposed to deal now with the various items in detail. Any explanation that may be desired by honorable senators will be furnished at the committee stage. The bill provides for an appropriation of £64,226,000 for the services of the year 1941-42, to which should be added the amounts already granted under Supply Acts Nos. 25, 27 and 30 of 1941, namely, £15,141,000 and £11,576,000 and £16,221,000, respectively, making a total of £107,164,000, which is the estimated expenditure from annual appropriations for ordinary services for the year 1941-42, as set out in detail in the second schedule of the bill.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without requests or debate.

page 1054

APPROPRIATION (WORKS AND BUILDINGS) BILL 1941-42

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Eraser) read a first time.

Second Reading

Senator FRASER:
Minister for External Territories · Western Australia · ALP

– I move-

That the bill be now read a second time.

The following is a summary of the proposed appropriation for additions, new works, buildings, &c. : -

Details will be found on pages 308-318 of the printed Estimates.

The civil aviation works estimate of £547,900 is largely occasioned by defence requirements. In addition to the amount of £1,566,000 to be appropriated from revenue for postal works, a further amount of £1,500,000 will be provided from loan fund. This will be the subject of a loan bill. The total expenditure on postal works in 1940-41. was £3,240,000.

The amount of £1,135,000 required for territories of the Commonwealth is attributable to large developmental programmes rendered necessary by the increasing populations of both the Australian Capital Territory and the Northern Territory. In Canberra, substantial expenditure is necessary in the provision of cottages, with the attendant engineering services. An amount of £96,000 has been included towards the cost of the Canberra Hospital, and £40,000 for the new abattoir. At Darwin also considerable expenditure is required for the extension of the jetty, completion of the hospital and other essential works.

The amount of the appropriation of £3,831,000 does not include works constructed out of the federal aid roads grant to the States, which this year is estimated to amount to £1,600,000. It also excludes works for defence and war services, and works made possible by the Commonwealth grant of £100,000 a year in aid of interest and sinking fund on public works carried out by local governing authorities. Although certain works in progress at the 30th June last have been carried on by credits from Treasurer’s Advance, this bill authorizes the commencement of a number of new works which it is highly desirable should be put in hand at the earliest possible moment. I trust, therefore, that honorable senators will agree to its speedy passage.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without amendment or debate.

page 1055

SUPPLEMENTARY APPROPRIATION BILL 1939-40

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (“on motion by Senator Fraser) read a first time.

Second Reading

Senator FRASER:
Minister for External Territories · Western Australia · ALP

[4.28 J. - I move-

That the bill be now read a second time.

The Supplementary Estimates for the year ended the 30th June, 1940, which have been tabled, cover the items of expenditure for which no specific parliamentary approval has been given, but which were met temporarily from Treasurer’s Advance pending submission to Parliament in the form of these Estimates. ,

For the year 1939-40, the usual provision in the Estimates in Chief under the heading “ Advance to Treasurer “ was increased to £4,000,000 owing to the war. That amount enabled the Treasurer to meet those urgent and essential services, including war expenditure, which could not be foreseen and which, therefore, were not included in the main Estimates. Particulars of this unforeseen expenditure in the form of Supplementary Estimates are now submitted for covering appropriation by Parliament. As copies of these Estimates are being circulated among honorable senators, I do not propose at this stage to refer to the items in detail.

Of the amount of £4,000,000 voted for Treasurer’s Advance in 1939-40, £2,239,029 was expended on ordinary departmental services and war services payable from revenue, whilst £126,145 was used for additions, new works and buildings, for which latter sum Supplementary Estimates will shortly be submitted separately.

Although in this bill Parliament is being asked to appropriate £2,239,029, the expenditure for the year was only £1,409,242 more than the total provision for ordinary services in the main Estimates and the additional Estimates of £9,000,000 for war purposes which were introduced in May, 1940. This is because in many instances the new expenditure was made contingent on savings of similar amounts in other items. In other words, straight-out savings were possible. Defence and war services account for £1,715,000 out of the amount of £2,239,029, included in the bill.

Full details of the expenditure which is now submitted for approval have already been furnished to Parliament in the Estimates and budget papers for 1940-41. The Estimates compare the amount voted for 1940-41 with the actual expenditure for 1939-40, whilst the budget papers also record the expenditure.

Details were also included in the Treasurer’s financial statement for 1939-40 which has been tabled for the information of honorable senators.

In order that honorable senators will have an assurance that these Estimates are based upon properly audited accounts, it is the practice to await the report of the Auditor-General on the accounts of the year under review. The Treasurer’s financial statement, which contains full particulars of these Supplementary Estimates, was forwarded to the Auditor General on the 8th October, 1940, and the Auditor-General’s report was laid on the table of the House on the 27th March, 1941.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without requests or debate.

page 1050

SUPPLEMENTARY APPROPRIATION (WORKS AND BUILDINGS) BILL 1939-40

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Fraser) read a first time.

Second Reading

Senator FRASER:
Western Australia Minister for External Territories · ALP

. I move -

That the bill be now read a second time.

When the Supplementary Estimates for ordinary services were presented, honorable senators were informed of the reason for and the procedure adopted in connexion with bills of this kind.

This measure provides for an appropriation of £126,145 for expenditure under “ additions, new works, buildings, &c”, which has been met from the vote “ Advance to the Treasurer “ during the year1 939-40. Although the amount to be appropriated by this bill is £126,145, it does not represent the expenditure on works and buildings in excess of the original estimates. Actually, the total expenditure of £3,036,445 was £497,555 less than the sum of £3,534.000 appropriated for this purpose. Parliament is therefore being asked to approve of new works expenditure which was more than counterbalanced by savings on other works. I do not propose at this stage to refer in detail to all the items which are included in the papers made available for the information of honorable senators. The main items include the provision of £58,874 on account of the Treasury owing to the acquisition of a building for the Taxation Department in Perth, and £66,640 for the Postal Department, mainly for trunk line and telegraph services.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 and 2 agreed to.

The schedule.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

– Will the Minister supply particulars of the the provision of £58,874 for buildings, works, sites, fittings and furniture for the Department of the Treasury? It is rather disconcerting to find such a large amount provided for a department like the Treasury.

Senator FRASER:
Minister for External Territories · Western Australia · ALP

– The acquisition of the building owned by D. and W. Murray Limited in Perth for the accommodation of the Taxation Department was not provided for in the Estimates for 1939-40. The provision of £58,874 has been made for that purpose.

Schedule agreed to.

Preamble and title agreed to.

Bill reported without amendment; report adopted.

Bill read a third time.

page 1050

LOAN BILL (No. 3) 1941

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Ashley) read a first time.

Second Reading

Senator ASHLEY:
Postmaster-General · New South Wales · ALP

– I move -

That the bill be nowread a second time.

This bill provides for the raising and expending of £1,500,000 from Loan Fund for postal works. A further £1.566,000 will be provided from revenue, making a total provision forthe year for postal works of £3,066,000. The total expenditure on postal works in 1940-41 was £3,240,000. These amounts are, of course, included in the Estimates of expenditure for the year and this bill is similar to the measures usually submitted in this connexion. A substantial portion of the expenditure is due to the provision of services for defence purposes. Expenditure on postal works is reproductive and charges for services provide for interest and sinking fund. It will be noted that the total expenditure proposed on postal works is almost £200,000 less than in J 940-41, and it is probable that next year it will be necessary to reduce further the expenditure on these works in order to transfer resources of men and money from civil purposes to the war effort.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 to 5 agreed to.

The schedule.

Senator A J McLACHLAN:
SOUTH AUSTRALIA · NAT

.- Will the Minister state the purposes for which the provision of £26,000 has been made for national broadcasting services?

Senator ASHLEY:
New South WalesPostmastcrGeneral · ALP

– This provision covers approximately half of the following items which total £53,900, the balance of which will come from revenue appropriations : -

Schedule agreed to.

Title agreed to.

Bill reported without amendment; report adopted.

Bill read a third time.

page 1057

SUPERPHOSPHATE BOUNTY BILL 1941

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Eraser) read a first time.

Second Reading

Senator FRASER:
Minister for External Territories · Western Australia · ALP

– I move -

That the bill bo now read a second time.

This measure is introduced for the purpose of granting and applying out of the Consolidated Revenue Fund moneys sufficient to provide for the payment of a bounty of 25s. a ton on superphosphate produced in Australia and sold by manufacturers on and after the 1st July, 1941. Honorable senators are probably aware that superphosphate is manufactured from raw rock phosphate, and that Australia is dependent on outside sources for its supplies of such rock. Since the outbreak of war, freights and other charges incurred in importing rock phosphate from Nauru and Ocean Island, and in consequence of damage by enemy action at Nauru, have consistently increased. The British Phosphate Commission has found it necessary from time to time to increase considerably the landed price of rock phosphate to superphosphate manufacturers. The Commonwealth Prices Commissioner, who has been in close touch with the superphosphate position throughout, has on three separate occasions approved of increases of the prices charged by manufacturers to users of this fertilizer.

The first increase of 10s. a ton which took effect from the 1st January, 1940, applied to all States. The second increase which operated from the 1st July, 1940, varied amongst the States. In New South Wales, Victoria, Queensland and South Australia, excepting Eyre Peninsula, the increase was 14s. a ton, in Western Australia and Eyre Peninsula 16s. a ton and in Tasmania 9s. a ton. The latest rise of 32s. a ton in all States has been in operation since the 1st July, 1941.

Our primary producers bore the cost of the first two increases, but it was obvious that,unless action was taken to cushion the impact of the further rise of 32s. a ton, the use of this fertilizer in Australia would be curtailed to a minimum, and, as superphosphate plays such an important part in the agricultural economy of this country, the increase would have constituted a serious menace to the efficiency of our rural industries. The Government of the day decided to grant a subsidy of 25s. a ton as from the 1st July, 1941, which meant that the net increase of price to the consumer from that date would be 7s. a ton instead of the full 32s. a ton approved by the Prices Commissioner. This is now operating although the enabling legislation was not passed by the previous Government. The bounty is payable to manufacturers of superphosphate who are required to adjust their prices to consumers so that consumers will receive the full benefit of the subsidy. The bill provides means for an adequate check on all transactions.

Honorable senators will appreciate that it is not possible to say exactly what amount of money will be involved in the payment of the bounty. The quantity of superphosphate that can be produced in Australia is dependent upon the quantity of rock phosphate available and on the phosphate content of the rock. Imports of rock phosphate cannot be predicted with any certainty, but should they continue at the present rate, probably 400,000 tons of rock will be imported during the twelve months ending the 30th June, 1942. This should represent about 600,000 tons of superphosphate, which, if taken by consumers, would involve bounty payments totalling about £750,000.

At a recent meeting of the Australian Agricultural Council, a scheme of rationing superphosphate submitted by the Department of Commerce was unanimously adopted. The scheme was the result of a consultation between repre sentatives of the British Phosphate Commission and the manufacturers. The scheme is based upon the use by each producer of 65 per cent, of the quantity of superphosphate used for the year 1939-40. Despite the reduced production of superphosphate, consequent upon the reduction in the imports of rock phosphate, this allocation to each producer will leave a sufficient reserve to enable crops of flax, vegetables for canning, &c, to receive special attention. The rationing system will work very simply from the Phosphate Commission to the manufacturers, from the manufacturers to the merchants and from the merchants to the producers. Special and doubtful cases will be referred by the manufacturers to the Departments of Agriculture in the States concerned which will decide the relative merits of cases in dispute. Supplies to meet such cases will be obtained from a contingency pool of 5 per cent, that each manufacturer will be asked to hold.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 to 3 agreed to.

Clause 4 (Bounty on production of superphosphate).

SenatorLECKIE (Victoria) [4.50].- As only the rate of bounty is mentioned in the bill, it would appear that the bounty is to be permanent. Further, the bounty is to be paid to the manufacturer not when the superphosphate is manufactured but when it is sold. Perhaps we can look forward to the time when the war will cease suddenly, and we shall again be able to secure ample supplies of rock phosphate from Nauru at reasonable prices. I take it that the bounty will then cease. However, no limitation of time has been provided for in this measure. The provision whereby bounty is paid to the manufacturer on sales and not on manufacture will mean that, when the war ceases, farmers will expect to secure superphosphate at lower rates, but manufacturers will then have large stocks on hand for which they have paid high prices. I ask the Minister to look into these discrepancies, and to ensure that manufacturers who have bought sulphur, sulphuric acid and rock phosphate at high rates, shall be given an opportunity to clear their stocks. We should not assume that the bounty will operate interminably. We should provide against such contingencies in a measure of this kind.

Senator FRASER:
Minister for External Territories · WESTERN AUSTRALIA · ALP

– I assure Senator Leckie that the system of rationing is based on the capacity of manufacturers and the quantity of stocks on hand, an inventory of which has been taken. I shall look into the point he has raised regarding the date of expiration of the bounty. That, of course, will depend upon whether necessity for its continuance exists.

Clause agreed to.

Clauses 5 to 13 agreed to.

Preamble and title agreed to.

Rill reported without amendment; report adopted.

Bill read a third time.

Sitting suspended from4.55 to 5.55 p.m.

page 1059

APPLE AND PEAR (APPROPRIATION) BILL 1941

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator Eraser) read a first time.

Second Reading

Senator FRASER:
Minister for External Territories · Western Australia · ALP

.- I move-

That the bill be now read a second time.

The purpose of this bill is to grant and apply out of the Consolidated Revenue Fund a sum of £1,400,000 for the repayment to the Commonwealth Bank of advances made by the bank for the purposes of the acquisition and marketing of the 1940-41 crop of apples and pears under the National Security (Apples and Pear Acquisition) Regulations.

Owing to the unfavorable outlook for any improvement in the export position of fresh fruit in 1941, the Commonwealth Government convened a confer ence of State Ministers of Agriculture and accredited representatives of the apple-growers and pear-growers to consider ways and means of dealing with the new season’s crop. Following several further discussions with the States, the Commonwealth Government finally agreed to proposals for a continuation of an acquisition scheme for the following season. The arrangements for 1941, however, differed in the following important respects from those of the previous year: -

  1. Acquisition was effected on 1st January instead of 1st March;
  2. Instead of making advances to growers at flat rates, a unit system was adopted, which provided for differential rates as between States and as between varieties of apples and pears produced in each State;
  3. Fruit had to -be actually delivered before qualifying for advances, except where delivery was not required for marketing. In these cases qualifications for advances were established on the basis of an official tree measurement of the crop at the time of maturity.

Certain changes were made in the organization of the scheme, and the Apple and Pear Marketing Board was constituted under the regulations to administer the acquisition and marketing arrangements. In accordance with regulation No. 25 of the National Security (Apple and Pear Acquisition) Regulations, arrangements were made with the Commonwealth Bank to advance the amounts necessary to meet the payments of advances to growers, the packing and marketing costs, and administrative and publicity expenses. Sums totalling £3,901,779 were advanced by the bank for the foregoing purposes, subject to the following conditions -

  1. A guarantee in pursuance of the regulations to be furnished for the full amounts of the advances made by the bank;
  2. The clearance of outstanding indebtedness before the 31st March, 1942;
  3. Interest on advances to be charged at the ruling rate for rural credit advances.

An application has been made to the Commonwealth Bank for a further sum of £255,000, which will make the aggregate advances £4,156,779. So far as it is possible to estimate at this stage, the acquisition and marketing of the 1941 crop will result in a substantial loss of between £1,500,000 and £1,600,000. Last year an amount of £750,000 was appropriated by the Parliament to meet the probable deficiency on the 1940 acquisition scheme. The actual loss on that year, however, will be approximately £605,000, leaving a balance of parliamentary appropriation of £145,000. Honorable senators are now asked to approve of the appropriation of a further £1,400,000 to meet the estimated deficiency.

In comparing the increased loss on the 1941 season with that of the previous year, there are a number of factors which must be taken into consideration. First, the 1940-41 crop for Australia was of record dimensions, aggregating 15,000,000 bushels of apples and pears. In most .States the crops were heavy, and, in some instances, abnormally heavy. In Tasmania and South Australia particularly, favorable seasonal conditions resulted in crops being exceptionally clean and free from disease. As a consequence, a greater proportion of the total crop in those States has qualified for advances than, would normally be the case. Although a market was found for approximately S,000,000 bushels of fruit, there was no outlet for the remaining 7,000,000 bushels in respect of which growers also received compensation. It should also be noted that the rates of advances to the growers were higher than those paid in 1940. Secondly, in 1940 we were fortunate in securing space for the shipment of about 2,000,000 cases of apples and pears to the United Kingdom for which very remunerative returns were received. This year, however, it has not been possible to ship one case of fresh fruit to England. Thirdly, the marketing results of the board were not so successful as was originally anticipated, owing to the nature of the propaganda directed against the scheme by certain interests.

During the year the board has taken full advantage of available interstate transport and cool storage accommodation, and arranged to hold record quantities of apples in cool store. A substantial increase of the production of dried apples, from a normal output of 470 tons to 1,250 tons - equivalent to 500,000 bushels of fresh apples - was made possible because of the action taken by the board. This additional tonnage was required to meet the large demands of the Defence services. However, it is not possible to market in Australia or process the whole of the surplus normally exported overseas. Honorable senators will be fully aware that the loss of our main export market for fresh fruit is a serious matter foi1 the apple growers and pear growers. Until these remunerative outlets are again restored, it is obvious that some measure of assistance must be afforded to the industry, and some control exercised over the marketing activities. With the early approach of the new season, the Government will make an announcement soon regarding the policy to be adopted in the future. I commend the bill to the favorable consideration of honorable senators.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without amendment or debate.

page 1060

PETROLEUM OIL SEARCH BILL 1941

Bill received from the House of Representatives.

Standing and Sessional Orders suspended.

Bill (on motion by Senator FRASER read a first time.

Second Reading

Senator FRASER:
Minister for External Territories · Western Australia · ALP

– I move -

That the bill be now read a second time.

The object of this measure is to amend the Petroleum Oil Search Act in two respects. The first amendment, which relates to section 5, subsection 5, paragraph a of the act is purely a drafting amendment designed to dispose of any ambiguity. As the sub-section is at present drafted it is not clear whether the Minister has power to enter into agreements relating to advances as well as to enter into agreements covering the repayment of advances. It was obviously intended that both those powers should be possessed by the Minister, and the amendment now proposed clarifies the position.

The proposed amendment to section 6 of the principal act has a somewhat wider significance. The intention is to confer upon the Minister power to vary the conditions governing the making of advances, thus affording a measure of flexibility to meet special cases. As in the case of the Papuan Apinaipi Petroleum Company Limited, which is searching for oil in Papua, it might be that a company or individual was unable to provide sufficient capital to comply with the provisions of section 6 in order to become eligible for Commonwealth advances. In those circumstances, although the prospects of discovering oil might be regarded by the Government’s technical advisers as favorable, operations might be suspended, and, indeed, would have been, suspended in the case of the Papuan Apinaipi Petroleum Company Limited had Commonwealth Government money not been made available. At a time like the present, and, for that matter, at any time, an obligation rests upon the Government and the people to prosecute the search for oil. It would, therefore, be inimical to the interests of Australia if operations were frustrated through lack of flexibility in legislation governing the search for oil.

In the case of the Papuan Apinaipi Petroleum Company, the previous Administration had advanced the company £30,000, and had promised to provide a further £20,000, subject to the company making a similar amount available. The company was unable to provide that amount, and when the present Government came into office it faced the situation of either allowing the company to discontinue operations in Papua or providing further government moneys to enable operations to be continued. The prospects of the discovery of oil were regarded favorably by the Commonwealth geological adviser, and he recommended that, notwithstanding the inability of the company to provide its quota, a further £55,000 be provided to enable operations to be brought to completion. In addition to making advances, the previous Administration has loaned to the company a drilling plant owned by the Commonwealth, which cost £25,000. This plant weighs about 500 tons, and when dismantled, parts of it weigh 12 tons. There is no wharf or cranes, and to remove the plant it would be necessary to float it out on pontoons on a suitable tide. In this connexion, it was stated that the tides were suitable only in January and February. The cost of removing the plant to Australia was estimated to be £10,000, and with the hazards associated with the removal the cost might easily be much higher. It was clear, therefore, that if the best use was tobe made of this plant and the Commonwealth interest in it was to be protected, there was no alternative but to provide government moneys to enable boring operations to be continued. It was, therefore, decided to provide a further £20,000 for this purpose to be paid at monthly intervals, subject to close supervision by departmental officers. It is to cover, in the main, such cases as the foregoing that the amendments are proposed. I commend the measure to the Senate with the assurance that, as it deals with the vital question of supplies of oil, it will receive the fullest support of all honorable senators.

Senator ARTHUR:
New SouthWales

.- This is the most vital bill that has been introduced during the present period of the session. In it, the Government proposes to make a donation to the Papuan Apinaipi Petroleum Company. Honorable senators should realize what the major oil companies have done for Australia. The Shell Company of Australia Limited has leased86,000 square miles - 87,000,000 acres - in the south-western portion of Queensland for a period of ten years, with the option of renewal for a further period of five years. In Western Australia another overseas company has been given rights over an area of 134 square miles.

Senator McBride:

– Who gave those rights ?

Senator ARTHUR:

– Honorable senators opposite, and Dr. Woolnough, Dr. Ward and Dr. Wade. Dr. Wade left the employ of the Commonwealth to become a servant of the Shell Company of Australia Limited.

Senator Cooper:

– Did this Parliament give the lease to that company ?

Senator ARTHUR:

– No.

Senator Allan MacDonald:

– A Labour government did so.

Senator ARTHUR:

– Now this Government proposes to give a subsidy for failing to find oil. In the House of Representatives a few years ago, after 5,000 barrels of oil had been obtained in Papua, the honorable member for Gippsland (Mr. Paterson), who was then a Minister, refused to disclose the name of the company which had found oil. The Commonwealth is operating at Lakes Entrance to-day on the advice of socalled geologists - book-readers who have no practical knowledge of the oil industry. The Lakes Entrance oil-field is a low pressure field, and the passage of time will prove that it is a seepage area. The Government proposes to sink a shaft with Australian labour, but, according to press reports published to-day, American labour will be used for the remainder of the work. After the shaft has been sunk and a chamber excavated, it seems that imported labour will drill by what is termed “ a special process “.

Senator McBride:

– Is the honorable senator opposed to this measure?

Senator ARTHUR:

– No, but I want to enlighten honorable senators about things that have been done in connexion with the search for oil in Australia which are of vital importance to this country. This bill proposes to render assistance in a way somewhat similar to the assistance being given at Lakes Entrance, and prob ably American labour will be allowed to sabotage the work, as was the case at Roma, which is another seepage field. I desire to place on record my definite protest against this measure. Although I shall support it, I shall do so only because my mental composition is different from that of honorable senators opposite, who have tried consistently to impede the present Government’s war effort. The passage of time will prove that I have told the truth when I have said that the major oil companies are robbing Australia. There is no reason why petrol should be rationed here. The truth is that the search for oil is controlled by company directorates with interests all over the world, and Mr. Walter Teagle, chairman of the Standard Oil Trust, is sitting back in his office in New Jersey directing the affairs of the Commonwealth, both in relation to national economy and its war effort in so far as oil is concerned. We are told that we can have only 12,000,000 or 15,000,000 gallons of petrol annually when four times that quantity should be produced within the country. Oil will be found at Lakes Entrance with a bitumen base and not with a paraffin base. When I die the people of Australia will say that “ Old Tom” Arthur told the truth about oil, and that “Harry” Foll sent from Australia the only man who could have discovered oil in Australia. This bill proposes to grant a sum of more than £33,000 of public money to a “ gogetting” company. In my opinion the investigation should at least have been carried out by people who know what they are talking about.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without amendment or debate.

page 1062

LEAVE OF ABSENCE TO ALL SENATORS

Motion (by Senator Keane) - by leave - agreed to.

That leave of absence be granted to every member of the Senate from the determination of the sitting this day to the date on which the Senate next meets.

page 1063

SPECIAL ADJOURNMENT

Valedictory

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

.- I move -

That the Senate, at its rising, adjourn till a date and hour to be fixed by the President, which time of meeting shall be notified to each senator by telegram or letter.

In submitting the motion, I take the opportunity, in the absence of the Leader of the Senate (Senator Collings), who, unfortunately, has been ill for some days, to offer to you, Mr. President, the usual felicitations at the close of the year’s work, and to say that every honorable senator has been well satisfied with the way in which you have presided over the Senate and maintained its high traditions. I take this opportunity also to thank Senator J. B. Hayes, your predecessor in office, for his valuable services as President. To the Chairman of Committees (Senator Brown) and his predecessor (Senator James McLachlan) all of us are indebted for excellent service rendered during the year. I refer especially to the clerks at the table and to their staffs, the messengers, and all who have contributed to the efficient working of this branch of the legislature. A special tribute is due to the member;? of the Hansard staff, who are doing a wonderful job- a job that probably is not equalled anywhere outside this Parliament. I believe that a recognition of the accuracy of their work, and the wonderful help they are to every member of the Senate, should be placed on record.

I hope that the coming year will usher in brighter days, that victory will come to the armies of the Empire and its allies, and despite the fact that we are closing the year in a time ofterrible stress, with so many of our men out of the country - and for them every senator has the kindliest feelings and gratitude for the wonderful service that they are rendering - we hope and pray that before another year passes the war cloudswil have lifted, victory will have come to our arms, and that Australia will benefit by its efforts.

The Government offers to every member of the Opposition its best wishes for the coming year, and hopes that we shall all return in good health to carry on with the important work ahead of us.

On behalf of the Leader of the Senate I express to the Leader of the Opposition (Senator McLeay) and the Deputy Leader (Senator McBride) our appreciation of their courtesy to us in assisting the despatch of the business of the Senate. This is one of the few occasions during the year when we can lay aside official cares and join in expressing mutual good wishes.

Senator McLEAY:
Leader of the Opposition · South Australia

– I endorse the remarks of the Acting Leader of the Senate (Senator Keane) as to the way in which you, Mr. President have presided over the Senate. Every honorable senator regrets that the distinguished Leader of the Senate (Senator Collings) is unable to be present, through sickness. We regret also the absence, for the same reason, of Senators Lamp and Uppill. I could not let this occasion pass without saying that the thoughts of all of us are with Senator Wilson, who is overseas with the Australian Imperial Force.

To you, Mr. President, the Opposition extends its best wishes. Every member of the Opposition appreciates the generous treatment that he has received from the stall during the year.

Having had experience ourselves in the control of departments, it is fitting that we on this side of the chamber should say to the members of the Government that we appreciate the difficult task which confronts them. We wish them health and strength and the best of luck in tackling these difficult and important problems. I trust that in the New Year the international situation will be much brighter than it is to-day.

The PRESIDENT (Senator the Hon J Cunningham:

– I thank the Acting Leader of the Senate (Senator Keane) and the Leader of the Opposition (Senator McLeay) for their kind references to myself, and I express my appreciation of their references to the members of the staff of the Senate. I take this opportunity also to extend to honorable senators my thanks for their courteous and kindly treatment since I have presided over this chamber. I extend my thanks also to the members of the Hansard staff for the service that they have rendered in this chamber.

I wish every member of the Senate and of the staff of the Senate a merry Christmas and prosperous New Year. I sincerely hope that when we meet again next March the international outlook will be brighter, and that the efforts of the members of the British Commonwealth of Nations and their allies to preserve freedom will have been successful.

Question resolved in the affirmative.

page 1064

INCOME TAX ASSESSMENT BILL 1941

Message received from the House of Representatives intimating that it had agreed to amendments Nos. 1, 3, 6 and 7 and had disagreed to amendments Nos. 2, 4 and 5 made by the Senate in this bill.

In committee (Consideration of House of Representatives’ message) :

Clause 13 -

Section seventy-eight of the principal act is amended -

by omitting paragraph (d) of subsection ( 1. ) ; and

Section proposed to be amended - 78 - (1.) The following shall … fie allowable deductions: -

Calls paid by the taxpayer in the year of income on shares owned by him in a mining company or syndicate carrying on mining operations in Australia for gold, silver, base metals, rare minerals or oil, or in any company carrying on afforestation in Australia as its principal business.

Senate’s amendment (No. 2) -

Leave out paragraph (b), insert the following new paragraph “ (b) by inserting in paragraph (d) of subsection (1.), after the word ‘Calls’, the words, not exceeding Fifty pounds,’ ; and.”

Clause 24-

Section one hundred and sixty of the principal act is repealed and the following sections inserted in its stead: - “160a. - (1.) Where a taxpayerhas, in the year of income, paid calls on shares owned by him . . .he shall be entitled to a rebate in his assessment of the amount obtained by applying to the amount of the calls . . .

Senate’s amendments (Nos. 4 and 5) -

After “ paid calls “ insert “ in excess of fifty pounds “.

Leave out “ the calls “ insert “ that excess “.

Motion (by Senator Keane) proposed -

That the committee do not insist on amendments Nos. 2, 4 and 5 disagreed to by the House of Representatives.

Senator ALLAN MacDONALD:
Western Australia

– I regret exceedingly that the Government has seen fit to disagree with these amendments. There has been a consultation with the Government on the matter, and the Senate. has again been placed in rather a false position, inasmuch as the committee on taxation which reviewed the incidence of this amending Income Tax Assessment Bill came to certain decisions, in regard to which the members of the Senate were not consulted. Apparently the Government holds the view that acceptance of the Senate’s amendment to exempt the first £50 in respect of calls paid to mining companies would mean the subsidizing of the investment by S3 per cent. According to the figures supplied by the Government, it would appear that under the amendment the exemption would increase alarmingly compared with the pre-war exemption. On an income of £300, the tax benefit received by the taxpayer prior to the war, in respect of a payment amounting to £50, was 16s. 7d. Under my amendment, it would be increased to £6 13s. 4d. The Government proposes to increase it to £1 2s. 3d., consequently the investor will receive some additional benefit. So the story continues, until the wealthy mining investor on the £5,000 mark is reached. His tax benefit, pre-war, amounted to £10 7s. 9d. This would be increased to £41 13s. 4d. under my amendment, and to £108s. 4d. under the proposal of the Government. I am not particularly interested in the wealthy mining investor, but I am concerned about the gold-mining industry of Western Australia. The Government is doing a disservice to that industry by declining to accept some amendment, if not the amendment passed by the Senate. I had no intention of asserting that the £50, representing the initial exemption, should be a rigid figure. It could be reduced, and the more highly salaried man could be restricted by the limitation or cancellation of the deduction when the amount paid in mining calls exceeded, say, £200 or £250. The Government remained adamant, however, and we have no alternative but to accept its decision. It would appear that the Government does not think the industry as important as we consider it to be. I repeat that the gold-mining and oil exploration industries and afforestation schemes will be affected by this tax, because once we commence a policy of whittling away inducements to pay calls no one knows where it may stop. The effect of this measure on the investing public may be detrimental to these industries. In future when committees are appointed representative of all parties in this Parliament to inquire into the effect of proposed legislation, this chamber should be properly represented. Honorable senators should refuse to continue to be the “ Yes men “ of the members of the House of Representatives. I have consistently objected to the Senate being placed in such a position. The Government does not improve its standing in this chamber by ignoring the rights of honorable senators to participate in the deliberations of such committees.

Senator KEANE:
Minister for Trade and Customs · Victoria · ALP

.- When I opposed the amendment originally submitted by Senator Allan MacDonald, I was under the impression that this chamber was represented on the committee appointed by the Government to inquire into the effect of its proposals in relation to the imposition of income tax and other taxes. I agree with the honorable senator that when committees of that kind are appointed in future this chamber should be adequately represented. When I learned to-day that no honorable senator had been appointed to the committeeI made strong representations to the Government that in future the Senate be given adequate representation on any committee which may be appointed to advise the Government with respect to any measures that may be initiated in or may ultimately reach this chamber. I was a consistent advocate of such a course when I was in opposition and I depart not one iota from the attitude that I then took up. Had this chamber been represented on the committee set up by the Government to consider the proposals contained in this and similar bills the passage of this bill would not have been delayed. I assure the honorable senator that the practice of past governments in ignoring this chamber will not be continued.

Question resolved in the affirmative.

Resolution reported; report adopted.

page 1065

PAPERS

The following papers were presented : -

Australian Imperial Force Canteens Funds Act - Auditor-General’s Report on the Audit ofthe accounts of the Trustees of the AustralianImperial Force Canteens Fund, for year 1940-41.

Commonwealth Railways Act - Report on Commonwealth Railways Operations, for year 1940-41.

Lands Acquisition Act - Land acquired at Tamworth, New South Wales - For defence purposes.

National Security Act -

By-laws - Controlled areas.

Orders -

Prohibited places (8).

Protected areas (6).

Taking possession of land, &c. (43)

Use of laud (8).

Regulations - Statutory Rules 1941, ivs. 202, 263, 205, 266, 267, 268, 269, 270, 271.

Senate adjourned at6.30 p.m. till a date and hour to be fixed by the President, which time of meeting shall be notified to each senator by telegram or letter.

Cite as: Australia, Senate, Debates, 27 November 1941, viewed 22 October 2017, <http://historichansard.net/senate/1941/19411127_senate_16_169/>.