20th Parliament · 1st Session
The PRESIDENT (Senator the Hon. Edward Mattner) took the chair at 3 p.m., and read prayers.
– I understand that, until about three months ago, it was possible for residents of Canberra to buy sides of mutton from the Canberra abattoirs at lower prices than they could, be purchased at retail butcher shops, but that this practice has now been discontinued. As the abattoirs are under the jurisdiction of the Minister for the Interior, I should like his representative in this chamber to ascertain whether the concession was withdrawn by ministerial direction.
– I shall make inquiries and inform the honorable senator of the result.
– Will the Minister representing the Minister for the Interior say whether there is any particular reason why power black-outs should so frequently occur in Canberra at 6 o’clock when most people are having their evening meal? This is a grave inconvenience, not only to members of Parliament who live in hotels, but also to the citizens of Canberra. Cannot something be done to ensure that the blackouts will occur earlier or later in the evening?
– I shall refer the honorable senator’s question to the Ministor for the Interior and ascertain whether an alteration can be made to the present practice in order to suit the honorable
– Can the AttorneyGeneral say whether it is a fact that Mr. Corbett Shaw, who worked in the Department of External Affairs for a short period in 1950, filed reports for Australian embassies, missions and legations abroad, read top secret despatches, and saw drafts of agreements prepared for consideration by Cabinet, and a host of other documents? Is it a fact that when Mr. Shaw joined the Department of External Affairs in 1950, files and documents marked “ top secret “ were lying around on desks while officers were away? Is it a fact that confidential documents were left in filing trays overnight, contrary to official instructions that they must be kept under lock and key? Is it a fact that unauthorized persons were free to wander unchallenged through the department and read confidential files? Is it a fact that temporary clerks were employed without being screened, and were allowed access to top secret documents at all times? 13 it a fact that Mr. Shaw was employed by the Department of External Affairs without being required to produce a character reference, that, apart from the production of a birth certificate, his antecedents were not checked in any way, and that without any further investigation he was attached to one of the foreign affairs sections? Is it a fact that unauthorized persons came and went from the External Affairs Department’s offices as they pleased., and that although a Commonwealth police officer stood by one doorway, tha three doors that were most used were without supervision of any kind ?
– I think I can say that most of the statements to which the honorable senator has. referred are not facts. The Minister for External Affairs made a statement on this matter in the House of Representatives yesterday. I am afraid that I have not a copy with me at the moment, but the Minister categorically denied the allegations and, if my memory serves me correctly, indicated that the person referred to was not in a position where he would have had access to documents of the kind mentioned by the honorable senator.
– Will the Minister for Trade and Customs read to the Senate a reply which I understand he has made to allegations contained in a special article in Country Life of the 23rd May, 1952, by Stanley IT. Houston, which stressed the need for Commonwealth action to ensure uniformity in laws regarding the labelling of textiles in order that purchasers may readily know their principal fibre content?
– I have read the article to which the Leader of the Opposition has referred and which is badly founded. I issued a press statement in reply to that article on the 28th May, which read as follows : -
On being asked to comment on the statement by Stanley IT. Houston published in Country Life on the 23rd May, to the effect that the Commonwealth Government had failed fully to implement requirements for the labelling of imported textile products, the Minister for Trade and Customs, Senator the Hon. Neil O’sullivan, said that he is astounded at the ill-informed remarks made in the statement which grossly misrepresented the position.
The truth of the matter, Senator O’sullivan said, is that the Commerce (Imports) Regulations do require in respect of imported textile products the application of a trade description indicating the name of the country of origin and the nature of the fibrous content of the goods.
The Commerce (Imports) Regulations as they now stand do require that a threefold classification expressed in percentages shall be applied to woollen goods, viz., virgin wool, re-processed wool and re-used wool as the case might be, but it has been found impracticable to administer this - requirement. Technical evidence is to the effect that there is no test whereby the presence of each of these classes of wool can be detected beyond doubt, still less can exact percentages of each be determined.
Honorable senators will appreciate that it would be quite futile to try to enforce a regulation the breach of which would be incapable of proof because no prosecution could be successfully sustained. The statement continued -
It is the Commonwealth Government’s aim to modify the regulations to provide a practical means of protecting the Australian woollen industry against unfair competition from other fibres and of protecting the consumer against any mis-description of textile goods offered for sale to him. It is the intention therefore to require that any wool present in an imported textile product be shown as a percentage by weight of the whole, other fibres being indicated in order of dominance.
Senator O’sullivan claims that it is most desirable that marking requirements be made as simple as possible consistent with the objectives desired to be attained by the marking.
He said that he recently conferred with State Ministers with the objects of explaining to them the reasons for the Commonwealth Government’s proposals and of stressing the desirability of adopting uniform legislation as regards imports and throughout the States, as regards the products of Australian industry. The State Ministers, he said, propose to hold a further conference in the matter.’
In the circumstances the question of the appointment of a royal commission as suggested by Mr. Houston does not arise.
– Yesterday, Senator Sandford asked me whether there was any provision in the Repatriation Act to grant benefits to a foster mother. I have now examined the matter and I find that, although no specific provision has been made for a foster mother, there is a clause in section 124 of the Repatriation Act which reads as follows : -
Persons in necessitous circumstances who are or were dependent on members of the forces.
That is the only provision that would cover such a case, and if Senator Sandford will give me particulars of the case he has in mind I shall go into it fully for him.
– Can the Minister representing the PostmasterGeneral clarify the position regarding the installation of automatic telephone exchanges in the country districts of Tasmania, with special reference to Antil Ponds and Hadspen?
– I know that the Postmaster-General is especially interested in the installation of automatic telephone exchanges in country districts, but I cannot say what is the position in respect of the two districts mentioned by the honorable senator. I shall bring this question to the notice of the PostmasterGeneral.
– I desire to address a question to you, Mr. President. Since the post office was removed from the King’s Hall to the basement of Parliament House, members of the Parliament have been put to considerable inconvenience through having to go downstairs to post their letters. Would it not be possible to have a letterbox installed at a convenient place in the King’s Hall, or to have a chute from the King’s Hall to the post office? I am not concerned so much about those, who are able bodied, but some members of the Parliament suffer from the effects of war injuries, and it is a hardship upon them to have to use the stairs when they wish to post a letter.
– This matter has been under consideration for some time. It was discussed again only yesterday, and honorable senators may rest assured that a letter-box will be installed by the time they return to Canberra after the forthcoming recess.
– Will the Minister representing the Minister for Civil Aviation inquire into the cuts that have been made by Australian National Airways Proprietary Limited to ‘ the service between King Island and the mainland? The residents of King Island are entirely dependent upon the air service for the carriage of mails and passengers between the island and Victoria and Tasmania.
– I realize the importance of. the matter raised by the honorable senator, and I shall make representations to the Minister for Civil Aviation with a view to ensuring that a reasonable air service shall be maintained between the mainland and King Island.
asked the Minister representing the Minister for Civil Aviation, upon notice -
– The Minister for Civil Aviation has now supplied the following information : -
Resulting from certain operators challenging the magnitude of air-route charges the matter was taken to the High Court some time ago. The Government is considering this question in connexion with the recent negotiations for the retention of competitive air services and a statement will be made in the near future. In the meantime, no good purpose would be served by listing the operators and the amounts owing by them on account of air-route charges.
– No Common* wealth industrial inspector is stationed permanently in Tasmania to police the operation of awards of the Commonwealth Arbitration Court. Will the Attorney-General inquire into the position in order to ascertain whether there is justification for stationing an inspector in Tasmania, instead of continuing to bring one from Victoria on periodical visits ?
– I shall bring the honorable senator’s question to the notice of my colleague, the Minister for Labour and National Service, and see whether anything can be done along the lines that have been suggested.
– I preface a question to the Minister for Trade and Customs by pointing out that the decline of primary production in this country is due, in part, to the shortage of steel. Difficulty is being experienced in maintaining even the present rate of primary production because of the inability of primary producers to obtain sufficient quantities of steel products. I understand that the steel works at Newcastle are working at only 70 per cent, of their capacity, and from what I have read in the press lately, it seems to me that the position is worsening.
– Order! The honorable senator should not seek to give information in a question. He must now come to the point and ask his question.
– In view of the urgent necessity to increase our primary production, can the Minister hold out any hope that the steel industry of this country will soon be brought to full production?
– The matter that has been raised by the honorable senator is properly within the jurisdiction of my colleague, the Minister for National Development. It is unfortunately true that the steel works of this country are not at present producing at full capacity. A lot of circumstances have been responsible for that state of affairs. I do not accept as correct the honorable senator’s statement that the position is deteriorating. I understand that since the present Minister for National Development has occupied that office the production of steel has increased, but it is still a long way short of our target of 100 per cent, of the capacity of the steel works.
– The rate of production of steel is still falling.
– If the honorable senator who has just interjected would exercise the weight of his undoubted influence in this connexion we might be able to improve on the present 70 per cent, production rate. I assure the Senate that the Government is offering every encouragement to the industry to bring its production of steel to the maximum capacity of the works.
asked the Minister representing the Minister for Immigration, upon notice -
– The Minister for Immigration has supplied the following answers : -
It is well known that the Mayorin Northam is endeavouring to secure from the State Housing Commission an increased share of houses erected under the Commonwealth and State Housing Agreement. In drawing attention to the housing problem of migrants in that area, the Mayor has emphasized that the migrants are an asset to the municipality, that they are most desirable as workers and that their behaviour over-allhas been exemplary.
SenatorROBERTSON asked the Minister representing the Minister for Immigration, upon notice -
– The Minister for Immigration has supplied the following answers : -
It is an accepted fact that the majority of crimes are committed by males between the ages of twenty and 35 years. Not only is the percentage of males higher amongst migrants than in the Australian population generally, but the proportion in the age group twenty to 35 years is also considerably higher (41.5 per cent. amongst migrants compared with 23.7 per cent. in the Australian population).
The report also states -
Upon consideration of all the available evidence the Committee is satisfied that there has been an overall decrease in the incidence in crime in Australia during the period of post- war large-scale immigration.
While the Committee does not regard the commission of any crime with equanimity, it does not feel that there is any cause for alarm in regard to the commission of offences by alien migrants. That small minority of post-war migrants which has been responsible for the commission of the few crimes of a most violent and serious nature has been dealt with by the law and in all cases where deportation is warranted the Committee is satisfied that deportation action has been or will be taken.
asked the Minister representing the Minister for Social Services, upon notice -
– The Minister for Social Services has supplied the following answers: -
asked the Minister representing the Treasurer, upon notice -
– The Treasurer has supplied the following answers: -
asked the Minister representing the Minister for the Interior, upon notice -
– The Minister for the Interior has supplied the following answers : -
asked the Minister for Trade and Customs, upon notice -
– The answers to the honorable senator’s questions are as follows : -
asked the Minister representing the Minister for Defence, upon notice -
– The Minister for Defence has supplied the following answers : -
asked the Minister representing the Minister for Commerce and Agriculture, upon notice -
– The Minister for Commerce and Agriculture has furnished the following answers : -
asked the Minister representing the Minister for Commerce and Agriculture, upon notice -
– The Minister for Commerce and Agriculture has furnished the following answers: -
asked the Minister representing the Minister for Commerce and Agriculture, upon notice -
– The Minister for Commerce and Agriculture has furnished the following answers : -
– by leave - I desire to inform the House that His Excellency the Governor-General in Council this morning approved of the Government’s recommendation for the establishment of the Department of Works, in lieu of the Department of Works and Housing. His Excellency the Governor-General subsequently accepted the resignation of the Honorable W. S. -Kent Hughes, M.V.O., O.B.E., M.C., E.D., M.P., as Minister of State for Works and Housing and appointed him to be Minister of State for Works.
Apart from the transfer to other departments of certain administrative functions relating to aspects of housing which had taken place since the department was created in July, 1945, it was found that the title of “Works and Housing” was confusing to the public generally and that it created an impression that the Commonwealth is directly responsible for all housing activities, including those controlled by the housing authorities administered by State governments. In addition, the Minister and the Department of Works and Housing were receiving many inquiries daily regarding housing matters generally, including those which concern the Department of Social Services or the Department of National Development.
There is no alteration of the existing functions of the department and the change will in no way affect the responsibility of the department to carry out housing projects for all Commonwealth departments as this class of activity will be adequately covered by the general definition of “ works “.
– I present the fourth report of the Printing Committee.
Report - by leave - adopted.
Motion (by Seantor McKENNA, through Senator MCLEAY) agreed to -
That leave of absence for two months be granted to Senator Tangney on account of ill-health.
Debate resumed from the 3rd June (vide page 1200), on motion by Senator Spicer -
That the bill be now read a second time.
– This hill deals with income tax and social service contributions. We might reasonably have expected that the Government would submit proposals for a substantial reduction of taxation. During the 1949 election campaign, the parties which now constitute the Government told the people that it was their intention, if returned to power, to reduce taxation, because they believed that heavy taxation was retarding production. The Government has now been in office for more than two years, and it is well to compare the1 position to-day with, the position that obtained in 1949. In that year, the people of Australia paid £504,000,000 in taxes; in 1950-51, they paid £718,000,000; and in 1951-52, they will be asked to pay £957,000,000. Thus, the Government, instead of honouring its solemn promise to reduce taxation in order to encourage production, has almost doubled taxation during the period that it has been in office.
Very little relief will be afforded to taxpayers by this legislation. The Opposition proposes to oppose two provisions in the bill - that dealing with penalties for errors in the assessment of tax by the taxpayer, and that dealing with special depreciation allowances. Dp to 1944, the taxpayer submitted a return of income, and on that return the Commissioner of Taxation assessed the tax. However, in 1944, because of rising prices and full employment, the system was altered to provide for the progressive payment of tax in instalments throughout the year so that, by the end of the year, the taxpayer had discharged the liability that had then become due. This method, known as the pay-as-you-earn system, was applied to incomes from salaries and wages. In order to apply the same principle to self-employed persons, such as farmers and business people, the system of provisional assessments was introduced, and under this system tax was collected in advance, although the Government will dispute that.
– The system was introduced by a Labour government.
– That is true.
– Does the honorable senator object to it ?
– I am not disputing it, but the Attorney-General (Senator Spicer) said in his second-reading speech on this bill that some of us would claim that the provisional assessment of income tax provided for the payment of tax in advance, and he denied that that was so. I well recall that he himself in this chamber six or seven years ago argued this very point.
– No, that was another point altogether.
– It was the same point as we are now discussing, and the question was whether the taxpayer was paying his tax in advance, or whether he was merely paying on income earned in the previous year. If we study the history of Commonwealth income taxation in Australia we must believe that income earned in one year is taxed in the following year. Therefore, when a man pays provisional tax he is paying in advance.
In this bill it is proposed to give taxpayers the right to assess the amount of tax which they shall pay. The term “ self-assessment “ sounds well, but it is provided in the bill that if a taxpayer, in assessing his tax, makes an error of more than 20 per cent, he shall be liable to certain penalties. The Labour party objects to that provision on the ground that if the assessment is wrong the error will be picked up by the Taxation Branch within a few months. How does the Government justify the imposition of a penalty? It is true that the Government should protect ; itself from people who might seek to avoid paying a portion of their provisional tax for a period, but that would soon be detected. In effect, taxpayers will be compelled to maintain two profit and loss accounts. In order to render a provisional return it will be necessary for a businessman to close his accounts and prepare a balance-sheet at the end of March, and estimate his probable income during the remaining three months of the financial year. It is apparent, therefore, that he will be faced with a great deal more work and worry. If a businessman employs a tax agent to prepare his income tax returns it is likely that the agent, on behalf of his principal, will apply to the Taxation Branch for a general exemption for a specified period. As honorable senators are aware, many business people apply to the Taxation Branch year after year for an extension of time in which to lodge their taxation returns. Under the proposed method of self-assessment of provisional tax, tax agents will have to furnish two returns instead of one, and the Government will not achieve very much. Furthermore, conscientious taxpayers who make a genuine attempt at correct self-assessment, will be penalized if their estimate of taxable income is less than four-fifths of the taxable income subsequently established. It is not right that people who should be granted relief, people who always pay their just taxes promptly, should be so penalized. For these reasons, the Opposition sees no merit in the penalty provisions of the bill
We have been told repeatedly that the staff of the Taxation Branch is insufficient to cope with the present work of the branch, and to detect tax evaders promptly. Indeed, it has been claimed that many matters connected with taxation that require investigation have been deferred because the Commissioner and his staff are overwhelmed with work. Under the proposed system, the staff of the Taxation Branch will have to cope with two returns from many business people instead of one. There will be the return based on self-assessment of provisional tax, and the true return of the result of the year’s trading. Not satisfied with the penalty provision, the Government proposes to authorize the Commis- sioner of Taxation to substitute an assessment of provisional tax for a taxpayer’s self-assessment, if the Commissioner does not feel disposed to accept the self -assessment. The Taxation Branch is able to estimate the incomes of people in various categories throughout Australia with reasonable accuracy. I consider that the Government will gain nothing by imposing penalties on people who assess their provisional tax incorrectly, and that this will do a great deal of harm. The Opposition believes that it should approach this problem on the basis of assisting the Commissioner of Taxation to obtain all the taxes that *the Government is determined shall be obtained from the people. On that basis, the Opposition considers that the imposition of a penalty in relation to errors of self-assessment would be bad in principle. The Government should give further consideration to the proposed provision, the benefits from which will be meagre. I am convinced that the evils of the proposed system outweigh its merits. At the committee stage, the Opposition will move for the deletion of the penalty provision.
I shall now address myself to the special depreciation provision. After the last war the former Labour Government introduced the special depreciation allowance to encourage industry to reequip itself with new plant, and to give some measure of relief to businessmen who had to pay the high prices then ruling. As honorable senators will remember, prices for plant and equipment at the end of the war were very high compared with pre-war prices, and the government of the day considered that business people should be able to write-off the purchase price over a period of five years. In many instances that arrangement has a year to run. In these days, when it is difficult to obtain the permission of the Capital Issues Board to raise new capital, and when credit restrictions are an obstacle to the obtaining of overdrafts, many primary producers are experiencing even greater difficulties than they expected in financing the purchase of plant and equipment. They have now learned to their dismay that the Government proposes to reduce the special concessional rate of depreciation on such plant and equipment from 40 per cent, to 20 per cent. The Government should allow the existing rate of depreciation to continue until the period of operation of the concession hitherto announced has expired, so that primary producers may be able to meet the commitments that they have entered into for the purchase of plant and equipment on the .understanding that the existing depreciation rate would be continued for another year.
Clauses 4 and 5 amend the principal act to provide that annual depreciation, of 20 per cent, may be claimed in respect of expenditure incurred on buildings and certain improvements for pastoral and agricultural purposes. Primary producers should be given encouragement to develop their properties. However, we must not lose sight of the fact that there are in Australia, to-day many people who are termed city farmers, who buy farms and rural properties for the purpose of concealing their profits. They pour the profits obtained from their investments into farms and utilize the returns from the farms to extend farm buildings and generally to improve the farm properties. They are able to claim depreciation for such improvements and are thus able to conceal profits that are earned from, the investment of other profits. By this means city farmers ultimately provide a nice nest-egg out of tax-free funds. The Attorney-General and the officers of the Taxation Branch should be aware of the fact that a groat deal of the profit derived from industry is diverted to the development of farming properties, not for the purpose of increasing food production, but in order to hide profits and ultimately to reap a capital gain.
– What does the honorable senator suggest should be done about that?
– That is a pertinent question, but I am not able to furnish the answer to it as a magician would draw a rabbit out of a hat. I do not attempt to offer a solution of the difficulty, which I realize will be difficult to overcome. We are aware that these practices exist, and it is our duty to bring them to the notice of the Parliament and of the officers of the Taxation Branch with a view to ascertaining whether it is possible to provide a remedy. It is of no satisfaction to genuine farmers who are working under adverse conditions and, in some instances, experiencing difficulty in carrying on their- properties, to learn that pseudo farmers are concealing profits derived from industry by investing them in properties that are of no value to this country.
The bill also contains clauses relating to the recovery and treatment of pyrites obtained in conjunction with mining for gold, or for gold and copper. In the case of a gold and copper mine, income derived from the working of the mine is now exempt from tax if the value of the output of gold is not less than 40 per cent, of the total value of the output of the mine. Whilst gold is of great value, pyrites, from which sulphur is obtained, is also of such great value that we should do everything possible to encourage its production and, therefore, the Opposition believes that the Government is acting wisely in extending that exemption to pyrites. Otherwise, mine-owners and mining concerns may reduce the production of pyrites in order to secure the exemption.
The bill also contains other amendments to the principal act which the Opposition generally endorses. We ask the Government to review the provision of the bill that relates to the penalties, and if the Government will agree to these two requests that I have made on behalf of the Opposition, honorable senators on this side of the chamber are prepared to support the bill.
– While I compliment Senator Arnold on his most reasonable approach to this bill, I propose to comment on certain statements made by him, because I believe them to be erroneous. The honorable senator referred to the increase of income tax receipts during the last three years, but he completely omitted to mention some of the factors that have brought about that increase. Since the Menzies Government assumed office in 1949, Australia has been involved in a major war. I refer, of course, to the Korean war. Another factor that has affected income tax receipts is the tremendous rise of the price of wool and of other primary commodities that has resulted either directly or indirectly, from the Korean war. Consequently, the last budget was designed not only to raise revenue by means of taxation but also to stem inflationary tendencies. It should be remembered that the present high rates of taxation are due to circumstances outside the control of this Government. No doubt they were not within the knowledge of the Prime Minister (Mr. Menzies) when he made his policy speech at the end of .1949.
I join issue with Senator Arnold, who condemned the self-assessment plan, and particularly the penal section of the legislation. The honorable senator, strangely enough, seems to think that the Commissioner of Taxation should decide the amount of provisional tax that should be levied. The Government, on the other hand, considers that the taxpayer should be permitted to assess his own provisional income tax. I suggest that it is more liberal to permit the taxpayer to make his own assessment than to give the Commissioner sole responsibility for such assessment. In a British community, the administration of justice depends upon the existence of penal provisions. Penal clauses are necessary in most legislation. In many instances such provisions are rarely invoked. Nevertheless, their retention is necessary. In my view, (Jio proposed penalty for underestimation of taxable income is not onerous and would probably work out to be not much more than normal bank interest. In addition, an overriding power has been vested in the Commissioner to absolve from penalty a taxpayer who underestimates his income.
I also join issue with the honorable senator concerning the abolition of the 40 per cent, initial depreciation provision. The Government, in its wisdom, stated that initial depreciation on the old basis would not be allowed to continue after the 1st July last. However, in the case of contracts made prior to that date, as a result of which goods are supplied after the 1st July but before the 30th June next, the 40 per cent, initial depreciation provision will apply. In that way the Government has endeavoured to overcome any hardship which might arise and which Senator Arnold apparently envisages.
I welcome this bill, which follows hard on the heels of legislation to increase the amount of exemption in connexion with land tax. Honorable senators will recollect that within the last few days legislation has been passed by this Parliament to increase the amount of such exemption from £5,000 to £8,750, thereby bringing immediate relief to approximately 22,000 persons who were liable to pay federal land tax. That legislation will also give relief to property-owners whose property is worth more than £8,750. I commend the Government for introducing this bill, and I hope that it will be the forerunner of others. The British budget, which was introduced in the House of Common, some months ago, sought to provide for reduction of taxes. I commend the Australian Government for following the lead which the British Government then set.
I wish to refer to the death in Sydney yesterday of Mr. Eric Spooner, which has caused me some personal sadness. It will be remembered that, early in 1950, Mr. Spooner became president of the Commonwealth Committee on Taxation which was instituted by this Government. Since its appointment, the committee has done’ invaluable work in connexion with taxation matters. I have been struck by the fact that it has treated taxation as something apart from party politics. Senator Arnold has also adopted that approach. Income tax, land tax, sales tax, and such matters should not be treated in this Parliament as party political matters. The foundations of taxation assessment policy which are laid by this Government may have to be used by a government of a different political colour, in the same way as the present Government has built on the foundations that were laid by the Chifley Government. It, therefore, appears to me that taxation assessment policy should be outside the ambit of party politics. 1 appreciate the work that is being done by the committee.
This Government, during its first year of office, introduced a budget which proposed to reduce taxes by £25,000,000. However, as I have already pointed out, the impact of the Korean war, and the disorganization caused by nigh commodity prices, made necessary some adjustment of proposals contained in that budget. The Government also introduced a simplified income tax assessment form. In my opinion, another milestone is represented by the attitude of the Government towards the assessment of provisional tax. It has worked on the basis of legislation enacted by the Chifley Government in 1944 and has said, in effect, that as far as wage-earners are concerned, the payasyouearn system, which was instituted by Mr. Chifley as Treasurer, is satisfactory for the future, but that with regard to 750,000 taxpayers who cannot conveniently pay as they earn, a system of self-assessment shall apply. Primary producers will welcome this legislation because many of them have suffered considerable hardship under the existing provisional tax system when incomes have fallen. In the year 1949-50, most primary producers paid tax, including provisional tax, on assessments issued under the averaging system. Prices had been rising steadily during the preceding four years, and they had been able to meet their tax commitments from rising incomes. However, provisional tax paid for 1950-51 was not nearly sufficient to meet commitments for that year, and assessments which included provisional tax for 1951-52, were so high that in many instances a considerable part of the 1951-52 income had to be used to pay tax liabilities. I compliment the Commissioner for Taxation and his deputies upon their realistic approach to the problem of adjusting provisional tax, and I am glad to see that the bill now before us gives legal authority for that treatment. I am sure that the courtesy that has been extended by the taxation authorities in the past in connexion with the wool sales deduction and the 40 per cent, provisional tax deferment, will again be extended to taxpayers in relation to the self-assessment system. The legislation provides that a taxpayer who has made a genuine mistake may be relieved of the necessity to pay any penalty and I arn certain that administration of that matter can confidently be left in the hands- of the Commissioner and his officers.
Senator Arnold claimed that businessmen would have to make out two profit and loss accounts. I do not agree with that. A businessman who makes a self-assessment, say in the month of March, need not destroy his figures and make a completely new calculation in July or August. His March self-assessment will cover a period of nine months, and the figures will be useful for his final return. I do not believe, therefore, that the new system will impose any additional burden on the business community. I compliment the Government upon the bold and imaginative manner in which it has tackled the problem of provisional tax. It was clear as far back as 1944 that some action would be necessary when incomes began to fall. The provisional tax system did not present any real problem when incomes were rising. It so happens that this is the year in which action has had to be taken.
I come now to the proposed tax concessions to stimulate primary production. The Government is to be congratulated upon this part of the measure. There is great activity in the farming world at present. Providential rains have fallen in some of our most fertile areas, and farmers whom I know, or of whom I have heard, are busily at work. Some of them are even operating their tractors at night, and I believe that when production statistics are available, we shall be very pleased with the work of the agricultural community in recent weeks. Primary producers in turn should be most grateful to this Government for its imaginative treatment of their problems. The Government has done a good job in regard to depreciation allowances on plant, equipment and buildings erected after the 1st July last, but I believe that the depreciation allowances in respect of old plant, equipment and buildings’ should be re-examined. The relevant order is income tax Order No. 1217. which was issued a number of years ago. That order is completely out of touch with present conditions. For instance, it provides for an annual depreciation allowance of 1£ per cent, for a wool shed built of stone or brick, and 2 per cent, for a wool shed built of wood and iron. For stone barns the allowance is 2 per cent, and for wooden barns 3 per cent. Such buildings wear out much more quickly than those figures would suggest, and I believe that the whole of Order No. 1217 should be re-examined. Its provisions covering manufacturing premises are just as obsolete as those dealing with rural buildings. Storekeepers, merchants and others are to receive no added’ depreciation allowances under this bill. This is a matter of great importance. We are asking people in all walks of life to produce more. Therefore, we are asking them to use their machinery and plant more, and the result must be a more rapid depreciation of that machinery and plant. Therefore, I contend that an immediate re-examination of the depreciation schedule is warranted.
I join with Senator Arnold in expressing appreciation of the Government’s treatment of gold-mining companies. This country is in great need of pyrites at present, and by continuing the existing exemption allowed to gold-mining companies, the Government has shown great understanding of this industry and of the needs of Australia.
I turn now to another problem that this bill brings to light. I refer to our rather half-hearted attempt to do something about the taxing of lease premiums. The Attorney-General said in his second-reading speech -
The bill also implements preliminary recommendations made by the Commonwealth Committee on Taxation relating to the taxation of leasehold premiums. That committee has not so far concluded its deliberations on the general subject of taxation of lease premiums. The amendments which are now being made will, however, remove anomalies and injustices requiring urgent rectification. The proposals in this .bill, therefore, do not represent the last word in the matter, but are designed, as a preliminary step, to strike a balance between the assessability to the recipient of consideration received for or in connexion with leases, on the one hand, and the deductibility of the amount so paid by a taxpayer, on the other. When the final report of the committee on these matters is received, the Government will again examine the subject and any further amendments which may be necessary will be placed before the Parliament.
I hope that, in spite of the death of Mr. E. S. Spooner, chairman of the Commonwealth Committee on Taxation, the Go- vernment will urge the committee to complete its investigations of this matter. It may sound technical, but it is a matter of great importance to many small shopkeepers, including newsagents who buy and sell businesses. If a newsagent purchases the land on which a business is carried on, the question of taxing the goodwill paid by him and received by the vendor does not arise, but 95 per cent, of small businessmen hold their land only on a monthly tenancy and, in the event of a sale, the vendor can be taxed on the alleged income that he receives for goodwill. This problem has not yet been dealt with by the committee, but I hope that it will be reviewed at an early date, because it is a matter in which many thousands of small business people are vitally interested.
In conclusion I commend the Government’s taxation policy generally. I remind the Government, however, that there are still a number of matters to which it should direct attention. I refer particularly to the need for the Commonwealth Committee on Taxation to report to the Government upon the remainder of the matters that have been submitted to it. I support the bill and hope that it will be given a speedy passage.
– I shall not delay the passage of the bill for very long, but I should like to refer to one or two phases of the second-reading speech made by the Attorney-General (Senator Spicer). Senator Laught suggested that many phases of this bill were very satisfactory and showered congratulations on the Government. I feel that there is small reason for congratulations because, despite the proposed amendment of the act, the taxpayer will still be called upon to pay exorbitant taxes although prior to the last general election the Government promised that it would reduce taxation. The fact that the Commissioner of Taxation will have the final word in fixing the amount of provisional tax payable will be small comfort to a man who will have to pay a big slice of his income as tax. It will also be very small comfort to taxpayers to know that in the opinion of a responsible Minister of the Crown the present generation of Australians will never be relieved of high taxation, and that the days are gone when a man could benefit by applying himself well and diligently to his work. I wonder what the reaction of the people of Australia would have been if the Minister had made that statement before the last general election.
The Attorney-General stated in his second-reading speech that the outstanding features of the bill are those which relate to the assessment of provisional income tax and those which are designed to encourage increased primary production. I have not yet heard any Minister say how the proposals contained in this measure are likely to increase production. It has been suggested that high taxation has been the cause of the decrease in primary production. Under successive anti-Labour governments, before the establishment of any system of orderly marketing, many primary producers did not earn sufficient to necessitate their paying income tax. Honorable senators are aware of the conditions that once existed in the dairying industry and the wheat industry. It is only since the advent of Labour administrations and the creation of an orderly marketing system, which has prevented primary producers from being victimized by the middle men, that many farmers have been able to earn taxable incomes. Possibly, because of the many years during which they were in receipt of low incomes, they cannot understand why they should now pay income tax. If complaints concerning high income tax rates had come only from primary producers one might be able to accept this explanation, but other sections of industry have also complained. Yet this bill makes no provision for the relief of that excessive burden which has been stated as the obstacle to increased production.
The fall in the rate of primary production has been serious and the Government should give every consideration to methods for increasing it. Australia’s position in world affairs has changed in recent years. We are no longer remote from other lands. Before the advent of air transport our isolation was regarded as our security. To our north, the Dutch and the French were strong and friendly neighbours, but now they have gone. That is why primary production has become most important to this country. Australia, being recognized as capable of producing foodstuffs for the world, will be looked upon with envious eyes by people who are without sufficient food. There is every reason why those peoples should eventually decide that if Australians will not cultivate their land and produce an exportable surplus, they might as well come here and grow what they require. It is therefore the duty of the Government to ensure that primary production is increased.
The relief that the Government has offered to primary producers in the terms of this measure will not be sufficient to induce them to undertake additional work. In reading this bill I was amazed to find that previous income tax legislation had provided that should a primary producer - a dairyman, for instance - lose his herd as a result of fire, the amount of compensation that he receives from an insurance company shall be deemed to be assessable for income tax purposes. The Government has now proposed that instead of the farmer being liable to pay tax on the whole of the insurance received in one year, he may have that amount regarded as income received in respect of a longer period of time. It has ‘been suggested that if income tax were immediately payable on the full amount of the insurance received it would make it difficult for the farmer to rehabilitate his farm. I should think that it would ! If the Government desires to encourage primary production it should remove the farmer’s liability to pay income tax on insurance entirely. No man who has lost his means of livelihood should be called upon to pay tax on insurance money that he has received in respect of his adversity. Could a farmer who was bereft of his herd replace it now at the same price as he paid for it three or four years ago ? The price of milch cows has risen rapidly and is now almost prohibitive. Yet the Government contends that farmers who suffered during the recent disastrous fires should be called upon to pay income tax on the amount that they received from insurance companies as compensation for the damage that they suffered. It is preposterous that the Government should allow such a provision to remain in the act.
– The Labour Government allowed it to remain there for years.
– Unfortunately, this provision existed long before I took an interest in this legislation but now that I have learned that this injustice is being inflicted on a section of the community I consider that I should be recreant to my trust if I did not expose it. I hope that members of the Australian Country party in this chamber will support the elimination of the provisions to which I have referred. If a man’s house is destroyed is he expected to pay income tax on the insurance that he receives?
– Of course not!
– Of course not! It is paradoxical that if a man loses his home in a fire he need not pay income tax on his insurance ; but. he must pay income tax on insurance received for the loss of his stock. Surely the Government has some sense of fair play !
– The honorable senator is criticizing the provisions of an act which was introduced by the Chifley Government.
– I am criticizing the provisions of the income tax assessment legislation. If honorable senators opposite are prepared to support this provision, let them say so. But if they support it they should not suggest that they are the friends of the primary producers and that they desire to have primary production increased during this critical period in our history. It does not matter who introduced the original legislation. If it inflicts an injustice then that injustice should be eliminated at the first opportunity. This Government is perpetuating it.
– What would the honorable senator say if the money received in respect of stock-in-trade damaged by fire in a trader’s store were not regarded as assessable income?
– If he suffered a total loss, and the cost of replacing his stock was greater than its value when he took out the insurance policy, an adjustment would have to be made.
Senator Laught directed attention to a novel feature in this bill - that which provides for the taxing of the goodwill of a business carried on in rented premises. If the goodwill of a business has a saleable value it can only be because the business is profitable; but all the profits of the business are taxed as they accrue, so that there can be no justification for taxing the goodwill also. It is certainly not right that a man who by hard work has established a profitable business should be taxed, not only on the return from that business, but also on the value of the goodwill that he has established. The Government should also reconsider the provision in the bill which imposes a penalty on the person who makes an error in the assessment of his own tax. It is often impossible to make an exact assessment.
– He is allowed a margin of 20 per cent. Surely that should be sufficient.
– It may not be. Who can accurately foresee the price of wool a few months ahead?
– The return is not made until the 31st March, and by that time it should be possible to know what income will be derived from the sale of wool and other primary products.
– I do not think so. The provision has been criticized by persons engaged in industry, and I give them credit for knowing what they ar? talking about.
– Primary producers would know their incomes.
– I am not certain that they would. Would the primary producers know by the end of March what the future price of wool and wheat would be? The Government has suggested that a taxpayer might make false assessments over a period of years. Surely the Taxation Branch, by examining his returns, would learn the true position, and if the taxpayer had defrauded the Treasury the penalties already provided in the act could be imposed.
– I welcome this bill because it will relieve the anxiety of many rural taxpayers who, during the last few months, suffered headaches when they received their assessments for the income received last year. Only a primary producer can realize how bad those headaches sometimes were. So heavy were the assessments in many instances that all incentive to produce was destroyed. Sometimes the provisional tax demanded was greater than the income for the current year. When I spoke on the budget last year, I foretold what would happen. I have been a primary producer myself, and I know how incomes from primary products can fluctuate. I remember when the price of wool fell from 40d. per lb. at 4 o’clock one afternoon to 18d. per lb. the following morning. I was not astonished, therefore, when the price of wool receded rapidly from 240d. per lb. to about half that figure, but under the income tax law provisional tax was assessed on the income derived in the year when the price of wool was at its peak. This bill honours the promise of the Prime Minister (Mr. Menzies) that an allowance of 40 per cent, will be made to wool-growers in an assessment of provisional tax.
The bill provides that a taxpayer may calculate and pay provisional tax based on his own estimate of his taxable income. The system should not be difficult to operate. Those who do not live among country people do not realize how absurd the present method of assessing provisional tax has been during this time of falling incomes. When I was in Melbourne recently, I was told about a small station-owner who, for many years, had been financed by a stock firm which had practically written him off as a hopeless case. He had not enough money to buy a motor “car, and drove a horse and buggy. However, when the price of wool rose he was soon able to buy a car, and eventually he became an asset to the Commissioner of Taxation. At one time he owed the firm of stock and station agents £18,000, but eventually he paid them off, although he never ran more than 4,000 sheep. However, because his income from wool declined, his provisional tax for this year was so great that he could not pay it, and had it not been for the 40 per cent, rebate, he would have been in dire trouble. The experience of that man was typical of the experiences of a great many primary producers.
It is proposed that the allowance in respect of farm buildings and plant shall be increased from 5 per cent, or per cent, to 20 per cent., and shall continue for five years. That concession will mean a great deal to farmers who erect dwellings for their employees and purchase machinery. Although the initial depreciation concession of 40 per cent, has been withdrawn, the provision in respect of farm buildings and plant will be some compensation. Unfortunately, many ‘ farmers had ordered machinery on the understanding that they would be allowed depreciation at’ the rate that previously obtained, and it was a great shock to them when they learned that the concession had been withdrawn.
It is important that there should be fi general reduction of taxation. I do not believe that’ taxes need to be as high as they are to-day, although I fully understand that taxes are high because so many people want something for nothing, and they want it from the Government. Taxation can be reduced only if we are able to persuade the people that production must be increased, either by employing improved methods, or by working harder. I agree with Senator Laught that the depreciation allowed annually on farm buildings should be increased. It is the same now as it has been for many years past.
I should like to obtain an assurance from the Minister in charge of the bill about the taxation of insurance money received for the loss of stock. It seems to me that such money should be taxed only if the person concerned, after having drawn the insurance money, sold hi.* farm and went out of production. Otherwise, he would have to use the money to replace the stock he had lost, in which case the money could not be regarded as income.
When I spoke on the budget, I expressed the opinion that the averaging system was the proper one for assessing the income of primary producers, and I have still to be persuaded otherwise. Many farmers are in difficulties to-day because the averaging system was abandoned. Evidence given before royal commissions that have inquired into methods of taxation has proved that the averaging system is the fairest for primary producers. I have yet to be persuaded that the averaging system is not the fairest method that could be applied to the taxation of primary producers, and I hope that there will be a return to it. As I have already stated, this bill is a step in the right direction. I trust that it will be followed by further taxation reductions after the budget has been introduced. I do not expect that great reductions of taxation will be made, but I believe, that the Government will provide as much incentive as possible to our primary producers to increase production. The best incentive is one that puts more money in the pocket. The sooner reductions of taxation are made the better.
Senator O’FLAHERTY (South Australia) [5.16 1 . - I approach a consideration of the bill with diffidence because of the excellent manner in which several honorable senators have addressed themselves to it this afternoon. Generally speaking, a bill to ameliorate the burden of the taxpayers of this country always meets with universal approval. I cannot recollect any honorable senator ever saying that he did not favour a reduction of taxation. However, I consider that the penalty clause of this bill is open to criticism. The taxpayers are to be given an opportunity to estimate the provisional tax that they should pay, and to substitute their estimate for the departmental figure. I agree -with the contention of Senator Piesse that, due to the vagaries of the prices of primary products, even after nine months of the financial year have elapsed, it is not always possible for a taxpayer to estimate with accuracy his probable income during the remaining three months of the .year. This observation applies particularly to wheat-farmers, despite the fact that they receive advances immediately after they put their wheat into the pool.
Let us consider the position of the woolgrowers. We know that there is to be a disbursement from the wool realization fund. But did the wool-growers know in
March - in which month they will have to lodge their provisional taxation estimates - that they would receive a disbursement during this financial year? I am fully aware that the Commissioner of Taxation is to be empowered to remit fines in such cases. However, I consider that the Government would be well advised to delete the penalty clause until it has had an opportunity to see how the proposed system works. While I do not presume to have a knowledge of the inner workings of the Taxation Branch, I think it is probable that this provision has been incorporated in the bill on the recommendation of departmental officers, in the light of their knowledge of what some taxpayers have done in the past. Doubtless the implication of the AttorneyGeneral’s (Senator Spicer) reference, to false declarations in connexion with payasyouearn taxation deductions was that seasonal workers are prone to make such declarations. We know that persons who submit false, declarations in relation’ to concessional deductions for dependants are liable to fines of from £2 to £500. Appropriate penalties have been provided for such offences in the light of the experience of departmental officers. But the self-assessment of provisional tax is an innovation. We do not yet know what may be the shortcomings of taxpayers in this respect. It may be found that some people take advantage of the concession in order to, in effect, obtain an interestfree loan of the amount of tax that they should pay. If the justification for the imposition of a penalty is proved, I would support the insertion of an appropriate provision in the legislation. Of course I realize that there will be difficulties associated with the administration of the scheme. Many individual taxpayers experience difficulty when furnishing their income tax returns.
I shall now address myself to the proposed 20 per cent, depreciation allowance. The Government claims that the effect of this deduction will be to write off the whole of a farmer’s expenditure on fencing, the provision of dams, &c, in five years. I point out that the practice in the past has been to calculate the percentage allowance for depreciation of the diminishing capital outlay. For instance, when the allowance was 10 per cent., in the first year a farmer would be allowed & deduction of £10 in respect of capital expenditure of £100. In the second year, the 10 per cent, would be calculated on £90, and in the third year it would be calculated on only £81. I should like the Minister to assure the Senate that the proposed 20 per cent, depreciation allowance will mean that the taxpayer will be allowed to claim one-fifth of his total capital expenditure as a deduction in respect of each of five consecutive years, thus enabling him to write off the whole of his outlay progressively. I understood the Minister to say during his secondreading speech that if a primary producer spent £6,000 of his income of £10,000 in a financial year on the development of his property, he would be liable to pay tax on only £4,000. 1 should like an assurance that the position is as I have stated.
I come now to the matter of natural increase of stock that has already been referred to by Senator Sheehan. Under the present system, a certain proportion of the natural increase is regarded as income. The taxpayer must elect the method of arriving at the natural increase, for taxation purposes. If a grazier commenced with 100 sheep, which produced 50 lambs in the year, and elected to pay tax on the increase of 50, that election would be applied in principle to subsequent years. The bill provides that tax shall be payable in respect of insurance recoveries on losses of live-stock. Proposed new section 26b (2.) provides -
Where a taxpayer receives an insurance recovery which is included in his assessable income of a year of income, he may elect that that assessable income shall be reduced by an amount equal to four-fifths of the insurance recovery.
I should like the Minister to assure me that the taxpayer’s assessable income may also be reduced by an amount equal to the value of the normal natural increase in relation to the stock destroyed, because insurance recovery provides only for the replacement of the stock.
Statements have been made by certain persons, including Ministers of the Crown, regarding the repayment of excess tax collections, which may lead to a great deal of misunderstanding. A considerable time usually elapses before taxpayers who have overpaid their tax commitments obtain refunds of the overpayments. This disability exists in relation to both current and provisional tax. In some instances overpayments have been credited against assessment of tax for the following year and the taxpayers have not received cash reimbursements. Because of the misleading statements that have been made on the subject, primary producers and, to a lesser degree, business people, may be under the impression that they can obtain reimbursement of the overpayments immediately upon application to the Commissioner of Taxation. That is not so. Long delays frequently occur in the checking of claims and if, when the right to a refund of tax has been established, the taxpayer has incurred a further liability to the Commissioner of Taxation in respect of income for the following year, the amount overpaid is merely credited against the assessment for that year. At the earliest, refunds have been made from six to nine mouths after the date upon which they should have become payable. Similar difficulty is experienced by pay-as-you-earn taxpayers who usually receive refunds of overpayments of tax as a kind of Christmasbox.
The amendments of the principal act proposed in this bill will enable tax agents to reap a veritable harvest of fees. The man in the streets - even the average member of this Senate - who examines this bill and the provisions of the principal act, finds it almost impossible to understand what is required of the taxpayer. Tax agents throughout Australia, who have made a special study of our taxation laws, realize what a harvest of fees they will glean from the provisions of this measure. Under the wool sales deduction legislation wool-growers have had to pay 20 per cent, of the full amount of the proceeds of the sale of their wool against their income tax .assessment for the year. That deduction is nothing but robbery. Very few woolgrowers have obtained cash reimbursements for overpayments of tax. After this legislation has been passed overpayments of tax will invariably be credited against the tax for the following income year.
I was under the impression that the Government was still examining the possibility of the simplification of tax returns and assessments. The improvements that have been effected so far have been worthwhile, and I give the Government credit for having made them. The provisions of this measure will, unfortunately, make the preparation of tax returns an even more complex and complicated task than it has been in the past, because returns must be furnished to cover provisional as well as current income. That proposal is also welcomed by tax agents, who spp in it a possibility of adding greatly to their incomes. We should endeavour to simplify returns as much as possible so that taxpayers will not need to employ agents to compile their returns. Although I may be twitted for being interested in that line of business, I do not like to think that it is necessary for taxpayers to seek the assistance of experts to prepare returns for submission to the Commissioner of Taxation. Many taxpayers already have to employ accountants to keep their accounts in accordance with the provisions of the legislation.
It is not my intention to delay the passage of the bill. If it is possible for the Government to reduce the incidence of taxes on the people in the near future, I trust that its first move will be to abolish the iniquitous sales tax and, later, when opportunity offers, that it will make substantial reductions of tax rates.
– Taxation is causing greater anxiety among the people as each year goes by. Senator O’flaherty drove himself into such a state of mental desperation when he spoke on the measure that he even commiserated with those taxpayers who have to engage the services of tax agents to prepare their returns. The honorable senator conveniently overlooked the mountainous load of taxes that was imposed by the Chifley Government and which still plagues the people. Having regard to the load of taxes that the National Parliament has placed upon the taxpayers of this country, that an Opposition senator should complain of the fee charged by a tax. agent for the preparation of a taxpayer’s return shows how completely out of focus are the views of Labour senators on this important matter.
I listened with attention to the speech made by Senator Arnold, who opened the debate on this bill on behalf of the Opposition this afternoon. The honorable senator, who speaks with some experience of these matters, should realize what is involved in the income tax system as applied by a socialist State. It is, of course, a fundamental conception of the socialist State that its revenues should be raised from taxes in order to mak: available money for social services and other commitments. When this country was engaged in total war the government of the day took the opportunity - I shall not say exploited the opportunity, although I believe that that is what I really mean - to impose upon the public of Australia the system of taxation known as the pay-as-you-earn system. But those who were responsible for the establishment of that system to-day pretend to have sympathy for its victims. The pay-as-you-earn system, having been established in 1942, it is idle for any government that is wrestling with the problem of raising revenue in 1952 to abandon the system without causing serious dislocation to the fiscal arrangements of the Commonwealth. Upon the expectation of the year’s revenue a government makes all sorts of national commitments. No government that has any degree of responsibility could cheerfully approach the problem of taxation reform and say, “ Three years or ten years hence we shall change the present system upon which income tax is levied “, because the fulfilment of such a promise would inevitably result in the dislocation of the revenues of the Commonwealth.
It will be recalled that in 1946 collections of income tax reached an all-time high. In that year, when the rates of taxes reached crushing levels, the Liberal party, of which I rejoice to be a member, waged a campaign against the tremendous amount of taxation that was being levied. Due to the drive and energy displayed by the present Prime Minister (Mr. Menzies), who was then Leader of the Opposition, the government of the day was forced to reduce taxes in the succeeding three years by approximately 40 per cent. Only a very irresponsible person would fail to realize that budgets presented by governments are dependent upon the circumstances that exist from year to year. Last year the present Government faced up to its responsibilities and decided that income tax levied on all scales of income should be increased by 10 per cent. The reason for that increase is a staggering one. The budget introduced by the Treasurer (Sir Arthur Fadden) last year provided for the payment to the States of a total of £161,000,000, representing reimbursement of income tax due to the States under the uniform tax system, special grants and the like. The Government called upon the States to keep at a moderate and responsible level their public works programmes and established a precedent by undertaking to provide, in addition to the £161,000,000 to which I have referred, between £150,000,000 and £160,000,000 to meet their works requirements. Those who complain of the taxes imposed by the Menzies Government in last year’s budget must remember that of the total collections under the budget proposals an amount of £300,000,000 will be returned directly to the States.
Sitting suspended from 5.45 to 8 p.m.
.- Senator “Wright stated, before the suspension of the sitting, that the Chifley Government had left behind it a mountainous pile of taxes. I notice that the honorable senator is not in the chamber at the moment, but it is customary for him to run away after making a misstatement. It is true that taxation was at a high level during the war but at that time Australia was fighting for its existence. During the post-war years, however, the Chifley Government, on five successive occasions, reduced taxation by a total amount of £280,000,000. This Government, however, has increased taxation by a total of £472,000,000. Yet the honorable senator charges the Australian Labour party with leaving behind a mountainous burden of taxes. It is obvious that he has never studied the position.
When the Attorney-General (Senator Spicer) is replying to the debate, I should like him to give me some information concerning the position of insurance in respect of stock which is lost. I wish to know whether, if a dairy farmer loses the whole of his herd because of drought, disease, floods or some other calamity, he is permitted to replace such stock before he is obliged to pay tax. If he is to be taxed on the amount of insurance that is paid, it seems to me that that would be entirely wrong. In my opinion, the stock should be replaced before the payment of tax is considered. Most farmers would not insure their stock for their total value. Indeed, it is doubtful whether insurance companies would insure them for their full value. A farmer who lost his stock would, therefore, be obliged to outlay a sum of money over and above the insurance payment that he received.
This Government appeals to primary producers for increased production, but at the same time, by means of taxes, it harasses them. The taxation measures of the Government will ultimately kill the incentive to produce and will result in decreased production. The Chifley Government permitted a deductible allowance in respect of depreciation at the rate of 40 per cent, in the first year, 40 per cent, in the second year, and 20 per cent, in the third year. This Government proposes to do away with that method and to spread the deduction over five years, at the rate of 20 per cent, for each year. Apparently, that method represents the Government’s idea of relieving farmers of taxes. I should like honorable senators opposite to explain how that proposal will benefit farmers who are endeavouring to increase production. The Government, in effect, has said, “ A little more taxation will not hurt you “, despite the fact that, since it came to office, it has increased taxes by £472,000,000. In my opinion, the proposed depreciation provision is definitely wrong, and I am opposed to it.
– Will the honorable senator oppose it?
– I am certainly opposed to it. If we seek increased primary production, we should not introduce legislation which will tend to reduce such production. That will be the effect of this provision.
– The bill provides for a most valuable deduction for depreciation.
– I am aware of that fact. I merely point out to the honorable senator that the Labour Government permitted a deduction of 40 per cent, in the first year, 40 per cent, in the second year, and 20 per cent, in the third year, whereas this Government proposes to spread the deduction over five years.
– The honorable senator does not know what he is talking about.
– Order! Other honorable senators will have an opportunity to speak during the debate.
– The Government apparently believes that by permitting farmers to assess their own provisional tax it is introducing a procedure that will be of great benefit to them. It has been said that the making of such estimates will be optional, but I point out that during his second-reading speech, the Attorney-General stated that if the assessment of a primary producer falls short of his true income by more than 20 per cent, he will be obliged to complete another assessment form and forward it to the Taxation Branch. In other words, it will be compulsory for him to do so.
– That is not so.
– The secondreading speech makes it plain that it will be compulsory for the farmer to do so. It will be an obligation upon him. If he complies with that obligation and makes an error in his estimate, he will be penalized.
– That is entirely wrong.
– It is not wrong. Obviously, Senator Gorton has not read the explanatory notes issued with the bill and did not listen attentively to the second-reading speech. If he had done so, he would not say that my statement is wrong.
– It must be an error of more than 20 per cent.
– We will take the word of the honorable senator and accept the figure of 20 per cent. It seems to me that it would be very easy for a farmer, in endeavouring to assess his income, to make an honest mistake of more than 20 per cent. It is only necessary to recall the increase of the price of wool during the last few years to appreciate the force of that statement. Does Senator Gorton suggest that any Australian wool-grower was aware that, within a few months, the price of wool would increase by 100 per cent.? Provisional tax is assessed on the current year.
– No, it is not.
– If the honorable senator contends that it must be assessed on the income of the next year, how does he suggest that it is possible to look ahead for twelve months and say, for instance, what the price of wool will be then? However, whether it is estimated on the income of the current year or the following year, I assert that before the price of wool rose so steeply, very few primary producers could have expected such an increase. Because of their failure to foresee that increase, they could have been SO per cent, out in their estimates of income. Yet the Government proposes to allow a margin of error of only 20 per cent.
Of course, there are many primary producers besides those who produce wool. A wheat-farmer, for instance, could overestimate his income by at least 50 per cent, if a drought occurred after his estimate had been made.. The same remark applies to potato-growers.. The only reasonable method of assessing income is to average it over a number of years. Drought, floods or disease may wipe out the whole of his crop or his stock-
– Would not he know that?
– I am sure that the Minister for Trade and Customs (Senator O’sullivan) would not know it if he were a farmer, if the honorable senator owned a race-horse or a milking cow, he could not forecast that it would contract a disease. If a farmer knew that his crop would contract a disease and would be wiped out, obviously he would not plant it.
– Nine months of the year would have gone by then!
– My point is that an over-estimate or under-estimate of income may be due to an honest mistake. 1 remind honorable senators of the speech that was made during this debate by Senator Pearson, in which he referred to the averaging system. Primary producers became accustomed to that system and were happy with it. But the Government was not happy with the averaging system and wiped it out in spite of protests by some of its own supporters.
– The averaging system has not been abandoned.
– Its application has been considerably restricted. Now, the primary producer is being asked to assess his own tax, and if he makes a mistake he is to be penalized. The Government’s reply to this charge is that the penalties will not amount to any more than an interest charge of 4 per cent, or 5 per cent. Unfortunately this is to be one way traffic only. If a taxpayer makes an overpayment of his tax, does he receive interest from the taxation authorities on the amount that he has overpaid ? He does not. Has any honorable senator ever been paid interest on any refund that he has received from the Commissioner of Taxation? Honorable senators opposite remain silent. Obviously, not one of them has ever received a penny piece in interest. The proposal is completely lopsided. The advantage is all on the Government’s side.
– Why did the Labour Government not provide for interest payments on taxation refunds ?
– Even if the Labour Government did not do it, that does not justify this Government’s failure. Two wrongs do not make a right. This Government is making the position worse by providing for the imposition of penalties for the under payment of tax.
– If I am wrong, the statements of honorable senators opposite in the course of this debate must have been wrong because I am basing my argument on their own admission. I say that I am not wrong on this particular point. I shall give an illustration. Owing to misfortunes during one year, I had to collect a substantial refund from the Taxation Branch at the end of the year. My money had been in the hands of the authorities for many months. I had to go to the Commissioner of Taxation and tell him that he would be doing me a great favour if he could let me have my money. I said that I did not believe in lending money to any government free of interest when I myself was paying interest on money. That was my own personal experience of this one way traffic. It is true that the imposition of penalties will be left to the discretion of the Commissioner, nevertheless there is a risk that unjust penalties will be imposed upon taxpayers who have made honest mistakes. The present difficulties could be overcome by removing the provision for the imposition of penalties, and by restoring the averaging system in full. The same revenue would ultimately be obtained, and the farmers would not be harassed as they are to-day by a Government which in the past has posed as the champion of free enterprise. Almost every piece of rural legislation that has been introduced by this Government has imposed some new controls or restraints upon the farming community.
If primary producers are to comply with the self-assessment provisions of this legislation, they will have to employ help to do their clerical work. Otherwise they will spend most of their time doing clerical work and be able to devote only their spare moments to farming. Incidentally, any expenditure by farmers on clerical labour will mean a loss to the taxation authorities because such expenditure will be deductible for taxation purposes. The Labour party believes that the averaging system should be restored in its entirety, and that the provisions of this measure in relation to the impositions of penalties should be removed. When the bill reaches the committee stage we shall have something further to say about those matters.
– I support the bill, and I propose to deal first with certain statements that have been made by Senator Aylett, whose speech on this measure was most worthy of him. Obviously he has no true conception of the depreciation allowance provisions introduced by the Chifley Government. He said that the Labour legislation had provided for a depreciation allowance of 40 per cent, in the first year. 40 per cent, in the second year, and 20 per cent, in the third year. I was a farmer, and I certainly was not given the benefit of depreciation allowances at that rate. The measure to which the honorable senator has referred allowed 40 per cent, in the first year, and then only the ordinary rates in succeeding years. In other words, Labour’s legislation was not even as generous as that before us. Senator Aylett also told us how unpopular this Government was. He said that our taxing measures were much more severe than those of the Chifley Government.
– Tax revenue has increased by £472,000,000 !
– Yes, because of higher incomes. No primary producer hopes for a return of the days of small incomes. Apparently Senator Aylett believes that farmers have very short memories. I have some comparative figures that will be of interest to him. A man, without dependants, who receives an income of £500 a year at present, pays £39 9s. in income tax, whereas five or six years ago, he would have paid £136. A taxpayer without dependants who receives £1,000 a year, pays £14S 10s. in tax to-day; under Labour’s administration a few years ago, his tax commitment would have been £355. Those figures hardly support the argument of honorable senators opposite that the people of this country are paying increased taxes. Carrying the comparison a little further, income tax payable to-day on an income of £2,000 received by a man without dependants is £515, compared with £951 under the Labour Government’s tax legislation. Income tax payable on £5,000 has decreased from £3,530 five or six years ago, to £2,297. 1 defy any honorable senator opposite to contradict those figures. I believe in being sincere with the Australian electors, and I have no doubt that if members of the Labour party continue to talk so much tripe in this chamber and in the House of Representatives, the people of Australia will continue to elect sincere Liberal governments.
This bill provides for a depreciation allowance of 20 per cent, a year for five years. In other words, the cost of plant, machinery and buildings will be written off at the end of five years. Under Labour’s legislation, the writing off process took seven or eight years. This ‘Government is fully conscious of the needs of primary producers if they are to increase the production of essential foodstuffs. The special depreciation allowance will apply not only to machinery, plant and buildings but also to homes built for farm employees. That is something that no Labour government ever thought of. Labour’s idea was apparently that the farmer should build shanties at his own expense for his employees. How can honorable senators opposite and their colleagues in the House of Representatives claim to represent the interests of the workers when they have been so neglectful of the needs of farm employees? Senator Aylett, of whom we are all so proud, and who, we hope, will be back with us again some day, claimed that this Government had abolished the averaging system. Let Us examine the facts so that the man on .the land may know the true position. Is Senator Aylett aware that 80 per cent, of primary producers are still being assessed under the averaging system? He is not aware of that. Is he aware that a further 8 per cent, of farmers benefit from the application of a special averaging allowance to the first £4,000 of their income?
When the wool sales deduction legislation was introduced into this chamber Senator Aylett cried in sympathy for the poor farmer who would have to pay the 20 per cent, deduction - the man with about 50 bales of wool who would earn about £10,000 a year. He said that it was necessary for the Opposition to protect this man because the Government proposed to fleece him. When Opposition senators went into the electorates and told that story they received a good hearing especially in Western Australia until the Government explained the effect of its legislation. Now wool-growers consider this a good measure because it has resulted in money being available for the payment of their current income tax liabilities. I believe that even the Labour party now regard it as a good measure, and, in fact, that they knew it was a good measure before. I understand that only 5 per cent, of primary producers are not benefiting from the averaging system as it has applied since it was introduced by the Labour Government in 1944. Opposition senators have cried for the man with an income of £14,000 a year or more. They have asked why the Government has been hurting such people. The Government has had to tax these people because it is responsible for the defence of the country which will cost £180,000,000 this year. That is nearly as much as the Labour Government spent on defence during the worst period of the war. I do not like the Labour party very much. I do not think that its members are sincere.
– I believe that the honorable senator made application to join the Labour party on one occasion.
– Yes. I went to a meeting of the Labour party on one occasion and they addressed everybody aa “ comrade “, as they do in Russia. I got out of that meeting as quickly as [ could and did not go back to another. [ did not like the “ comrade “ business. This great Australian Labour party which stands for greater production has been in office for a considerable period in the New South Wales Parliament. What has it achieved? Although New South Wales is the greatest wheatproducing State iri the Commonwealth, it has had to purchase 8,000,000 bushels of wheat a year. It has had to buy 300,000 cattle a year from other States in order to feed its population. It has had to purchase potatoes, onions, and butter. What sort of a Labour government has that State? I do not know. It seems to me that all Labour governments are the same. I have not known of a good one. That is another reason why I did not join the Labour party.
I fully support the bill before the House as a measure designed to increase food production. However, the Government should pay some attention to the fishing industries of the Commonwealth. In Western Australia, the crayfish industry” produces £1,000,000 worth of crayfish a year. Other large fishing industries also contribute to our food production. This bill contains no provision for a special depreciation allowance for the fishing - industry. The more fish we catch in Australia the more food we shall have available for export to England. The people who are engaged in the fishing industry have to expend a considerable amount of money in equipping fishing vessels of from 50 to 60 feet, which cost between £8,000 and £10,000. Those people will not be able to maintain those vessels unless the special depreciation allowance which is available to other food producers is extended to them. Therefore, I recommend that the Government should extend this allowance to the fishing industry.
– What will the workers receive from the allowance? .
– The workers will receive good jobs. Most of the fishing industry is conducted on a share basis. A few men purchase a boat. They work for a while and then return to port and sell their- fish. Very few men work as employees in the fishing industry . apart from the canners on the shore.
– What is the method of distribution on the share basis?
– One person usually supplies the boat and is entitled to a third of its earnings. He has to pay the running expenses of the boat. About four other men participate in the venture and they receive two-thirds of its proceeds. Those men, who do not invest any money, can earn £1,500 and £2,000 a year by fishing for not much more than six months of the year. In order to increase the production of food, the Government must encourage every foodproducing industry, including the fishing industry. In addition to the 20 per cent, depreciation allowance, farmers are permitted to deduct from their taxable incomes the amount spent on dams and water reticulation systems. Consequently the farmers realize that this Government has accepted its responsibilities and will enable them to achieve the rate of production that is essential to the economy of this country.
– in reply - One or two matters have been raised in the course of this debate to which I should like to refer. Some misunderstanding of the nature of the Government’s proposals in regard to insurance recoveries was displayed by Senator Sheehan and Senator Aylett. The present act requires the inclusion in the taxpayer’s income tax return of that portion of his insurance recoveries which can properly be described as income. The act states that his assessable income includes any amount received by way of insurance or indemnity or in respect of any loss of stock which would have been taken into account in computing taxable income. In other words, when the producer receives insurance in respect of his trading stock, he is treated in much the same way as if he had disposed of that stock. As a result of a fire or other misfortune, his trading stock may pass from his hands. In return for it he receives the amount of his insurance. The method by which his income is calculated is exactly the same as the method that is, adopted for the purpose of determining what would be his income if in ‘that particular year he had disposed of the whole of his trading stock.
– How is he to replace his stock?
– Out of the insurance money that he collects, but the total amount that he receives by way of insurance does not necessarily represent income. That is made clear in section 26j of the act. The effect of the present provision is that the portion of the insurance money that is to be treated as income is taken into account for income tax purposes in a single year. Honorable senators will appreciate that if a man loses the whole of his trading stock the amount involved might be very considerable and, when rates of tax are high, as at present, the taxpayer might be subjected to a very heavy impost. We now. say that, seeing that such a situation arises because of a misfortune suffered by the taxpayer, it is only fair that he, haying obtained his insurance money, should be able to divide it over a period of years for income tax purposes, and thus be relieved of the heavy burden of taxation that would fall on him if he had to include the entire amount in one year’s income. The law has not been altered insofar as it requires insurance recoveries to be shown as income for taxation purposes; but the amendment provides that the whole amount recovered need not all be taken into account in the one year, and this amendment will afford the taxpayer very considerable relief.
– Is not a trader’s stock a capital asset?
– No, it is trading stock. The honorable senator is confusing the loss of trading stock with the loss of a home. When a man’s home is destroyed he loses a capital asset.
If a business man disposes of the whole of his stock, and makes a profit on the transaction, are we to assume that no part of the receipts shall be subject to income tax? Of course not. In that case he disposes of his stock voluntarily at a profit. If he loses his stock by fire, he disposes of it involuntarily, and if when he collects his’ insurance money he makes a profit on the transaction, there is no reason why that profit should not be subject to income tax.
– Suppose he suffers a loss on the transaction.
– If it can be shown by calculation that he has suffered a loss he will not be subject to tax. Whether or not he suffered a loss would depend on the way in which he had conducted his business over a period of years.
I was asked whether the amount of 20 per cent, depreciation would be deductible in ea.ch of the five years. The answer is that the amount of depreciation allowable in each of the five years will be one-fifth of the amount expended on the item under consideration. Senator Aylett seems to entertain some strange ideas on the subject of depreciation. He tried to indicate to the electors, I think, that the munificent Labour Government, which, when it was in office, was so much concerned for the welfare of the farmers, had allowed 40 per cent, depreciation over a period of three years. That is nonsense. There was a special allowance of 40 per cent, for depreciation in the first year, and for the rest of the time the ordinary rate of depreciation applied. The proposal put forward by this Government is much more favorable to the farmer, in that he will be entitled to an allowance of 20 per cent, in each, of the five years after the installation of the items under consideration. This concession is being made at a time when it has become obvious that every effort must be made to increase the production of food, and it is difficult to imagine a better way to stimulate food production than to encourage farmers, by a concession of this kind, to install plant and equipment that will help them to produce more.
– “What will the farm labourers get out of this provision?
– They will get decent houses to live in, I hope, something which the Labour Government never thought about. Senator Arnold discussed provisional tax, and the provisions in this bill which are designed to allow some measure of self-assessment. The provisional tax system represents an attempt to get as near as possible to a payasyouea rn income tax system. Wage and salary earners are on a true pay-as-you-earn basis. As they receive their pay from week to week or month to month deductions are made by the employers, and passed on to the Commissioner of Taxation from the 1st July of each year until the 30th June of the following year. It was intended that the provisional tax system should put other taxpayers on a pay-as-you-earn basis insofar as that is possible. It is necessary that honorable senators should understand that point. The system is not perfect because, unfortunately, in the case of persons engaged in their own businesses or professions it is not possible to deduct from them week by week or month by month as they earn their incomes the amounts which they should contribute as income tax. I was a member of the committee which, evolved the provisional tax system. The best system that could be devised for persons who are self-employed was to provide that they should be taxed in respect of their current year’s income an amount calculated on the basis that their current year’s income would be the same as their income ‘for the previous year. The tax that they are called upon to pay under that system is known as a provisional tax, but it is a tax on the current year’s income, and it corresponds to the weekly or monthly contributions made by the salary, or wage earner under the payasyouearn system. It is admitted, of course, that because we must rely for the purposes of calculation on the previous year’s income it is not possible to collect from a taxpayer in every instance the precise amount of tax which he should pay on his current year’s income. If the current year’s income is greater than the previous year’s income, the taxpayer will pay less in provisional tax than the amount which he will ultimately be called upon to pay on his current year’s income, and vice versa. That has been demonstrated during this period of great fluctuations of income, particularly among woolgrowers. That is why the wool sales deduction scheme, which was introduced by this Government when wool-growers’ incomes were rising, was of real benefit to them as they now realize because under that system, there was collected at the source 20 per cent, of the tax on their current year’s income, and the amount which they were called upon to pay in the following year, when the income they had earned was finally ascertained, was correspondingly reduced.
The Government is attempting in this bill to bring the system of provisional tax still more closely into line with the. payasyouearn system. The taxpayer does not usually get his assessment until eight or nine months of the financial year have elapsed, and he is not forced to make any of his calculations until the. 31st March, or until nine months of the year have gone by. If at that time his income for the year is less than his income for the previous year, we give him the option of putting in an assessment to the Commissioner of Taxation in which he makes it clear to the Commissioner that, although he is being charged provisional tax on the basis of his higher income of last year, his income for the current year has come down, and his provisional tax should therefore be reduced. If he is a wise man, in those circumstances, he will make a self-assessment and forward to the Commissioner a lower amount of tax than he has been called upon in the assessment to pay. There is no penalty associated with that side of the matter. It will be to the interest of a man whose income has come down to take advantage of this provision, and thereby reduce the immediate liability that he is called upon to meet. These things cannot be all one way. The other side of the picture is seen when a man’s income has increased. The provisional tax that the taxpayer is called upon to pay will be then insufficient to meet his tax for the then current income. In that case the Government says to him, in effect, “We will not worry about a 20 per cent. fluctuation “. But when we reach the circumstance that the taxpayer’s income is going to be more than 20 per cent. above the previous year’s income, and his provisional tax will be insufficient to meet his tax liability, it is up to him to send in a. self-assessment indicating to the Commissioner that the provisional tax upon the basis of his previous year’s income will not be sufficient to. meet his tax for that year. It is only in the set of circumstances where there is a departure upwards of more than 20 per cent. that any element of penalty arises. Labour brought into operation in this country rhe pay-as-you-earn system of taxation for the salary and wage earners. They have to start making payments in the first week of the financial year towards rheir current tax. Surely it cannot be that the Labour party, which supports that proposition, opposes the proposition that when nine months of the year have expired and it is possible for a man to make a reasonable calculation of his income for the year, and it is reasonably clear to him that his income is up 20 per cent. or more on the previous year, he should not make that calculation. Labour apparently says, “ Do not touch that man. Do not collect from him this year the income tax that he should pay. Let him retain the money until the following year. Let him have it interest-free. Do not put him on the same basis as the wage and salary earner. The only way to get reasonably accurate returns from people whose income has gone up by more than 20 per cent. is to impose a penalty for failure to do so. It is only to be expected that thousands of people will take the rather short-sighted view, but at any rate a view which I think, would be quite common in the community : “ If I do not have to pay the additional tax until next year, the money will be better in my pocket than in the Treasury”. I suggest that that is a perfectly reasonable proposition.
– Nobody is opposing that.
– The Opposition is opposing the only thing that is going to make it effective.
– The penalty?
– Yes. As the honorable senator reminds me, we talk about it as a penalty, but it does not amount to anything more than 4 per cent. on the tax which the man will escape unless he has put in a proper self-assessment. There is sufficient protection provided in the bill where his calculation proves to be inaccurate because of circumstances of which he could not have known at the time that he was called upon to lodge his self-assessment. I suggest that that is a real . advance on the pay-as-you-earn system introduced by Labour in 1944, and that, given a real opportunity to operate, it will soon be recognized by the taxpayers of this community as a means of relieving them of some of the burden of the present system of provisional tax. It will ensure that they will, in fact, pay from year to year as nearly as may be the tax appropriate to their current income.
Question resolved in the affirmative.
Bill read a second time.
Clauses 1 and 2 agreed to.
Clause 3 (Insurance recoveries on losses of live-stock).
– This clause is a very wise provision. It will enable the taxpayer who has been the victim of loss, in respect of which he has been prudent enough to insure, to include only one-fifth of the insurance recovery as income in the financial year, instead of the whole of it, as was required by the Chifley Government’s legislation. Let us suppose that a taxpayer received insurance money of say, £5,000. Under the 1947 legislation the whole of that amount would be taxable income in his hands. Of course everybody who has a modicum of understanding of income tax appreciates that if that man spent £6,000 t;o replace his stock, he would have no tax to pay because the net effect of the transaction would be that he had unfortunately suffered loss. But it is not to meet such a case that this clause has been designed. It is to give that unfortunate taxpayer relief where he has not been able to buy suitable replacement stock in the income year in which he received the insurance recovery. Under the existing legislation, which was enacted by a Labour government, he has to pay tax on the whole amount of the insurance recovery. This Government is to be commended for introducing a measure to give such a taxpayer relief to the “extent of excluding fourfifths of the insurance recovery in that financial year. I emphasize that situation, in view of the remarks of honorable senators opposite. I consider that the bill merits the most emphatic support.
I shall now deal with an allied subject, upon which I ask the Attorney-General (Senator Spicer) to supply some information to the committee. I refer to the case of an uninsured primary producer who suffers loss. Provision should be made to meet the circumstances of such a man if he is forced to sell his live-stock because the destruction by fire, flood, or drought, of his improvements or pastures, prevents him from carrying on his agricultural pursuits. At such a sale he would probably realize a greater amount than is included in his income tax schedule. Let
U3 assume that the sale realized £5,800, which he put in the bank on the 30th April, and that a favorable opportunity f:o buy replacement stock did not occur until the 30th September. The victim of that emergency disposal would be liable to account for the realization sale, and if he did not replace his stock by the 30th June the Commissioner of Taxation would say, “ T am sorry, but you will have to account to me “. That man would then be taxed on the £5,800. On the 30th September, when the opportunity presented for kim to replace his stock, the man would say, “Out of that £5,800 I have paid taxes of, say, £2,000: how :un I going to continue my business? The bank will have to sec me through “. That is the problem that vexes my mind in this situation. I have already mentioned it to the Treasurer (Sir Arthur Fadden), and the only reason why I am content to leave the matter in this position is that the right honorable gentleman assured me that this particular problem is now the subject of consideration by the Commonwealth Committee on Taxation which this Government appointed immediately after coming to office. It will be realized, of course, that to pen a provision designed to meet the uninsured victim of drought, fire, or other loss is a matter of considerable complexity. When we reluctantly impose taxation, it is our duty to see that, it is imposed in terms that will apply to all sections of the tax-paying community equally. I trust that the expert committee will bring to bear upon the problem such experience that a provision may be framed appropriate to the situation that I have outlined. The provisions of this clause will greatly improve the position as we find it. It is imperative that a taxpayer who has recovered insurance for the loss of stock should not have to account for the whole of it for the purpose of income tax but should be entitled to spread it over a period of five years.
– The provisions of this clause pose one of the questions that I raised during the second-reading debate this afternoon. The Attorney-General (Senator Spicer) should inform Senator Wright that he was a member of the committee that made recommendations that were accepted by the Chifley Government in respect of these matters.
– Oh, no !
– A farmer may possess stock worth £5,000 at the beginning, of the year. During the 3rear the value of his stock increases by £1,000 and he is assessed on the accretion in value of £1,000. If such a farmer insured his stock at the beginning of the year for £6,000 and lost it as the result of fire or some other hazard and recovered £6,000 from the insurance company, which he utilized in full for the restocking of his property, would he be assessed on the additional £1,000 or on the whole amount received from the insurance company?
– The receipt from the insurance company would he totally offset by expenditure for the purchase of new stock.
– The honorable senator’s statement is in complete variance with another statement that he made only a few minutes ago. The legal members of this chamber say one thing one minute and say the very opposite a minute later. Obviously, they do not know whether they are going or coming. I assume that the expenditure for restocking would be offset against the receipt from the insurance company. That principle is applied under the existing legislation. In this measure the Government has provided that if a farmer has been recouped by payment of insurance for the loss of stock and he does not spend the whole of the amount of the insurance recovery for the restocking of his property, one-fifth of the unexpended balance shall be regarded as income for income tax purposes. I do not want farmers to be misled into believing that insurance recovered for the loss of stock is completely exempt from tax. I should like the Attorney-General to state specifically whether in the event of the total loss of stock by fire, drought or some other happening, the money received by the farmer in respect of such loss will or will not be taxable under this legislation.
– Owing to an unfortunate misunderstanding on my part I lost my opportunity to speak during the secondreading debate on this bill, and accordingly I propose to make some comments on this clause. A provision which gives to the Commissioner of Taxation power to levy tax on insurance recoveries in respect of the loss of stock is, in my opinion, most iniquitous.
– Such a provision is contained not in this measure, but in the principal act.
– Proposed new section 26b (1.) applies to amounts recovered “ by way of insurance for or in respect of a loss of live-stock “. Let us consider the case of the man whose sheep have been destroyed by fire. Having been fortunate enough to insure them, he recovered their insured value from the insurance company. In my 25 or 30 years’ experience as a farmer I have not known of an instance in which the amount of insurance recovered for stock losses has exceeded the cost of stock replacement. The point I emphasize is that to render the proceeds of insurance recoveries liable to income tax is iniquitous. The recovery of insurance in respect of a loss of stock cannot by any means be regarded as in the same category as a sale of stock. The loss of stock represents an unfortunate disposal of capital which must be replaced. In the case of a sheep-farmer, if the lost stock is not replaced, the earning capacity of the farmer is correspondingly diminished, because he loses not only the progeny, but also the wool from his lost sheep. He must use the proceeds of the insurance recovery to replace them. As Senator Wright has said, if he is unable to expend the money received from the insurance company before the 30th June, one-fifth of the unexpended portion is regarded as income for the year. Such moneys should be regarded as being kept in trust for the replacement of stock, and should be exempt from income tax. During periods of drought sheep-farmers must decide whether to sell their sheep for what they can get for them, or retain them in the hope that rain will fall. If they decide to sell they must be prepared to accept a reduced price. They would be very fortunate to obtain 70 per cent, of normal market values. Indeed, many farmers have accepted as little as 45 per cent, of the ordinary market value in such circumstances. The proceeds of the sale must be used to replace the stock. Ordinarily speaking, in Western Australia, a farmer could not profitably replace his stock before the 30th June. He must wait for a favorable opportunity to obtain sheep of comparable value. Generally, he has to find additional money for that purpose. To levy tax in respect of the amount which a farmer receives from such a sale, or from insurance for stock lost through fire, drought or other hazards, is ridiculous.
I accept the bill because it grants a certain measure of relief in that only one-fifth of the money received as insurance recovery is liable to tax. If the whole of the money is not expended in subsequent years, the farmer must include as income one-fifth of the unexpended balance in each succeeding income year. I contend that it is absolutely wrong to levy tax on moneys received by way of insurance for the loss of stock through fire or drought or for compulsory sale. Though I shall support the clause solely because it grants a certain measure of relief, I am by no means satisfied with it.
– I am in complete agreement with Senator Seward on this matter. Two conflicting viewpoints have been expressed by the legal members on the Government side in connexion with this matter. In my second-reading speech I endeavoured to get the Attorney-General (Senator ‘Spicer) to clarify the position and I have since tried by interjection to encourage him to deal with it. He said quite clearly that the whole of the amount received by way of insurance is taxable, though not necessarily in the one income year.
– Such a provision is included in the 1947 legislation.
– Unfortunately, the Attorney-General does not agree with the honorable senator. If the AttorneyGeneral gave an explanation similar to that given by Senator Wright, I should have no doubts about the matter. Unfortunately, he did not do so.
The clause deals with live-stock, but the Attorney-General in his second-reading speech referred to trading stock. No reference to trading stock is made in the bill. I want to know definitely whether, if a farmer used the whole of the proceeds of an insurance recovery before the end of the financial year to replace stock lost through one circumstance or another, he would be liable to the payment of income tax in respect of the amount so received. Senator Wright has said that the whole amount would not be liable to tax.
– The honorable senator has got the story all wrong.
– Not at all. If the whole of the insurance recovery is liable to tax, the farmer would virtually be taxed on money used for. the restocking of his property. Whether the provisions of the principal act are right or wrong;, two wrongs do not make a right.
– Apparently they do. in this instance.
– The matter should be given serious consideration by the Government.
– I am sorry to have to correct Senator Aylett by saying that, for the purposes of income taxation livestock is trading stock. In this bill mention is made of live-stock and not of trading stock because we propose to extend the benefit to live-stock. My references to trading stock for the purpose of illustrating this problem were quite in accord with the provisions of the Income Tax Assessment Act. It is a mistake to proceed on the assumption that, under the present legislation, the whole of the proceeds which a man receives by way of insurance recoveries are taxable. They are taken into account, in the same way as receipts from sales would be taken into account for the purpose of calculating profits. I shall attempt a simple illustration. Imagine that a man starts off with an opening stock of £5,000 and that a fire occurs. He loses the whole of his stock. He may be lucky enough to receive £6,000 in insurance, and he then proceeds to use the whole of it to purchase replacement stock. He will then show purchases to the value of £6,000.
– In the same financial year ?
– Yes. He finishes with a closing stock, on that basis, of £6,000. In those circumstances, his accounts will show a profit of £1,000, and that is the amount upon which he will be taxed. That is the position to-day. I shall now point out the benefit that he will receive, in the same circumstances, when this bill becomes law. Again, we start off with an opening stock of £5,000, and assume that he receives an insurance payment of £6,000. For the purposes of this calculation, he does not have to show the receipt of £6,000; he has merely to show, for this year, the receipt of one-fifth of £6,000, which is £1,200. Nevertheless, he has received insurance of £6,000 and is able to make purchases to that amount. He finishes with a closing stock valued at £6,000. In those circumstances, I think that the accounts will show that he has suffered a loss of £3,800, and will therefore not be subject to tax at all. That is the way in which the proposed provision will work.
Senator Wright has referred to uninsured losses. I appreciate the point that he made and can imagine that a person who is not insured against catastrophe may be obliged, almost as a salvage measure, to dispose of the whole of his stock. Those circumstances are not entirely comparable with those in the insurance problem to which I have just referred, because that problem concerned a payment which followed a completely involuntary act, as the result of which the property-owner suffered. Nevertheless, real comparison can be made between the two situations. The circumstances to which Senator Wright has referred have been referred to the Commonwealth Committee on Taxation, and I suggest that they can safely be left there for the time being. The matter will be considered by the committee. Because of varying circumstances, many complexities are bound to arise, but the Government is endeavouring to provide relief.
Clause agreed to.
Clause 4 agreed to.
Clause 5 (Special depreciation allowance to primary producers).
, - I address myself to this clause only because of the evident misunderstanding displayed by honorable senators opposite during the second-reading debate. An attempt was made to prove that the clause will not confer the benefits which the Attorney-General (Senator Spicer) claimed for it during his second-reading speech. The true meaning of this provision is that if a primary producer purchases plant between 1951 and 1955, or erects structures on his property for the ordinary use of his farm, such as woolsheds, dairies, stables, barns, or residences for his employees, share-farmers or tenants of a value of £2,000 each, he is entitled to deduct each year, over a period of five years, 20 per cent, per annum of the actual cost of each building. One has only to make that statement to reveal the immense benefit which the provision will confer over and above the deceptive 40 per cent, allowance under the legislation introduced by the Chifley Government. That Government’s provision was a snare and a delusion. It applied only to trading plant. The deduction of 40 per cent, in the first year left the taxpayer entitled to only the ordinary depreciation deduction in each successive year. Because of rising costs, it was the common experience of all who received that depreciation allowance that the re-sale value of the item of plant or equipment was such that the seller was in a worse position than he would have been had he received the ordinary depreciation allowance year by year.
– That ls ridiculous !
– It is not ridiculous. It was the unfortunate experience of many people who thought that they were actually receiving a benefit because of the 40 per cent, initial depreciation deduction provision. Of course, in some instances the plant wore out or became obsolete and was written off altogether. Therefore, it had no re-sale value, and depreciation did not need to be taken into account. In that event the taxpayer received a benefit, but only because the asset, which had been bought at an inflated price, had totally worn out. The fact that he had lost an economic asset was less distressing to him because he had received a realization price of which only a part had been paid back to the Commissioner of Taxation.
This clause provides a positive approach to one of the problems of primary producers. If a farmer buys plant, or improves his property by installing windmills, irrigation piping, bulldozers, motor lorries and so on, or erects cottages or residences for his tenants or sharefarmers, he is entitled to deduct, from each year of his income, one-fifth of the actual cost of the value of such plant or structures, up to £2,000. That should provide a substantial incentive to increase primary production. Instead of money being diverted to the Treasury, where it may be wasted, it will be used for the improvement of properties and so to increase the productive capacity of the nation, fu that respect, I believe that it is important that we should draw attention to the distinction between the proposed depreciation allowance and that which operated previously.
– This afternoon I referred to the depreciation provisions of this bill, and I should like the Attorney-General (Senator Spicer) to explain that matter as lucidly as he did when he replied to the question asked by Senator Aylett. I! am grateful for the explanation given by the Minister in that connexion. If there is to be a departure from the present method, of assessing depreciation, I should like to hear about it. For the purposes of illustration, let us suppose that £2,000 is the unit of value. A 20 per cent, deduction in the first year would reduce that sum by £400. In the second year, would the deduction be 20 per cent, of the remaining value, namely £1,600, which would be £320? Will the Minister inform me whether that system is intended to operate, or whether £400 per annum would be deducted until the value of the unit was exhausted?
.- If Senator O’Flaherty turns to clause 5 of the bill, he will see that proposed new section 57aa provides that-
1 ) Notwithstanding anything contained in the last three preceding sections, in the case of a unit of property to which this section applies -
– So that a person would be entitled to deduct £400 per annum?
– Exactly. He is entitled to deduct 20 per cent, each year. 1. do not profess to be thoroughly familiar with the intricacies of depreciation allowances, but I gather that at present two systems are in operation and that the taxpayer may exercise an option. If he prefers, he may apply what is described as the diminishing cost basis, which will operate in the manner referred to by the honorable senator, or he may apply the straight-out method of deducting 20 per cent, each year. It was to the diminishing cost basis that Senator O’Flaherty was referring to. If the honorable senator will turn to the relevant provision, he will find that it states clearly that the depreciation allowance shall be 20 per cent, of the cost of the unit each year.
– Can the Attorney-General (Senator Spicer) say why motor vehicles designed primarily and principally for the transport of persons are excluded from the items on which the depreciation allowance may be claimed ?
– The intention was to include in the special depreciation allow- . ancc provisions only those items which could properly, and without any ambiguity, be regarded as being for exclusive use for farming purposes. Thi* honorable senator will argue, no doubt, that, in many instances, motor cars are so used, but we all know that there has been a tendency to take advantage of the special depreciation allowance provisions in relation to motor vehicles.
– By buying Bentleys and other expensive cars.
– Exactly. We have heard a lot about people buying Bentleys and taking full advantage of the initial depreciation allowance on them. I believe that there is real justification for the exclusion of motor cars. As I have said, the intention was to include within the provisions of the allowance only those items which could clearly be said to be required for genuine farming and agricultural purposes.
– There is one aspect of this matter to which I would like to refer. This Government abolished the special depreciation allowance i introduced by the Chifley Government. Now the allow-, anrc is to bo restored, but only in respect of primary producers. I assume that the Government’s call for increased produc-; tion applies not only to primary production, but also to secondary production.
Surely the mining of coal and the production of steel are just as important in the production, drive as the growing of wheat or wool. Why then is this tax concession to be granted only to primary producers’? Are we to assume that the need to expand Secondary production is no longer acute? Surely that is not so. I shall have something more to say about this matter when the next clause is before the committee. It is all very well for honorable senators opposite to say now that something must be done for the primary producers. I maintain that the special depreciation allowance should never have been -abolished. It should have continued to dc a feature of our income tax legislation, and if necessary, its provisions should have been extended. I make that comment because I am rather puzzled to understand why the emphasis is being placed on only one phase of production while the other is being ignored entirely.
– Having heard the explanation given by the Attorney-General (Senator Spicer) of the exclusion of motor cars from the special depreciation allowance provisions, I am inclined to move that the portion of this clause which makes that exclusion be struck out. 1” do not think that past abuses of the depreciation allowance provisions in respect of motor cars justify the Government in depriving all farmers of this concession. I have in mind particularly ex-servicemen who are taking up holdings in Western Australia under the war service land settlement scheme. Western Australia is not a small compact State as Victoria is. Most of the soldier settlers are being established on properties that are from ten to twenty miles from business centres, and motor transport is absolutely essential to them. If a doctor is required at night, and there is no telephone, a motor car is of the utmost necessity. Even for a ordinary shopping expeditions a motor car is indispensable. In short, I believe that on most farms, a motor car is just as important as a harvester or any other item of farm equipment.
– The ordinary depreciation allowance of 15 per cent, will still be allowable in respect of motor cars.
– That is different. I realize that the concession was withdrawn because of abuses, but surely it would not be difficult to confine the special depreciation allowances to one car only a property. At busy periods such as harvest time, a motor car is just as essential as a telephone. I appeal to the Attorney-General to examine this matter again with a view to allowing this concession at least to soldier settlers on new properties.
– This provision will not operate as rigidly as Senator Seward may imagine. The exclusion is confined to motor vehicles “ designed primarily and principally for the transport of persons “. In other words it applies only to motor cars. It does not apply to utilities, trucks, and any other vehicles that are not designed primarily and principally for the transport of persons. The ordinary depreciation allowance of 15 per cent, may be claimed in respect of motor cars. I believe, therefore, that the situation is well covered.
Clause agreed to.
Clause 6 (Repeal of section 57a).
– Section 57a, -which will be repealed by this clause, was inserted in the act by the Chifley Government in 1945. It provides for the special depreciation allowance for capital equipment in both primary and secondary industries. Honorable senators will recall the circumstances in which the provision was introduced. We had just passed through a war, and many industries were not able to provide the capital equipment that they required to expand production. The Labour Government realized that in a vast country of small population, modern and efficient capital machinery was a fundamental necessity. It promised that the initial depreciation allowance provisions would be continued until 1952 in order that industry might have an adequate opportunity to reestablish itself in the post-war years. The importance of the very latest capital machinery in a young country such as Australia cannot be over-stressed. We have thankfully moved from that stage of our industrial development at which, we looked to the Old Country for secondhand equipment such as textile machinery to enable production to be undertaken in this country. We know that if we are to compete with the rest of the world, we must have the most modern industrial machinery. To encourage industry to instal such machinery, the initial depreciation allowance was introduced and it did its job very well. Unfortunately, like many other concessions, it was abused. Nevertheless I believe that this Government’s decision to withdraw the concession altogether was a retrograde step. The remedy surely was not to withdraw the concession, but to remove the abuses. The Government could have prepared schedules of allowable items such as have now been drawn up for primary producers. The Labour party regards with disgust this Government’s action in removing the concession before the promised date. Although that promise was made by a previous administration, neither of the present Government parties said in its policy-speech in 1949 or 1950 that it intended to withdraw the special depreciation allowance. In fact, both parties promised to reduce taxes wherever possible. The withdrawal of the special depreciation allowance is tantamount to a direct increase of taxes. It is an increase that could have been avoided and I believe that, for the honour of this Government, it should have been avoided.
The Opposition will vote against the repeal of section 57 a because we believe it to be a desirable provision. Senator Wright’s argument against the 40 per cent, initial depreciation allowance was muddled reasoning. Of all the equipment installed in industry probably not 2 per cent, would be re-sold within five years. Even if it were- re-sold and a profit were made, tax would be levied on that profit and there would be no loss. I believe that the initial depreciation allowance could well have been made a permanent feature of our taxation laws, provided, of course, that certain safeguards were established, as has been done with primary producers. When a farmer lives a few miles out of town, motor transport is very important to him, but the Government apparently thought that too many Bentleys and Jaguars were being included in initial depreciation allowance claims, so all motor cars havebeen excluded from this concession. However, I should like to see provision made for the inclusion of certain utility types of motor cars. Motor transport can bejust as necessary on a farm as a tractor. The Opposition will oppose the deletion, of section 57a of the principal act.
Question put -
That the clause stand as printed.
The committee divided. (The Temporary Chairman - Senator A. D. REID.’
Majority . . 6
Question so resolved in the affirmative.
Clause agreed to.
Clause 7 agreed to.
Clauses 8 to 11 - by leave - taken together.
– I do not consider that the provisions of clause 8 relating to premiums and weekly tenancies are adequate. I presume, from what the Attorney-General (Senator Spicer) has said, that this is just a preliminary step. The payment of cax on goodwill chiefly affects the little man who sells his business. The big man is in a different position because he rarely acts before he has received advice. I know of many vendors who have lost a great part of the capital accumulated in the course of their life’s work because of the taxation that they have, had to pay on the money received from the sale of their business. I shall ai”-°pt clause 8 of the bill on the understanding that the Government will examine this matter further in order to ascertain the advisability of permitting the purchasers of weekly or other tenancies of indefinite duration to elect to amortise premiums paid for such tenancy or consideration paid for local goodwill over a period of two years. The subject of goodwill is a very vexed question and taxation on goodwill has had a very harsh effect on the small business person.
– I support the remarks that have been passed by .Senator “Wedgwood. I hope that the Attorney-General (Senator Spicer) will be able to give a satisfactory explanation of this proposal which is most important to the small shopkeeper. I do not know w.hy the committee on taxation considered that a premium received in respect of a weekly tenancy should be regarded as income received over a period of two years. I. cannot understand why the person who has only a weekly tenancy can be considered to possess any right to remain in occupation of the property concerned. No lease is attached to the occupation of the premises in such a case. I can understand that when there is trading in leases, such as hotel leases, it might be necessary to levy income tax on any increased amount received from the transfer of those leases. But I cannot understand why such a tax should be levied on the vendors of small businesses which are .conducted under a weekly tenancy. As I mentioned during the debate on the second reading of the bill, a person may open an empty shop and, by applying himself to his work, develop a comfortable business. When he has to retire, perhaps on account of ill health, bow is the value of his goodwill to be assessed? Should the full amount that he receives for the business be re garded as payment for goodwill or should some other amount be so regarded ? Money that is received in this way should not be subject to taxation. This matter is causing a great deal of anxiety. Many little businesses are sold by people who are not familiar with the law in this respect. When they are called upon to pay a large sum in income tax they find that they are not as well off as they thought they were.
– When the Menzies Government came to office section 84 of the Income Tax and Social Services Contribution Assessment Act provided that the assessable income of a taxpayer should include any premium received by him in the year of income and any consideration so received for or in connexion with his assent to any grant or assignment of a lease. Under section 83 of the act, which was also in force when the Menzies Government came to office, a premium was defined in such a way as to spread a net for the unwary and catch the little fish for whom Senator Sheehan has expressed belated concern. A premium was there defined to mean any consideration in the nature of a premium paid in connexion with the grant or assignment by the taxpayer of a lease, or any consideration for the surrender of a lease, or any consideration for or in connexion with any goodwill attached to or connected with land a lease of which was granted, assigned or surrendered. I rise to ask the Senate to give its attention to this matter because I consider that that definition created an anomaly. It applies, not only to a premium paid on the surrender of a lease - in which ease one would expect it to be paid to the landlord - as it is really rent paid in advance, or commuted rent, but also to the price paid for any goodwill attached to land in connexion with which a lease is assigned. Will honorable senators bear with me if I go back six or eight centuries to find the origin of the distinction between leasehold and freehold? A goodwill sold in relation to a freehold is immune from tax; but under the act of 1947 a goodwill sold in relation to a leasehold was caught in the mesh of taxation. What is the distinction? Formerly, an estate in land granted for the life of a particular person, or for some other indefinite term, waa described as freehold ; but an estate in land granted for 999 years or 2,000 years or 10,000 years was a leasehold, since it was granted for a definite term, and it came to be recognized, not merely as a personal contract, but a right of property. On such a distinction do present-day legislators fasten income tax liability.
That point is not unrelated to the terms of this bill, because one of the provisions of the bill proposes to exempt the holders of 99-year leases from the payment of income tax on premiums. The reason that is offered to impress us is that the provision is intended to benefit lease-holders in the Australian Capital Territory who hold leases in perpetuity from the Crown. It is claimed that such leases are practically the equivalent of freehold. Coming as I do from one of the remote provinces of Australia, it seems to me that such an argument merely emphasizes the aphorism, which I first heard in my youth, that if you want good bread it is well to live near the bakehouse. I raise my timid voice in protest against the suggestion that there is any need to give special protection to leaseholders in the Australian Capital Territory. I should have stronger suggestions to offer, were it not that I have been assured that this entire problem has now been submitted to the Commonwealth Committee on Taxation. I hope that we shall receive from it a thoughtful report on the validity of the distinction between freehold and leasehold for the purpose of taxing money received for the sale of goodwill. I cannot see any valid reason for the distinction, ft seems to me that the Labour Government, in its attempt to explore every crevice of income when it framed the legislation of 1947, went beyond the boundaries of income, and brought in an item of .capital. If a man who is carrying on business in leased premises establishes such goodwill in his business that he is able to sell the lease at a premium, there is no distinction between such a transaction and the sale of goodwill attaching to a freehold property. In the case of the leasehold property there is no ground for assuming that the premium paid is really rent. .”For a considerable time past, I !iac believed that this provision in the act should be reviewed, and the present would be an appropriate time to review it except that the matter is now being considered by the committee on taxation. When the report of the committee is before us we shall be able to give the subject closer attention.
I was’ somewhat perturbed at the proposal that persons who hold a 99-year lease should be granted immunity from the taxation of premiums, particularly when the persons concerned are those who own business premises in Canberra. However, I realize that the benefit will accrue also to persons in other parts of the Commonwealth, and as the granting of this concession is a step in the right direction in that it tends to place leasehold and freeholds on the same basis it has. my approval. Under the act passed while the Labour Government was in office, a person who sold his goodwill in association with a weekly tenancy would have to pay in one year tax on ‘the entire proceeds. The proposed amendment to the act will enable the vendor to spread the amount over two years, thus lightening the burden of taxation. In this way, the Government proposes to confer a benefit on the small businessman who has not taken out a long-term lease. The man who has a lease for a period of five years can, upon the sale of his goodwill, spread the premium for taxation purposes over five years.
Senator SPICER (Victoria - AttorneyGeneral) [10.251. - -The taxation “of goodwill attached to premises presents great difficulties. The provisions in the present act have been there, in substance at any rate, since 1936, when the act was amended in accordance with the recommendations of a royal commission on taxation. It is quite easy to point to anomalies that arise under the present provisions, and it is not my concern to defend those provisions in their entirety. As Senator Wright has pointed out, the whole matter has now been referred for consideration to the committee on taxation. The Government wishes to devise a method that will give reasonable protection to the revenue while not imposing undue burdens on citizens. It is clear that income received by a person in the form of rent for premises should be subject to tax, but if the provisions of the act were made to apply only to money, received in the form of rent, it would not be long before landlords would hit on the bright idea of accepting a large premium when a lease was first entered into, and then, in consideration for that, charging a very small rental. Thus, the landlord would be able to escape his just liability, and in order to close that loophole the legislature decided to tax premiums, because a premium, although paid in a lump sum at the beginning of the lease, is rent, and should be subject to income tax. In order to overcome that provision the bright people would then hit on the idea that the lump sum should not be paid as a premium, but should be paid for the goodwill attaching to the premises. Unless there is in thu law some provision to meet such a situation there is a grave risk that some people may escape their just liabilities, because the money paid to them for the goodwill of premises would, in effect, be actually a substitute for rent. It is easy enough to point to difficult cases under the present provisions, and in my professional experience I have encountered them, but it is well to remember that there is another side to the matter. These provisions were not put into the act in order to impose unjust burdens, but in order to ensure that people shall not escape their liabilities by resorting to various devices. The substantive part of the present proposal gives effect to the recommendations of the committee on taxation, which are designed to give to the purchaser of a lease of uncertain duration, who is called upon to pay a premium - a premium within the meaning of the bill - something to enable him to get the advantage of an amortization over a period of years. Under the existing legislation he cannot claim any deduction at all. Associated complementary provisions relate to cases where tenants of uncertain duration, under the terms of their tenancies, are called upon to make improvements to the premises. This is only an instalment of relief in relation to this matter. Any one who is concerned about the problem must recognize that these particular provisions are an improvement on the existing situation.
– I thank the Attorney-General (Senator Spicer) for the manner in which he has dealt with the aspect that I raised previously. Unlike the Minister, Senator Wright has indulged in cheap propaganda against a former Labour government. I was pleased to hear the AttorneyGeneral say that this will not be the end of discussion on a matter that he realizes involves grave difficulties and is likely to cause hardship. I remind Senator Wright that this has been the only occasion for many years on which an income tax assessment bill to relieve taxation, has been discussed by the Senate. During the regime of the former Labour Government it was necessary to obtain additional revenue . to prosecute the war. That Government was faced with a tremendous task, and it made no excuses for the taxes that it collected from the people. Immediately after the war, Labour commenced to unwind the war machine, and certain reductions of ‘taxation were granted. Now the present Government has introduced this measure to unwind the war machine still further.
– I rise to order! The honorable senator’s remarks are far removed from the clauses before the committee.
– Order! The honorable senator should confine himself to the clauses under consideration.
– I am sorry that the Attorney-General has been so impetuous, because he has been very fair in his treatment of the problem so far. My remarks were inspired by the unjustified and cheap political propaganda that has been indulged in by Senator Wright. Governmental expenditure as a result of the war in Korea is insignificant by comparison with the expenditure of the former Labour Government during World War II. I trust that before long the Government will see fit to honour its promise to further reduce taxation, and that the next income tax assessment bill that is brought down will remove the anomalies and disabilities to which the Opposition has directed attention.
– I, too, am a little concerned about the provision with relation to the taxation of goodwill, although I agree entirely with what has been said by the Attorney-General (Senator Spicer) and Senator Wright, who both agree that bona fide premiums on leaseholds should be taxed. I think that both honorable senators would also agree that bona fide goodwill should not be taxed, because it represents an appreciation of capital and accordingly is not taxable as income. I was pleased to hear that this matter is to be reviewed by the expert committee on taxation, because I do not think that the problem is insuperable. Stated briefly, the problem is: When a consideration is paid for the assignment of a lease, what proportion, if any, should’ be regarded as premium, and what proportion should be regarded as bona fide goodwill? I suggest that these proportions can be ascertained on the assignment of a leasehold in relation to a business, which are the leaseholds mostly affected. Any qualified accountant should be able readily to ascertain the respective amounts. I sincerely hope that the matter will be clarified at an early date.
– I point out to the AttorneyGeneral (Senator Spicer) that the majority of people are not greatly concerned about landlords who grant leases and receive premiums for goodwill as a cloak for rent. There is a case before the appeal court at present concerning a wellknown tailor in Victoria who was advised, probably wrongly, to form his business into a proprietary company. He had, by skill and courtesy over 30 years, built up a flourishing business. He rented his premises on a monthly tenancy. The proprietary company was formed with a nominal capital of £10,000. The assets were valued at £4,000. The tailor received 10,000 £1 shares for his business, on which he was taxed more than £4,000. Six thousand shares were alleged to be paid by the company for goodwill. Honorable senators will note that the tax was more than the value of the assets of the company, which still consisted of only one man who held all the shares with the exception of one, and the business was conducted in exactly the same manner as formerly. If that man has to pay the amount of tax that I mentioned he will probably become insolvent.
Clauses agreed to.
Clauses 12 to 16 agreed to.
After section two hundred and twenty-one YD of the Principal Act the following sections are inserted : - “221yda. - (1.) A taxpayer who receives a notice of assessment “221YDB. - (1.) Where, in respect of a year of income -
Senator ARMSTRONG (New South Wales) [10.43 J. -I move-
Thai; proposed new section 221YDB be left out.
As has been indicated by the Opposition already, we consider that a penalty aris-ing from compulsory self-assessment should not be imposed. As Senator Arnold, Senator Aylett, and Senator Sheehan, have dealt fully with this matter during the debate on the motion for the second reading of the bill, honorable senators are familiar with the problem. It is, that if a man’s income is 20 per cent, more than his income for the previous year, he shall be compelled to assess himself. My first reaction to the principle of self-assessment was that it was a good one, and I must say that the scheme has been “ sold “ very well by supporters of the Government. On consideration, however, T do not think that it will save manpower in the Taxation Branch. At first sight I thought that it would simplify matters of taxation, but I am now convinced that additional taxation staff will be necessary, and that matters will not be made easier for the taxpayers. A taxpayer will have to determine first whether his income is likely to be 20 per cent, more than it was during the previous financial year. If he makes a wrong decision he may be in legal difficulties with the Taxation Branch. To the best of his ability lie. will have to estimate what his income for the year will be, and then assess /the amount of provisional tax that he should pay. If, having made a self-assessment, his estimate is, say, 20 per cent, below his actual income, he becomes liable to a penalty. The Government’s approach to this matter is not equitable. It is wrong for the Government to force taxpayers to make self -assessments which they do not want to do. Indeed, until now the Taxation Branch has refused to permit taxpayers to do so. Because selfassessment brings in its train penalties for breaches of the provisions of the legislation, the proposal should not be persevered with. The Attorney-General may say, “ A penalty must be prescribed for breaches of the provisions of this proposed new section “. I do not know whether the imposition of penalties for such breaches is necessary. It would be interesting to try out the efficacy of the proposed new section with the penalty provision omitted. .
– Has the honorable senator any doubts about the matter?
– I do not know how the provision will operate.
– We did not come down in the last shower.
– Judging by the record of the Government during the last two and a half years I should be astonished if the Attorney-General and the other members of the Government have any idea how this provision will operate. I cannot anticipate the result of its application. If the AttorneyGeneral suggests that he can do so, it will be the first time in two and a half years that he has successfully anticipated the result of any Government proposal. The Opposition strongly supports the amendment.
– I support the retention of the proposed new section, and oppose the amendment. The provisions of the proposed new sections 221yda and 221YDB will remove, from primary producers particularly, one of the great disadvantages from which they have suffered during the year 1951-52. It has been explained to honorable senators that that disadvantage arises as the result of the method by which provisional tax was first imposed. The collection of provisional tax was introduced by a Labour Government, but that Government could not have foreseen - and I do not blame it for not having done so - the rapid fluctuations that would take place in incomes throughout Australia. A future drought could well bring about a position similar to that which has existed in 1951-52. In order to prevent the recurrence of that position the Government has extended the right of self-assessment to business men and primary producers. The proposed new sections are, in many ways, a copy of provisions which are at present in operation in Canada and have worked very successfully for many years. The Canadian legislation also prescribes a penalty for breaches. It is essential when considering penalties to realize that all primary producers will assess their liability to tax when nine months of the year have already gone by. They will therefore be in a position to estimate their income for the year almost to a penny, because 99 per cent, of them will have already sold their produce and the other 1 per cent, will have a very clear indication of the prices they will obtain for their products during the three remaining months of the year. In these circumstances they could easily decide whether their income will be increased by one-fifth during the year. If, in assessing their incomes, they make a mistake, they will have the protection that unless the mistake represents an amount which is 20 per cent, in excess of their actual income, they will not be called upon to pay a penalty. After nine months of the year have gone any person who makes a mistake of that magnitude in assessing his income will not make a genuine mistake and accordingly he should be liable to the small penalty prescribed as a deterrent to such practices. I reject the amendment.
– I support the amendment. The Attorney-General has said that it is not compulsory for a taxpayer to estimate the amount of his income.
– I said nothing of the kind. I said that the element of selfassessment did not come into the picture unless there was an increase of 20 per cent, in the income of the taxpayer.
– If the income of the taxpayer is increased by 20 per cent, by a given date he must estimate his income for the year or pay a penalty for failure to do so.
– That is so.
– Therefore it is compulsory for the taxpayer to make his own assessment. The Attorney-General lias sought to convince us that the choice is left to the taxpayer. How can the taxpayer be given an option iri the matter if failure to carry out the provisions of the proposed new sections render him liable to a penalty? Self-assessment is compulsory to the degree that if the taxpayer docs not estimate his income he is mulct in a penalty.
Senator Gorton has said that after nine months of the financial year have gone 99 per cent, of the taxpayers should be in a position to estimate their income for the year to a penny. If a proposed law will inflict injustice on 1 per cent, of the taxpayers it should be altered.
Let us consider the position of a Tasmanian potato-grower under this legislation. In March he is just beginning to harvest his main crop. Harvesting continues throughout the months of March, April, May, and June. He cannot foresee what he will receive for his crop, nor can he know to what degree it may be affected by disease. In March it is impossible for a potato-grower to estimate the income that he will receive in the intervening period up to the 30th June. Potato-growers are dependent for the disposal of their product upon shipping services provided by the Government. They receive directions from the Potato Board to deliver certain quantities of potatoes frequently only to find that on the following day the orders are cancelled. Thus, they cannot estimate the amount of income that they will receive in the ensuing three months.
An honorable senator who supports the Government has had long experience in connexion with these matters. He should be honest and state his views on this legislation clearly and fearlessly to the committee.
– To whom does the honorable senator refer?
– I refer to Senator Chamberlain who, I am sure, could bear out the accuracy of my remarks. The honorable senator knows that what I am saying is true, but for political purposes he chooses to remain silent. We would appreciate the benefit of his advice. If he is able to correct misapprehensions’ about this matter that appear to exist in the mind of the Attorney-General it is his duty to do” so. Although he may not like to hear some of the statements that I have made he cannot deny their accuracy.
This measure will embarrass certain members of the community by compelling them to pay to their lawyers £1 ls. - in these days of inflation the fee may well be £2 2s. - ‘to prepare assessments of income. It will cause primary producers to waste their time when they are very busy. I would not object to these provisions if the penalty clause were deleted. As they stand, I most vehemently object to them.
– I desire to make a personal explanation.
– Does the honorable senator claim to have been misrepresented ?
– Yes. It appears to me - I do not know for sure - that in the poor, bemused mind of Senator Aylett there is some impression that I had said that 1 per cent, of the people would be unfairly dealt with by this measure. That thought seemed to be bubbling around inside the honorable senator’s head. I take the opportunity to reiterate what I said so that Senator Aylett may understand the position. I said that after nine months of the year had gone by 99 per cent, of the primary producers should know for certain what their incomes would be because their earnings would have been received by that time. Senator Aylett assumed that the remaining 1 per cent, would be penalized because they would not know for certain what incomes they would receive. I pointed out that although the remaining 1 per cent, would not know for certain exactly what their incomes would be they would be in a position to make a fairly accurate estimate. The contention of Senator Aylett that I had said that 1 per cent, of the primary producers would be penalized is completely untenable.
– I urge the Government to give careful consideration to this amendment. The Government adopted in good faith the proposal that certain taxpayers should make self-assessments of #their income. This innovation should be of great assistance to businessmen and primary producers. I give the Government credit for proposing an amendment of the income tax legislation which will be beneficial to taxpayers and will help taxpayers who, at a time of rapidly falling incomes, would otherwise be penalized. I ask the
Attorney-General (Senator Spicer) to accept the assurance of the Opposition that the proposed amendment is designed to assist taxpayers and not to make the task of the taxation authorities more difficult.
– Order! In conformity with the sessional order relating to the adjournment of the Senate, I formally put the question -
That the Chairman do now leave the chair and report to the Senate.
Question resolved in the negative.
– Penalties have been provided in the bill in order to deter people from exaggerating expected reductions of their incomes and to ensure that the system of self-assessment will result in more or less accurate returns. I suggest that the inclusion of the penalty provision removes the very benefit that is sought to be extended to people who find that their incomes have declined. The Government proposes to compel all traders, three months before taxation returns normally would be prepared, and three months before final trading accounts would be taken out, to endeavour to ascertain their financial position with reasonable accuracy. If they make a serious mistake in doing so, they will be subject to certain penalties. It is to be left to the discretion of the Commissioner of Taxation to decide whether such mistakes are made in good faith or with malicious intent. Because a taxpayer may believe that the Commissioner will rule against him, he is obliged to be meticulous in his assessment of income. I suggest that by the provision of penalties the Government will merely prevent a few wrongdoers from withholding, for a few months, the proper amount of tax which they will be liable to pay. In addition, it will prevent 80 per cent, or 90 per cent, of taxpayers, who try to render their just dues to the Commonwealth, from receiving benefits which the Government wishes them to enjoy. Those taxpayers will not he prepared to take a chance. They will be obliged to go to a great deal of trouble in order to find out exactly where they stand. Many farmers consider that they are not capable of rendering proper income tax returns and”, accordingly, employ agents to compile their returns for them. The agents frequently are obliged to ask for a blanket exemption for their clients for a number of months, because they are so cluttered up with work that they are not able to- cope with it immediately.
It seems to me that the Government is endeavouring to extend a benefit to certain people and is destroying the effect of that benefit by including penal provisions. Apart from that, I congratulate the Government on introducing this measure.
– The expressions of opinion by Senator Arnold are echoed by me. Before dealing with the question of penalties, I wish to say one or two words with regard to this grand improvement upon the provisional tax system. Those honorable senators who were in the army during the last war, and who received army rates of pay, will recollect that when they were discharged they were obliged to fight against the adverse economic circumstances of the time. If their income was subject to modest increments year by year, they found themselves sandbagged by this iniquitous system of provisional tax, which provided that tax increased in double proportion to the increment. It took the record prices that were received for wool to reveal the full absurdity of that situation. The Government promptly made amendments in the way of deferment of 40 per cent, of provisional tax, arid it has now laid a solid basis for the future equitable, assessment of provisional tax.- It has put into the hands of taxpayers themselves the right to estimate their own incomes for the current year, after nine months have elapsed. I make that point clear because I campaigned very vehemently against the system that operated from 1947 onwards. I rejoice to think that the Government not only gave’ to wool-growers prompt deferment of 40 per cent, of provisional tax last July, but also introduced this measure which will ensure a permanent and satis1 factory method of assessing provisional tax. It is characteristic of the fairness of Senator Arnold that he should congratulate the Government on having done so.
– Do not praise him too much !
– This reform will be a great incentive to those who still feel that there are opportunities to increase their prosperity under a system of free enterprise, whether they remain in the Senate or like the honorable senator who has just interjected, can look forward to an early departure from this chamber.
The one criticism that has been levelled against the bill is that it provides for a penalty to be imposed upon a taxpayer who makes a mistake in his estimate of income for the current year in excess of 20 per cent. I say that the sentiments expressed by Senator Arnold find an echo in my mind because during the last twelve months I have given serious consideration to instituting a move in the Senate to appoint a select committee to examine the administration of penalties by Commonwealth authorities in all taxation measures. Any one who is jealous to protect the taxpayer, as I am, and’ who has experience of the unjustifiable basis that is often adopted by taxation officials in imposing irritating penalties for technical offences, will no doubt agree that the Parliament should revise the power that is committed to such authorities in order to ensure that penalties are imposed only in cases where a substantial offence has been committed. Particularly is that necessary where deceased estates are concerned, and in relation to gift duty and other forms of tax.
Having said that, I am bound to add that in my experience the Taxation Branch has adopted a fairly understanding outlook towards such matters. When I found that this bill contains provision for a penalty to be imposed if an erroneous estimate is made - not for a mis-statement of fact, but for an erroneous estimate - I examined it with the utmost scrutiny. For myself, I am prepared to entrust this power to the administrators of the provision, particularly when it is appreciated that the only penalty that can be imposed is 10 per cent. of the tax, not of the taxable income. That is to say, where a man has allowed for provisional tax on £2,000 and his taxable income is, in fact, £3,000, he will be called upon to pay 10 per cent. of £600, which is the difference between £3,000 and £2,400. I accept the statement made by the Attorney-General (Senator Spicer) in his second-reading speech, that in most cases the penalty will work out, on an interest basis, at 4 percent. per annum or less. I believe that the Parliament intends a penalty of this nature to be used against the cunning person, who is out to beat the department and to evade the obligation to pay tax which his fellow citizens acknowledge. On that basis, I am prepared to entrust the power to the Commissioner, realizing that the penalty, in the ordinary sense, will not be harsh.
I have taken trouble to explain those matters out of deference to Senator Arnold’s thoughtful contribution to the debate. I submit that this penalty section should not be magnified and made clear that where the Commissioner is satisfied that an erroneous estimate was made because the taxpayer was not aware of circumstances that affected his income, the penalty may be remitted. In other words, if the estimate was not consciously erroneous, there need be no penalty, but I submit that if an estimate is intentionally erroneous, the taxpayer concerned should pay a penalty, because he has endeavoured to evade an obligation that he shares with other sections of the community.
– I fear that Senator Arnold has magnified the difficulties of taxpayers in self-assessment. A taxpayer will make his self-assessment calculation in the month of March. The figures that he used in the course of that calculation will not be so much wasted effort but will stand him in good stead when he prepares his return after July. Therefore, this out to impose a “ hoodoo “ or something of that kind. Sub-section (4.) of proposed new section 221YDB makes it quite endeavour by the Government to help taxpayers to solve the provisional tax problem will not put an additional burden on the taxpayers at all. In effect they will complete their tax returns in two instalments, the first in March, covering the first nine months of the year and the second in July covering the remaining three months of the year. The selfassessment system will be a great boon to taxpayers, and will not be a burden as Senator Arnold has suggested. The Government is to be complimented upon the introduction of this system.
Question put -
That the words proposed to he left out (Senator Armstrong’s amendment) be left out.
The committee divided (The Temporary Chairman - Senator A. D.Reid.)
Ayes . . . . . . 22
Noes . . . . . . 31
Majority . .9
Question so resolved in the negative.
Clause agreed to.
Clauses 18 and 19 agreed to.
Title agreed to.
Bill reported without amendment; report adopted.
Bill read a third time.
Bill returned from theHouse of Representatives with a message intimating that it had disagreed to the amendment made by the Senate (vide page 1214), for the reasons assigned therein (vide page 1411).
In committee (Consideration of House of Representatives’ message) :
.- I move-
That the committee do not insist on the amendment disagreed to by the House of Representatives.
I think that the reasons for that motion will be apparent to all honorable senators, having regard to what took place in the Senate last night.
– The view that has been taken in another place is that the amendments of this chamber are diametrically opposed tq, the principle of the Land Tax Assessment Act which imposes land tax on the basis of the true unimproved value of the land owned by taxpayers. I am presumptuous enough to disagree with the view that the amendment is diametrically opposed to that principle. To the contention that the amendment would cause grave anomalies between taxpayers, I reply that that fact was recognized in this chamber when the amendment was passed but it was also recognized that parallel discrepancies and anomalies had existed for twelve years, from 1939 to 1951, because of the preservation of the land tax roll during that period. I said during the debate on the amendment that I conceived it to be my bounden duty to attempt to protect people whom I considered would suffer unjustly and inadvertently under the provisions of the bill. The amendment of the Senate was returned to another place and I assume that it was considered there by. men who have the responsibility for raising the revenue of the country. I do not intend to deny the taxpayers whom 1. am privileged to represent a half-loaf because it will be better than no bread.
– The old story.
– And the old mule reminds me of it. Honorable senators on this side of the House take pride in the fact that they arc entitled to defend their principles. Having done that il would now be ridiculous for us to oppose the action that has been taken in another place to the extent of rejecting this bill. This measure will give some relief. In the course of my speech on the second reading of the bill I called it an instalment of relief to a considerable section of taxpayers. I affirm that as a decision has been made in another place on this matter it is time for me to be silent.
.-! am sorry that the Government has not seen fit to accept the amendment that was made to this bill last night. This bill imposes what must be regarded as a very unfair tax in certain circumstances. It is based on what I consider to be unreal value. The valuations concerned were made in a peak period and it is officially admitted that they have increased in some States by an average of 150 per cent. The amendment would limit the increase in valuation for taxation purposes to 100 per cent. In certain cases valuations have increased by up to 500 per cent and even up to 1,000 per cent. Can anyone regard as fair a tax on a property the income from which is no greater than the tax? I know of a property owner who, even after taking into consideration the proposed exemption of £S,750, will receive barely sufficient income from the property to pay his tux. This owner has to pay all the expenses associated with the building. But because rents are pegged he will not receive sufficient money to meet those expenses and pay for the tax that will be imposed by the bill. I am sorry that the Government has not seen fit to rectify a grave anomaly and injustice to certain taxpayers whose properties thus become liabilities instead of assets.
– I join my colleagues in regretting that the Government was unable to accept the amendment that was made by this house of review. Honorable senators considered that in amending the bill they would bring to the notice of the Government an aspect of the matter which was worthy of its attention. As my colleagues have mentioned, this amendment has been considered in another place and I arn now quite prepared to accept the provision for the exemption from the tax of the first £8,750 of the value of a property. Those who pay land tax will receive some deduction in taxation. I regret that they will not receive as much, as this committee tried to obtain for them. However, the Government’s proposal is better than nothing and I accept it.
– Et has been most entertaining to hear the apologies that have come from Government senators who have now spoken in a manner diametrically opposed to the way in which they voted on the amendment. The assumptions upon which at least two honorable senators opposite have based their remarks are completely ill-founded. Senator Wright and Senator Henty assumed that the amendment had been given consideration in the House of Representatives. The fact is that the Senate’s message was given no consideration in that House. The majority decision of this chamber was treated with contempt in complete violation of our parliamentary traditions.
– I rise to order, ls the honorable senator in order in making a reflection on the House of Representatives? Honorable senators do not know what happened there. All that I know about what happened is conveyed in the message that you read to us, Mr. Chairman.
– The Leader of the Opposition will continue.
– If that is all that Senator McCallum knows, he knows very little. Every other honorable senator knows what happened. My comments are correct and well justified. If government senators who voted with the Opposition last night were sincere they should have the courage to vote with the Opposition on this matter once more. If the Senate insists on this amendment what right has any honorable senator to assume that the House of Representatives will not change its attitude? It is futile to contend that the taxpayers would lose the benefit of the proposed exemption. Government senators have not put this matter to the test and they lack the courage to do so. In other words they are merely posturing, and there is no sincerity in their actions. They have left their colleagues in another place completely out on a limb. Those colleagues will probably have more to say to them about this matter than I care to say at present.
The reasons that have been furnished - I do not know by whom - for the rejection of the amendment are completely hypocritical. The suggestion that the government has rejected this amendment because it is diametrically opposed to the principles upon which land tax is calculated, namely the true value of the land, comes ill from a government which, for nearly two years has taxed land on the basis of values that have been pegged at 1939 levels. Nobody can suggest that values have not risen in that period. They did not just jump to their present levels on the 30th June, 1951. The Government has sought refuge in high principles which it saw fit to ignore for two years. No high principle is involved in the Government’s decision, or in the decision of honorable senators opposite who spoke and voted for the amendment but have now changed their attitude.
. - In listening to the Leader of the Opposition (Senator McKenna), I was reminded of the words of Lord Thurlow who, when addressing an opponent, said, “ The honorable gentleman whom I now look down upon “. When the Leader of the Opposition had broadcasting facilities available to him in this chamber last night in order that he might honestly inform the public of his convictions he declaimed for half an hour, hypocritically abusing certain men. Then, when he came to the conclusion of his speech, he whispered to Mr. President so that the listening public might not hear, and said, “ Bound as I am by the platform of the Labour party, I shall vote against the bill “. Now I am expected to accept his rebuke. The Leader of the Opposition has accused me of running away from an issue. He knows that in every encounter I have had with him I have never run away, and I shall certainly not run away now, but I am not going to provide a kennel for the fleas of the Opposition to infest by continuing to insist upon the amendment which I moved last night. That amendment was agreed to by the Senate, and submitted to the
House of Representatives for consideration. Now, in accordance with parliamentary practice, it has been returned to this chamber with an intimation that the House’ of Representatives has not agreed to it. The Leader of the Opposition, who voted against the motion for the second reading of the bill, and committed the other members of his party to oppose it also, now thinks that he sees an opportunity to make political capital out of the situation that has arisen because of the refusal of the House of Representatives to accept the amendment. The leader of a party whose ‘principles are utterly perverted and prostituted at the dictation of an outside executive, a man with an obviously tortuous outlook, now condemns us for not insisting on an amendment in which he believes that he sees an opportunity to win public approval. This honorable senator, who is supposed to represent Tasmania, but who is scarcely ever seen there, now tries to make the people of Tasmania believe that he is eager to relieve them of some of the burdens of the federal land tax. Never before have I felt to the heels of my boots such unqualified contempt as I now feel for the performance of the Leader of the Opposition in this chamber.
– When I remember that Tommy Trinder is paid £2,000 a week, it seems to me that Senator Wright is entitled to £10,000 a week on the strength of his performance to-night. I wonder, however, how much of it he meant. He has not altered one fact by his extraordinary histrionics which, 1 confess, I have never seen equalled. 1 remind Senator Wright that he cannot alter the facts of the situation merely by accusing the Leader of the Opposition (Senator McKenna). The facts have been stated by Senator Wright, Senator Guy and Senator Henty, and they still stand. The truth is that the federal land tax as now applied is a particularly vicious impost, which is based on wrong principles. That is what Senator Wright himself said last night, so why is he not prepared now to carry the matter further ? The Opposition voted in a certain way on this amendment, and is prepared to vote in a certain way again to-night. Senator Wright told us last night that the tax was being applied viciously and unfairly in Tasmania. It will continue to apply viciously and unfairly after his escapade to-night. If he were to stand his ground now, as he led the people to believe he would, the situation might yet be saved. Senator Wright has accused members of .the Labour party of being caucus-ridden. His own party does not even bother to take him into the caucus. One by one his fellow members took him out into the corridor and ran the steam-roller over him. Then he came back into the chamber, and told us that he had carried his insistence on the amendment as far as he properly could, and that he was (prepared to accept the decision of the House of Representatives. As a matter of fact, the House of Representatives did not give his amendment even a minute’s consideration. It had been debated for hours in this chamber, but it was dismissed by the House of Representatives in a very brief time; yet Senator Wright pretends that the amendment was duly considered by the House of Representatives, and then rejected. If he is satisfied with that sort of consideration from the House of Representatives, he is easily satisfied. Those of his colleagues who followed him blindly last night are now regretting their action. Never again will they be persuaded by his glib tongue. He has had his fling in the Senate, and now is finished. I believed last night that Senator Wright was honest in the attitude he took up. I hold definite views about the application of the federal land tax. His colleagues from Tasmania followed his leadership last night, only to find to-night that he has left them leaderless, and now their reputation as honest and conscientious men has suffered. Last night, they proved their case to the hilt and now, only 24 hours later, they have abandoned it. This has been a sad day for the Senate.
– While listening to the diabolic benedictions of Senator McKenna and Senator Armstrong I was reminded of a native characteristic which is obvious to the discerning observer. In Australia there are two birds, the raven and the crow, which are both black, and are indistinguishable except to people who set out to study them. One is a benign bird which is helpful to the community; the other is predatory, and is an eater of carcasses.
– I rise to a point of order. Is Senator Cormack discussing the business before the Senate, or is he trying to fill the role of public entertainer?
– There is no point of order.
– My simple parable was meant to illustrate the attitude of Senator Armstrong and the Leader of the Opposition (Senator McKenna). In the guise of being fairminded, reasonable and responsible senators who consider dispassionately the affairs of the nation, they have assumed the characteristics of crows perched in the branches of the legislative tree hoping for an easy morsel. There is no honesty in their attitude, as was amply demonstrated by the Leader (if the Opposition himself. He stated that the Labour party, on dialectical grounds, was willing to concede that the federal land tax should be abolished, and then, with a hasty glance over his shoulder in the direction of the executive of the party, he confessed that his party would oppose the bill. I have seen nothing more unctuous than the condemnation by the Leader of the Opposition of those honorable senators from Tasmania who, with perfect propriety, sought to advance the interests of the people of their State. The amendment that was agreed to by the Senate last night was considered by the House of Representatives, and returned to us with an annexure asking the Senate to reconsider its amendment. Those honorable senators from Tasmania have now declared that they are willing to accept half of what they ask for, instead of insisting on the whole. I admire the attitude of men who are willing to defend the right, and reserve my contempt for those who are only too eager to condemn them for doing so.
Ss.no. tor ARNOLD (New South Wales) [11.57]. - During the last half-hour, we in this chamber have been treated to an extraordinary spectacle which will go a long way towards destroying the fiction that, whilst members of the Labour party are regimented and subjected to caucus decisions, members of the parties who support the Government are free to make their own decisions in accordance with what they believe to be the interests of their constituents. I listened with interest to Senator Wright when he told us of the great hardship that would be inflicted upon the people of his State if his amendment were not accepted. He made out a very good case, and so strong were his arguments that he convinced the other Tansmanian Senators on his side of the chamber that they, too, should support the amendment. Now, he has reversed his attitude, and although he used the -most extravagant language in trying to defend himself, he failed to give a satisfactory reason for his change of front. Last night he said that certain things were true, and he has not since said that they were untrue, but he has condemned members of the Labour party for continuing to support the contentions which he advanced with such vehemence last night. Senator Wright convinced his own colleagues that the provisions of the bill were unfair to their constituents, and they felt so strongly about it that they voted in favour of the amendment. Then Senator Wright reversed his decision without any explanation other than a great deal of abuse of the Labour party, and I have never yet heard an abusive argument that contained much sense. Honorable senators opposite who supported the amendment in this chamber last night have now changed their opinion because they apparently consider that the Labour party might have gained a political advantage.- They have transferred their wrath against the Government for its unjust legislation to the Leader of the Opposition (Senator McKenna) because he had the courage to follow the lead that was given to him for a very good reason last night. It is time that honorable senators opposite made Up their minds to be free men and, if necessary, to vote against their own party if they consider that that party is doing an unjust thing. When honorable senators reverse a stand that they have previously taken, at least they should explain to their colleagues the reason for changing their attitude.
Thursday, 5 June, 1952.
– Most of the discussion that has taken place on the motion has been irrelevant. We should be considering a message that has been received from the House of Representatives, lt was highly improper for the Leader of the Opposition (Senator McKenna) to base his speech on hearsay, or on information that was brought to him by scouts or spies. The message from the House of Representatives is quite clear, and the motion leaves honorable senators free to alter an opinion that they may have expressed previously. I unreservedly support the motion!
.- Without a doubt, there has arisen in this Parliament during the last 24 hours one of the most outstanding circumstances that has ever arisen in this country. I can well appreciate the embarrassment of some honorable senators on the Government side of the chamber, but if they are taking comfort in the thought that they have tricked the Opposition they are entirely wrong. The amendment was carried by a majority of this chamber .last night. Therefore the House of Representatives should not have been so ungenerous as to. dispose of the Senate’s amendment without even a moment’s consideration. I agree with Senator McCallum that it would probably be more to the country’s advantage if we were to consider the reasons given in the message for the rejection of the Senate’s amendment, but I submit that we have nothing to consider because the House of Representatives did not consider the amendment.
– The honorable senator should not reflect on the proceedings of the House of Representatives.
– I did not intend to do so.
– I rise to order! The Senate has received a mesage from the House of Representatives. The honorable senator is not merely insinuating; but is alleging, that that message is improperly before us.
– Nothing of the kind!
– If there is anything that I can do to relieve the mental suffering of the Minister for Trade and Customs (Senator O’Sullivan) I shall be pleased to consider it.
– Stop speaking!
– Although I am very charitable I am not disposed to accede to the Minister’s suggestion, and I shall continue my remarks, and so prolong the Government’s embarrassment. During the debate in this chamber last night supporters of the Government accused the Opposition of blindly following a party decision. I shall make my position quite clear. I belong, to the Australian Labour party because .1 believe in its platform. If I differ from the executive on matters of administration, that is my own lookout.
- (Senator George Rankin). - Order! The honorable senator should confine his remarks to the motion before the committee.
– The . criticism that was hurled at the Opposition last night by supporters of the Government was not fair. I cannot express too strongly my disapproval of the treatment of the amendment that was agreed to by the Senate. It has been shown conclusively that the Tasmanian senators on the Government side of the chamber are prepared, irrespective of outbursts that they might make in this chamber, to fall into line with the party machine at the first crack of the whip. I sincerely trust that in future Government senators will refrain from hurling threats and accusations at the Opposition.
– I am entirely in agreement with the motion. It indicates the good sense of the other House. It would have been very unfair for the amendment to be incorporated in the bill. To say the least, some of the statements that have been made by honorable senators opposite to-night have been untrue. When a number of honorable senators entered this chamber for the first time after the general election of 1949, they believed that the Senate was, in fact, a house of review. However, the action of the Labour Opposition when the anti-Communist legislation was before the Senate destroyed their belief, because a number of Labour senators were no more in favour of voting against that legislation than we are of voting against the acceptance of +.he message from the House of Representatives. Although I was opposed to the amendment that was agreed to last night, I am sure that Tasmanian senators who voted for it endeavoured to gain an advantage for their State. We who are old and seasoned enough in politics know that there is such a thing as political tactics. I am glad that the House of Representatives did not subscribe to the point of view of the Tasmanian senators. I see nothing whatsoever wrong with the action of the House of Representatives, and if honorable senators opposite are going to talk about what the other House should or should not do, they should search their hearts and consciences to see whether they have always acted in accordance with their beliefs.
– I am amazed at the attitude of Senator Wright who has been so euphemistically referred to by Senator Armstrong. I thought that a man who could wax so bitter as can Senator Wright on a certain subject would at least have the “ guts “ to stick to his convictions. But I was wrong. The honorable senator reminds me of the following inscription on an old statue in London: - .
The Grand Old Duke of York had 10,000 men,
He walked them up the hill, and he walked them down again.
When they were up they were up,
And when they were down they were down,
And when they were only half way up,
They were neither up nor down.
That is the position in which the honorable senator finds himself to-night. Senator Cormack also finds himself in an unusual position. I usually think of him as “MacCormack” although “ Mac “ indicates the son, and he is probably the original. When the honorable senator referred to a crow I was reminded of the people of Tasmania. The story is told of a white gentleman in that State who took an aboriginal shooting. The white man said, “ Jacky, I want to be fair. If we kill a crow and a duck you can have the duck, and I will have the crow “. The aboriginal replied, “ It sounds all right, boss, but I know that I will get the crow whatever happens “.
– Order ! I haveallowed the honorable senator a certain amount of latitude, but he should now confine his remarks to the motion.
– I am amazed that the Standing Orders provide that honorable senators shall not criticize action taken in the House of Representatives. What are we here for? A message has been received from the other House. Senator Wright said, in substance, that the House of Representatives had given it great consideration. If the honorable senator was in order, surely it is in order for us to say, if we think so, that the other House did not give the Senate’samendment due consideration. We have this message before us. If we cannot discuss what has taken place in the House of Representatives we cannot discuss anything. We are either discussing something, or nothing. What are we discussing? We are discussing something, but we are listening to nothing.
– I rise to order! With due respect, I submit that the honorable senator is out of order, because Standing Order 416 provides -
No Senator shall allude to any Debate of the current Session in the House of Representatives, or to any measure impending therein.
– There was nodebate.
-For the last few minutes Senator Grant has been alluding to the debate in the House of Representatives.
– That is the very point to which I had directed attention. I have said that there was no debate. If Labour senators had not been present in the chamber I should have been wasting my sweetness on the desert air. I was elected to this Senate on the Labour platform, and I stand by it. When the Leader of the Opposition made a similar statement Senator Gorton scratched his head - we shall pick up the splinters later - and cried, indeed, almost shouted, “ Where do you stand ? What happened in 1910?” All Labour senators are pledged to support the platform of the
Australian Labour party; but our friends opposite, on public platforms, over the air and in the press have repeatedly said, “ We are not bound by anybody. We are free men. We discuss matters objectively. We are not governed by Mr. Menzies, Sir Arthur Fadden or anybody else ! “ That is not true. The Government Whip, Senator AnnabelleRankin, came into the chamber to-night and called one Tasinanian Government supporter after another to leave it. I directed the attention of the Opposition Whip to the fact that one after another they obediently left the chamber: I remarked, as also did Senator Ashley, that the steam-roller had gone over them. Honorable senators opposite should be ashamed of themselves for having said that while Labour senators are governed by the party to which they belong, they themselves are not. We admit that we are governed by the Australian Labour party. Let honorable senators opposite be equally as frank and admit that they, too, are not free individuals. When father says, “ Turn “, they all turn. The leaders of the Government parties in the House of Representatives said to Senator Annabelle Rankin, “An election is in the offing; if Government supporters are not prepared to vote as we want them to vote, we shall get somebody else to take their place”.. We make no. bones about the fact that we are governed by the decision of the triennial conferences of the party to which we belong and it is our proud boast that the federal executive of the Australian Labour party is one of the most democratically elected bodies in Australia.
– The honorable senator is completely out of order.
– In an almost miraculous change of front Senator Wright abandoned his bitter hostility to the Government and within 24 hours is content to fall into line at the beck and call of the Government Whip. I hope that the people of Tasmania will estimate him at his true worth as a 100 per cent. opportunist.
Motion (by Senator Spicer) put -
That the question be now put.
The committee divided. (The Ch airm an - Senator George Rankin.)
Majority . . 9
Question so resolved in the affirmative.
Question put -
That the committee do not insist on the amendment, disagreed to by the House of Representatives.
The committee divided. (The Chairman - Senator George Rankin.)
Majority . . 9
Question so resolved in the affirmative.
Resolution reported; report adopted
Motion (by Senator O’Sullivan) agreed to -
That the Senate, at its rising, adjourn to to-day, at 11.30 a.m.
The following papers were pre sented -
Commonwealth Telegraphs Agreement - Commonwealth Telecommunications Board - First General Report to 31st December, 1951, and Statement of Accounts to 31st March, 1951.
Lands Acquisition Act - Land acquired for -
Defence purposes - Balcombe, Victoria.
Postal purposes - Cavan, New South Wales.
Public Service Arbitration Act - Determina tions by the Arbitrator, &c. - 1952 -
No. 39 - Commonwealth Public Service Clerical Association.
No. 40 - Commonwealth Storemen and Packers’ Union.
No. 41 - Professional Officers’ Association, Commonwealth Public Service.
Senate adjourned at 12:31 a.m. (Thursday).
Cite as: Australia, Senate, Debates, 4 June 1952, viewed 22 October 2017, <http://historichansard.net/senate/1952/19520604_senate_20_217/>.