12th Parliament · 1st Session
Mr. Deputy Speaker (Mr. McGrath) took the chair at 11 a.m., and read prayers.
– Honorable members are aware that next week this House will begin its sittings on Wednesday. Will the Acting Prime Minister state whether that practice is to be followed in subsequent weeks for the balance of the session, or whether the Tuesday sitting is to be resumed?
– An exceptional circumstance - the holding of an important meeting in Melbourne - is responsible for the decision to adjourn until Wednesday next. In the following week the adjournment will be from Friday to Tuesday.
– Is the Acting Prime Minister in a position to state when the present sittings are likely to terminate?
– I cannot yet make a definite statement, but as I have informed the House on many occasions, so soon as I am in a position to do so, I shall inform honorable members what business must be transacted before the sittings are brought to a termination.
Export of Sheep Skins
– Will the Acting Prime Minister inform the House whether it is correct, as reported, that the Government - or the caucus, I am not sure which - has decided that there shall be imposed a duty of1/2d. per lb. on the export of sheepskins from Australia? If it has been so decided, will the honorable gentleman, in view of the injury that will thus be caused to Australia’s principal primary industry, give to representatives of the wool-growers an opportunity, similar to that given to the fellmongers to place their position before the Ministry ? .
– It is not the practice in answer to questions to furnish information relating to policy, particularly with respect to the tariff.
– Has the Assistant Minister for Customs received the report of the Tariff Board in connexion with the fellmongering industry?
– The report of the Tariff Board has been received, and will be made available to honorable members as soon as possible.
– As action has been, and is being taken by some of the States to pass moratorium legislation, will the Acting Minister for Markets and Transport state whether any steps have been taken by the Commonwealth and State authorities to define clearly the powers of the States in regard to such laws ? If not, will such stopsbe taken, so as to prevent the undue disorganization of industry in the application of those laws?
– This matter was raised recently at the conference of Commonwealth and State Ministers which was convened to consider the position of the wheat industry. Sir James Mitchell, the Premier of “Western Australia, expressed the opinion that the bankruptcy law of that State conflicted with the federal law, and that it would be necessary to confer on the matter. The representative of South Australia also raised the question. The Commonwealth Attorney-General’s Department was asked to go into the matter, and it has prepared an opinion to the effect that, if the State laws are drafted along the lines of the South Australian law, they will not conflict with the federal law. The Federal Government views the whole matter sympathetically, and the honorable member for Galore may rest assured that whatever stops are necessary will be taken to deal with the position.
– Recently I asked the
Acting Prime Minister whether the Government was prepared to appoint a royal commission to inquire into the parlous condition of the wheat industry, but his reply had no relation to my question. I now ask again whether the Governmentis prepared to appoint a royal commission to inquire into that matter?
– If the honorable member is dissatisfied with any reply given by me, and will place his question in a lucid form on the notice-paper. I shall do my best to reply to him.
– Will the Acting
Prime Minister be good enough to state what, in his opinion, constitutes lucidity ? Yesterday I asked a question, and to-day I was informed by the honorable gentleman that if I framed it in a more lucid manner he would endeavour to answer it. My question was -
In view of the importance of the wheal industry to this country, and the parlour condition in which that industry is, will the Government appoint a royal commission to inquire fully into the disabilities and cause of such disabilities under which the industry is labouring, and reportas early as possible to thisParliament?
Upon consideration, I am unable to increase the lucidity of my question, and I now ask the Acting Prime Minister in what form he would like to have it so that he may bo able to give me a definite answer ?
– I am sorry if the honorable member has taken offence at my use of the word “ lucid.” I thought this morning that he was making some addition to his question, and my intimation to him was merely that, if he would put the complete question on the noticepaper, I would endeavour to give hima complete answer.
– Has the Acting Minister for Markets and Transport had inquiries made into the suggested alteration of the train service to and from Canberra ?
– This matter was raised the other night, and, as Acting Minister for Markets and Transport, I promised that suitable representations would be made to the State authorities. Those representations have been made, but I have not received a definite reply to them. I shall have further inquiries instituted.
– Last night the Acting Prime Minister stated that the Government intends to proceed with some measures relating to the granting of a bounty on the production of gold. Will he now say whether the intention is to proceed with those measures before the House rises this year, or subsequently?
-It is intended to pro- ceed with them before the House rises.
– As the accounts for the last quarter show a deficit of over £6,000,000, and it is questionable whether the proposed new taxation will bring in additional revenue, will the Acting Treasurer indicate from what fund the Government will obtain the money necessary to pay the gold bounty? Does it intend to resort to note inflation?
– No money will be needed for the payment of a gold bounty during this finaaicial year.
– Will the Acting Minister for Trade and Customs inform the House whether it is the intention of the Government to withdraw the excise duty of 2s. per lb. upon locallymanufactured tobacco, and to increase by that amount the duty on imported leaf?
– For obvious reasons, I cannot reply to such a question. The whole matter is under consideration, but no decision has been arrived at by the Government.
– The Acting Treasurer has notified his intention to introduce nine measures to amend the Sales Tax Acts. Is it intended to bring t hose forward before the House adjourns ? If so, will the honorable gentleman indicate at the earliest possible moment the nature of the proposed amendments, so that the business world may be aware of what is intended?
– The intention is to bring down these measures during the present sittings of the House, and at the earliest possible moment I shall indicate their contents. I may say at this stage, however, that the bills deal only with what may be regarded as technical defects that have been discovered in the administration of the Sales Tax Acts, and that a general review of the operation of that legislation will not be undertaken until the Prime Minister, who introduced the original measures, returns to Australia.
– Will the tax be increased ?
– There will be no increase of the tax.
– Will the Minister for Home Affairs state whether Mr. Wickens, who is to act as a royal commissioner to inquireinto the basic wage, will be required at the same time to perform the duties of Commonwealth Statistician? Further, how long does the Minister anticipate that Mr. Wickens will be required to act as a royal commission, and what provision has been made for the control of his subdepartment during his absence from it?
-It is intended that Mr. Wickens shall continue to discharge the duties of Commonwealth Statistician while he is acting as a royal commissioner, and it is anticipated that no trouble will result from his filling both positions. He is empowered to obtain what assistance is necessary, both in his department, and as a royal commissioner. The inquiry will last abouttwelve months, and it is not expected that the work of the Commonwealth Statistician will fall behind during that time.
– Is it proposed to make any provision for the effective representation of interested parties at the basic wage inquiry, or is it proposed that, as in the case of the so-called sugar inquiry, no evidence on oath shall be taken, and that there shall be no crossexamination of witnesses?
– I was under the impression that in my statement last night I made it clear that the royal commissioner would obtain assistance and information from all available sources, including employers, employees and all other interested sections of the community.
– Will evidence be taken on oath ?
– Every royal commission gives the right to take evidence on oath. The full scope of the inquiry will be explained to honorable members later.
– Seeing that the expressed view of the Government is that royal commissions of inquiry are undesirable, why are Ministers on this occasion appointing a royal commissioner to inquire into the basic wage? Why cannot the Government make up its own mind on the subject without holding any inquiry?
– The Leader of the Opposition must realize that there are many important matters to be considered in fixing a basic wage. I understand that, although no direct request was made, a hint was dropped that the present Arbitration Court did not feel itself qualified to determine a proper basic wage for Australia at the present time. If a just decision can be arrived at after investigation by this royal commission, a splendid service will have been rendered to the country.
– Will the appointment of the royal commission interfere with the work of the Arbitration Court which is at present conducting an inquiry into the basic wage in Melbourne?
– I ask honorable members to place on the notice-paper any further questions regarding this subject.
Alleged Statement by Mr. Yates.
– Does the Acting Prime Minister agree with the statement of the honorable member for Adelaide (Mr. Yates) that persons who subscribe to the present Commonwealth loan are Shylocks and “gold-bugs,” and that interest on the loan should be paid by increasing the note issue?
– I do not know whether the honorable member for Adelaide made use of those terms or not. I desire to impress upon the honorable member for Warringah (Mr. Parkhill) and others that there will be no repudiation in connexion with this loan, and I am pleased to inform him that many honorable members on this side of the House will be subscribers to it.
– Will the Postmaster-
General state whether the post office revenue has been declining, and, if so, why the department has refused applications for new telephone installations?
– The revenue from the post office is not coming up to expectations, but that has no bearing upon the refusal of applications for telephone connexions. Those applications have been refused because the Government’s works programme has been limited. The amount of money available for works connected with the post office and, indeed, for the Commonwealth as a whole, has had to be cut down because money cannot be procured. Additional telephone connexions cannot be made, because we have not the money with which to do the work.
– Additional telephone connexions mean more revenue.
– In some instances such additions are profitable, while in others they are not. In any case, if the Government is unable to raise loan money the work cannot be done. This is the position, not only in regard to telephone connexions, but also in regard to automatic telephone installations and other public works.
asked the Post master-General, upon notice -
How many broadcasting listeners’ licences have been issued since 17th July, 1929, and how much net does this mean that the departmenthas collected from licence fees, when the cost of the following has been deducted from the gross amount collected: -
– The answers to the honorable member’s questions are as follow : -
asked the Acting Treasurer, upon notice -
-T he answers to the honorable member’s questions are as follow : -
asked the PostmasterGeneral,upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the Acting Treasurer, upon notice -
– The answers to the honorable member’s questions are as follow : - 1.Yes.
asked the Minister for Defence, upon notice -
– Inquiries will be made, and a reply will be furnished to the honorable member as soon as possible.
asked the Acting Treasurer; upon notice -
During his recent visit to Canberra, did the Premier of Tasmania make application to the Commonwealth Government for financial assistance for the purpose of . relieving the unemployed in that State: if so, what was the reply?
– The answer to the honorable member’s question is as follows : -
The Premier of Tasmania, in letters and by personal representations, has sought increased financial assistance from the Commonwealth on the lines recommended by the Federal Parliamentary Standing Committee of Public Accounts, and in doing so has referred to the necessity for further revenue to afford unemployment relief. He has, however, been informed that consideration of the recommendations of the Standing Committee of Public Accounts must be deferred until the budget for the financial year 1931-32 is being prepared.
asked the Acting Treasurer, upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the Acting Trea surer, upon notice -
What revenue was collected per medium of the federal entertainments tax for the twelve months ending 31st August, 1930, for each respective State, from - (a) moving picture theatres: and (b)all other amusements (respectively detailed)?
– The information is being obtained, and will be furnished as soon as possible.
asked the Acting Prime
Minister, upon notice -
– The answers to the honorable member’s questions are as follow : - 1, 2 and 3. The information will be obtained as far as possible.
asked the Acting Minister for Markets, upon notice -
– The desired information is being obtained.
asked the Acting Prime Minister, upon notice -
– The answers to the honorable ‘ member’s questions are as follow : -
asked the Acting Prime Minister, upon notice -
In view of the fact that the Commonwealth Arbitration Court has announced that, notwithstanding the appointment of a royal commission, the court will proceed with the basic wage case, will he state the precise terms of any request to the Government by the court to appoint sucha commission?
– I refer the honorable member to the answer given by me to the question asked by him on this subject, without notice, yesterday, from which it will be seen that I did not state that any specific request had been made by the court to the Government.
asked the Acting Minister for Trade and Customs, upon notice -
– The answers to the honorable member’s questions are as follow: -
Motion (by Mr. Fenton) proposed -
That the House at its rising adjourn until Wednesday next at 3 o’clock p.m.
.- I protest against the’ adjournment of the House until Wednesday of next week. . Parliament was called together on the 30th October, and consequently members from distant States have now been at Canberra and away- from their homes for five *weeks, and, because of the indecision of the Government, it appears that “we may be here another five weeks without accomplishing anything definite, notwithstanding that the business on the notice-paper is so trifling that it could easily be disposed of to-day. What has this Parliament accomplished since it met on the 30th October? It is true that we have passed a few bills; but they really mean nothing. Apart from the tabling of tariff schedules by the Assistant Minister for Trade and Customs (Mr. Forde) no definite attempt has been made to cope with the present situation. The Ministry should take control of the House, and conduct its business, as has been the case in the past. It is absurd that we should meet only two or three days a week, and then adjourn for another week. I understand that the members of another place are not to meet until next Wednesday. I protest most emphatically against the tactics adopted by the Government. In view of the serious position of the country, one would have expected the Government to face the position bravely, and make an honest attempt to deal with it. It is all moonshine to say that it is necessary to adjourn until Wednesday next, unless, of course, the Government does not desire to accomplish anything at all. I protest against the way in which honorable members have been humbugged and against the expense associated with keeping this Parliament sitting without anything definite being accomplished.
.- I support the protest of the honorable member for Lilley (Mr. Mackay). The Government adopted an unusual course when it called Parliament together on a Thursday to continue the session. It is evident that that day was chosen to suit the convenience of the Labour caucus which was then endeavouring to formulate a policy. Indeed, ever since Parliament assembled, the Labour caucus has been struggling to frame a policy to place before the House, but so far it. has not been successful, and is still floundering. The sittings of the last month . have been the . most futile, humiliating and puerile in the history of this Parliament. If the business which we have been called together to transact is as important as we have been led to believe - and there is no question of the urgent necessity for doing something - we should not have to wait until next Wednesday before resuming our sittings. Every person in the community, with the exception of the members of the Labour caucus, realizes the necessity for Parliament doing something to stem the financial drift. Instead of doing nothing, Parliament should do its work, and then allow members from distant States to reach their homes for Christmas. I protest against this continued delay.
– I feel that the Government is acting unfairly in proposing to adjourn from to-day until Wednesday next. Parliament was called together on the 30th October, only to sit for a few minutes that day before adjourning for practically another week. The Government should give consideration to the position of honorable members who represent remote constituencies; some of them travelling 2,700 miles to get to Canberra. One would not object to being brought here if the Government allowed Parliament to settle down to business; but, instead of doing so, it indulges in dilly-dallying tactics which get the country nowhere. We are now approaching Christmas, and those of us whose constituencies are in distant States, desire to return to them in order that they may give personal attention to the many needs of our constituents. Those whose constituencies are close at hand, can attend to their business over week-ends. It is unfortunate that the Government party is split into so many factions, with the result that there can be no united effort on the part of honorable members opposite to assist the country out of the serious position in which we now find it. I protest against this unnecessary adjournment until Wednesday next.
– I. desire to voice my protest against the haphazard way in which the Government is conducting the business of the country. There is not the slightest justification for the House’ not meeting on Tuesday next. Cabinet has frequently met in Melbourne at a weekend, and the business of the country has still been conducted in this chamber. Apparently, there is to be the usual performance of the “ Brawlers’ opera “ in “ cawk-ass “, and the business of the country is to be heldup in consequence. I put it seriously to the Acting Prime Minister (Mr. Fenton) that if the ramshackle contraption in this Parliament that terms itself a “Ministry” does not take care, it will fall to pieces before much longer.
– Replying to the protest of honorable members opposite that an adjournment until Wednesday next is unnecessary, I suggest that if we continue in session until well into December, they will have ample time to attend to the business of the country, and still will be able to reach their homes to spend Christmas and the New Year with their families.
Question resolved in the affirmative.
Rabaul and Far-East
.- On the 19th November I promised to obtain further information in order to reply more fully to questions asked by the honorable member for Wakefield (Mr. Hawker) concerning the reported intention of the Eastern and Australian Steamship Company Limited to establish a new shipping service between Rabaul and the East. As the result of inquiries that i have caused to be made, I have been informed that the company proposes to vary the itinerary of three of its vessels which provide a shipping service between Australia, Manila, Hong Kong and Japan, so as to include Rabaul as a port of call, and to omit Cairns, Thursday Island and Sandakan. The three vessels concerned are registered as follows : The Nellore, Greenock ; the Tanda, Glasgow; and the St. Albans, London. It is not intended that the Government shall grant any subsidy in connexion with this alteration. national debt sinking fund bill:
Bill brought up by Mr. Lyons, and read a first time.
– by leave - I move - .
That the bill be now read a second time.
This bill provides for the variation of the sinking fund law on the lines announced in the financial statement that was delivered by me on the 5 th of November. The national debt sinking fund was established in 1923 to provide for the redemption of Commonwealth debt. It was designed to pay off the post office debt in 30 years and war and other debt in 50 years. The act, as originally framed, provided for the Treasurer paying the necessary contributions from revenue to the sinking fund. These annual contributions amounted in the case of post office debt to 30s. per cent. of the debt. On war and other debt the annual contribution was to be 10s. per cent. ofthe debt. All these sums were to be accumulated at the rate of 5 per cent. per annum. The annual contributions thus payable to the sinking fund, compounded at 5 per cent. per annum on the basis provided in the law, would have sufficed, without any other assistance, to redeem the Commonwealth debt within the periods provided for in the act.
In addition to the contributions referred to, other moneys are payable to the sinking fund under the present sinking fund law. These sundry additional payments would, if continued, provide for paying off the debt in a much shorter period- than that originally contemplated. The most important of these excess contributions are reparation moneys and half the profits of the Commonwealth Bank. Moreover, £7,415,755 of surplus revenue has been applied to the redemption of debt since the establishment of the sinking fund. Though debt to that amount has been paid off from the surplus revenue, the contribution to the sinking fund of 10s. per cent. on the whole debt has been continued and would, under the law as it now stands, be continued for the full 50-year period. While these generous payments towards the redemption of our debt could be readily justified in times of abundant revenue, the continuation of such heavy contributions, in present circumstances, would place an undue and unnecessaryburden on the taxpayers of Australia. The position is that in flic last seven years the sinking fund received considerable sums in the way of windfalls. lu our present financial position, we cannot continue to provide windfalls for the sinking fund, and we are fairly entitled fo put the fund buck on the basis of 30 and ;>Q years, as originally planned. In each of the last two years the actual provision for Commonwealth debt redemption has exceeded £6,000,000. The amount for 1928-29 was £6,230,000. For 1929-30. £6,422,000 was provided. For the present year provision under the law as it now stands was estimated nt £6,S50,000. These figures include payments to the British Government in redemption of our war indebtedness to Great Britain. There is a separate law for the redemption of our debt to the British Government, and payments to that Government are made directly from, revenue, and do not pass / rough our sinking fund commissioners.
It must not be forgotten that, though the Commonwealth has had a sound debt redemption scheme for seven years, it lias been incurring new debt for new works at the same time as it has been redeeming old debt from the sinking fund. An important stage was reached in bur sinking fund operations last year, when, for the first time, the debt redeemed from sinking fund considerably exceeded new debt created as a result of new borrowing. Even on the reduced basis of sinking fund provision now contemplated we shall be paying into debt redemption this year considerably more than we shall be spending on new loan works. In other words, the sinking fund is doing the work which it was intended to do, and, up to the present time, lias paid off an additional £14,000,000.
In considering the Commonwealth sinking fund law it is important to remember that the bulk of the Commonwealth debt is war debt. Australia is doing as much as can reasonably be expected in paying off this debt over a 50-yoar period. As a matter of interest and comparison, I may point out that the debt of Great Britain to the United States of America, and the war debts of the allies to Great Britain, are being repaid over a period of 62 years, whereas the Commonwealth, even under the amended arrangement authorized in this bill, Will repay her war debt over a period of 50 years. As regards the non-war debt, approximately half was incurred for post office, telegraph and telephone works, and these amounts are being amortized over a period of 30 years.
In the light of all these facts the Government considers there is ample justification for adjusting the sinking fund to the original basis of 30 and 50 years, particularly at a time like the present, when Commonwealth and State budgets disclose deficits. The bill therefore provides that only so much as is necessary to carry out this plan shall be paid to the National Debt Commission during each financial year. When discussing the financial statement the honorable member for Gippsland (Mr. Paterson) suggested that provision btmade to ensure that reparation payments and profits from the Commonwealth Bank should continue to go towards debt redemption. The bill makes the provision, but the annual revenue contribution now provided for will be reduced so that the fund will only receive in each year the appropriate amount dm1 in: that year for the redemption of the debt on the 30 and 50-year plan. If Commonwealth ‘ Bank profits fail to provide sufficient money to redeem the debt, in the 30 and 50-year’ period, additional sums from general revenue will have to bc contributed. This, I think, meets the point raised by the honorable member.
– Will the 30-year period date from the passing of this bill ?
– No ; it will date from 1923. The result of this adjustment in the sinking fund contributions for the present year will be a reduction in the revenue contributions of approximately £1,950,000. The amount which will still be available for Commonwealth debt, redemption this year will be £4,900,000. which sum will exceed the amount of loan money expended.
I, strongly resent the suggestion that these proposals represent a raid on the sinking fund. Statements of that nature are altogether unwarranted. They serve no good purpose, and are liable to damage the credit of Australia, because, as I have shown, we are maintaining a sinking fund that will compare favorably with sinking funds established by governments in other countries. We are continuing to give effect to the intention of Parliament.
– The Treasurer is just having a little dip into the fund.
– Yes, and taking a bit more out.
– We are not taking a bit more out. The Commonwealth,when it established the national debt sinking fund, contracted to pay off its debts in. periods of 30 and 50 years. This hill does not interfere with that arrangement; it merely places the sinking fund on a basis which will carry out the original intention of Parliament when the existing law was passed. To make unnecessary calls on taxpayers to the extent of nearly £2,000,000 a year would, in the present condition of finance, be wrong. The sinking fund position of the Commonwealth is sound. The moneys provided for debt redemption in. the first seven years of the scheme far exceed the provision contemplated. No country appears to be doing more relatively for the redemption of its debt. In order to ensure that the proposals contained in the bill shall provide for the redemption of the Commonwealth debt within the periods of 30 and 50 years, the amendments now before the House have been submitted to actuarial examination. The actuary attached to the Commonwealth Superannuation Board, after completing his examination, has stated that the sums to be paid under the scheme in this bill will provide for the redemption of the debt as desired.
The adjustment proposed in the bill does not in any way affect the sinking fund for State debts established under the financial agreement. That agreement makes provision for the redemption of State debts existing at the 30th June, 1927, in a period of 58 years, and of new debts in a period of 53 years. So that there may be aproper understanding of the debt position of Australia, I propose to set out the varying periods over which the Australian debt is being redeemed. They are as follow: -
Commonwealth Debt. - : War indebtedness to British Government - 35 years from 1921; post office debts - 30 years from 1923 in the case of old debt, and 30 years from the date of raising in case of new debt. Other debt - 50 years from 1923 in the case of old debt, and 50 years from the date of raising in the case of new debt.
Debts of the States. - 58 years from 1927 in the case of debt then existing, and 53 years from the date of raising in the case of new debt.
Debate (on motion by Dr. Earle Page) adjourned.
In committee: Consideration resumed from the 27th November (vide page 824) .
Clause 1 agreed to.
Clause 2 -
Section twenty-four of the Principal Act is amended by omitting sub-sections (1.) and (2.) and inserting in their stead the following sub-sections : - “ (1.) In the case of a person (other than a company or an absentee) whose income is derived solely from property, there shall be deducted, from thatincome -
the sum of One hundred pounds less One pound for each pound by which the income exceeds One hundred pounds: or
Section pro-posedtobe amended -
– I move -
That the word “One” paragraph (a) of proposed new sub-section (1) be omitted, with a view to insert in lieu thereof, the word “ Two “.
I intimated at an earlier stage in the debate, that the Government had agreed to increase the exemption as now proposed. The bill fixed the exemption at £100, to disappear at £200. This amendment will provide for an exemption of £200, to disappear at £400.
– I appreciate the action of the Acting Treasurer in submitting this alteration ; but I do not think that he has gone far enough. The exemption should really be £300, so that the present position would be unaltered. There is no reason why discrimination should be shown in taxation he.tween personal exertion income and income from property. Those who are dependent on income from property are frequently unable to perform any work at all, and, therefore, could not have an income from personal exertion. The whole purpose of exemption was to meet such cases. I cannot see why there should be any difference in taxation between a man earning £300 per annum, and another, who is unable to work, drawing £300 per annum from property. Therefore, I regret that the Government has not seen fit to retain the exemption of £300. Still, £200 is, to my mind, much better than £100, and I, therefore, accept the Government’s proposal. Subsequently, I intend to submit an amendment, the effect of which would be to make the exemption disappear less rapidly than is now provided for. As the clause stands, the exemption of £100 disappears entirely when the income reaches £200. Under the amendment proposed by the Acting Treasurer, an exemption of £200 will disappear entirely at £400, which, I think, is far top low a figure. I suggest that the disappearing point should be £S00, because between £600 and £800 the amount of exemption to be granted will be very small. My desire is that the exemption shall be £200, less £1 for every £3 by which the income exceeds £200. That would remove much of the inequality to which I referred yesterday. Under this bill an income of £350 from property will have to bear increased taxation to the extent of 2,900 per cent. That is a staggering increase, which should surely be avoided. The amount of tax that would be lost by a reduction of the tax on the lower incomes would be relatively small. The taxation of the higher incomes will not be affected by the exemption. On incomes of £800 per annum and upwards there will be no exemption, and every penny will be taxed. Consequently, I desire that persons with the lower grades of incomes should be placed in a position equivalent to those with the higher incomes. The increased tax proposed to be imposed on incomes
Dr. Earle Page. of £500 per annum, amounts to about 1,000 per cent, and on incomes of £750 per annum, about 600 per cent. I trust that the Treasurer will be able to accept the amendment that I shall submit.
Amendment agreed to.
Amendment (by Dr. EARLE Page) proposed-
That the words “each pound,” paragraph a, proposed new sub-section (1.) be omitted with a view to insert in lieu thereof the words “ every three pounds “.
– I support the amendment. The clause deals solely with the exemption, and does not, in any way, affect persons with large incomes. Those who are affected are persons with comparatively small incomes, say £250, £300 or £350 per annum. I have no objection to a differentiation between the rate of tax charged on income obtained by personal exertion, and that on income obtained from property; but that is an entirely different matter from exemption from taxation, and the two should not be confused. There is no justification for differentiation with regard to the amount of exemption, even though different rates of taxation are charged, according to the source of the income. I have not protested against the reduction of the exemption from £300 to £200, because a reduction to £100 was at first proposed, and I realize, in regard to the amendment just made, that half a loaf is better than no bread; but none the less I strongly hold the view that the exemption allowed should be the same, regardless of source of income. What is the object of allowing exemption from income taxation? It seems to me that it is to ensure that a taxpayer shall be allowed to retain a sufficient amount of his income free from tax to permit him to meet reasonable living expenses. If that is so, surely it cannot be contended that an income of £200 from property is equal in purchasing power to an income of £300 from personal exertion. It will not be contended seriously, of course, that £1 for £1, the income from the one source is worth any more than the income from the other,. For this reason I submit that there is no justification whatever for any differentiation in the amount of exemption in the case of the two classes of income. But a differentiation is’- being made in two ways. First, the amount of exemption is being reduced, and, secondly, the exemption is being made to disappear at a more rapid rate in the case of income from property than in that Of income from personal exertion. This, in my opinion, is harsh treatment of the taxpayer who enjoys a small income from property. His exemption will totally dis- appear when his income reaches £400, while a taxpayer who obtains his income from personal exertion will enjoy some degree of exemption until his income reaches £1,200. This is a very strong argument in favour of the amendment.
I do not know whether the right honorable member for Cowper (Dr. Page) feels happy at having the support of the honorable member for Eden-Monaro (Mr. Cusack) for his proposal. Yesterday this honorable member said that the exemption should be made to disappear more slowly, and that it .should not totally disappear until the taxpayer was receiving £800 of income. That is about the first really wise remark I have heard the honorable member make.
In order to show honorable members exactly how the proposal of the Government and the amendment of the right honorable member for Cowper will affect taxpayers with small incomes, I shall submit two or three concrete illustrations. A man with an income of £350 per annum or, roughly, £6 15s. a week from property, could hardly be called a plutocrat. Under the existing law he would be obliged to pay a tax of £1 per annum, but if the exemption is reduced to £200 and it is made to disappear at the rate of £1 for £1 above that figure, he will be obliged to pay £29 8s. 4d. per annum in taxation, or 29^ times more than at present. This impost will be in addition to his State income taxation, and any taxation he may have to pay for unemployment relief and other purposes. But, although the Government proposes to place this heavy impost upon such a taxpayer, it has refused to agree to the suggestion that civil servants enjoying an income of anything below £725 per annum. shall be called upon to suffer any deduction therefrom. In the one case the taxpayer with £350 per annum will have to pay £29 8s. 4d., or an increase of 2,940 per cent, on his present rate of tax, while, in the other, the taxpayer with more than double the income of the other man, will lose nothing. A man in receipt of an income of £250 per annum or, roughly, £4 16s. per week, -^-little more than the basic wage - will be obliged to pay a tax of £9 2s. per annum under the present proposal of the Government. This is nearly equivalent to two full weeks of income. A man with an income of £300 per annum or, roughly, £5 15s. per week, which is still a comparatively low income, will be obliged to pay under this proposal, £18 13s. lid. in taxation, although his income is only about two-fifths of the income of some civil servants, who, in the opinion of the Government, should be exempt from any special impost. These cases show how harsh this proposal actually is.
The amendment of the right honorable member for Cowper would reduce these exactions to some extent. If the amendment is adopted, the disappearance of the exemption will be at the rate of £1 in every £3. Taxation paid by a person receiving £250 a year, or £4 16s. a week, would be £6 instead of £9 2s. ; on £300 a year, or £5 15s. a week, about £12 instead of £18 13s. lid. ; and on £350 a year, or £6 15s. a week, £18 13s. lid. instead of £29 8s. 4d. I do not believe that there should be any discrimination in exemptions and the rate at which they disappear, but I admit that there i3 some justification for a higher rate of taxation on unearned increment than on income from personal exertion. An exemption is granted simply to enable a person to have sufficient income free from taxation to enable him to meet his ordinary expenses. Surely it cannot be contended that there should be any differentiation in the exemption as between income from property and from personal exertion. Yet, although I contend that there should be no distinction, I arn prepared to accept a reasonable compromise. As I regard the amendment moved by the Acting Treasurer (Mr. Lyons) to raise the exemption from £100 to £200 as something in the nature of a compromise, I appeal to the Minister to accept the amendment moved by the right honorable member for Cowper, under which the lower exemption will disappear at the same rate as the exemption on income from personal exertion. I support the amendment, and trust that the Minister will accept” it.
.- The proposals embodied in this bill indicate the enormous increase in taxation imposed by this Government as compared with the general decrease in taxation provided in the legislation passed by the late Government. It is important that the people should understand exactly what they have to pay for an absence of economy from Commonwealth administration. I propose to quote three or four examples to show how taxation on income from property will be increased. On an income of £250 a year from property I find that in 1921 - a year in which taxation was heavy - the federal income tax payable was £7 15s. 9d.; by 1928, on the same income, it had been reduced to £4 18s. 7d.; but, under this measure, and allowing for the amendmentjust adopted, it will be £24 3s. 5d. Summarized, the position is as follows: - In 1921 it was £7 15s. 9d.; 1928, £4 18s. 7d.: and 1930, £24 3s. 5d. On an income from property of £500the figures are:- 1921, £20 9s.7d.; 1928. £12 19s. 3d.: and in 1930, £51 15s. 2d. On an income of £750:- 1921, £43 3s. 9d.;1928, £27 6s. 9d.; and 1930, £90 16s.8d.
– Is that after making allowance for the exemption?
– I am assured by the accountant who prepared these figures that allowancehas been made for an exemption of £200.
– That is so.
– Between 1921 and 1928 taxation on the incomes I have mentioned and on all other incomes from property was substantially reduced; but in each of the cases I have mentioned it is now being substantially increased. In one instance it is double and in another it is nearly three times as much as was paid in 1921. The result will be to impose a heavy burden upon a large number of thrifty persons in the community, who, with a high degree of self respect, have saved sufficient to render themselves independent of any assistance from the State. Even with the modification now suggested by the Treasurer, the immediate effect will be to impose great hardshipupon the people. Surely there is a much better way to deal with the matter than adopting proposals of this character. I do not intend toenterupon a general discussion of taxation matters, but surely it would be preferable to exercise economy along some of the lines suggested by the Opposition than to inflict the heavy taxation now proposed. I have not the slightest hesitation in saying that it would be more equitable to reduce these taxes than to continue to pay a maternity allowance of £5 to women whose husbands are in many cases in receipt of incomes of £1,000 a year. That cannot be justified at present, and a modification of the maternity allowance would prevent the imposition of unnecessarily heavy taxation on an important section of the community. I support the amendment.
– I expressed my views on this measure during the second-reading debate, and its effect has also been lucidly explained by the right honorable member for Cowper (Dr. Page) and the honorable member for Gippsland (Mr. Paterson). The latter has shown in detail its severe incidence upon a very deserving section of the community. In asking the Acting Treasurer to accept the amendment, I am not making an appeal in the interests of the wealthy section of the community, but on behalf of those who are deriving incomes of from £200 to £300 a year from property; incomes not equal to those of many trade unionists. As pointed out by the honorable member for Gippsland, the honorable member for Eden-Monaro (Mr. Cusack) has expressed views similar to those of honorable members on this side of the chamber, and I am sure that a number of those supporting the Government will admit that its proposals are unreasonable. If the amendment is adopted, it will benefit a large number, and will not affect the revenue to any great extent.
. -I join with members of the Opposition in asking the Acting Treasurer (Mr. Lyons) to give a little further consideration to the people with smaller incomes. The speeches delivered this morning show that an injustice will be done to the poorer classes. I ask the Acting Treasurer to endeavour to come to some compromise with the right honorable member for Cowper (Dr. Page).
Mr.MARKS (Wentworth) [12.21].- I too appeal to the Acting Treasurer (Mr. Lyons) to agree to the suggestions of the light honorable member for Cowper (Dr. Page). The proposed amendment would not relieve me, but it would be of considerable help to the smaller propertyowners. I am inundated with appeals from people in my electorate who have saved a few hundred pounds, and fear that they will be hardly hit by this tax.
– Nobody is more reluctant than I am to propose taxation of this kind, and I assure honorable members of the Opposition that no Government supporter cheerfully acquiesces in it. Probably, if I were in a less responsible position,I would be speaking against the tax, but knowing that the Commonwealth must obtain additional revenue, I, as Acting Treasurer, am compelled to ask the people to make sacrifices that I would not otherwise suggest. I have already made a substantial concession to those who have asked for a higher exemption, and the amendments which the Government is proposing will reduce the estimated revenue from this tax by one-third. In other words, we are surrendering £500,000.
– All of that would have come from the poorer people.
– It would have come from various classes. I refer particularly to the abandonment of the double taxation of income from property. Under the bill as drafted, companies would pay taxation on their income from property, and when the dividends were distributed to the shareholders, they also would pay taxation at the property rate. The Government has agreed that such income should be taxed only once, and that is a substantial concession. I regret that some honorable members of the Opposition should suggest that there is something vindictive in the proposals of the Government. No honorable member on this side of the chamber would desire to impose these rates if they were avoidable. In fact, I know that they are anxious to afford further relief to the smaller taxpayers, and I am prepared to compromise with the mover of the amendment. If he will substitute “ every two pounds “ for “ every three pounds “, I shall accept the amendment.
– I thank the Treasurer for having made that concession, and I ask leave to withdraw the amendment.
Amendment - by leave - withdrawn.
Amendment (by Dr. Earle Page) agreed to -
That the words, “each pound,” be omitted and the words, “every two pounds,” be inserted inlieu thereof.
Clause also consequentially amended.
.- The clause proposes a new sub-section 2a which provides a complicated method of deducting the exemption. The object is to throw the deduction on to the income from personal exertion rather than on to that from property. The proposed new sub-section reads -
In the case of a person (other than a company or an absentee) whose income is derived partly from property and partly from personal exertion. . . the deduction shall he made in the prescribed way. For the first time in the taxation of companies, a distinction is to be made between income derived from property and that derived from personal exertion. The’ Acting Treasurer, in his financial statement, after mentioning that income from property, broadly speaking consisted of interest, dividends and rents, said -
All fixed income from property, including interest, is in a relatively better position to-day than last year, because of reduced commodity prices.
That is very cheering news to persons whose income from property has been reduced by from 40 to 60 per cent. The Acting Treasurer continued -
It is proposed that a super tax of 74 per cent, be imposed upon all incomes derived by every taxpayer (including companies) from property.
Presumably, a rates measure will be introduced to give effect to that proposal: but is it not necessary,in this assessment bill, to provide definitions of income from personal exertion and income from property? It is all very well to say that later, in a rates measure, certain taxation will be imposed on income derived from property; but what does that mean? A company isa corporation, that is, an artificial, legal person, and, as such, is incapable of personal exertion. In the familiar phrase, it “ has neither body to be kicked nor soul to be damned.” Not possessing a body, it has not hands to work with. It is, therefore, difficult to apply to a company the idea of the taxation of income derived from personal exertion. Section 4 of the Income Tax Assessment Act contains a long definition, setting out certain classes of income as income from personal exertion. Income from property is defined as meaning all income from sources in Australia not derived from personal exertion. Accordingly, all income is income from property unless it can be shown to be income from personal exertion. If a special tax of 71/2 per cent. is to he imposed on the income of a company derived from property, it will be necessary to examine all the items of a company’s profits, and to consider whether they do or do not fall within the definition of income from personal exertion. Income from personal exertion covers “ earnings.” Perhaps a company could have earnings, but I doubt whether it could receive a “ salary “ or “ wages “. It could receive “ commission “, “ fees”; and “ bonuses “, hut not a “ pension “, “ superannuation allowance “, or “ retiring allowance “. Income from personal exertion includes the proceeds of any “ business carried on by the taxpayer “. When certain requirements of the Companies Acts have been satisfied, a company commences business, and it would be difficult to suggest that anything it did in accordance with its memorandum of association was not “ carrying on business.” Practically everything that a company does can be said to be the carrying on of business. If that view were adopted by the court, then practically all the income of a company is income derived from “ business carried on by the taxpayer “, that is, by the company. Therefore, the taxation of a company’s income from property might produce nothing. Even the making of investments is part of the business of a company when there is power conferred on the company by the memorandum of association to invest money. The House of Lords has held that full effect must be given to all objects contained in the memorandum of association. Everything done under it is part of the business of the company, and if there is power, as there generally is, to invest money, then that is part of the business of the company. So, if the definition of income from personal exertion is left untouched, most, if not all, of the income of a company will be income from personal exertion. It may be that the Acting Treasurer (Mr. Lyons) has an answer to what I have said. I am raising the question now in order that there may be full opportunity to consider it. Attention should be given to the point, because there seems to be a risk of the Government being seriously disappointed in the amount of revenue that it hopes to obtain from this source. At any rate, there is a risk of much litigation, which, I am sure, is not the desire of honorable members. The Government should take pains to see that no doubt exists. Obviously, as the impost is so heavy, if there is a loophole in the legislation, full advantage will be taken of it. It appears to me difficult to dealwith this question satisfactorily in the rates bill - of course, I have not seen that bill. The provisions of clause 2a, and any provisions which involve the distribution of the income of a company as income from personal exertion, and income from property, will increase enormously the present difficulty and expense of complying with income tax requirements. It will mean dissecting the accounts of all Australian companies carrying on business here, picking out the items of income derived by the companies from property, and distinguishing them from those derived from personal exertion, accurately allocating deductions in the way of expenses and other matters, and calculating income tax payable on two different bases. Then there is the passing on of the rebate of the tax paid by the company to the shareholders, who will have included the amount of their dividends in their income tax returns. One could almost wish himself an accountant Or a taxation expert in order to have an opportunity of working in the new field of employment which will be opened up by this legislation.
Mr.Fenton. - Have not these difficulties already been overcome?
– No. They are new difficulties arising from the necessity, in order to apply the taxation proposals of the Government, for distinguishing, in the case of a company, between income derived from personal exertion and that derived from property. I am not at all sure that there is a distinction between the two, but the work of dissecting accounts on this new basis will require the employment of scores of additional clerks and accountants in the Taxation Department, and of taxation advisers, accountants and solicitors outside. I am inclined to think that in a year or two the work of the department will be hopelessly in arrears. How, for instance, can these new considerations bo worked in with the averaging system? Without having seen the rates bill it appears to me that there is a real risk of legal trouble arising, and, in the best spirit, and not with any party object, I invite the Acting Treasurer to consider these matters very carefully.
Mr. LYONS (Wilmot- Acting Treasurer [12.43]. - I accept the suggestion of the Leader of the Opposition in the spirit in which it is offered. So far as I can ensure it, the rates bill will make the provision to the need of which he has drawn attention. That the honorable member has raised the point at this stage is sufficient to cause me to make absolutely certain of the matter before the bill is introduced. I hope that all difficulty will be avoided, and I shall proceed on those lines.
Clause, as amended, agreed to.
Sitting suspended from 12.45 to 2.15 p.m.
Clause 3 consequentially amended and, as amended, agreed to.
Clause 4 agreed to.
Ml NAIRN (Perth) [2.16].- I move -
That the following new clause be inserted: - 1a. Section 4 of the principal act is amended by inserting in the definition of “ Income from personal exertion,” after the word, “ money,” the words, “ or disposing of goods by hire-purchase”.
This new provision is designed to meet the special position of interest that accrues under hire-purchase agreements. That interest, under the existing definition, is classed as income from property, although, actually, it is not in the nature of income from property. When one examines the line of demarcation that has been drawn, one notes that income from personal exertion was intended to comprise income derived from some sort of activity or industry ; and, on the other hand, income from property connotes the ownership of some sort of property, whether it be real property, shares in companies from which dividends are received, or interest from investments such as mortgages, bonds, and the like. It will readily be seen that the interest which accrues under hire-purchase agreements does not really fall within the category of income from property. Hirepurchase agreements contain a provision for the payment of interest at certain periods, ordinarily monthly or quarterly. Usually, the rate of interest is stated at 8 per cent. or 10 per cent. ; but if regard be had to the periods of payment, the amount of interest in nearly every case works out at very much more than that stated in the document, 8 per cent. rising to 15 per cent. and 10 per cent. to 18 per cent. That does not mean that a person who sells goods under a hire-purchase agreement receives those profitable rates. The fact is, that in these transactions, it is the practice to include in the interest rate a very considerable proportion of the gross profits of the business that is being carried on, and the interest goes towards making provision for general overhead costs, such as the cost of warehousing, advertising, selling, &c. In the majority of businesses the aim of the proprietor is to turn over his capital five times in a year; that is generally regarded as a fair average for a substantial business.
– He would be eminently successful if he could do that.
Mr.NAIRN - Certainly, it is turned over more than once a year ; any business that could not do so, would not be able to carry on. I believe that, in nearly all businesses, the proportion to capital of what may be termed overhead costs, works out at from something like 30 per cent. to 40 per cent. of the gross return. Therefore, the amount of interest payable under a hire-purchase agreement is no index of the actual profits made from the hirepurchase business. If persons who sell motor vehicles, sewing machines, farming implements, &c, under hire-purchase agreements, are to be charged71/2 per cent. on the interest as expressed in every transaction, they will be charged over and over again on their income for the year. The only fair method is to treat this as a business in which money is employed for the purpose of the business, and to levy taxation, not on the gross amount of interest which the taxpayer receives, but on the net amount of profit which he makes out of his business. That principle is recognized in the principal act, in which the definition of “Income from personal exertion “ reads - ‘ Income from personal exertion “ or income derived by any person from personal exertion “ means income consisting of earnings, salary, wages, commission, fees, bonuses, pensions, . . . aud the proceeds of any business carried on by the taxpayer
The interest earned under a hire-purchase agreement would come under the heading of “proceeds of any business carried on by the taxpayer and would be returned :as income from personal exertion were it not for the concluding portion of the definition, which refers to interest, and reads - but does not include interest, unless the taxpayer’s principal business consists of the lending of money
There is a recognition of the principle which I contend should find expression in this bill. The principal act recognizes that the money-lender or pawnbroker ought not to be charged taxation on the gross amount of interest that he receives during the year, but only on the profits that he makes in the employment of the money which returns him the interest. Hire-purchase agreements are in exactly the same category, because the person who sells goods under such agreements uses his capital in connexion with his business. But the interest he gets on the several transactions does not represent the profits he makes on his capital. The only fair method of taxing these persons is to tax them on the actual profit they make out of their business. This amendment, if carried, will not have the effect of granting specially favorable treatment to persons selling goods under a hire-purchase agreement. They should, of course, be required to pay a tax on their profits in the same way as other people have to do, but they should not be taxed on what does not constitute profit at all. The shareholder who receives a dividend will receive it as income from property, and he will very properly be taxed at the property rate; but while the money is in the hands of the company - the “ undertaker “ or corporation carrying on the business - the gross interest received on hire-purchase sales should not be treated as income from property. I feel sure that the Acting Treasurer will realize that if the provision remains unamended it will have the effect of mopping up probably the whole of the profit arising from hirepurchase businesses. Of course, such a situation could bc met by the traders striking out interest altogether from their calculations, and increasing the nominal price of the article so as to include interest. Many hire-purchase agreements are, however, still extant, and grave injustice will be inflicted upon those who sold goods under such agreement unless the clause is amended.
– I propose, to support the amendment. I have here a copy of a letter dated the 11th of November, aud addressed to the Acting Treasurer, by the Queensland section of the Taxation Standing Committee. In connexion with the measure before the House,’ the committee made certain recommendations, one of which is practically identical with the amendment moved by the honorable member for Perth. I know that the Acting Treasurer has received a communication from the committee, and I have also received advice from him that the committee’s recommendations have been considered. This Standing Taxation Committee is a very representative body. It has been in existence for many years, and I know that Treasurers ki other administrations have always appreciated the recommendations and suggestions put forward by this committee, of which the following are constituent bodies: -
Brisbane Chamber of Commerce.
Brisbane Stock Exchange.
Brisbane Timber Merchants’ Association.
Commonwealth Institute of Accountants (Queensland division).
Federal Institute of Accountants (Queensland branch).
Queensland Confectioners’ Association.
Queensland Employers’ Federation.
Queensland Law Society (incorporated).
Queensland Tax Agents’ Association.
The Accountants and Secretaries Educational Society.
The Associated Bank (Queensland).
The Australian Sugar Producers’ Association Limited.
The Brisbane Merchants’ Association. The Institute of Chartered Accountants in Australia.
The Master Carriers’ Association of Brisbane.
The Property Owners’ Protection Association.
The Queensland Chamber of Manufactures. The Soft-Goods Warehousemen of Queensland.
The Taxpayers’ Association of Queensland.
The United Licensed Victuallers’ Association of the Commonwealth of Australia (Queensland branch).
United Graziers’ Association of Queensland.
The letter to which I have referred contains the following recommendation : -
At a meeting of this committee held this afternoon, it was decided to place the following recommendations before you: -
That the definition of “ income from personal exertion “ in section 4 of the principal act be amended so that interest earned in connexion with time-payment or hire-purchase sales will be regarded as part of the sale price of the goods, and, therefore, as income from personal exertion.
This recommendation is made on the grounds of the great difficulty a time-purchase trader will have in arriving at the amount of interest included in sales, and in the case of extensions being granted with extra charges for accommodation (interest) the impracticability of allocating portion of the overhead expenses of the business against the interest. This difficulty will be particularly apparent in the case of companies carrying on such businesses, as companies have not been previously required to differentiate between personal exertion and property income.
The honorable member for Perth has fully explained the objectif his amendment, and I sincerely trust that the Acting Treasurer will be able to accept it.
– I hope that the honorable member for Perth (Mr. Nairn) will not, press his amendment. If the amendment were accepted, and the interest received in respect of hire-purchase sales were regarded as the reward of personal exertion, there would be no logical reason why the same should not be done in the case of interest on business accounts. That would involvea very substantial loss of revenue which the Commonwealth Treasury is not able to afford. In 1922 the last Government decided, with the approval of Parliament, to exclude all interest. except money-lenders’ interest, from the definition of income from personal exertion, and to treat it as income from property. The Government at that time was, to some extent, anxious to get more revenue, but it; was particularly anxious to avoid the administrative difficulties associated with the then existing system. Those difficulties would crop up again if this amendment were accepted. The Government has given full consideration to the representations which have been made on this matter, but it can see no reason why the amendment should be accepted. I trust that the committee will not agree to it.
Proposed new clause negatived.
– I move -
That the following new clause be inserted: - 1a. Section twenty of the principal act is amended by inserting in sub-section (4.) after the word “tax” (first occurring), the words “ forany financial year prior to that commencing on the first day of July One thousand nine hundred and twenty-three “.
Sub-section 4 of section 20 reads as follows : - (4.) Where a company has paid income tax on undistributed income and that income is in any year subsequent to that in which it was derived by the company distributed to the members or shareholders of the company, a member or shareholder who is a taxpayer shall be entitled to a rebate in his assessment of the lesser of the two following amounts: -
This clause is necessary in consequence of a. proposal which will be introduced by resolutionin Committee of Ways and Means for an additional tax of1s. 6d. in the £ 1 on income from property. Those proposals apply to companies as well as to individuals; but they do not apply to dividends paid to the shareholders of a company out of income upon which the company has paid the additional tax of 1s. 6d. in the £1. As shareholders are thus exempted from the additional tax in respect of such dividends, it is necessary to provide that they shall not be entitled to any rebate of the additional tax paid by the company on the income out of which those dividends are paid. If this amendment is not made, those who are not taxable at all under ordinary circumstances would be entitled to claim a rebate. Persons who are exempt from the payment of tax should not be entitled to claim rebate in respect of it.
.- I ask the Acting Treasurer (Mr. Lyons) to make clear what will be the actual effect of this clause. Sub-section 4 of clause 20, to which he referred, is a general section dealing with rebates to shareholders who receive dividends representing the distribution of profits on which a company has already been taxed. It is proposed in future, I understand, to collect company tax, which now stands at1s. 4d. in the £1 on taxable income, and also another tax of71/2 per cent. on income derived by the company from property. The object of the amendment, so far as I can make out, is to prevent shareholders who have not paid any tax from obtaining a rebate in respect of the 71/2 per cent. tax on property. If we look at sub-section 4 of section 20, however, we see that the effect of the introduction of these words will be to limitthe application of the section to assessments for the financial year prior to. the 1st of July, 1923. This section is a general rebate section, so that after the date mentioned there can be no rebate to shareholders in respect of taxes paid by companies.
– That provision is retained ; but it will not apply to this extra tax of1s. 6d. in the £1.
– The section, as amended, will provide that, where a company has paid income tax for any financial year prior to that commencing on the 1st July, 1923, and that income is subsequently distributed, then the shareholder is allowed a rebate. Will any rebate be allowed to any shareholder in respect of taxation paid by a company on income earned after the financial year 1923? In other words, has the rebate been abolished ?
– I think that the honorable member is wrong. In 1923 the act was amended, and since then taxation has been imposed year by year whether the dividends were distributed or not. Upon a literal application of the provisions of section 20 (4) of the principal act, a shareholder to whom a company pays a dividend out of income upon which it paid the proposed additional tax, would be entitled to a rebate of that tax. Those proposals, however, are merely a survival of the law as it stood when companies were only taxed on so much of their incomes as they did not distribute to their shareholders. While the law so stood, it was necessary to provide for a rebateto shareholders when the company distributed income upon which it had paid tax. In 1923 the basis of company taxation was altered, and tax became payable on the whole of the taxable income of a company without regard to any distribution of that income. Appropriate rebates of tax paid by a company on the new basis were provided for by the provisos- following section 16 b. (iii) of the principal act. It was, nevertheless, necessary to retain the provisions of section 20 (4), to provide rebates to meet the case of dividends paid out of income upon which the company had paid tax at the high rates in force under the old law.. It was still necessary to retain that provision ; but, in order that it shall not be invoked for a purpose for which it was not intended, namely, to obtain rebates of the new property tax, it has become necessary to amend the provision by inserting a clear declaration that it shall only apply to distribution by a company out of income upon which the company has paid tax under the old law, that is, the law in force for assessments for financial years prior to 1923-1924. New clause 1a is an amendment which will have that effect.
.- The doubt which has been cast upon the effect of this clause by the Leader of the Opposition (Mr. Latham) makes it imperative that very close consideration be given,, to it. It seems probable that if it is. allowed to go through, in its. present, form a good many hundreds of thousands, of pounds will be paid away to lawyers in the course of litigation which will ensue. Suppose the income of a company amounts to, £100^000 a year, and of this £80,f)00 is due to personal exertion, and £20,000 is derived from other sources. If the company distributes only £50,000 or £60,000, how is any one to determine whether the distribution to a shareholder is made from the £20,000 derived from property, or from the £80,000 derived from what will be described as the personal business of the company? How is it to be determined? Has any machinery been devised for the purpose? Will it be settled on a proportionate basis? Before we can consider this complex matter we ought to know what is in the mind of the department in regard to it. What disturbs me is that the taxpayer or shareholder who has not internal knowledge of the working of the company, and does not know where its dividends come from, will be absolutely in the hands of the Taxation Department. He will not know whether he has been given a fair rebate or not. I should like to see more machinery clauses introduced in order that this matter may be put beyond doubt. Is the object of the Government to prevent the shareholders of a company from obtaining a rebate in respect of” the income tax on property paid by the company?
– That is the object.
– Then the shareholder will pay twice; the company will have paid ls. 6d. in the £1 on that portion of its income which is derived from property, and subsequently the shareholder will pay on the same income.
– The shareholder is exempt from the payment of this tax. The company pays it ; but he does not.
– He does pay on his dividend” as part of his property income at the company rate.
– He pays the ordinary tax, and not the super tax provided in the bill.
– How will the department ascertain how much has been paid? Four-fifths of this dividend is the result of the personal exertion of the company, however the Acting Treasurer may define that. The remaining, onefifth may be regarded as. property income. How much of that is to be taken into account so far as the individual share- 1 holder lis concerned? What rebate is he to obtain?
– This special tax of ls. 6d. in the- £1 will affect only the property income. The shareholder will not be entitled to any rebate.
– He, will have to pay the property- rate of tax on the dividend that he receives.
– That is so.
– Is that not an increased rate of tax?
– Does the Acting Treasurer assure me that the shareholder will not have to pay this special tax on his dividend?
– Yes. He will pay tax at the existing rate. This special tax will not apply to him except in so far as the company pays it in the first instance.
– Does the Minister say that this super tax is being charged on all dividends?
– Not to the individual ; it is paid by the company.
– In his introductory speech, the Acting Treasurer stated that it is proposed that a super tax of 7-J per cent, shall be imposed on all incomes derived by every taxpayer, including income from property. Where is the provision to exempt the income of the individual shareholder? The individual shareholder is to be charged a super tax of Y-J per cent, on his ordinary income tax assessment.
– No. Provision will be made in the rates bill to exempt the individual shareholder.
– That should be done in this bill.
– Am I to understand from the Acting Treasurer that the income from property derived by a shareholder from company dividends will not be regarded as income from property?
– Yes, so far as the extra tax is concerned. That will be paid originally by the company, before the dividend is distributed.
– I fail to see where that is provided in the bill. I have examined the resolution which the
Acting Treasurer has been kind enough to give me, and it does not seem to me to cover the position that I am explaining. We shall commit a grave injustice upon this class of taxpayer if we make himpay twice
Mr.LYONS (Wilmot - Acting Treasurer) [2.48]. - If the bill remained in the form in which it was introduced, and as it now stands, the contention of the right honorable gentleman would he perfectly correct. I give my assurance that ifthat were the position an amendment would have been effected to obviate the imposition of double taxation. The company will pay this additional taxation, and the rates bill that will be introduced later will provide the necessary exemption for individual shareholders.
– How will it. operate i n the ease of a company that has a mixed income, part of which is subject to property tax, and part to personal exertion tax?
– I am assured by the officers of the department that there will be no difficulty in separating the amounts into their respective categories. The important point to be remembered is that this super tax will not affect the individual except to the extent to which it reduces the dividend that he will receive from the company. The company will pay the super tax of1s. 6d. in the £1, but the dividend, after being distributed to the individual shareholder, will not bear the super tax. That will be definitely provided in the bill that is to follow. I give that assurance to the committee, and it will be carried out to the satisfaction of honorable members. If there is any doubt about the clause when it comes before the committee, honorable members need have no hesitation in suggesting methods by which it may be tightened up to ensure that no injustice shall be done.
.- It appears to me that there is a serious risk of confusion and of submitting taxpayers to an injustice if we pass the provision as it stands. Take the case of a shareholder who receives a dividend of 1s. a share from a company. For assessment purposes he at present returns the total amount of the income that he receives from property, and is allowed a rebate of the amount paid by the company in respect of the dividend received by him. It is now proposed to imposeon both companies and individuals a special tax of 71/2 per cent. on property income. Suppose that the gross income of thishypothetical company amounts to £50,000, and that the net income, after deducting expenses and the like, is £20,000. The latter amount is the taxable income, and it is to be distributed between property and. personal exertion sources. I suggest that no one in this chamber at the moment has any idea how that is to be done. The portion which is derived from property will pay the ordinary rate of1s. 4d. plus the super tax of 71/2 per cent., which amounts to1s. 6d. in the £1. The rest, which is regarded as having been derived from personal exertion, will pay the1s. 4d. rate. The shareholder will be granted a rebate of the1s. 4d. on his personal assessment, where that impost has fallen on his dividend, but no rebate of the 1s. 6d. rate. The dividend has to be distributed in some way between property and personal exertion. One would suppose that, in respect of part of that dividend of1s. per share, there would be a deduction upon the basis that the company had paid1s. 6d. plus1s. 4d. or 2s.10d. and upon the rest of the1s. there would be a deduction at the rate of only1s. 4d. The Acting Treasurer informs us, however, that instead of working it out in that way, provision is to be made that the shareholder shall not be taxed under this new provisionwhich imposes a super tax of 1s. 6d. on property income, in the case of dividends from companies. It can be worked out in that way, but, honorable members will realize that the distribution of the company income between personal exertion and property is itself an operation of some considerable difficulty. Then there will be some provision for the notional apportionment of the dividend from property and personal exertion sources, in order to determine the proper method of dealing with the matter. It may be that I am misunderstanding the position, but it appears to me that there are serious risks of complication, more particularly at the company end. If it is definitely provided somewhere that the shareholder is not to pay the super tax of1s. 6d. on his dividend, that will remove one difficulty that I have mentioned. He will then simply have to pay the1s. 4d. /rate on the whole of his dividend, whatever it may be. But, even if that provision is made somewhere else in the law, there will surely be some machinery required to apply the distinction between personal exertion and property income, in. the case of company income.
.- 1 should like to have much more information with regard to this matter, because to me it appears to bo very complex. I have in wind the case of a company with an annual income of £30,000. It holds shares in another company which returns an income of £500, and has reserves of £10,000 invested in Government stocks which return £600. Thus the total income of the company is derived from certain business returns and the actual carrying ou. of its own business. It shows a profit of some £3,000 per annum. It pays in dividents £1,500, and the balance of profit is taken into reserves. What I cannot understand is this: Mow will the shareholders of that company ascertain what proportion of the dividend has been taxed at the property rate of ls. 6d. in the bauds of the company? We are given to understand that one-half of the profits of the business of a company in this case is to be taxed in the hands of the shareholders, and that that will be a rebate on the dividend of the profits from property. Are the profits from property £1,100 out of £30,000 or £1,100 out of £3,000? This legislation will prove to be the most complicated ever introduced into the income tax law. By comparison, the provisions of section 21 will be extraordinarily simple. We should not allow this clause to pass without a more adequate explanation from the Minister concerning the protection to be given to shareholders of companies. Are we to understand that the Commissioner will exercise his discretion as to the allocation of the property income of a company? And what will be- the position of a company which makes a loss on its general operations and uses its property income to pay a dividend? These practical illustrations of what is likely to happen, occur readily to my mind; I should like, to hear what the Minister has to say concerning the points which I have raised.
– Will the Acting Treasurer also consider the case of a com pany . which makes a loss on personal exertion, but has income from property, and shows a loss on the year’s operations? Will it be required to pay taxation at the rate of ls. 6d. in the £1 on its income from property?
Mr. LYONS (Wilmot- Acting Treasurer [2.59]. - With regard to the point raised by the Leader of the Opposition (Mr. Latham) I can assure him that the position of such a company would be examined. As to the other objections, I am informed that the difficulties mentioned have not only been foreseen, but that, in fact, they exist in connexion with the existing legislation.
– That cannot be, because existing legislation makes no demand for taxation from property income.
– Section 16b and the proviso deal with the apportionment of the income of a company. I recognize that the Leader of the Opposition (Mr. Latham) and the right honorable member for Cowper (Dr. Page) have had a somewhat lengthy experience of ‘this legislation, and I can assure them that the points which they have raised will not be overlooked in the further measure to be introduced. I believe that it will be possible to provide satisfactory safeguards. I am assured, however, that in the case last mentioned by the Leader of the Opposition, there would be no taxable income in the hands of the company.
– I can see the difficulty that is likely to arise iii the administration of this measure if an attempt is made to make a charge upon the property income of a company in the hands of the company. The Acting Treasurer (Mr. Lyons) has assured us that it is not intended to levy double taxation; in other words, that mEe a company has paid 7-J per cent, taxation on its income derived from property, if it declares and distributes a dividend, its shareholders should get a corresponding rebate. If if is not intended to levy double taxation, this could be secured by refraining altogether from making any apportionment of the income in the hands of the company. Why not simply charge 7£ per cent, on the dividend in the hands of the shareholders? This would arrive at the same result without the extraordinary difficulties which have been foreshadowed by the previous speakers.
Proposed new clause agreed to.
. -I move -
That the following new clause be inserted : - 3a. Section sixty-seven of the Principal Act is amended by omitting from sub-section (2.) the words “the next succeeding section “ and inserting in their stead the words “ section sixty-eight or sixty-nine ofthis act “.
The section proposed to be amended reads -
This amendment will remedy an oversight in the drafting of the Income Tax Assessment Act 1930,which was passed during the last session of Parliament. That act inserted new section 67 a in the principal act, with the result that the words “ next succeeding section “, which appear in section 67 (2), and which have, since the commencement of that act, been a reference to section 68, became an erroneous reference to new section 67a. This amendment corrects the reference in section 67 (2) and advantage is being taken of the amendment to extend that reference to section 69 - a section which, for the purposes of any action under section 67 (2), is not logically distinguishable from section 68.
Proposed new clause agreed to.
Mr. LYONS (Wilmot- Acting Treasurer [3.4]. - I move -
That the following new clause be inserted: - “ 3b. Section ninety-four of the Principal Act is amended -
by omitting the words “of land”; and
by inserting at the end thereof the following sub-section: - “(2.). A covenant “or stipulation in a mortgage, whether entered into before or after the commencement of this sub-section, which has or purports to have the purpose or effect of including in the interest payable, in any specified circumstances, by the mortgagor, any amount in respect of income tax payable by the mortgagee upon the interest to be paid under the mortgage, shall be void to the. extent only to which it has or purports to have that purpose or effect.”.
The section proposed to be amended reads as follows: -
Section 94 of the principal act, of which section thisclause is an amendment, was inserted withthe object of preventing a mortgagee from passing on his liability for income tax on the mortgage interest to the mortgagor. As it stands, the section applies only to mortgages of land. The objects of the amendments proposed innew clause 3b are - (1) to extend the provision of all mortgages, as defined in section 4 of the principalact, namely, every charge, lien or encumbrance to secure the repayment of money upon which interest is payable; and (2) to remedy certain defects in the provision disclosed by the decision of the High Court in the case of Brett v. Barr Smith 26, Commonwealth Law Reports, page 87. The first object will be effected by amendment a of the new clause. Amendment b is designed to effect the second object. It is necessary to explain the position to which that amendment relates. The class of case originally contemplated by section 94 was that in which a mortgagee stipulated in the mortgage deed that the amount payable to him by the mortgagor during each year should be such amount as would, after payment of the mortgagee’s income tax on the annual interest at a specified rate on the mortgage debt, leave a clear remainder of the’ amount of interest at that rate. The effect of section 94 was to render any such stipulation void, assuming the mortgage was entered into after the inception of Commonwealth income taxation. The case of Brett v.Barr Smith was a result of the efforts of conveyancers to evade the provisions of section 94. This clause is intended to provide against what has happened in the past; but while it will clear up the position so far as existing mortgages and contracts are concerned, it cannot, of course, give protection for the future. In many of these cases, the mortgagee has not exercised his option; but, in view of the proposed super tax, there is a fairly good indication that attempts will he made by such mortgagees to exercise their powers under contracts. This provision has been included to ensure that the collector of the interest shall pay the super tax.
.- 1 can see no objection to extending to all mortgages a provision already applying to mortgages of land. This is another incident in the long war, that has gone on for many centuries, in connexion with the law of real property, between the legislator and the conveyancer. The conveyancer often finds a way of outwitting the legislator. The Commonwealth Parliament has legislated to provide that the person who receives interest under a mortgage, that is the mortgagee, shall pay the income tax upon it, and shall not pass it on to the mortagor. It may be most desirable to achieve that result; but it is almost useless to attempt it, because, if the legislation were “successful, it would only mean that the rate of interest would be increased. There is nothing in this proposal. It is a thing to talk about; but it is rather a placard than anything else. If the proposal is successful, it defeats, to a very considerable extent, its own object of protecting the mortgagor ; but I admit not completely, because of the fact that income tax is graduated, and the rate paid by some mortgagees would be very much heavier than that paid by others. It is only to that extent that, after a period, the provision would be effective. I am inclined to think that the general effect of such a provision will be rather to raise the rate of interest against the mortgagor, and not to give him the advantage which it is conceived such measures confer upon him.
Under section 94 of the act, it is provided that “ a covenant or stipulation under a mortgage of land, which has or purports ‘to have, the purpose or effect of imposing on the mortgagor the obligation to- pay income tax on the interest to be paid under the mortgage,” shall be void. There are certain provisions as to mortgages made antecedent to the passing of the act. In the case of Brett v. Barr Smith, the High Court had to consider a. clause drawn by a’ skilled con veyancer, I think, in Melbourne, for tha purpose of meeting this provision. Honorable members who are following this debate with close attention will appreciate the point that the existing legislation applies only to a covenant which imposes an obligation to pay income tax on the interest. The clause in the mortgage in question, in the Brett v. Barr Smith case, imposes no obligation, and it is in a form which has become more or less common since the introduction of this legislation. The clause in that mortgage gave the mortgagor an option; it did not impose an obligation on him. It provided, in effect, that interest should be paid at the rate of, say, 8 per cent., provided that if the mortgagor chose to exercise the option of paying an amount equivalent tq 6 per cent., plus the income tax payable by the mortgagee on the interest received under the mortgage, the mortgagee would accept such amount in lieu of the 8 per cent. The High Court held that this section conferred only an option on the mortgagor, and. did not impose an obligation on him; in no case was he bound to pay the 6 per cent., plus income tax. Accordingly, as the rates of income tax happened to be such as to make the burden on the mortgagor less, if he accepted the option, it was accepted, and the payment made was 6 per cent, plus the income tax. Under the present clause, , an attempt is made to deal with this position.
I rise, not for the purpose of discussing the provision generally, but to tell the Government that in this realm it must walk very warily, and must be quite sure that it knows where it is going. If honorable members will look at the proposed new clause, it will be seen that it states -
A covenant or stipulation in a mortgage, whether’ entered into before dr after the commencement of this sub-section, which has or purports to have the purpose or effect of including in the interest payable, in any specified circumstances, by the mortgagor, any amount’ in respect of income tax payable by the mortgagee upon the interest to be paid under the mortgage, shall be void to the extent only to which it has or purports to have that purpose or effect.
If this proposal became law. and I were not a member of this Parliament, I should confidently anticipate receiving a brief within ten days to draft a clause to get round it. One of tlie things I should do right away would he to make quite sure that the additional payment would not be included in the interest. This provision only applies to a covenant or stipulation which has, or purports to have, the purpose of “ including “ in the interest payable any income tax payable by the mortgagee. I should make a clear distinction between the interest payable and the further sum falling due, but I should probably also point out to a mortgagee that this clause makes a stipulation void only to the extent that is has, or purports to have, the effect of including income tax with the interest. Take the case of :i covenant in which a mortgagor ioveni ants to pay S per cent., or, at his option, a sum of 6 per cent., plus income tax. What is made void? It is i ntended, I presume, that only the part of the clause that adds the interest shall In- void. I think that there is some doubt whether the effect might .not be that, as the purpose was not to present the alternative between 8 per cent, and 6 per cent., but between S per cent, on the one hand, and fi per cent, plus “x” on the other, the whole alternative would be void. Therefore, the mortgagor might be loft by this legislation, benevolently intended to operate in his interest, under the obligation to pay S per cent., the rest of the provision being made invalid by this clause. That, of course, would produce exactly the contrary effect to that intended. I know that the draftsman has not been unaware of the risk that I am mentioning, and an effort has been made to meet the position by saying that a covenant shall be void to the extent only to which it has, or purports to have, that purpose or effect. Now that may produce the intended result. All that I am saying is that it is certainly arguable whether it does or does not do so. and that there is a risk of the mortgagor being left to pay 8 per cent. Tt is quite doubtful whether this provision, as it is drawn, is a fair piece of retrospective legislation. After all, the parties to these mortgages have, in each case, gone into the business with their eyes open, and the mortgagors know perfectly well that they have agreed to pay S per cent.. or 6 per cent., plus income tax. Why not, therefore, let the existing mortgages run out? No one intended that the money should be loaned for 6 per cent. bare. In these circumstances, is it fair to alter the law in this way? Such a provision would, of course, confer tremendous benefits upon some persons, but it is doubtful whether it is right to make it retrospective. I know of some cases in which such a provision would profoundly affect many thousands of pounds. I am rather inclined to think that in trying to determine the precise incidence of taxation in the case of mortgages, Parliament is yielding to a natural impulse which it is quite impossible to carry out effectively or fairly. Generally speaking taxation is really considered as a charge on business. A man takes into account his income taxation when he is determining the charge that he intends to make for his goods. Although many theorists assert that income taxation should not be regarded as part of the cost of a business, because it is paid out of profits, it is, in fact, taken into account in fixing charges. It is quite useless to think that consideration of income taxation is not a vital element in the determination of the details of business transactions of the kind now under notice. No law can prevent mortgagees taking income taxation into account. Having regard to the uncertainty of the effect of the proposed new provision, and to the fact that it is almost sure to be the subject of litigation if passed, it is hardly worth putting into the bill.
– As to whether this provision will achieve the object for which it is designed, all I can say, as a layman, is that it has been very carefully drafted, and that an honest attempt has been made to meet a difficulty that has arisen. Those responsible for the drafting of the provision readily admit the soundness of the points raised by the Leader of the Opposition. . They recognize that this will deal with the case of Brett v. Barr Smith and similar cases in the future, but there can be no guarantee that it will give complete protection. I disagree with the remarks of the Leader of the Opposition in regard to the possible effect of, the retrospective aspect of the provision. There is not the slightest doubt that, unless something is done to protect the interests of the mortgagor, the mortgagee would get an increased benefit, for the additional income tax-, instead of being paid by the collector of the interest, would be paid by the mortgagor, which would accentuate difficulties a hundredfold. That would certainly happen unless we inserted a provision of this kind in the bill. If the provision had the effect of forcing up interest rates on mortgages, which I sincerely hope it would not have, there would he very serious difficulties ahead of this country. Unless we can get a general reduction in the rates of interest I do not know how we are going to finance the country. If the proposed now sub-section were amended by adding after the words “ including in “, the words “ or adding to “, would it, in the opinion of the Leader of the Opposition, be strengthened?
– Undoubtedly it would. I think it would then give effect to the intention of the Government.
– Then I ask leave to amend the proposed newclassic by inserting after the words “including in” the words “ or adding to “.
.- It is quite evident that we are, so to speak, handling a two-edged sword. In fact, I think, the sword has not only two edges on its blade, but four others on its handle. By our attempt to protect from the incidence of this new taxation those who are at present paying interest we arc apt to create a very difficult position for interest payers for the future. The Acting Treasurer has just suggested that certain words should be added to the proposed new sub-section in the hope that it will meet a situation which the Leader of the Opposition has suggested may occur if the sub-section is passed in its present form. Had the subsection been agreed toas printed, the only alternative for a mortgagee would have been to pay 8per cent. or 6 per cent. plus tax, which would have meant £6 9s. per cent. The amendment, it seems to me, would take away the alternative from him. At any rate, he would no longer be able to exercise it. There is, in my opinion, an extraordinary danger about this whole matter. In the light of my own bitter experience in these matters, 1 urgently suggest to the Acting Treasurer, that instead of agreeing hurriedly to the insertion of certain words in a carefully drafted provision, he should give us an undertaking that if the provision isagreed to he will carefully consider theeffect of the proposed addition before thebill is passed by another place. Otherwise, everybody may rue the insertion of these words, which may have a result that nobody ever intended.
I would prefer, however, that the Government should take its courage in both hands and drop the whole provision, because in my opinion, it is dangerous. The ultimate effect of it must be thein creasing of interest rates. I do not. see how anything in the world can prevent that result if the provision is passed. While the provision may have a good, helpful effect temporarily, from thepoint of view of some people, it must undoubtedly have unfortunate effects subsequently, because money will always beinvested where the best return can besecured from it. If we place obstacles in the way of the investment of money in Australia, which will prevent investorsfrom obtaining what they regard as a fair return, they will simply invest their - money in other places where such difficulties do not exist. I urge theGovernment to consider whether this provision is justified. Personally, I think that it has been inserted merely to show others who are making sacrifices that those receiving interest should also contribute their share. It is all right if theGovernment can get away with it; but the difficulty will bo to obtain any revenuefrom this source. A person wholoaned money to the Commonwealth at 3 per cent. some years ago had to continuereceiving that rate, although interest increased to 6 per cent. The Government did not grant him an additional 3 percent., and it cannot now reasonably deduct 11/2 per cent. or 2 per cent. by imposingtaxation in this form which in essence isa form of repudiation. The position issurrounded with all sorts of legal difficulties. The provision can apply only toexisting contracts, and the only result will be to force up the rate of interest. I sincerely trust that the Government will consider the alternative of substantially reducing expenditure so that thismeasure will be unnecessary.
– I can assure theright honorable member for Cowper (Dr. Page) that his suggestion to give this provision further consideration before the measure reaches another place will receive the attention of the Crown Law authorities, who, however, feel that no additional safeguards can be provided. I cannot, however, agree to the right honorable member’s suggestion that the Government should reconsider the whole of its taxation proposals.
Proposed new clause agreed to.
Title agreed to.
Bill reported with amendments.
Motion (by Mr. Lyons) agreed to -
That the bill be recommitted for the reconsideration of clause 4.
In committee (Recommittal) :
Clause 4 -
The amendments effected by this act shall apply to assessments for the financial year, beginning on the first day of July, one thousand nine hundred and thirty, and all subsequent years.
– I move -
That after the word “ by “ the words “ sections two and three of “be inserted.
Originally clause 4 applied to the whole of the bill which consisted really of clauses 2 and 3. Other clauses have since been inserted to which it is not desired that it should apply.
.- One can only make a guess at the effect of the amendment moved by the Acting Treasurer. The clause covers assessments for the current and subsequent years. Why should not the other provisions also apply only to those assessments? Surely it is not proposed to reconsider the past assessments of mortagees or mortgagors who have transacted business in terms of the mortgage and who have been assessed and have paid the tax? Is the Minister suggesting that these covenants shall be void in the sense that they shall always be deemed to becapable of being assessed retrospectively?
– Will not this provision apply only from the time the measure is enacted ?
– I cannot understand the meaning of the amendment. A measure comes into force from the day on which it has received the GovernorGeneral’s assent. I see the necessity for clause 4 in its original form, because some assessments for this year have perhaps been made, and it is desired to provide that these amendments shall apply to all assessments for this year. There should not be a purely casual or arbitrary distinction between assessments for the current year. That is the object of clause 4. Why should not the clause also apply in a like measure to these mortgages ? I cannot appreciate the necessity for the amendment.
– I think that the Leader of the Opposition (Mr. Latham) sees some difficulty that does not actually exist. Those clauses are simply voiding certain agreements. They do not affect assessments at all.
– I do not think the position is as clear as the Minister suggests, but I do not wish to delay the passage of the measure.
Amendment agreed to.
Clause, as amended, agreed to.
Bill reported with a further amendment.
Motion (by Mr. Lyons) - by leave - proposed-
That the reports be adopted.
.- Between fourteen and sixteen members have spoken on this bill, and every one, with the possible exception of the honorable member for Eden-Monaro (Mr. Cusack), whose speech I did. not hear, but who asked for an. amendment, condemned it. Although a dozen members spoke from the Opposition side, we were not able to stimulate a supporter of the Government to say a word in defence of the hill. Not one of them has pretended to reply to our criticisms. I propose to set out shortly the facts which have been established against the measure. First, it is undeniably a breach of a definite agreement with the States that the Commonwealth would not encroach on their field of taxation. Secondly, the bill is unjust in its incidence. It proposes an outrageous increase of the burden on thrifty people - an increase as high, as 2,900 per cent, in some cases. Thirdly, it will not produce the revenue which the Acting-Treasurer (Mr. Lyons) has estimated’. He has, I admit, accepted an amendment which will reduce the anticipated returns to- some extent ; but apart from that I doubt whether the yield from this tax will be nearly what the honorable gentleman has predicted. In his financial statement the Acting-Treasurer said -
Income from property, broadly speaking, consists of interest, dividends,, and rents All fixed income from property, including interest, is in a relatively better position to-day than last year because of reduced commodity prices.
It is a great help to the man whose income from property has been reduced from £100 to £40 to. be told that commodity prices have fallen approximately 11 per cent. ! Recently the Sydney Bulletin, published the result of an investigation of the affairs of all companies whose shares are quoted on the Sydney Stock Exchange. It showed that 90 per cent, of them had either not declared a dividend or declared a reduced dividend. That is one measure of the relatively better position of fixed income from property.
– Those companies were preparing for bad times. Their failure to declare dividends was not due to unprofitable trading last year.
– There may be a few who are placing more to reserves as aprecaution. But whatever the reason the result is what I have stated. The experience of landlords have been the same. Rents are down at least 25 per cent, all round; many houses cannot be let at all. The moratorium provisions that are being introduced in respect of rent and interest indicate the position of persons who have fixed incomes. A recent investigation by the Melbourne Stock Exchange showed a depreciation of 40 per cent; in the dividends of a large number of leading companies. In Adelaide, the reduction was from 50 per cent, to 60 per cent. The truth is that income from property is not available for taxation, and therefore the Treasurer cannot obtain a great deal of revenue from that source. But the imposition of this further burden will undoubtedly have the effect of increasing unemployment, and that will be followed by increased demands for oldage pensions. I support the contention of the right honorable member for Cowper (Dr. Page) that the Government must make a real cut in the expenditure of the Commonwealth. That is not being- attempted now, and I shall not be surprised if, in March next, the House is asked to receive another financial statement. The delay of the Government in taking effective measures is making the position worse for all citizens, except those who desire to maintain the pretencethat they are not reducing wages or allowing standards to depreciate. The Government has not been supported from its ownside by argument ; it has been supported by votes only. It is true that some honorable members opposite: said that if they had 2’jOOO votes they would cast them against this measure, but those heroeswere absent when the division took place. I have never previously known a government that would so tolerate any attack from its supporters. Ministers say, in effect, “We are lying down; kick usagain.” They seem to like maltreatment, and meekly ask for more. Except for an occasional mild interjection from the Government side, there has been no reply to the arguments of the Opposition. Only a short year ago the Labour party marched into the House, 47 strong - thestrongest single party ever returned to> the Federal Parliament - with banners waving, drums beating, trumpets blaring and members singing “Solidarity for Ever.” They sing no more; they do not even speak. No longer do we hear thecorridors of this building resounding with the rhythmic strains of “ The Red Flag “ and “ Solidarity for Ever “. Now, devoid of ideas and bereft of policy, the Labour party is stumbling along aimlessly. Twelve months ago it believed itself to bean eagle ; to-day it is like a wounded duck on the ground with a large left wing, and a broken right wing, and this legislation is what this Parliament has to suffer, and the people have to tolerate, because Labour has not a policy or, if it has, does not know what it is.
Question resolved in the affirmative.
. - by leave - I move -
That the bill be now read a third time.
I do not propose to continue the entertainment which the Leader of the Opposition has just provided. A reply to all the points raised by the Leader of the Opposition is unnecessary and would get us nowhere. He claimed that this legislation entails a breach of agreement with the States. It does not. At the conference I was in close touch with the representatives of the States, and I can vouch for the fact that this question was fully considered. It was even considered by the Loan Council. While it cannot be claimed that this legislation completely carries out the undertaking arrived at, it is, in the circumstances, as near to it as possible. The State Ministers, as the duly elected representatives of their respective States, attended the Loan Council, and offered no objection to the proposals which are now before this Parliament.
– Were they given an opportunity to consider this bill?
– They knew the whole story because this legislation was foreshadowed in the financial statement. They knew exactly what taxation was proposed, and to what extent State realms were being encroached upon. They brought this question up and, with the exception of the newly-appointed Premier of New South Wales, offered no objection to it. The other representatives of the States were present when the undertaking was given by the Prime Minister. They passed a resolution to the effect that no further encroachment was to be made upon State realms. Since that resolution was carried, the Government has modified its taxation proposals. The original proposal was to collect an additional revenue of £1,500,000. Under this bill only £1,000,000 will be collected by way of taxation. The following table shows the effect of the compromise which was arrived at as a result of the amendment of the right honorable member for Cowper (Dr. Page) : -
Income From Property.
Comparison of Tax paid under. - (a) Present Rate of Tax ; (b) Tax as introduced in House by Acting Treasurer ; and (c) Tax under compromise on amendment as accepted by Acting Treasurer on amendment of Dr. Earle Page.
.- There are two points to which I wish to refer. The first is that the taxation proposals of the Commonwealth and the States should be discussed not at a meeting of the Loan Council, but at a Premiers Conference.
– The members of the Loan Council are nearly all Premiers.
– That may be so, but the Loan Council should confine itself to its proper work - the indebtedness and borrowing policy of the Commonwealth. I am satisfied that if detailed matters such as this are dragged before the Loan Council, trouble will arise which we shall not be able to correct. My second point is that the Acting Treasurer has suggested that these proposals do not completely carry out the undertaking given at the Premiers’ Conference. The particulars of that undertaking were given by the Acting Prime Minister (Mr. Fenton) subsequent to the Premiers’ Conference. An attempt was first to be made to balance the budget by bringing about substantial reductions in expenditure. and only when that had been accomplished was taxation to be increased, and then in such a way as not to encroach upon the field of the States. Not only has there been no reduction in expenditure, but no State Treasurer was aware of the manner in which the Government’s proposals would increase the total direct taxation of the Commonwealth and the States. Under this legislation, incomes of a certain size will be taxed practically 12s. in the £1. That is a staggering imposition, and is not likely to bring about any real good; in fact, the industries and governments of this country will bo given no opportunity to recover. I regret that the Commonwealth Government has not taken the right course,and that is to reduce expenditure before increasing taxation. Ienter my protest against the whole of this legislation.
Question resolved in the affirmative.
Bill read a third time.
The following paper was presented:- -
High Court Procedure Act and Judiciary Act - Rule of Court, dated5th November, 1930.
fernbrook exchange- financial Conference.
Motion (by Mr. Fenton) proposed -
That the House do now adjourn.
.- [ wish to bring under the notice of the Postmaster-General the position of certain primary producersin an outback part of my electorate, who are being dealt with harshly and whose treatment will result in a definite loss of revenue to the Commonwealth. The position is this : Some years ago certain farmers became subscribers to theFernbrook exchange. They bad to guarantee for three years a certain amount towards the cost of the construction, of a telephone line. They were told at the time that at the end of the guaranteeperiod,a reductionin rental charges would take place. Those three years haveelapsed and there has been no reduction in rental charges. In fact, because of an investigation of the actual mileage, the subscribers are being charged from 15s. to 30s. a year more than before. These men are suffering a reduction in their total income, and ifthe charges are increased instead of being reduced, as was promised by the department, many of them will be forced to discontinue their telephone connexion. I ask the PostmasterGeneral to give this matter his personal consideration, and, if possible, to continue the present rentals and thus retain for the department the revenue from the line.
. -In view of the increasing seriousness of our financial position,may I suggest to the Acting Prime Minister (Mr. Fenton) the advisability of convening a conference of the leaders of all parties in this House, somewhat on the lines of the consultation to take place with the Commonwealth Bank next Tuesday. The combined action and guidance of such an all-parties conference might in some way or other initiate something to the advantage of Australia, and help to steer it. into a position of financial stability. If the Acting Prime Minister (Mr. Fenton) would be bigenough on this occasion to invite the loaders of the various parties to meet him and his Cabinet, nothingbut good could result; it would certainly inspire greater confidence in Australia overseas. The directors of the Commonwealth Bank, although they should be the first to be consulted, are not the only financial interests to be taken into account in regard to the terrible difficulties of Australia to-day. There are other great financial institutions in Australia, and if, in addition, an invitation to consult with them were sent by all parties here to the Bank of England and other financial institutions in Great Britain, and to the Government of Groat Britain itself, I am sure that Australia would derive some of the benefits which would have accrued to us had effect been given to the suggestions of Sir OttoNiemeyer. I hope that the Acting Prime Minister will take my suggestion into his serious consideration.
Question resolved in the affirmative.
House adjourned at3.58 p.m.
Cite as: Australia, House of Representatives, Debates, 28 November 1930, viewed 22 October 2017, <http://historichansard.net/hofreps/1930/19301128_reps_12_127/>.