Senate
11 October 1922
8th Parliament · 2nd Session
- QUESTION
- OODNADATTA TO ALICE SPRINGS RAILWAY
- PUBLIC WORKS COMMITTEE
- PAPERS
- QUESTION
- INCOME TAXATION
- IRON AND STEEL PRODUCTS BOUNTY BILL
- SUPERANNUATION BILL
- INCOME TAX ASSESSMENT BILL
- QUESTION
- INVALID AND OLD-AGE PENSIONS APPROPRIATION BILL
- INCOME TAX BILL
- INCOME TAX ASSESSMENT BILL
- PUBLIC SERVICE BILL
- INCOME TAX BILL
- INCOME TAX ASSESSMENT BILL
- SENATE ELECTIONS BILL
The President (Senator the Hon. T. Givens) took the chair at 3 p.m., and read prayers.
page 3511
QUESTION
FEDERAL CAPITAL
Establishment of Agricultural College and Experimental Farm
Senator GARLING:
NEW SOUTH WALES
– I ask the Minister representing the Minister for Defence when he will be able to give me an answer to the question I put to him on the 4th instant relative to the establishment of an experimental farm and agricultural college at Duntroon?
Senator PEARCE:
Minister for Home and Territories · WESTERN AUSTRALIA · NAT
– I have caused inquiries to be . made into the matter, but I have not yet been supplied’ with an. answer to the honorable senator’s question. I shall endeavour to get an answer during the day, or to-morrow.
Later:
Senator PEARCE:
NAT
– (By leave.)- On the 4th October Senator Garling asked the following questions: -
- Whether the attention of the Minister for Defence has been drawn- to a proposal originally made by Sir J. H. Carruthers, M.L.C., of New South Wales, and referred to by ma la this Chamber on two occasions, that part of Duntroon Military College and part of the area of about 3,000 acres set apart for military training purposes should be utilised for an agricultural college or high school and experimental farm ?
- Whether, in view of the fact that much - of the accommodation and equipment at the College is now unused, as the result of the recent alteration of the Defence policy of the Commonwealth, and that the proposal above referred to will enable such accommodation and equipment to be effectively used, and so reduce the per capita cost of Keeping up the establishment, the Commonwealth Government will be prepared to consider a proposal with the above object, if submitted by the Government of New South Wales, so long as it does not prejudicially affect the continued use of Duntroon for military purposes?
The Minister for Defence has supplied the following reply: -
I am now in a position to inform the honorable senator that if any scheme is put forward with a view to the establishment of on agricultural college, the Minister for Defence will give it careful consideration.
page 3512
OODNADATTA TO ALICE SPRINGS RAILWAY
Statement by Mr. Denny, M.L.A.
Senator FOLL:
Queensland
.- (By leave.) - I wish to make a short statement on a matter concerning the reports presented by the Public Works Committee on their inquiry into proposals for the extension of a railway from Oodnadatta to Alice Springs, and from Mataranka. to Daly Waters. In. the South Australian newspapers published last Thursday there is a report of the proceedings in the South Australian House of Assembly, from which it appears that Mr. Denny, a member of the South Australian Parliament, made the statement that he was passing through Melbourne one day at the end of last week, and called at Federal Parliament House. According to the report of this speech he claims to have done a certain amount of logrolling, and as a result was very pleased to be able to inform the South Australian Parliament that the Public Works Committee would probably recommend that the Commonwealth Government should construct a line from Oodnadatta to Alice Springs. I wish to state that the Public Works Committee had completed their inquiry into this work a week previous to. Mr. Denny’s visit to Melbourne. At the time he was here their complete report was in the hands of the Government Printer in Melbourne, and it was laid on the table of the Senate on the following day.
page 3512
PUBLIC WORKS COMMITTEE
Quarters for Air Force at Point Cook.
Senator NEWLAND brought up a report from the Public Works Committee, together with minutes of evidence, relating to proposed additional quarters at PointCook, Victoria, for the staff of the Royal Australian Air Force.
page 3512
PAPERS
The following papers were presented: -
Arbitration (Public Service) Act - Determinations by the Arbitrator, &c. -
Noa. 15, 16, and 17 of 1922- Australian Postal Assistants Union and the Federated Public Service Assistants Association.
No. 18 of 1922- Professional Officers Association : Commonwealth Public Service.
No. 19 of 1922- Australian Telegraphists Union.
No. 20 of 1922- Legal Professional Officers Association.
Audit Act - Finance : Treasurer’s State- ment of Receipts and Expenditure during year ended 30th June, 1922, accompanied by the Beport of the Auditor-General.
Publio Service Act - SeventeenthReport on the Commonwealth Public Service, by the Acting Commissioner (dated 9th October, 1922).
page 3512
QUESTION
VOLUNTARY WHEAT POOLS
Conditions of Government Guarantee
Senator ELLIOTT:
for Senator Bolton
asked the Minister representing the Prime Minister, upon notice -
- Under what conditions do the Government propose to guarantee any future voluntary wheat pools?
- In framing such conditions will the Government effectively (provide for the protection, of the interests of local buyers and consumers?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The answer is - 1 and 2. The only way in which the Commonwealth Government is concerned in the voluntary wheat pools is that it has agreed to guarantee the Commonwealth Bank to the extent of any advances which it may be decided to make to the wheat pools at the rate of 3s. 8d. per bushel, tlie extra 8d. to cover all handling charges be-, twecn the railway siding and the ship in respect of all wheat delivered to a voluntarypool for the season 1922-23, and it has no power to fix the price, at which -wheat is tobe sold locally.
page 3512
INCOME TAXATION
Payments Madeunder State Acts
Motion (by Senator de Largie) agreed to-
That a return be prepared and laid on the table of the Senate, showing, under the operation of the State Income Tax Act of each State in the Commonwealth -
the amount paid on £500 income;
the amount paid on £1,000 income.
page 3512
IRON AND STEEL PRODUCTS BOUNTY BILL
Message reported, intimating that the House of Representatives had agreed to the amendments made by the Senate in this Bill.
page 3512
SUPERANNUATION BILL
Message reported, intimating that the House of Representatives had made the amendments in this Bill requested by the Senate.
Bill read a third time.
page 3513
INCOME TAX ASSESSMENT BILL
Bill received from the House of Representatives.
Senator E D MILLEN:
‘Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– 1 move -
That so much of the Standing and Sessional Orders be suspended as would prevent the Bill being passed through all its stages without delay.
I do not contemplate taking full advantage of the motion if the Senate agrees to it, but it will obviously be convenient to get over some of the more formal stages of the measure without the intervention of a day’s delay.
Question resolved in the affirmative.
Bill (on motion by Senator E.D. Millen) read a first time.
page 3513
QUESTION
BUDGET, 1922-23
Debate resumed from 10th October (vide page 3430), on motion by Senator E. D. Millen -
That the Estimates of Receipts and Expenditure for the year ending 30th June, 1923, and the Budget-papers, 1922-23, laid on the table of the Senate on the 18th’ August, 1922,be printed.
Senator FAIRBAIRN:
Victoria
– I desire, first of all, to direct attention to the aggregate balance-sheet of the Commonwealth Bank of Australia. It is desirable, in the interests of the country, that the figures of the balance-sheet of the Bank should be placed before the people, because they are the owners of the Bank. According to the balance-sheet, the total assets of the Commonwealth Bank amount to £86,995,780 9s. It -has occurred to me that it would probably be interesting to know how this enormous amount of the people’s money is being utilized. The small array of figures supplied in the aggregate balance-sheet of the Bank is all the information which the public are given on the subject. I find that, in the enumeration of the assets, coin, bullion, and cash balances represent £6,145,318 12s. 8d. It is obvious that the Bank must keep a considerable amount of coin on hand, and that item of the balance-sheet is readily understood. The amount represented by Australian notes is £8,047,213. The amount on short call in London is £19,325,000. I believe that at present a great deal of that money might be much better employed in Australia than in London. Until recently there was an advantageous market in London for the employment of money on short call, but that market has completely collapsed, and the sooner a great deal of the money which the Commonwealth Bank has at short call in London is brought back to Australia to help Australian industries and enterprise the better for this country. I find that there is ah amount of £25,179,15618s.1d. representing “ Investments, British, Colonial, and Government securities.” It seems to me that that’ is an extraordinary amount of money to have in such investments. I thought at first glance that the words “ Government securities “ must cover Commonwealth Government securities, but the next line of the balance-sheet shows that the amount invested in the Commonwealth Government securities is £9,696,564 16s. 2d. We may assume, I think, that the words “ Colonial securities “ cover investments with the State Governments, but just what is covered by the words “British, Colonial, and Government securities.” I do not know.
Senator Reid:
– They may be State loans.
Senator FAIRBAIRN:
– I should think they would come under the heading of “ Colonial securities.” We are left to guess, and the people have no idea how their money, amounting to nearly £87,000,000, is being invested. There are fixed deposits in other banks amounting to £929,000. That is quite bona fide and legitimate, and that money is being used to assist industries generally in Australia. “Bills receivable in London and remittances in transit” are shown as amounting to £2,212,175 12s. 2d. That is also an ordinary Australian practice. “Bills discounted, loans and advances to customers, and other sums due to the bank.” total £14,459,387 14s. 5d. That refers to direct loans to municipalities, local governing bodies, and private individuals. We can say, therefore, . that only about £17,000,000 out of nearly £87,000,000 is really used in Australia, so far as I can gather from the figures, after having been over them several times. That does not seem to me to be a legitimate use of the money that is collected and utilized by the Commonwealth Bank. A great deal more of its money ought to be invested in mercantile work in Australia. The private banks,” owing to various circumstances, have had quite enough to do. In our great industries labour has had to be paid, and there has been nothing coming in at all. If the Commonwealth Bank uses only £17,000,000 out of nearly £87,000,000, it shows that a great deal of Australian money is not being devoted to the assistance of Australian enterprise. I thought I would bring the matter before Parliament to see if more information could be obtained.
Senator Reid:
– Yet the Commonwealth Bank has earned the reputation of being most liberal in assisting industries.
Senator FAIRBAIRN:
– I have not heard that.
Senator NEWLANDS:
SOUTH AUSTRALIA · ALP; NAT from 1917
– Do you know1 whether the Bank is fairly generous in making advances to industries?
Senator FAIRBAIRN:
– I believe that it conducts business on much the same lines as an ordinary bank. If it has a good security, it lends money on it.
Senator Bakhap:
– How does that £17,000,000, out of the total sum of nearly £87,000,000, compare with the amount lent by the private banks on Australian enterprises?
Senator FAIRBAIRN:
– The private banks would show a very much greater proportion of their money utilized in Australia.
Senator Bakhap:
– Your point is that the Commonwealth Bank is much more conservative than private banks.
Senator FAIRBAIRN:
– I would not call it conservative. The most conservative policy is the safe policy, and it would be better to lend the money in Australia.
The profit and loss account consists of three lines. On the credit side the profits for the half-year are shown at £208,932 12s. 8d. That amount, according to the charter of the Bank, is divided between the reserve fund and the redemption fund, each receiving £104,466 6s. 4d. The Commonwealth Bank pays no taxation, whereas the New Zealand Government have received over £3,000,000 from its bank in that way. The Bank charges high rates for advances, and the Government have been much worse off from that point of view than if there had been no Commonwealth Bank at all. I hope that the Government will see that the charter of the Bank is altered, so that the people shall have some say as to how this large sum of money, nearly £87,000,000, is to be utilized. Year after year enormous rates are charged, and the Government never receive one shilling in taxation. If it were not for that fact, it might be possible to reduce income taxation to the extent pf ls. in the £1.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– You are more optimistic to-day than usual.
Senator FAIRBAIRN:
– If the Commonwealth Bank had to pay taxation, as an ordinary bank does, it would result in several million pounds being paid into the Federal Treasury. The present arrangement has existed for nine years, and the Government have never had any assistance in this direction. I have done my duty in having called attention to the position -for the second time. It is becoming obvious that something ought to be done.
An important feature in regard to private banks is the fact that behind .the directors are the shareholders, who are individually anxious to see that those banks are well managed. In the case of the Commonwealth Bank, the people are the shareholders; and what does the Bank bother about the people? It produces a balance-sheet consisting of thirty or forty lines, and that is all we are told of its workings. That is decidedly wrong. I suggest that the Government should try to absorb some small bank or some large bank, and then they would get, not only a good directorate, but there would be shareholders at the back of them, and the result would be that the management of the institution would be thoroughly watched. Even to appoint three directors in the place of the one director now employed would .not altogether meet the case. Three directors would be quite independent, and they would have to deal with a Treasurer who would be up to his neck in other work. If the Government absorbed another bank, on the same lines as the Amalgamated Wireless Company has been absorbed, they would have the advantage of shareholders taking an interest in the Bank’s management.
Senator Vardon:
– Would that not be practically converting the Commonwealth Bank into a private bank?
Senator FAIRBAIRN:
– No. In the case of the Wireless Company, the Government appoint a. majority of the directors, and thereby have a controlling in- fluence. If that course were adopted, the people would have the advantage of publicity concerning the Bank’s dealings. At present that publicity is entirely lacking.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– If the Commonwealth Bank purchased one of the private banks it might result in entirely wiping out the shareholders.
Senator FAIRBAIRN:
– It would be useless if the shareholders were wiped out altogether.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Absorption could be provided for in that way.
Senator FAIRBAIRN:
– The Government have not wiped out the shareholders in the Wireless Company. We should keep the shareholder who has the actual personal stake in the Bank. If there were a number of shareholders who were personally interested, they would attend meetings, and take the trouble to see that the Bank was run on open lines. The balance-sheet of the Commonwealth Bank may be quite satisfactory, but I object to the lack of information in it. I am accustomed to reading balance-sheets, but I cannot understand what is meant by “ Government securities.” Are they Argentine, Russian, or Chinese securities? Shareholders would soon find out what they were, and why the sum of £19,000,000 was kept in London. They would want to know why so much money was invested outside of Australia, and why only £17,000,000 was invested in trading and municipal enterprises in the Commonwealth.
Senator Bakhap:
– Government securities, other than those of Britain and the United States of America, cannot be regarded as “ gilt-edged.”
Senator FAIRBAIRN:
– The balancesheet refers to British, Colonial, and Government securities, and I thought that included Commonwealth securities; but I find that it does not, because, in the following line, reference is made to “ Common wealth Government securities, £9,696,564 16s. 2d.”
Senator Bakhap:
– That would indicate that the others aire British, Dominion, or Colonial securities. They are not foreign securities.
Senator FAIRBAIRN:
– I think it suggests that they are. The position is not set out at all clearly, and one is at a disadvantage in endeavouring to ascertain exactly how the money has been invested. The £25,179,156 may refer to Colonial securities, but reference is also made to Government securities, and if it does not mean Commonwealth Government securities, what does it mean. ?
Senator Bakhap:
– They may be foreign Government securities, and, if so, they can hardly be regarded as gilt-edged unless they refer to the United States of America,.
Senator FAIRBAIRN:
– That is so. As I have already said, those who are really the shareholders in the Commonwealth Bank should have a voice in its management, as has been provided in connexion with the Amalgamated Wireless (Australasia) Limited, which company has, to some extent, been absorbed by the Government. Although we have a controlling interest in that company, there are outside shareholders who will naturally do their best to see that the undertaking is effectively and economically managed.
I have taken a good deal of interest lately in freights ruling between Australia and other countries, and have made an effort to get them, reduced. The shipping companies) complain .that freights are high because the port and other charges imposed are excessive. In perusing the figures, I find that £166,638 was expended last year in connexion with lighthouse services, and, as this amount is contributed by the shipping companies, the freights charged have necessarily to be increased to meet that expenditure. The State authorities also impose charges, which, are passed on by the shipping companies to the primary producers and others who have to export their products. The number of lighthouses around the coast is comparatively small considering our extensive coastline, and a certain amount of expenditure is, of course, justified. .
Senator Russell:
– Many of the coastal lights are automatically controlled, and, consequently, little expense is incurred.
Senator FAIRBAIRN:
– That may be so; but in perusing the Estimates one finds that numerous clerks, messengers, and typists are employed in the Department.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– It would be impossible to collect £166,638 without an adequate staff.
Senator FAIRBAIRN:
– Yes ; but it is the duty of the Government to closely scrutinize the figures to see if legitimate reductions cannot be made which would then, I presume, be reflected in freights charged. I understand that the port charges in Melbourne are higher than those in any other port in the world, and the Government should make an effort to effect some reduction.
The Health Department seems to be extending its operations, as last year it cost £108,000 odd, and the estimated expenditure for this year is £125,000. The health of the community must be carefully protected ; but it has always been understood that, under the Constitution, the Commonwealth was to intervene only in the event of an epidemic extending beyond the limits of one State. Personally, I do not care whether the matter is under the control of the Commonwealth or State authorities ; but there should be no overlapping, involving needless expenditure. It has been suggested that a Royal Commission should be appointed to iinquire into our Health Department.
Senator Pearce:
– Every epidemic which has occurred has shown the necessity for some line of demarcation.
Senator FAIRBAIRN:
– Yes, that is why I suggested that the activities of the Commonwealth and the States should be clearly defined. The head of the Department naturally desires to make his Department important, and he will, unless prevented, handle matters which should be dealt with by the States. But it is the duty of the Government, as the custodian of the people’s money, to see that the work performed is necessary, and that the expenditure is not excessive. I think I have shown the necessity of some investigation being made to ascertain if the estimated expenditure is necessary, and if the present overlapping could not be avoided.
Debate (on motion by Senator Bakhap) adjourned.
page 3516
INVALID AND OLD-AGE PENSIONS APPROPRIATION BILL
Bill received from the House of Representatives.
Standing and Sessional Orders suspended.
Bill (on motion by Senator E. D. Millen) read a first time.
Second Reading
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I move -
That this Bill be now read a second time.
This measure is purely formal, and is to authorize the Treasurer to pay into the Trust Fund, from which pensions are drawn, any surplus moneys available. It does not affect the rate of payment in any sense, but merely authorizes the surplus money to be taken out of one account and placed in another.
Question resolved in the affirmative.
Bill read a second time, and reported from Committee without amendment.
Motion (by Senator E. D. Millen) proposed -
That the reportbe adopted.
Senator MacDONALD:
Queensland
– Would the Minister be good enough to give the Senatesome information as to” when the Appropriation Bill for the rest of the year will be brought down? We have arrived within a few days of the close of the session, and I would like to know whether we may expect the Bill before the last day of the session.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I would remind the honorable senator that, as this is not a money Bill, he is not entitled at ‘this stage to discuss any matter he may choose. It is not possible for me to answer his question, because, as every parliamentarian knows, the Budget, accompanied by the Appropriation Bill, is the last measure that the House of Representatives will allow to pass from its hands. The honorable senator has had many opportunities of discussing the Budget-papers, and he has not availed himself of them with avidity. I have not seen any one killed in the wild rush to discuss them. I am unable to say when the other House will pass the Appropriation Bill, and, therefore, I cannot say when it will be here.
Question resolved in the affirmative.
Report adopted.
Bill read a third time.
page 3516
INCOME TAX BILL
Bill received from the House of Repre sentatives.
Standing and Sessional Orders suspended.
Bill (on motion by Senator E. D. Millen) read a first time.
page 3517
INCOME TAX ASSESSMENT BILL
Second Reading
SenatorE. D. MILLEN (New South Wales - Minister for Repatriation) [3.51].- I move-
That this Billbe now read a second time.
I think honorable members will agree that this Bill invites discussion in Committee rather than on the second reading. The bulkiuess of it is accounted for because it is a consolidating as well as an amending measure. There are eight Income Tax Assessment Acts on the statute-book, and the Bill represents an effort to bring them within the limits of one Act. It might have been thought that it would have been better to bring forward the proposed amendments apart from the consolidation of the existing Acts. Had that course been followed - and I admit it is the usual course- it would have been extremely difficult for honorable senators to see the effect of the proposed amendments. They would have found it necessary, in certain cases, to refer to the whole of the eight Acts to see where the amendments fitted in, and what their effect would be. The Government thought it better to bring down a consolidating Bill and include in it the amendments. In the main the measure consists of consolidating provisions, but there are a limited number of amendments to the existing law. I propose, briefly, to outline these amendments, leaving the more detailed discussion of them to the Committee stage of the Bill. I may say, in passing, that most of the provisions in the Bill are founded on the report of the TaxationCommission, which, for many months, inquired into the subject of taxation in the Commonwealth.
The first proposal to which I shall refer is that which provides for the introduction of what is called the averaging system in relation to incomes which are taxable. There are many schemes which come under the heading of averaging, and after considering the merits of them all, the Royal Commission made a recommendation which, practically, is embodied in the Bill with, however, one proviso. The Commission’s ‘ recommendation was that there should be an averaging of the rate, the taxpayer paying upon his income for the year, but at a rate determined on the basis of an average of five years. The Government attached a proviso to cover cases where it is obvious that the averaging system would adversely affect the taxpayer with a falling income. The man with a falling income would certainly be adversely affected by the averaging system, whether the averaging was of the rate or the income, although he would be affected in a somewhat different degree. It is proposed, whilst applying the averaging system, that it shall not affect any taxpayer whose income is falling, until such time as his income commences to rise, when it will immediately operate.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I can. say, in regard to this or any other measure, that I have never discovered a means by which we can legislate to give absolute mathematical equity to every one. We cannot follow the thing to too fine a point, and, even if we could, the system would become so complicated that no . one would know where he stood. The averaging system is already in operation in Australia as applied to one special tax, and there appears to be no reason why we should have two systems in vogue, one for one class of taxpayer, and another for another class. Therefore, it is proposed to apply to all taxpayers the system which is now in operation for primary producers.
Senator Payne:
– I have not heard any Minister state . the advantages of the averaging system to the taxpayers.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I can do it without much hesitation or preparation. It is an advantage, I submit, to men with fluctuating incomes to know that, as with rental and other charges, they have to meet a fixed obligation; It is equally an advantage to the’ Treasurer to know that his income is fairly constant. Once we get into the swing of the averaging system the Treasurer’s income will tend to an equili- brium. It will, no doubt, rise and fall somewhat, but probably not to the extent that it does now.
Senator Duncan:
– The averaging system will probably affect the primary producer more than the ordinary taxpayer.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I would dispute that entirely. I have been engaged in primary production and in business, and the severest and sharpest fluctuations I have had to face have been in business. At present I am merely outlining the principles of the Bill; we can discuss the merits or demerits of its various clauses when we are considering it in Committee.
The next provision of the Bill to which I desire to direct attention is the proposal relating to the valuation of live stock. Honorable senators will recollect that there was a considerable outcry some time ago with regard to this matter, and to meet it a reduction was made in the fixed prices at which live stock should be taken into account. It is now proposed that the taxpayer shall, within, a maximum and minimum figure, be allowed to fix his own valuation, but once having fixed it, he will be required to adhere to it. The House of Representatives has accepted an amendment which / seems to provide another option. I am not at all certain that it will be either workable or advantageous, but it is in the Bill as sent to this Chamber.
The Bill also makes an alteration in regard to the method of valuing trading stock. It offers the option to the trader of taking his stock into account at cost, market value, or replacement value.
Senator Vardon:
– In the case of stock that has depreciated considerably the replacement value would be the real value.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The owner has the option of taking either of the three values. He would not take the cost price if the stock had depreciated. He would then take either the market value or the replacement value. He would take the market value if he thought the replacement value would mount. I do not think he can complain of having such an option.
The Bill does not propose to make any alteration in regard to the taxation of companies. The present system follows the dividends distributed by companies into the hands of shareholding recipients, and levies upon them according to the rate which the individual taxpayer pays. In this case, the Government’s view of the matter is supported by the finding of the Royal Commission. Many people are, perhaps, attracted by the simplicity of the alternative system of levying solely upon the company, and are inclined, I think, to overlook the inequity of that system. “Under it, the man receiving a small income would be called upon to pay in excess of the amount for which he was liable, whilst the man with the bigger income might escape the burden thrown upon the shoulders of the man with the smaller income.
Senator Benny:
– You are not taxing at the source.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– We are following the practice of the existing law.
Senator Keating:
– Are there not some cases in which you propose to tax at the source?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– As far as the general principle of taxing company dividends is concerned, the law remains unaltered, but there are some alterations to which I propose to refer. As to bonus shares, a matter that has been kept very prominently before honorable senators by the interest that has been excited outside in connexion with this Bill, it is provided that bonuses, out of the previous year’s profits, shall escape taxation, but that all other bonus shares shall be taxable.
Senator Keating:
– That is to say, bonus shares out of current profits.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Yes, they are to be taxed. Another matter affecting companies is in regard to the ‘section of the Act which places in the hands of the ‘Commissioner power to interpose when he thinks that a reasonable proportion of profits has not been distributed to the shareholders. The present law has been found to be seriously defective in that it does not carry out what Parliament intended should be done. Let me illustrate what I mean by saying that if the profits distributed by a company amounted to 50 per cent., and the ‘Commissioner thought that 60 per cent, was a fair and reasonable proportion to distribute, he could interfere, but a legal decision holds that if his view was upheld he would be bound to levy a tax upon the whole of the profits. That was not thought to be the wish of Parliament, and Parliament is now to be afforded an opportunity of altering the law. This Bill provides that if a company distributes two-thirds of its profits no questions will be asked, but if it distributes less than the proportion the Commissioner will have power to interpose and require the company to demonstrate that the proportion distributed in relation to capital is a fair and reasonable one. If the case goes against the company, and if it is held that it has not distributed a reasonable proportion, the extra tax collectable will be levied, not upon the whole of the profits, but upon that amount which it is decided would be a fair and reasonable distribution.
There is another very important alteration in the existing law, and that is in regard to the collection of taxation from a taxpaying shareholder who should have received dividends if the approved amount had been distributed.
Senator Benny:
– That lis taxing at the source.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– It is taxation of the undistributed dividend. It is a question as to who should be taxed - the shareholder who had not received the dividend or the company which had retained it. The existing law says that the tax should be paid by the shareholder who has not received the dividend, but this Bill proposes to tax the company that retains the dividend, and I think this will be regarded as a considerable improvement on the existing law.
Another important feature of the measure is the amendment governing profits on walk-in-walk-out sales. It has been held that when a man sells his whole business concern, lock, stock, and barrel, no matter what profit he may have made on the deal, he is not taxable. I have been in this position myself, though certainly it was before the days when Federal income taxation commenced to trouble us. I took up an area of grazing country, stocked it with a small number of stock, and for four or five years allowed natural increase to remain undisturbed. Then I sold out on a walk-in-walk-out basis. As the law now stands, I would not have been taxable on the profit I made on that deal, because my returns would have shown no annual profits; but under this Bill it is proposed that profits made in that way shall be subject to tax, and I venture to suggest1 that this is an eminently fair and reasonable proposition.
Another important provision - I say this unhesitatingly - affecting a large number of taxpayers is the decision’ to raise the limit of exemption to £200.’ I should like to say, with regard to this provision, that it will relieve about 200,000 taxpayers of the necessity of furnishing returns, and that the loss in revenue to the Government will be about £600,000; but it is obvious that as these returns are furnished in the main by the smaller taxpayers of the Commonwealth, the saving in administration costs, including clerical work, will be considerable.
Senator Payne:
– “Would not the greater number of- those 200,000 taxpayers be wage-earners, whose returns could be easily checked?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– It is not only a question of checking returns. It takes just as much time to address an envelope to a man who is the small taxpayer as to the large taxpayer.
Senator Payne:
– But I was referring particularly to the work of checking the returns.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– What the honorable senator says may be quite true, but the work in checking the small returns in respect of taxable incomes of, say, between £2 and £3 will represent an infinitely greater percentage of administrative cost than in connexion with the larger income tax returns.
Senator NEWLANDS:
SOUTH AUSTRALIA · ALP; NAT from 1917
– Will there be very much saving shown in the Department through the raising of the exemption?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– There will be some set-off, but what the actual amount will be I cannot say. These returns will certainly represent a loss to the Department; but I suggest that there will be a substantial set-off in the direction I have indicated.
Another alteration in the law to which I propose to direct attention is that which increases the deduction allowable in respect of superannuation payments from £50 to £100. As the law stands, this allowance affects principally wageearners, but it has been increased to £100, and is applicable to all incomes under £800, no matter from what source they may be derived.
Senator Russell:
– Will life assurance premiums be included 1
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The alteration does not affect life assurance premiums.
Senator Elliott:
– Why the distinction ?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I think it arises from the fact that superannuation payments are regarded as a means by which the poorer members of a community may be enabled to make provision for their old age, whereas life assurance is, I think, regarded as a means of thrift practised more by those who are in more comfortable circumstances. It is quite obvious that there was an inequality in the law which allowed a man receiving £1,500 a year in salary to get the benefit of the exemption, because he was included under the heading of a wage-earner.
Senator Lynch:
– The Government propose to increase the exemption in respect of superannuation payments.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Yes; it is now proposed to allow a taxpayer to deduct £100 per annum, in respect of such payments.
Senator Lynch:
– That is much in favour of the higher-paid officials.
Senator Crawford:
– It is really an extension of the principle.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Yes; an extension of the principle to bring in a. larger number of beneficiaries.
Senator Reid:
– What is the objection to extending the same amount to life assurance premiums?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I ask honorable senators to remember that the Government are under the necessity of obtaining a certain amount of revenue, and, while it may be desirable to lighten the burden upon certain classes of taxpayers, we have, I submit, put forward a reasonable proposition. The Government proposal does ease the burdens of many taxpayers. If it were possible, nothing would give me greater pleasure than to move for the repeal of income-tax legislation altogether.
Senator NEWLANDS:
SOUTH AUSTRALIA · ALP; NAT from 1917
– You would become very popular if you did.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I have no doubt that I would be very popular until, probably, the first of next month, when, perhaps, honorable senatorswould find that the Treasurer did not have the wherewithal to recoup them for their services. It is the desire of the Government to make the taxation burdens fall as lightly upon the people as possible, and, whilst honorable senators could no doubt suggest many ways in which the load could be further lightened, I am entitled to ask them to regard this measure as a whole, and not to be led into the belief that we could widen its provisions without endangering . the financial proposals of the Government.
Senator Senior:
– Has the Minister any idea of the amount of revenue that will be lost as the result of these alterations in the law?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– At present I cannot say that, but I am endeavouring to obtain information, and, if successful, I shall furnish it to honorable senators. I am reminded that one reason why the provision with regard to exempting superannuation payments does not also include’ life assurance premiums is that contributions to superannuation funds are, as a rule, compulsory, whereas life assurance is optional. No doubt that was the reason why the originators of the income-tax legislation had in mind when this legislation was introduced about seven years ago.
Other provisions of a somewhat minor character are included in the Bill, but I should like, briefly, to refer to them.
Senator Russell:
– I pay £84 12s. 6d. life insurance premium on my children, and, apparently, I shall be allowed to deduct only £50. That does not seem to be equitable when compared with the deductible amount in connexion with superannuation payments.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I can only remind the honorable senator that there is cm the statute-book a law which he helped to pass, and which fixes the exemption at £50. Like Senator Russell, I might personally appreciate a higher exemption myself, but I think the proposal in this Bill is not unfair.
Senator Russell:
– That is taxing children.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– That may be said of every tax. Another clause of the Bill deals with calls of mining companies. Only a slight alteration of the existing law is proposed; but I direct the attention of honorable senators who are concerned with the interests of the mining industry to clause 16 d (ii). Yet another proposal is to enable! losses made in one business to be deducted” from any source of income otherwise obtained. Under the existing law a taxpayer may deduct losses in one business from profits made in another business in -which he is engaged; but ibis Bill proposes to permit losses in any business to be deducted from any other income, irrespective of the source from which it is obtained.
Senator Garling:
– Would it not be from income from personal exertion only ?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– No, from income from property or from personal exertion. It is considered that this is more equitable than the existing law.
The Bill contains a provision to reduce the present inequality of taxation on partnerships, on the one hand, and individual companies, on the other. Under the existing law a company pays the company rate on the proportion of profits retained in its business, whilst the individual pays tax on the whole of his profits, whether he puts them again into his business or not, and as the individual rate is higher than the company rate he is penalized to that extent. Provision is contained in the Bill to permit in the case of individual companies 15per cent, profits being taxable at the company rate if left in the business. The intention is to remedy an existing provision of the law which is regarded as unfair, and this Bill will put individual and partnership companies on the one footing, and, therefore, the consent of honorable senators to the provision can be readily relied upon.
There is another proposal which is more one of form than of substance. It deals with the limit of time within which it is possible to amend assessments. Under the existing law the Commissioner has power to give time for- the amendment of assessments, and in practice, with the approval of the Treasurer, he. has limited the time to three years. That is not a statutory limitation, and this Bill provides that it shall be the statutory limit except where fraud is suspected.
It has been found desirable to provide for the exemption from payment of the tax of certain visitors. Honorable senators will remember that Australia received an advertisement which was not of a flattering character, when some time ago an attempt was made to collect income tax from certain journalists who travelled out here with the Prince of Wales. That at- ‘ tempt was strictly legal, but it is now sought under this Bill to provide for exemption from payment of the tax in “the case of visitors of that kind^ the members of visiting cricket teams, and those who come out here on what in Continental countries would be called diplomatic missions.
An. important alteration of the existing law is proposed to deal with cases of fraud, because though in many cases no reasonable man could doubt the committal of fraud, it. has been found in practice extremely difficult for the Department to secure a conviction. The reason for this is that the information upon which a conviction could be secured remains in the possession of the accused’ person. To meat this difficulty it is proposed, on the advice of the SolicitorGeneral, to include in this Bill a provision, taken from the Customs Act, under which the averment of the prosecutor stands unless refuted. That would mean, that in such- a case as I have indicated, where the taxation authorities have reason to believe that fraud has been committed, they will be able to make the averment, and the accused person will be called upon to disprove it. Under the existing law, in such a case, the Department has to call upon the accused person for the evidence, which he alone possesses, in order to prove its case.
Senator Duncan:
– The Government start off by saying that a man is guilty, and he has to prove his innocence. That is the position.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I hope that Senator- Duncan will not fall back upon what hasbecome a platitude - that every man is innocent until he is proved guilty. We have found it necessary, on more than one occasion, in connexion with legislation, to depart from that principle, and say, “ This man can prove the truth or otherwise of the allegations made against him, and it is right that he should be called upon to do so.”
Senator Duncan:
– Any one has only to make an allegation against some person, and that person must prove that it is not true.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– No doubt
Senator Duncan has availed himself of opportunities to make allegations against people. We have to consider the real position. The Department knows that it is being defrauded, and the papers and evidence necessary to prove that are locked up in the safe of the man it accuses. It is proposed in this Bill to permit the Department to say to such aman,. “You are committing a fraud, and that allegation must stand unless you go in the box and produce papers or evidence £o disprove it.” If that course is not followed, an accused person will not subject himself to cross-examination, and will not produce papers or evidence. The result in such cases is, under the existing law, that although the taxation authorities have- the clearest knowledge that fraud has been committed, they are unable to secure a conviction.
Senator Duncan:
– They cannot have clear knowledge without evidence.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– There are many things in this world about which we are quite certain, although we cannot prove them. This provision is not novel. As I have said, it is in operation under the ‘Customs Act. When it was first proposed to include it in that measure, I am not sure that I was not one who took the startled view of the matter that Senator Duncan has taken, and was alarmed at such a departure from the good old British tradition.
Senator Duncan:
– The Minister has fallen from grace*
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– No. I have mounted in experience. I wa3 disposed at that time to consider that the proposal represented the letting go of one of the sheet-anchors of the Constitution, and I am not certain that I did not, in a feeble way, attempt to sketch some of the dire results which would follow. No such results have followed the operation of the provision in the Customs Act, but, on the contrary, because of it, some very useful work has been done in the interests of common honesty. I commend the proposal to the Senate for the reasons I have set out.
There is one other matter to which, perhaps, I should refer. A deduction of £30 is allowed under the existing Act for each child maintained by a taxpayer. This Bill raises the amount to £40.
Senator Duncan:
– That is not enough.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– It is very easy for the honorable senator to say that that is not enough, but might I ask him what is enough?
Senator Duncan:
– We should allow enough to maintain a child in food and clothing for a year.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– What would that amount to?
Senator Duncan:
– It should be £1 per week for each child.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The living wage is £4 per week,- and there are many men earning that wage who are raising three and four children. If it cost them £1 per week for each child the man and his wife would have nothing left to liveon. It is easy for Senator Duncan to say that the amount allowed should be £1 per week for each child, but it would be just as easy for me to say that the honorable senator is hard-hearted, and . that the amount ought to be 30s. There must be some reason in these matters. Governments do not levy taxation because they want to do so. The community must find the revenue necessary to carry on the government of the country; and in easing the taxpayers the Government have gone as far as they can in this Bill.
Senator Duncan:
– I understand that the Government desired the amount to be £30, and that honorable members of another place secured the increase in the amount allowed for each child.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I should like, to see many deductions allowed for children. It would be highly popular to advocate them outside, but I submit that we owe a duty to the country. The proposals of the Government represent a considerable easement to the taxpayers, and if honorable senators were to carry this, that, and the other exemption, the result would be to destroy the financial arrangements of the Government.
Senator Duncan:
– Is there any provision in the Bill to make a suitable allowance to members of Parliament?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I understand that a measure dealing with their remuneration will shortly be under review.
Senator Duncan:
– Not in this Chamber.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The honorable senator may be a prophet. I have briefly indicated the headings under which tha Bill provides for amendments of the existing law without attempting at undue length to argue them, because I submit that the most profitable discussion of the measure can take place during the Committee stage.
Question resolved in the affirmative.
Bill read a second time.
In Committee:
Clauses 1 to 12 agreed to.
Clause 13 (Income tax).
Senator PAYNE:
Tasmania
.- This clause deals with the individuals, companies, and associations who have to pay income tax. I regret that I missed an opportunity on the definition clause to direct the attention of the Committee to a matter of some importance. There are organizations and associations established in Australia, not with a view to making a profit, but with a view to engaging in certain forms of snort, recreation, and instruction. These organizations have hitherto been subject to income tax. I refer especially to bands, bowling clubs, and institutions of that kind. A case was brought under my notice some time ago where a number of men who had combined to establish a band in a certain district had made a small profit in one year. Notwithstanding the fact that they had heavy engagements to meet from previous years, they had to pay income tax on the profit they made. In the same way an association of bowlers was called upon to pay income tax at the rate of “2s. 8d. in the £1, which applies to companies and associations, although they had incurred heavy losses in previous years. I have only bad the Bill in my hands for a few minutes.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I did not deal with what was already law.
Senator PAYNE:
– Perhaps my remarks would be more applicable when clause 14 is under consideration.
Senator GARLING:
New South Wales
-This is the first time that the averaging system has been applied to taxpayers generally. It is quite novel in that sense, and, perhaps, not readily understandable at the first glance. I call attention to sub-clause 4, which, says that the first average year shall not be earlier than the year beginning on the 1st July, 1920. Does that mean that for the financial year commencing on the 1st July, 1922, the average is to be ascertained by taking the average for the two years only? The supposition is that we are averaging for five years.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The new system is being started with the average for the last two years.
Senator GARLING:
– I also direct attention to sub-clause 6, which states -
Any year in which the taxpayer was not carrying on business and was not in receipt of a taxable income shall not ‘be counted as an average year, but any year in which the deductions allowable in his assessment to a taxpayer engaged in .business left no taxable income, shall be capable of being a first average year, and, if an average year, shall be taken into account in ascertaining tie rate and the excess of allowable deductions over assessable income shall be taken into account in calculating the average.
The averaging principle does not, apparently, apply to any case other, than the case of a man who is carrying on business. In other words, it does not apply to the case of a man whose income is derived from property or investments. Will the Minister (Senator E. D. Millen) make it clear whether I am right or wrong in drawing that conclusion? I do not see why a distinction should be made, because losses are just as likely to arise in the case of a man who is dependent on his investments - in such enterprises as mining or ordinary commercial undertakings as in the case of a man who derives his income from the carrying on of a business.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– It is intended to apply to businesses only.
Senator GARLING:
– I would venture to. suggest that the Minister might let us know why it is that the other incomes have been left out.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I should like an opportunity to look into that point, but I hope that the clause will be agreed to at this juncture.
Senator GARLING:
– Another point is that, notwithstanding the fact that an explanatory memorandum has been circulated showing the difference between the Income Tax Assessment Act and the present Bill, it would appear from sub-clause 6 that the losses that a man may make in carrying on his business are not to be taken into account in averaging his income for taxation purposes. I should certainly gather from sub-clause 6 that the losses made in a number of years are not to be added together and then deducted from the total income so as to arrive at the average income over that period. But in the first of the examples circulated, given under, the heading “ Business incomes,” we find that the average is to commence with the first year showing a loss, and that that loss is to be taken into consideration with,_ say, the next year’s loss, and the next two years’ profits; but I gather from subclause 6 that that is not intended. Will the Minister make it clear whether we are giving the taxpayer as much consideration as the examples distributed appear to indicate ?
Senator FOLL:
Queensland
.- Sub-clause 6 deals with the case of a taxpayer who is carrying on business, and during anyone year in the averaging period of five years does not earn a taxable income. Why is it that allowance is not to be made for the year in which the income does not reach the exemption level ? I take it that the averaging system has been adopted to grant relief to taxpayers who in certain years suffer hardship as the result of decreased income. Take the case of the man in receipt of a small income, who receives, perhaps, only £30 or £40 above the exemption figure. If he were out of employment for six months of the yean, his income would be reduced below the exemption, level, and that man should be permitted to include that year’s income in arriving at the average over the five years’ period. Otherwise the man on a small income would reap very little advantage from the averaging principle.
Senator KEATING:
Tasmania
– There is apparently something in the point raised by Senator Poll, but one cannot say off-hand. The Bill has not been long in our possession. Mindful of last session., I spent last week-end over this measure, but a good deal of the work I did at that time has been rendered’ valueless because of the amendments made in another place.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– There have been only two amendments of importance made by the other Chamber.
Senator KEATING:
– This Bill ought to have been circulated long ago; but it was distributed less than a fortnight ago. When I received a copy I spent the greater part of two days upon it; but to what extent it was altered in another place we did not know until it reached this Chamber. We are dealing with a very important principle, and primd facie, it seems to be of very great advantage to the taxpayer; but we are not sure upon that point. The proposal might be “ loaded “ for all we know. I have not had time to read this clause through carefully yet. Sub-clause 6 begins: “Any year in which the taxpayer was not carrying on business.” The word “ business “ is defined as including “any profession, trade, vocation, or calling.” There may be other . means of employing one’s time, and acquiring income, that might come under, the term “ business.” It is not a question merely of receiving no taxable income, but of not receiving taxable income, and also in the same year not carrying on business. If we are to confer the privilege of averaging we should take such a year into consideration. Two matters are jumbled up in this sub-clause. It commences: “ Any year in which the taxpayer was not carrying on business, and was not in receipt of a taxable income, shall not be counted as an average year.” I have read the memorandum on the Bill very carefully, but I think it is somewhat out of line now, on account of the alterations made in another place. Senator Foil’s point seems to be that if a man has not received an income in any one year which in ordinary circumstances would be below the taxable amount, that income should be taken into consideration in estimating the average.
Senator Garling:
– If he is not carryins on a business, he must be earning income from property, and such a case does not come under this provision at all.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Did I understand Senator Garling to ask if this is limited to businesses?
Senator Garling:
– Yes, and the Minister replied in the affirmative.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Then my answer was incorrect, as it is not.
Senator KEATING:
– A man may be physically or mentally incapable of conducting his business. A professional man may be suffering from over-strain and ordered by his medical adviser to leave his work for many months, and I should think, in such cases, the income for that year, however small, should be calculated in averaging the income over a period of five years. There are numerous cases in which men are not carrying on business for the whole or portion of a year owing to circumstances entirely beyond their control. I know of instances where men have been ordered to leave their work, and have been compelled to borrow money to get away and restore their health.. Their medical advisers have said, “What is the use of saying you have not the ready cash? If you do not go, you will die.” Diminished incomes during such periods should be calculated in averaging the income over a period of years. I do not think it is fair, and Senator Foil’s criticism of the clause should be met by some amendment. It is, however, practically impossible to deal with the matter fully and accurately in such a hurried way.
Senator GARLING:
New South Wales
– If a person is not receiving any income it cannot be averaged.
Senator Keating:
– The provision refers to “taxable income,” and if a person was in receipt of £188 per annum his income would not be taxable.
Senator GARLING:
– The point is one which should be cleared up. If a person is receiving a salary he would be regarded, under the definition clause, as one carrying on business. Does it mean that a man must be physically carrying on business, and in receipt of a taxable income? I- hardly think . the provision is intended to go to ‘that extent.
Senator Keating:
– A professional man is frequently ordered away.
Senator GARLING:
– But he can arrange for some one to conduct his business in his absence.
Senator Keating:
– Many do not make such an arrangement.
Senator GARLING:
– That is usually done.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
. “ - It has been frequently stated during the debate that honorable senators have been brought face to face with this measure, in its present form, for the first time. I do not contradict the statement, but I do say that the Bill was placed in their hands at least a fortnight ago.
Senator Keating:
– Not this Bill.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– With one or two minor or consequential amendments made in another place - I can only recall two, one which, relates to the valu ation of live stock, and the other to increasing the allowances for children - the measure is precisely the same as that circulated two weeks ago. I submit, therefore, that the statement that ‘this Bill has now been brought under the notice of honorable senators for the first time is unjustified. I admit that the measure is complicated, but, curiously enough, the provisions we are now discussing - with the exception of the exemptions and the averaging system. - have been the law for years. Honorable senators are doubtless aware that this is a consolidating measure, and they cannot say that it is the first time the bulk of the provisions have been brought under their notice, and that it is unfair for the Government to ask the Committee to proceed to discuss it now.
Senator Garling:
– I have been referring to the proposed new averaging system.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Honorable senators know the state of business, and are doubtless as anxious as I am to get on with the- Bill. If it is considered necessary to postpone the consideration of certain clauses I am prepared to agree to such a suggestion; but it must be admitted that as many of the provisions have been law for years there is no justification for debating them at this juncture. I do not know if Senator Garling is anxious that this clause should be postponed.
Senator Garling:
– I think it should be.
Senator KEATING:
Tasmania
– I can quite agree with the statement of the Minister (Senator E. D. Millen) that this is a consolidating measure, . and as such I welcome it. There are, however, several clauses which are new, and as amendments have been made in another place since the Bill was first circulated we should have sufficient time in which to consider them. I fully expected that the debate on the second reading would have been continued after the Minister had concluded his secondreading speech, and as I was at the time engaged here at the table in other parliamentary work I did not have the opportunity of speaking to the motion. Had I done so, I would have referred to the fact that in the main this is a consolidating measure. But clause 13 introduces a new principle, and I sincerely trust that provision has been made for a genuine averaging system. The criticism offered by Senator. Foll seems to suggest that sub-clause 6 is not what we have a right to anticipate, because lean years should be taken with the good ones in arriving at an average. I agree with the Minister that there is no necessity to discuss many of the clauses, as they have been the law foT some time; but before the measure leaves this Chamber the point raised by the honorable senator should be cleared up.
Senator FOLL:
Queensland
– We are all anxious to get on with the business, and as the Minister (Senator E. D. Millen) can easily consult the officers of the Department who are available, he should be able to state whether the objection I have raised is a reasonable one. Senator Keating, who makes a very close study of all measures which come before this Chamber, has supported my contention. This clause does not provide for the averaging of incomes in . the manner which we desire.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– What does the honorable senator wish me to answer ?
Senator FOLL:
– I thought I made the position clear. The sub-clause reads -
Any year in -which the taxpayer was not carrying on business and was not in receipt of a taxable income shall not be counted as an average year. …
That, I think, conflicts with the wording in another portion of the clause.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– When once the taxpayer comes under the averaging system he is always under it. Is that clear ?
Senator FOLL:
– I cannot follow the clause as’ it is worded. I am not only concerned with the position of professional men, but am thinking of the smaller taxpayers who, owing to some misfortune in one particular year, may not be able to bring their incomes up to the taxable rate, in which, case they would not receive the benefit of the averaging system. They could not include a year in which their incomes were below the taxable rate. As there appears to be considerable difference of opinion concerning the clause, I trust the Minister will agree to its postponement.
Senator Fairbairn:
– I have not even a copy of the Bill..
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Copiesare available..
Senator Fairbairn:
– Some honorable senators may have them.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– If copies are not available, . I shall certainly not ask honorable senators to discuss the Bill.
Senator THOMAS:
NEW SOUTH WALES · NAT
– I have not a copy, but I do not suppose that is unusual ‘ when measures are being rushed through at this rate.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I am informed by the ‘Clerk of the Senate that all the available copies have been distributed, and I shall therefore ask that progress be reported.
Clause postponed.
Progress reported.
page 3526
PUBLIC SERVICE BILL
Message reported intimating that the House of Representatives did not insist on its amendment in clause 83, disagreed to by the Senate, and had agreed to the consequential amendment made by the Senate to amendment in clause 84.
page 3526
INCOME TAX BILL
Second Reading
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
.- I move-
That this Bill he now read a second time.
This is another measure which will be heralded with pleasure by members of the Senate. I gather that the Government has at last succeeded in pleasing Senator Fairbairn and Senator Thomas at one and the same time, and if it has never done anything else, that is an achievement of some moment. The Bill is the annual measure for imposing the rates of income tax. The schedule to the Bill sets out the rates of tax on the various, classes of income. The rates are based, as in all previous years, upon the scales of rates imposed by the original Income Tax Act of 1915. The supertaxes subsequently imposed on those rates, aggregating slightly over 70 per eent., have been reduced by the Bill. The Bill gives effect to the Government’s decision to reduce the rates of income tax all round by 10 per cent. It does so by reducing the combined super-taxes to 53½ per cent., and proportionate reductions, as nearly as possible, have been made in the rates on -
- companies, which have been reduced from 2s. 8d. to 2s. 5d. in the £1;
- absentee shareholders, debentureholders, and depositors in companies, the rates for whom have been reduced from 8d. to 7d. ; and
- prizes in lotteries, the tax upon which has been reduced from 14 per cent, to 12½ per cent.
In all other respects, except one, the Bill is the same as previous Income Tax Bills. The exception is in clause 6, and is due to the inclusion, in taxable prizes in lotteries, of prizes paid in bonds, inscribed stock, or other securities. In this connexion, I would refer honorable senators to clause 16, sub-clause 1, of the Income Tax Assessment Bill. Those are briefly the provisions of the measure, which, I believe, will find ready acceptance at the hands of honorable senators.
Senator BAKHAP:
Tasmania
– I intended to address the Senate very briefly on the measure with which the Committee was dealing a few moments ago, and I do not think that my remarks will be altogether out of order in connexion with the Bill we are now discussing. I should regret very much if they happened to be out of order, and I will try to make them in order by alluding to the rates of income tax. I do not suppose that. I can discuss the question of general assessment, or the effect of taxation upon industries in too general a way, but I wish to emphasize my view that, in regard to one industry, the rate of tax should be of the most nominal kind. Senator de Largie, in addressing himself to the Budget last evening, alluded to the decadent state of the mining industry in Australia. The mining industry differs from all other Australian industries, and I think it may be said that, without exception, it has been most valuable in regard to Australian settlement, and yet it cannot be compared with any industry which can be reconstituted. Mining deals with a wasting asset, and it is true that never in the history of the exploitation of Australian resources has the mining industry been so depressed as it is at present. It is in a decadent condition; prospecting has practically ceased, and if you approach a capitalist and ask him to invest any money in a . mining venture, he will look at you as if you contem plated a robbery. There must be in Australia a multiplicity of latent mining resources. There must be many fine fields yet to be discovered. Seeing that mining enterprise, if not altogether dead, is nevertheless languishing, any Administration which wishes this continent to progress and to see revivified the spirit of enterprise which was manifested two decades ago, and at an early stage in Australian development, should take into consideration the question of relieving the mining industry of its disabilities.
ThePRESIDENT (Senator the Hon. T. Givens). - The honorable senator is transgressing in going beyond the limits of the Bill.
Senator BAKHAP:
– I believe that very, very nominal rates of income tax should be levied on incomes derived from the exploitation of the mineral resources of this continent. I will not further transgress in respect to the Standing Orders. My remarks particularly refer to metalliferous mining, which differs in its incidence and in the erratic nature of the deposition of ores from all other kinds of mining. It differs from coalmining and from oil-mining. I think that only a nominal rate should be imposed upon incomes that may be fortuitously derived from metalliferous mining, because metalliferous ores are a wasting asset which can never be restored.
Question resolved in the affirmative.
Bill read a second time.
In Committee:
Clauses 1 to 5 agreed to.
Clause 6 (Tax on prizes in lotteries).
Senator DE LARGIE:
Western Australia
– During the second reading, Mr. Chairman, you referred to metalliferous mining as being something in the nature of a gamble. I quite agree with that point of view. The position of the mining industry has been seriously jeopardized by the heavy burden placed upon it under the Tariff, and, if possible, we should now undo some of the harm then done. Unless we can do something to ease the burden on the industry in my State, there will be little prospect of the financial position of Western Australia improving in the near future. Recently we had a statement as to the position in Tasmania under the Commonwealth. If the people of Western Australia had come to this Parliament seeking relief from the enormous burden placed upon the mining industry in the Tariff, and owing to the reduction of the> gold output, we would have been able to put forward a very good case indeed. I do not know in just what way relief may be afforded under this measure, but I feel that something should be done. At present there are only a few good mines in operation in Western Australia.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Surely the matter mentioned by the honorable senator does not come under this Bill.
Senator DE LARGIE:
– This clause refers to the tax on prizes in lotteries, and, undoubtedly, metalliferous mining, and especially gold mining, is a highly speculative enterprise, or gamble; ‘at the present time. ‘ However, if I am out of order I shall have to resume my seat, but I hope something will be done in the near future to afford relief.
SenatorFOLL (Queensland) [5.21]. - This . clause deals with the ‘taxation of prizes won in lotteries, and I think this is a suitable occasion to expose the inconsistency of the Government in regard to sweepstakes and lotteries generally. The Postmaster-General’s Department, as has been said times out of number, declares it to be illegal for remittances to Tattersall’s, in Tasmania, to be carried through the post, but if a person happens to be fortunate enough to win a prize, the Government regard the amount as income, and take their proportion of it by way of taxation. The clause also aims at the Golden Casket lottery, in Queensland, organized for the benefit of Queensland hospitals. I am not going to deal with the merits or demerits of that method of raising money for charitable purposes. It is a debatable question. Nevertheless, money is raised in that manner in Queensland, and the Federal Government levy a tax of 12½ per cent, upon prize winners, whilst other art unions conducted anywhere, provided the prizes do not take the form of negotiable bonds or other negotiable instruments, to quote the language of the clause, are not affected at all. I do not altogether object to the holding of art unions, provided they are for a good purpose, but I think it would be far better if the necessary revenue for the maintenance of hospitals were raised by direct taxation.
Senator Fairbairn:
– Under Government control, the cost of our hospitals would be increased about ten times.
Senator FOLL:
– There is no reason why the hospitals, in that event, should pass under Government control. But that is not the matter I wish to discuss at all. I want to direct attention to the inconsistency of the Government in attempting to discourage people from subscribing toTattersall’s sweep and the Golden Casket lottery, in . Queensland, and then levying a tax of 12½ per cent, on the prize winners.
Senator E D MILLEN:
Minister for. Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Senator Foll has argued his case so feelingly that I am almost inclined to think he has been one of the fortunate winners. But I . point out that this is a proposal to levy a tax oh incomes which, may be derived in a certain way, and surely he does not object to that?
Senator Foll:
– Not in the least-
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Then there is every reason Why the honorable senator should support the clause. The thing he really objects to is the provision in the Post and Telegraph Act, passed many yeans ago, preventing the carrying of letters through the post to certain institutions. If we levy a tax on a man who works hard for £250 or £300 a year, surely we should also place a tax upon another man who may be fortunate enough to win £1,000, or the value of that attractive “gold brick” which is offered in Queensland ? Here is a proposal to levy a tax on certain cash prizes. I fail to see how the honorable gentleman or any other honorable senator can object to it. If Senator Foll feels that there is something wrong with the Post and Telegraph Act, the proper course is to take action to amend it.
Senator Foll:
– Willyou support me if I do ?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I am not expressing any opinion on that subject at all. I am merely saying that the proposal now before the Committee might well receive the honorable senator’s cordial support.
Clause agreed to.
Clause 7 agreed to.
Schedules and title agreed to.
Bill reported without request; report adopted.
Bill read a third time.
page 3529
INCOME TAX ASSESSMENT BILL
In Committee (Consideration resumed) :
Clauses 14 and 15 agreed to.
Clause 16 -
The assessable income of any person shall include -
money derived by way of royally or bonuses, and premiums fines or foregifts or consideration in the nature of premiums fines or foregifts demanded and given in connexion with leasehold estates, and the amount of any payment received by a lessee upon the assignment or transfer of a lease to another person after deducting therefrom -
the part (if any) which, in the opinion of the Commissioner; is properly attributable to the transfer of any tangible assets belonging to the lessee; and
so much of any fine premium or foregift paid by the lessee or any amount paid by the lessee for the assignment or transfer of the lease as is properly attributable to the period of the lease unexpired at the time of the assignment or transfer by the lessee :
Provided that this paragraph shall not apply to the proceeds of the sale, transfer or assignment of the lease of a mining property (other than coal mining) where the Commissioner is satisfied that the lease has been sold, assigned or transferred -
Senator FAIRBAIRN:
Victoria
– I have an amendment to propose in this clause which will make no material change, . but will make the clause read better. I move -
That the word “the”, line 4 of the proviso to paragraph (e), be left out with a view to insert in lieu thereof “ a.”
This will make it read “ a lease “ instead of “ the lease.”
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Senator Fairbairn has, with perfect frankness, admitted that his amendment will make no material difference in the clause, but I point out to him that, if it is agreed to, it will destroy the symmetry of the Bill. If he will look at the paragraph preceding that which he proposes to amend he will find many references to “the” lease. If that form is departed from in this paragraph it will destroy the symmetry of the Bill, and, as the honorable senator does not attach much importance to his amendment, I hope he will not press it.
Senator FAIRBAIRN:
Victoria
– I shall not press my amendment. I intend to move -
That the following words be added to- paragraph (e) - “A lease from the Crown of lands used for grazing, pastoral or agricultural > purposes, if the Commissioner is satisfied that the lease was originally purchased or acquired - by the taxpayer bona fide for pastoral, grazing or agricultural purposes.”
My reason for this amendment is that it has been the practice since the decision of the High Court in Western Australia to treat all “walk-in-walk-out” sales of leasehold as capital. If a man sells a freehold it is capital, undoubtedly, and I can see no difference between selling a leasehold and selling a freehold. The Minister (Senator E. D. Millen) will see that profits made on the sale of mining leases are exempted from taxation under this clause, and profit on the sale of a freehold is exempt from taxation. I cannot see ‘why a man making a profit, on the sale of a leasehold should be taxed. I have tried to grasp the reason for taxing such a profit, because I must admit that the Treasurer has met us in every possible way. The Bill represents a monument of studious effort on the part of the Treasurer (Mr. Bruce) to meet taxpayers in every way he could. Still, this is a matter which requires some further attention. If we consider the cattle industry at the present time, no one can doubt that leaseholders of grazing properties, particularly in Queensland, are in a most deplorable position. If one of them sells his pastoral lease and makes a profit on it, he is taxed upon that profit, but if he makes a loss on the sale he is not permitted to deduct that loss from his income. My amendment would put the matter on an equitable basis. Leaseholders have been harshly treated under this provision. They have had tremendous struggles to keep going, and I cannot see why they should be treated differently from other leaseholders. Many of them have spent a great deal of money on the improvement of their leases, and they get very little consideration for their improvements. Under the Queensland law a fence is supposed to have lost its value entirely in fourteen years. I should like to hear what the Minister has to say on the question, but I believe that Crown lessees can make out a perfectly good case for such an exemption from taxation as I propose, where they make a bona fide “ walk-in-walk-out “ sale of their leases. I quite understand that we could not permit trafficking in the sale of leases and allow deductions in those cases. A man who makes a business of buying and selling leases as a speculator would not be entitled to the benefit of the exemption I propose, but where a man buys a leasehold for bond fide pastoral or agricultural occupation, and on selling it again makes a profit in the ordinary course of his business, that profit should not be taxable. I do not see why a man who takes up a leasehold for pastoral or agricultural purposes should be placed in a different category in this regard from a man who buys a freehold to use for the same purpose.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The explanation is a very simple one, and one which will appeal to Senator Fairbairn. The reason why the differentiation is made is that the leaseholder is granted an allowance for amortization. If he has a twenty years’ lease, he is allowed to deduct a certain amount each year, and at the end of twenty years those sums would amount to the full value of his lease. He cannot have ‘it both ways. Having been allowed what is practically the purchase price of his leasehold, he is in such a position at the end of that period that the lease has cost him nothing.
Senator Sir Thomas Glasgow:
– It would be worth nothing at the end of the time, apart from the improvements.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– In the majority of cases the leaseholder sells Ee balance of his lease at a profit.
Senator Sir Thomas Glasgow:
– So does the freeholder, and his land depreciates.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– We allow the freeholder nothing. It is not at all unfair that a man who makes a profit on his lease should be called upon to pay income tax in respect to that profit. .
Senator DRAKE-BROCKMAN:
Western Australia
– I support the suggested amendment of Senator Fairbairn. In the form in which he has put it, it is only applicable to the Bill in its original form. The honorable senator wished to move an amendment to paragraph d, sub-paragraph ii of the original Bill, but that has no application to the
Bill in its present form. I have not had an opportunity to look at the Bill in its present form, but I have had a copy of the memorandum that was circulated.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The Bill was issued with the memorandum.
Senator DRAKE-BROCKMAN:
– A copy of the latest Bill was not supplied to me. I desire to contribute to the improvement of the Bill; but, according to the memorandum, an extraordinary result would follow. The proviso to paragraph d states -
Provided that this paragraph shall not apply to the proceeds of the sale, transfer or assignment of the lease of a mining property . (other than coal mining) where the . Commissioner is satisfied that the lease has been sold, assigned or transferred -
The intention of the Government is that prospectors shall be exempt from taxation in respect to the matters contained in this paragraph ; but the effect of the provision, as drafted, is that they are in a worse position than the other people provided for, because they are excluded from the benefits mentioned.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The provision excludes certain mining leases.
SenatorDRAKE-BROCKMAN. - That is what is intended, but the clause does not do that. ‘ It excludes them not from paragraph d, but from sub-paragraph ii of paragraph d. The people whom it is intended to benefit have, therefore, an additional impost placed upon them.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– It excludes them not from sub-paragraph ii, but from the whole of what the honorable senator speaks of as paragraph d, which is paragraph e in the Bill as now before us.
Senator DRAKE-BROCKMAN:
– I know what the intention of the Government was.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– If the honorable senator will only refer to the Bill itself, he will see that the memorandum from which he is quoting is incorrect.
Senator DRAKE-BROCKMAN:
– I think the Minister said that the memorandum was in the same form. The Crown Law authorities have told me that my contention is perfectly correct, and that they intended to make an alteration. I want some assurance that that has been done.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– If you look at the Bill, you will see that the alteration has been made.
Senator DRAKE-BROCKMAN:
-The Minister should allow me sufficient time.
Senator Earle:
– There are two Bills on your table.
Senator DRAKE-BROCKMAN:
– I cannot look at them while I am on my -feet.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The honorable senator should be able to glance at the Bill, and talk at the same time.
Senator DRAKE-BROCKMAN:
– That I am unable to do. My friend Senator Garling, who is a lawyer, has told me that my statement of the position is correct.
Senator GARLING:
New South Wales
– I am sure the Minister (Senator E. D. Millen) need not take umbrage at Senator Drake - Brockman’s suggestion that this provision is incorrect in its present form. In the Bill originally circulated this proviso came immediately under the word “ or;” which is on the bottom1 line of sub-paragraph ii of subclause e, and that naturally led to confusion, and the belief that that proviso applied only to what we might term paragraph ii of sub-clause e. The mere fact that the draftsman or the printer moved the word “ provided “ one inch into the margin does not overcome the fact that the word “ paragraph “ has been wrongly used. What is being dealt with is in subclause e of clause 16, to which these words are a proviso. It is not a proviso to paragraph ii of sub-clause e, but intended to ‘be a proviso to sub-clause e of clause 16. If the Minister will agree to amend the paragraph to make it a sub- paragraph of the sub-clause it will cover the point mentioned by Senator DrakeBrockman, and will not lead to any confusion, which naturally follows from connecting the proviso with paragraph ii of sub-clause e. The proviso in its present form’ is not sense, and as it is worded conveys the impression that the proviso will govern that sub-paragraph, instead of that relating to the first paragraph of the sub-clause.
Senator Keating:
– If we alter paragraph to sub-paragraph it will make it clear.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I have had some journalistic experience, and have spent considerable time in Parliament, and I have never known so much time to be wasted over such a. trivial point. If - honorable senators will look at the Bill they will see exactly what we are doing.
Senator Garling:
– I referred to the Bill.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The honorable senator referred to the form in which it is printed.
Senator Garling:
– Yes, the word “ provided “ has been carried out an inch.
S enator E. D. MILLEN . -If honorable senators will refer to any column in the newspapers they will see that the matter is run on continuously in most cases, and if it is “ broken,” it is regarded as a paragraph.
Senator Garling:
– A Judge of a Court would not take that into consideration.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– A paragraph is a . paragraph, and a sub-clause is a sub-clause. The proviso does not refer to a sub-paragraph, but to a paragraph which is paragraph e.
Senator Garling:
– That is a subclause.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Senator Drake-Brockman’s contention was that it applied only to the sub-paragraph preceded by the number ii. That is not a paragraph.
Senator Drake-Brockman:
– In the Bill which I have it is.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Possibly so, but I am dealing with the Bill before me. Any one can see what is intended, and there does not appear to be any valid reason why it should be amended.
Senator Garling:
– What does it refer to? Paragraph e. That is not a paragraph, but a sub-section.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– What is the difference? I am supported in my contention by the interpretation of the Solicitor-General (Sir Robert Garran).
Senator KEATING:
Tasmania
– In spite of what the Minister (Senator E. D. Millen) has said, I think it would be well to alter the word “ paragraph “ to the word “ sub-clause,” because, taking i he literal meaning of the word paragraph, this proviso is in itself a paragraph. Reading the Bill and not the memorandum on page 9, the new paragraph commences with the words “ Provided that this paragraph.” Which paragraph ? The paragraph of the proviso itself. Not only is the Commissioner of Taxation available, but the officers of the Crown Law Department are also present, and I would direct attention to the literal significance of the word “ paragraph.” It reads, “ Provided that this paragraph.” Which paragraph ?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Paragraph e.
Senator KEATING:
– No; the proviso itself. Would it not be better to say, “Provided that paragraph e” or make it clear in some other way. As it stands at present it is ambiguous, and to remove that ambiguity I suggest that an amendment should be made in the direction suggested by previous speakers.
Senator E. D. MILLEN (New South
Wales- Minister for Repatriation) [6.10]. - If honorable senators will peruse any portion of the Bill, they will see that there is a distinct difference between paragraphs, sub-paragraphs and . clauses, and sub-clauses. There is an instance on page 19.
Senator Garling:
– In that clause numerals are quoted, and in this, letters are used.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I move -
That the word “ this “ in the proviso to paragraph e be left out, and that the letter “(c)” be inserted after the word “ paragraph.”
Amendment agreed to.
Senator DRAKE-BROCKMAN:
West ern Australia.
.- Now it is quite clear that the amendment suggested by Senator Fairbairn will not have the effect of imposing additional hardship on the holders of pastoral leases. I move -
That after the word “to” in the proviso to paragraph c the letter “(a)” be inserted. ,
The reason why this amendment should be made has already been explained by Senator Fairbairn, but I could not support it as it was originally suggested, because it would be doubtful if the further proviso would have had the effect of imposing an additional burden on the lessee, as apparently the Bill intended to do, of the unfortunate holder of a mining lease. I propose then to move for the insertion of the following paragraph -
A lease from the Crown of land used for grazing, pastoral, or agricultural purposes, if the Commissioner is satisfied that the lease was originally purchased or acquired by the taxpayer for grazing, pastoral, or agricultural purposes.
Senator E. D. MILLEN (New South
Wales - Minister for Repatriation) [6.18]. - The amendment moved by Senator Drake-Brockman is practically the same as that suggested by Senator Fairbairn. I have already informed the Committee why it is hot possible for the Government to fall in with the proposal. The effect of it would be to place pastoral leases, in the same position as mining leases. A little earlier in the day we had a very pronounced declaration from Senator Bakhap, who urged very strongly that the mining industry should be placed in a separate category because of the special disabilities and handicaps attaching to it. It was said that mining was a gamble, and that it involved greater risks than other businesses.
Senator Wilson:
– The pastoral industry is also a gamble.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– It may be; but it was urged that there were features connected with the mining industry which entitled it to special consideration. Senator Drake-Brockman now says that because we have placed mining leases in a certain position, we ought, in equity and symmetry, to” put pastoral leases there also. I do not think the one has any relation to the other.
Senator Drake-Brockman:
– It is desired to put pastoral leases and freehold properties on the same basis.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– That might be considered from the stand -point of putting an additional tax on freehold land, but the proposal now is to exempt from taxation leasehold lands used for pastoral purposes. The Government cannot accept the amendment, and I do not think it ought to be inserted in the Bill. To say that there is an element of risk in the grazing industry in Australia, is to say what we all know to be true. ‘ Many members of this Senate have taken those chances, but, on the whole, the industry is not of the same speculative nature as mining. There is a degree of difference in the element of chance that enters into it. I can see no reason why the man who makes a profit from the sale of a lease and who, having been allowed to recoup himself year after year for the proportion of the purchase money he paid for the lease, should not be charged on the profit.
Senator FAIRBAIRN:
Victoria
.- The Minister (Senator E. D. Millen) has not given his support, or the support of the Government, to the amendment because, he says, a pastoral lease is not in the same class as a mining lease. He has said that mining is under a cloud. I do not suppose, however, that there is any more .disastrous state of affairs in the Commonwealth at the present time than that which exists in the cattle industry.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The plea put forward for the mining industry was not because it was under a cloud, but because of the risk associated with it.
Senator FAIRBAIRN:
– The cattle industry at present is not a risk; the depression it suffers from is a certainty.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The honorable senator put up the same argument two1 or three years ago, when the cattleowners could not ask enough for their cattle.
Senator FAIRBAIRN:
– That was a different time from, the present. A leasehold has always been regarded as part of a man’s capital, and I cannot see why . it should be separated from his ordinary capital. A freehold is not separated in this way, and why should a leasehold be ? If a poor fellow makes a profit on the sale of his lease, he is taxed; but if he owns a freehold, which goes on for ever, he is not taxed.
Senator Earle:
– He buys the freehold, but not the leasehold. -
Senator FAIRBAIRN:
– One cannot get a leasehold for nothing. Something has to be paid for the good-will.
Senator Earle:
– Why should not the man who owns that good -will pay something to the revenue of the country ?
Senator FAIRBAIRN:
– Because it is his capital. When he buys a lease on a “ walk-in-walk-out “ basis, he pays for a going concern, which consists of so much leasehold land, so much stock, and so much, improvement. Those have always been treated as his capital, and the High Court held that they were capital. Suddenly, I cannot understand why, we propose that a man who possesses a leasehold shall be told, if ‘he sells it, that some part of it is income. A case similar to this was before the Queensland Parliament some time ago, and the members there thought it so inequitable that they amended it. A leasehold in Queensland is now treated as capital, and not as income. The Bill is an endeavour on the part of the Treasurer (Mr. Bruce) to meet the taxpayers in every way he can. but in the clause under discussion I think there must have been an oversight. I cannot see why a leaseholder, even if. he is allowed to write off a part of his lease as an expiring asset, should be required to separate his lease from his other capital.
Senator DRAKE-BROCKMAN:
Western Australia
– If a man should buy a freehold property, say, for £10,000, hold it for a few years, and sell it for £15,000, the difference between £10;000 and £15,000 is not subject to taxation unless he is a land jobber; but if he should purchase a leasehold property for which he pays £10,000, and which he subsequently sells at £15,000, he pays taxation on £5,000. The sum of £5,000 as regarded as an accretion of capital in the case of the freehold, but under the Bill it would not be regarded as an accretion of capital in the case of a leasehold. All the amendment aims at is to place freehold and leasehold properties on the same footing. Personally, I cannot see why that should not be done. Suppose there are two men both engaged in the pastoral industry. One of them goes on a block of land which is freehold, and the ether takes a block which is leasehold. In some parts of Australia a man cannot acquire freehold. That is the Commonwealth policy with regard to the Northern Territory, and in the State of Queensland he cannot acquire freehold from the Government. Yet it is proposed to place men who are compelled to take leasehold’ in a worse position than men in Victoria who can acquire freehold.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Many of the persons of whom the honorable gentleman is speaking would not make their properties freehold, even if they could.
Senator DRAKE-BROCKMAN:
– That is not the point. Why should a man, who, from choice or compulsion, it does not matter which, carries on a pastoral, business on a leasehold, be in a worse position from the point of view of taxation than a man who carries on an identical business, on identical land, and makes identical profits, on a freehold ? It is too absurd for anything.
Senator Earle:
– The honorable senator is advancing a strong argument in favour of taxing freehold.
Senator DRAKE-BROCKMAN:
– It may be an argument for levying a tax on freehold, but why treat leasehold and freehold differently? If the argument is strong for granting an exemption to a freeholder, it is still stronger, in my opinion, for granting an exemption to a leaseholder. The profit on a sale would be an accretion of capital in both cases. Why should it be an accretion of capital in respect of a freehold, and not in respect of a leasehold?
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The reason for the distinction referred to by Senator Drake-Brockman is that the leaseholder is allowed each year to write off a certain amount for depreciation in respect of his lease.
Senator Drake-Brockman:
– That is . because, at the end of the lease, he would have nothing left, but the freeholder would still have his freehold.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The number of leaseholders who sell and reap a profit is certainly a minority, and not a majority. The majority, I venture to say, run their leases through. The clause, therefore, would only apply to a minority of leaseholders. If we adopt the amendment and put leaseholders and freeholders on the same footing,, we would be compelled to withdraw the provision which enables them to deduct a sum every year for depreciation. They cannot be allowed to have the benefit both ways.
Sitting suspended from, 6.30 to 8 p.m..
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– At present leaseholders are entitled to a rebate on their taxable income of an amount equal to the depreciation of the lease.
Senator Garling:
– In what section of the Act does that provision appear?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I think it is in section 25. Let us assume, for the purpose of argument, that a freeholder and leaseholder respectively invest £10,000 in a property, ‘and realize at £15,000,, the profit in each case being £5,000. In the case of a leasehold there would be a rebate allowable of £1,000 a year for the depreciation of his lease, the holder of the lease in this way recouping himself for the whole cost of the lease; but in the case of the freeholder there would be no deduction. If this amendment is carried, the leaseholder will still expect a rebate or exemption equivalent to the depreciation of the lease. It is obvious, however, that he cannot have it both ways. He cannot expect to be treated as a lessee and also as a freeholder when he comes to realize on the lease. Senator Fairbairn admitted that the majority of the leaseholders are not men who sell at a profit. Therefore only a small minority would, in any case, experience any benefit under this amendment. If the adoption of this amendment means, as I contend it ought to mean, the death of the present system under which leaseholders are allowed to make annual deductions, the majority, say 75 per cent., of the leaseholders, would lose what benefit they now get, in order that 25 per cent, of the leaseholders may be allowed a refund in the case of a sale. Leaseholders who do not sell at a profit would lose the benefits of the present Act.
Senator Foll:
– Why should they?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Because it is claimed for them that they should be treated as freeholders. They must ‘ be either one or the other. They cannot one moment claim to be . regarded as freeholders and the next as leaseholders; If they are to be treated as freeholders, then they must forfeit all rights to the annual deductions for depreciation of the lease. If, on the other hand, they are to be treated as leaseholders, it ‘ is right that they should be permitted to make these deductions annually under the present law.
Senator Drake-Brockman:
– If the Minister’s premises were sound, his argument would be sound also.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– That is not a novel argument to put up. I am putting it to the Committee that these men cannot be regarded both as leaseholders and freeholders. This is not a matter that affects only the small man. It affects some of the big pastoralists in the northern areas and in the western divisions of my own State.
Senator Reid:
– And it will help the speculator who takes up leases for sale.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– There may be a good deal in that argument.
Senator Benny:
– Suppose a man sells his lease after the first year.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Then he would be allowed a deduction for one year representing a certain depreciation in the value of the lease. Each year carries its quota of depreciation. I submit that this Bill is not dealing unfairly with the grazing interests.
Senator Sir Thomas Glasgow:
– That is auite true.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– It is meeting them in many directions.
Senator Sir Thomas Glasgow:
– In many directions.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I am tempted to remind those who are claiming this concession on behalf of leaseholders of Aesop’s story of the boy and the pitcher, and to advise them not to attempt to grasp more than they can draw out.
Senator Fairbairn:
– We only want a fair thing.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I have never yet known some people to be satisfied with a reasonable thing if they see a chance of getting something more. This Bill treats them very fairly indeed. I also remind the Senate that some time ago there was a suspension in the collections of taxation in respect of leaseholders. Apparently the more you give some people the more they want.
Senator Lynch:
– There was no remission of taxation. Was it not merely a suspension ?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– If the suspension was for a long enough period I would not care what you called it. The fact is that in the case of leaseholders the Department actually suspended the collection of taxation.
Senator Lynch:
– Because the leaseholders were not able to pay.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I submit that both by legislation and administration the Government have treated these people very well indeed, and in the circumstances I think it would be unreasonable to press the amendment.
Senator DRAKE-BROCKMAN:
Western Australia
– If the Minister’s premises were sound his argument would be an excellent one, and I would be found voting with him. Unfortunately for him, they, are not sound. He has put up a very plausible plea for the retention of the clause based on the claim that leaseholders are allowed an annual deduction in respect of depreciation in the value of their leases. That ia perfectly correct and just. It should be so. But let us go back to the beginning of things. A freeholder at the end of any taxing period is still a freeholder. He has the property, whereas a leaseholder at the end of hia period has nothing.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– But a freeholder has not been allowed annual deductions as in the case of a leaseholder.
Senator DRAKE-BROCKMAN:
– That is because the freeholder at the end of his period has the full value of hia property, whereas the leaseholder has nothing. We ask by this amendment that the freeholder and the leaseholder, in respect of sales, should be placed on the same footing. If the leaseholder sells his lease, and makes a profit, he should be in the same -position as a freeholder who sells his freehold at a profit. In other words, the profit accruing to the lessee, as well as to the freeholder, who sells, should be regarded as an accretion to capital. There is the whole position in a nutshell.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The effect of the amendment would be to put back in one man’s pocket money which he had paid for a lease. You want him to have both the money and the land.
Senator DRAKE-BROCKMAN:
– Nothing of the sort. The Government propose to tax him on an asset that is decreasing every year. At the end of his term of lease he will have nothing. It is only reasonable that he should be allowed to deduct something in respect of each year.
Senator Elliott:
– When a leaseholder takes up a Crown lease he does not pay anything for the lease.
Senator DRAKE-BROCKMAN:
– The principle is the same. The bulk of the land available and suitable for leasehold, purposes in New South Wales, Queensland, and in my own State is already taken up by various lessees, ‘ so evidently the idea which Senator Elliott has in mind is notapplicable.
Senator Reid:
– Yes, it is. Leases are running out every year in Queensland, and they are always open to competition.
Senator DRAKE-BROCKMAN:
– I am merely endeavouring to show that the Minister’s premises are entirely false, and that, therefore, his conclusions are erroneous. I think honorable senators will agree that my conclusions, being based on sound premises, are therefore sound, and that the amendment should be supported.
Senator LYNCH:
Western Australia
– This is a very interesting subject, and while the discussion throws little additional light upon it it increases one’s anxiety to know more about the proposal. As I understand the matter, the Bill proposes to tax the profit of a lessee on the sale of his lease. That means that that profit is regarded as income and not as capital. I take the case of a lease for which the lessee in the first instance pays nothing. He proceeds to) improve his lease by expending money on water conservation, the sinking of wells, the making of roads, the building of sheds, and so on. Then he has to stock the lease. The stock are regarded as tangible assets. Let us assume that his lease runs for thirty years. At the expiration of that term the lease would be worth nothing to him. All he would have would be the residual value of the improvements he had made plus the value of his tangible assets. If after his lease had run for fifteen years a man came along and desired to purchase the lease, is the lessee on selling itto be held liable to taxation for all he receives in excess of the residual value of his improvements plus his tangible assets? If since his taking up the lease it has acquired an added value, the Department, in my opinion, does wrong to tax the leaseholder on that value, because that increment of value is added to the leasehold only in the same way that an increment of value may be added to a freehold. The Minister (Senator E. D. Millen) reminds us that a lessee is given an allowance annually, but that is only in respect of improvements and in proportion to the unexpired term of his lease.
Senator Keating:
– He would get no allowance, if he paid nothing for the lease originally.
Senator LYNCH:
– If during his occupancy of a lease it acquires a value over and above the value of the improvements made upon it plus the value of the tangible assets, then by all rules of ordinary experience and of natural, justice the owner of the lease is entitled to that added value. It is the property of the lessee and of no one else, and when the lease changes hands by way of sale that increment of value should not be taxed as income. The Government propose that it should be taxable as income. The question we have to consider is whether that is fair or just. I can understand a lessee selling out at a loss. Many leases have been sold for much less than the tangible assets plus the value of the improvements. There is nothing for the Taxation Department to levy on in such cases, and I say that where there is an added value to a lease by natural justice it should be regarded’ as the property of the leaseholder. Why should it be regarded as income liable to taxation when in the case of a freehold an added value is regarded as capital, and is not liable to taxation ?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– This has been the law for a long while, and no one has ever made any complaint about it before.
Senator LYNCH:
– -The Minister has said that an allowance is made each year to a leaseholder.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– That is where the. leaseholder has paid for his lease. If he has paid nothing for it, there is nothing to warrant a rebate.
Senator LYNCH:
– I have assumed a case where duringthe term of a lease it has acquired an added value, and I say that by right and by natural justice that should be regarded as the property of the man who created it. If we regard that as income to be levied upon by the Taxation Department, we shall make a most unfair distinction between the lessee and the freeholder. That added value in the case of a lease is as much an accretion of capital as it is in the case of a freeholder.
Senator FAIRBAIRN:
Victoria
.- The Minister (Senator E. D. Millen) said that the man on the land is getting it both ways. I am no longer a leaseholder; I have sold out all my leases.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The honorable senator apparently has some sympathy for those who bought from him.
Senator FAIRBAIRN:
– One of the ways in which leaseholders are to get it under this Bill is that they are to be taxed on profits made on the sales of their leases. Up to now there has been no tax on the sale of the good-will of a lease.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The honorable senator is wrong there.
Senator FAIRBAIRN:
-I beg to differ from the Minister. Such profit has always hitherto been treated as capital since a decision of the High Court in a Western Australian case. This is an entirely new departure.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I am assured that the honorable senator is wrong. The proposal in the Bill is operative to-day.
Senator FAIRBAIRN:
-I was not taxed in connexion with the leases I sold a little while ago..
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The honorable senator is always lucky. I shall expect a cheque from him. for- conscience money.
Senator FAIRBAIRN:
– The decision of the High Court in the Western Australian case exempted leaseholders from this taxation. It is suggested that ai leaseholder is given a great concession in being permitted to write off a certain amount for each year of his lease. If, for instance, a man pays £10,000 for a lease of ten years, he is allowed each year to write off £1,000. His improvements or machinery for carrying on his business wear out, and something has to be allowed for depreciation. As the term of his lease becomes shorter, it is of less value. In the circumstances, the allowance to which the Minister has referred cannot be regarded as a concession. It is a mere matter of justice that the leaseholder should be able to write off so much each year as the term of his lease runs out. The Minister has said that the men on the land are a grasping lot, but what the Government are giving them under this Bill is an extra tax.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Where is the extra tax?
Senator FAIRBAIRN:
– Leaseholders have not had to meet this taxation before.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I repeat that this provision is operative to-day. The honorable senator has referred to a High Court decision in the case of “walk-in and walk-out” sales.
Senator Garling:
– That is so ; there is nothing new in this provision.
Senator FAIRBAIRN:
– I cannot believe that.
Senator Drake-Brockman:
– The tax has never been paid.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Senator Fairbairn admits that, so far as he is concerned.
Senator FAIRBAIRN:
– The Minister has said that the more we give the men on the land the more they want, and he was referring to the fact that the land tax on leaseholds had not been enforced. I should like to give the Committee the history of the land tax on leaseholds. Some members of this Parliament who are now on our side were members of the Labour party supporting the Government that imposed that tax. I get information from all kinds of people. There are seventy-five members in another place. At the Caucus meeting of the Labour party the decision to tax’ leaseholds was carried by a very small majority. There were forty-six members of the Caucus, twenty-four voted one way, and twentytwo against the taxation of leaseholds. When the matter came up for consideration in the House, we had only about thirty members, and if twenty of the Caucus members who had voted against the taxation of leaseholds had voted with us, the vote would have been fifty to twenty-six against the proposal. Instead of that, the Caucus members voted solidly together, and’ the vote on the proposal was forty-six to about thirty. That shows how absolutely unjust that tax was originally. It has not been imposed because it was based on the freehold value. The value of a leasehold was assessed in that way, and the provision was found to be absolutely ridiculous. I knew of one lease that would have been sold for less than the tax on it amounted to. Rack rents such as caused all the disturbance, in Ireland were to be allowed for, and in Queensland, where the big leases are, the Government took every shilling they could get.
Senator GARLING:
New South Wales
– I think it does not matter to honorable senators whether this is a new . provision or not. This is a consolidating measure, and comes before us as a new Bill. I had no hand in the passing of any former Bill of the kind which recognised the right to tax as income the profits referred to here. Senator DrakeBrockman stated the matter clearly, and I propose only to deal with an interjection made by the Minister in charge of the Bill. I ask honorable senators not to assume that, because the Minister’s view has been expressed in such strong terms, the provision means exactly what he himself believes it does. Clause 25 provides that a deduction shall not, in any case, be made in respect of any wastage or depreciation of lease, or in respect of any loss occasioned by the expiration of any lease, provided that, where it is proved to the satisfaction of the Commissioner that any taixpayer (being the lessee under a lease or the assignee or transferee of a lease) has paid any fine, premium, or foregift, or consideration in the nature of a fine, premium, or foregift for a lease or a renewal of a, lease, the Commissioner may allow the deduction set out in the clause.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– If a man has irpaid nothing for his lease his case is not parallel with that of thei leaseholder who has paid cash.
Senator GARLING:
– A fine, foregift, or premium is that premium or sum of money that is often paid, such as on the transfer of a hotel licence. This clause cuts down the deduction mentioned by the Minister to a mythical sum in the case of the transfer of pastoral properties. There is no deduction at all that honorable senators have to take into consideration in dealing with this matter, and they should not be led away by the statement that a man cannot have it both ways. Fines, premiums, and foregifts very rarely, if ever, come into consideration in the case of the transfer of pastoral properties. Let me give a simple illustration of the difference between leasehold and freehold and how respective holders will be affected by this Bill. On tha Mildura side of the River Murray the orchards are all held under freehold, whereas on the Curlwa side of the river the properties are leasehold. It does not matter to the Mildura man what profit he makes out of the sale of his freehold, but the leaseholder on the other side of the river who sells out has to include in his income any payment received by him- upon the assignment or transfer of his leasehold property, -less - what never happens in these cases - any fine, premium, or foregift, or any amount paid by the lessee for assignment or transfer of the lease.
Senator KEATING:
Tasmania
– I understand that Senator Garling contends that the words he has quoted from clause 25, “fine, premium, or foregift or consideration in the nature of a fine, premium, or foregift,” have no application to pastoral leases, and that therefore what the Minister (Senator E. D. Millen) has said in regaid to people having it both ways is not correct. If that is! the case, the amendment before the Committee simply amounts to beating the air, because what we propose to except this class of lease from is the provision in paragraph e, namely: -
Money derived by way of royalty or bonuses, and premiums, fines, or foregifts or consideration in the nature of premiums, fines, or foregifts demanded and given in connexion with leasehold estates. . . .
The words are the same as those used subsequently.
Senator Garling:
– The proviso that Senator Drake- Brockman suggests takes pastoral leases out of paragraph e altogether.
Senator KEATING:
– It is proposed to exempt pastoralists on leasehold property from being assessable in respect of such receipts. There is a subsequent provision that in respect of premiums, fines, or foregifts it shall be competent for the lessee to deduct every year the total amount so paid, divided by the number of years for which he is entitled to the holding. The words used are the same in both cases. If there is any equity in the amendment, I do not think it goes far enough, because there are not only pastoral lessees who have to pay on obtaining a lease, but there are people in metropolitan districts who have to pay very large sums in order to obtain the transfer of, say, hotel leases. Sometimes as much as £10,000 and even more has to be paid for the balance of a current lease. Sometimes large residences are leased and converted into apartment houses or flats, and when the leases change hands substantial sums are paid for the good-will. Surely cases of that kind should be treated as analogous to the transfer of pastoral leases. The amendment would result in invidious distinctions.
Senator Fairbairn:
– Are payments for hotel leases taxable now?
Senator KEATING:
– When a person assigns an unexpired portion of such a lease, and receives payment on doing so, the amount he receives is taxable. If the amendment has any equity in it, it is inequitable to the extent that it confines the benefits, whatever they may be, to one particular class - the pastoralists. I cannot support the amendment when it introduces such invidious distinctions.
Senator FOLL:
Queensland
– In Queensland the perpetual lease principle is in operation. Every soldier settler, holds his land under that system, whereas if the State Government had adopted a different policy thosa settlers would have been on the same basis as the soldier settlers in the other States.
Senator Elliott:
– Then the soldier in Queensland has not to buy the freehold.
Senator FOLL:
– He has no chance of getting the freehold of the land.
Senator Elliott:
– He does not have to sink capital in it.
Senator FOLL:
– If he improves the lease it will become more, valuable when he wishes to sell. Such a person would be at a disadvantjage when compared with a man settled in the other States who had obtained his land on a freehold basis.
Senator Lynch:
– But they expect to get more out of it than they put into it.
Senator FOLL:
– Every man who goes into business expects that, and Senator Lynch would, I am sure, be the last to suggest that we should expect men to go on the land and not get more out of it than they put into it. As the returned soldiers settled on the land in Queensland hold their blocks under perpetual lease, I shall support the amendment.
Senator Plain:
– It costs up to £20 per acre to clear some freehold land.
Senator FOLL:
– Yes; and that is anotherreason why I am supporting the amendment moved by Senator Fairbairn. Surely the men who have put their time, energy, and money into working a holding should be compensated when they desire to sell. I do not intend to support a measure under which such men will be taxed in the manner suggested, particularly when returned soldier settlers, amongst others, are placed at a disadvantage in consequence of the different policies which are in operation in other States.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I want to reiterate, in spite of what Senator Garling has said, that my presentation of the case was a perfectly correct one. My contention was that a man was allowed a rebate in each year in respect of a proportion of the amount paid for leasehold land. If he did not pay anything, as Senator Sir Thomas Glasgow interjected, he would not be entitled to any allowance. But if he had paid something for good-will he would be entitled “ to deduct in his incometax return each year an amount representing that sum, which would be arrived at by dividing the total amount he had paid over the number of years during which he had held his lease.
Senator Drake-Brockman:
– But he cannot deduct anything in respect of improvements.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– He is allowed depreciation, too.
Senator Drake-Brockman:
– Not on leaseholds.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Not where they carry improvement conditions.
Senator Drake-Brockman:
– Even so, in the matter of improvements he is not allowed deductions’.
Senator Keating:
– He is, under this Bill.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I have said that a man is entitled, in making up his return, to include a reasonable allowance in respect of the yearly proportion of the total sum paid. Clause 25 provides that a deduction shall not, in ‘any case, be made in respect of certain matters which are set out. The clause then goes on to provide that -
Where it is proved to the satisfaction of the Commissioner that any taxpayer (being the lessee under a lease or the assignee or transferee of a lease) has paid any fine, premium, or foregift, or consideration in the nature of a fine, premium, or foregift for a
That is the sum paid for the land- or a renewal of a lease, or an amount for the assignment or transfer of a lease of premises or machinery used for the production of income, the Commissioner may allow as’ a deduction for the purpose of arriving at the income, the amount obtained by dividing the sum so paid by the number of years of the unexpired period of the lease at the date the amount was so paid……….
That is a literal and complete confirmation of the case I presented to the Committee, and, whatever may be the merits of the case, I claim that I fairly and accurately stated the position to the Committee.
Senator Lynch:
– What of the acquired value ?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The acquired value does not come into consideration unless there is a sale. The man who retains possession of his lease is not taxed, and it is only when he sells and makes a profit that he is liable.
Question - That the letter “(a)” proposed to be inserted be inserted - put. The Committee divided.
AYES: 13
NOES: 14
Majority . . . . 1
AYES
NOES
Question so resolved in the negative.
Amendment negatived.
Senator VARDON:
South Australia
– I wish to direct the attention of the Minister (Senator E. D. Millen) to sub-paragraph ii of paragraph a, which refers to the actual cost price, or market selling value, of trading stock.
The CHAIRMAN (Senator Bakhap:
TASMANIA
– The honorable senator can speak to the clause, but he cannot move an amendment to a portion which precedes that already dealt with.
Senator VARDON:
– I am sorry that I have missed my opportunity. The existing Act simply provides that, in computing profits, the trading stock was to be taken into account, but this sub-paragraph reads -
In the case of trading stock (not being live stock), the actual cost price or market selling value of each article of trading stock, or the price at which each article or trading stock can be replaced, at the option of the taxpayer in respect of each article.
I believe the Minister said that stock could be taken into account either at the cost, or selling price, or the price at which it could be replaced, and it seems that the use of the words “ the market selling value” may lead to some confusion. I would like to be assured by the Minister that the value would be the cost price, or a price based on depreciated value. It has been suggested that the object of the amendment is to make it impossible for a manufacturer to take a part of his stock in at cost price and a part at below cost.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– He has an option under this provision.
Senator VARDON:
– I am precluded from submitting an amendment, so I merely direct the attention of the Minister to the alteration.
Senator PAYNE:
Tasmania
.- I am very glad that Senator Vardon has mentioned this matter, as the amendment sought to be introduced . in sub-paragraph ii of paragraph a is very important, and one which is likely to have a serious effect upon the trading and manufacturing community. Under the existing Act, a manufacturer or trader makes up his income tax return after taking stock of the goods in his warehouse or manufactory. In taking stock, the ordinary practice would be to take that portion which had depreciated since he purchased it at what he considered to be its real value, and the balance of the stock at actual cost price. Although the chance of moving an amendment on this point has been lost, those who agree with me may be able to make out a sufficiently good case to secure a recommittal of the Bill. I have explained the ordinary methods of taking stock, so that a manufacturer or trader can make up his income tax return accurately. Now it is proposed that a trader., in making up a return, shall estimate the whole of his stock at cost price.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– He has an option which he will no doubt exercise.
Senator PAYNE:
– The option is that he must either make up his return on the basis of stock taken in at cost price, or. - -
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– He has an option of three alternatives. He can take the cost price, the market value, or the replacement value.
Senator PAYNE:
– Let us assume that a man has a stock the original value of which was £10,000 ; £5,000 worth of it has depreciated, and is only worth £4,000. The market value of the balance may be £6,000, it having appreciated from £5,000. He would be compelled, by the clause, to value that stock for income tax purposes at the real market value.. He would be compelled to pay income tax on an amount which has not been realized, because the stock still remains ihp his establishment. The income assessed by the Department would not be a true indication of the income the trader or manufacturer had received from his transactions during the year. Stock which a man has in his establishment may be worth £5,500, but he may have paid only £5,000 for it. In making up his return he would be compelled to show the value as £5,500.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– No. He would have the option of returning the stock at cost price.
Senators PAYNE. - Andhe must return the whole of the stock, including that which has depreciated, at cost price.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– No. He has the option in respect to each article.
Senator PAYNE:
– My reading of the clause is that he must make up his return on the actual cost price, or the market selling value, of each article. The market value would be the price at which he could replace any article.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The honorable senator has been reading, not the Bill, but a memorandum circulated in connexion with it.
Senator PAYNE:
– The memorandum was handed to honorable senators to enlighten them as to the meaning of the amendments to the present Act proposed in the Bill. The addition of the three words which appear at the end of the clause, in the Bill, but not in the memorandum, make no material difference. The trader’ is distinctly instructed, in making up his balance-sheets, and preparing his income-tax return thereon, to take either the actual cost of the goods that he has purchased for his trading, or their present market value.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Or, thirdly, the price at which they can be replaced.
Senator PAYNE:
– I shall sit down and allow the Minister to justify the clause, if he can.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I cannot recall a provision in the Act which is more elastic and more favorable to the taxpayer than this clause. It says to a trader, “ You shall have the option, with regard to your stocks, of returning them either at cost, at the market selling value, or the replacement value of each article.” This does not mean that he must select one of these methods and apply it to the whole of his stock. If he had £1,000 worth of stock which had depreciated, he would return it at cost, but if it had appreciated he would, no doubt, exercise the option given to him under the clause. In this way skilful merchants, like my friend, Senator Payne, would soon be able to see what a great concession is given to them in the clause.
Senator NEWLANDS:
SOUTH AUSTRALIA · ALP; NAT from 1917
– Would it suit them if we cut the paragraph out?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– They have framed strong arguments for cutting out the whole provision. ‘ When a taxpayer is given three alternatives, it is as certain as that the sun will rise in the morning that each trader will take, with regard to each article, that alternative which will enable him to refrain from paying something to the Treasurer.
Senator ELLIOTT:
Victoria
– I would suggest to the Minister (Senator E. D. Millen) that, in view of the great shortage of houses in all the capital cities, some modification of paragraph / is called for. This provides that if a man builds a house, and thus assists to relieve the house shortage, he shall be at once met with an impost- of “ 5 per centum of the capital value of land and improvements thereon owned and used or used rent free by the taxpayer for the purpose of residence or enjoyment.” Every one who, at present, builds a house is faced with the probability, upon the return of normal conditions, of a very severe loss in his capital, and on top of that he has to submit to this impost. In view of the necessity for relieving the shortage of houses, every encouragement should be given to persons to exercise thrift and provide themselves with homes of their own. A good way of accomplishing that would be to delete the- clause.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The question raised by Senator Elliott goes back to times gone by. Senators who were members of this Chamber when the first Income Tax Bill made its appearance, will remember the battle royal which raged on this point. There has been a lot of discussion on it, and it is quite easy to say, “ Encourage men to build their own homes.” It seems to me that the proposal in the Bill is entirely equitable. Take the case of two men, each with £3,000. Senator Elliott, with £3,000, would proceed to buy a house. The- sum of £3,000 would, indeed, be modest for such a house as he would desire, but let us suppose that he invests £3,000 in a house. I put £3,000 into a farm, which is a working proposition. I am taxed on the income which I make out of the farm. I might put my money into an investment and get 6 per cent., or £180 a year, and I would be taxed on that. I need a house to live in, but no allowance is made for what I pay as rent. Senator Elliott, however, by becoming his own landlord, thinks he should escape- paying a tax on what is, unundoubtedly, the interest he receives for bis money. It is true that he does not receive the interest in cash, but he is his own landlord. He does not receive . £180 return for his capital, but if he rented a house to live in he would have to pay that sum for it. I can see no reason why a man who puts his money into a house in which he lives should not pay the same tax as a man who builds a house which he rents to another. This provision has been in operation for a long time, and I ask the Committee not to alter it.
Clause, as amended, agreed to.
Clause 17 -
- The proceeds derived from the sale, after the thirtieth day of June, One thousand nine hundred and twenty-one, whether on the sale of the business as a going concern, or in any other manner whatsoever, of the trading stock or part of the trading stock of any business, shall he assessable income derived from carrying on a business.
- Where any trading stock is sold, together with other assets of the business, the part of the consideration attributable to the trading stock shall be determined by the Commissioner, Assistant Commissioner, or Deputy Commissioner (as the case requires), and the part of the consideration so determined shall be deemed to be the price paid for the trading stock ‘by the purchaser.
- For the purposes of this section . any trading stock which has been disposed of otherwise than by sale shall be deemed to have been sold, and any trading stock so disposed of and any trading stock which has been sold for a consideration other than cash shall be deemed to have realized the market price of the day on which it was so disposed of or sold, but, where there is no market price, trading stock shall be deemed to have realized such price as the Commissioner determines.
-
In this section -
- the expression “trading stock” does not include live stock which in the opinion of the Commissioner, Assistant Commissioner, or Deputy Commissioner are ordinarily used as beasts of burden or as working beasts or for breeding purposes;’ and
- references to disposal of tradingstock do not include disposal by way of testamentary disposition.
- Any taxpayer who is dissatisfied with the decision of the Commissioner, Assistant Commissioner, or Deputy Commissioner under this section may require the Commissioner to refer his case to a Board of Appeal, and the Commissioner shall refer the case . accordingly.
Senator GARLING:
New South Wales
– This clause represents a complete departure from the very equitable system that has been followed in the Department for a considerable time. I refer to sub-clause 4 (a), which deals with live stock, and reads as follows: -
The expression “ trading stock “ does not include live stock, which, in the opinion of the Commissioner, are ordinarily , used as beasts of burden, or for breeding purposes.
The present practice is to exempt from the operations of the tax, in the event of the sale of a property as a going concern, the normal nock and to treat as income so much of the sale proceeds as represents the average value of the stock that has been sold from year to year by the pastoralist while carrying on the property as a going concern. In the event of a complete sale of the business as a going concern, or on its winding up, the rest of the stock are treated as the normal flock or capital, and rightly so. I submit that any other method of dealing with this matter is ‘altogether inequitable. Therefore, very strong reasons should be given by the Minister (Senator E. D. Millen) before we make such a complete departure from the established practice. An attempt has been made during the last couple of years, in the case of the resumption of pastoral properties in New South Wales, for the purpose of soldier settlement, and in the case of the sale of station properties in Western Australia, as well as in a number of other cases, to treat the whole of the proceeds of the stock at the time of sale as though it were part of the income and not as realization of capital. The position is clearly stated in a decision in a case in which Robert Newman, a Western Australian pastoralist, appealed against an assessment bv the Commissioner of Taxation. Mr. Newman carried on business as a pastoralist and sold his property, including the live stock and plant as a going concern. The Commissioner of Taxation for that State made an apportionment of the purchase money in respect of the live stock, and assessed the vendor on that amount as income derived from the carrying on of the business. The case came on appeal beforethe Supreme Court in Western Australia from the Lower Court, and Mr. Justice Burnside, in giving judgment for the pastoralist, used these words -
The appellant contends that where a business is sold as a going concern the resulting price is capital, and I think he is right. Income is something that recurs, that comes at intervals that may be annual or at lesser periods of time, but once the sale of the business, whatever its nature may be, is completed, there is an end of the income; there can be no more income from that business. In my opinion, it makes no difference whether the purchase price is derived from the chattels or from the whole property. The sale of a business out and out, such as this, has, to my mind, the same effect as would arise in the case of the death of the owner, the land and chattels passing to his executors. There could be no more income; the executor could not be charged with receiving income, because the goods and the chattels forming the estate became his property. I agree with the passage quoted by Mr. Pilkington from Levinson’s Income Tax Act, page 47, that . where a business is sold as a going concern, the resultant price is always capital.
The matter went on to the High Court, and I quote the following from the concluding words of the judgment, given by the Chief Justice -
Now, applying that statement to the facts stated in this special case, it is clear, in my opinion, that the transaction out of which the £16,000 arose was entered into, not in the course of carrying on thebusiness or for the purpose of carrying on the business, but for the purpose of putting an end to the business. That being so, I am of opinion that neither the £16,000 nor any part of it comes within the provisions of section 16 of the Act, and that the decision of the Full Court of Western Australia was correct.
The opinion was that that disposal of property was a realization of capital. In this clause we are going to reverse altogether the equitable system that the Federal Income Tax Department, in contradistinction to the Income Tax Department of the States, has been following for some years past. It is a practice that has met with general approval everywhere as being eminently fair that, in the event of the sale of a business as a going concern, and having regard to the fact that the live stock for the carrying on of the business is part of the capital, the taxpayer when rendering his return at the end of the year following the sale should only be called on to render as part of the income of the business that part of the sale proceeds ‘as represents the average value of the stock sold in the course of the business during preced- ing years - I believe the term is fixed, at ten years. We are asked to depart from that principle. I submit that good and sufficient reasons have not been given by the Minister for the adoption of this course.
There is one other matter to which I desire to draw attention, and that is dealt with in sub-clause 5, which states that any taxpayer dissatisfied with the decision of the Commissioner, Assistant Commissioner, or the Deputy Commissioner may require the Commissioner to refer his case to a Board of Appeal. I should like to know whether, in the event of a case being referred to a Board of Appeal, the decision of that tribunal will be final.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– On the facts, yes.
Senator GARLING:
– I realize that that is apparently so ; but I invite the attention of the Minister to clause 50, in which it is indicated that there may be appeals from the decision of the Commissioner either to the High Court or a Supreme Court.I do not think that subclause 5 of the clause now under consideration permits of any reference beyond the Board of Appeal, whether on matters of fact or of law, and I propose to endeavour to take the matter a little further before . we part with this clause.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Does the honorable gentleman know of anything that will prohibit a man from appealing to the law Courts?
Senator GARLING:
– An appeal in any circumstances is not always permitted.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– If on a matter of law, I think it is. Look at sub-clause 6 of clause 51.
Senator GARLING:
– I do not see anything in clauses 50 or 51 which permits such a reference to be carried any further, whether on matters of fact or law.
The main point of my objection to this clause centres around sub-clause 4, in which the expression “ trading stock “ does not include live stock used for the carrying on of the business.
Senator Keating:
– Is sub-clause 4 (a) a new matter ?
Senator GARLING:
– I say it is. Unless the Minister can give some satisfactory reason why the present equitable method of treating stock, in the case of the sale of a business as a going concern, is to be departed from, I propose to submit an amendment somewhat in the following terms: -
The expression “trading stock” does not include live stock, except such live stock as, in the opinion of the Commissioner, Assistant Commissioner, or Deputy Commissioner, exceeds the normal carrying capacity of the property.
Anything in excess of the normal carrying capacity is, as a rule, sold annually, and it is habitually taken into income where the business is carried on as a going concern.
Senator E. D. MILLEN (New South
Wales - Minister for Repatriation) [9.23]. - This is the clause which really covers the walk-in-walk-out sales, and when introducing the measure I indicated the reasons that induced the Government to -adopt the proposal contained in subclause 4 (a). Senator Garling has quoted some remarks of a Judge, but it is desirable to take the practical point of view in this matter, and to have some regard for the position of the Treasury and the Consolidated Revenue of the Commonwealth. It is easy to quote cases showing that here and there the law may operate harshly. The Department has had experience of cases in which properties have been sold on the walk-in-walk-out basis for two years running, with consequent loss in income tax revenue, because properties known to be revenue producing have by this means evaded payment of the tax. Surely the Committee is entitled to consider cases of this nature, and to provide safeguards against their occurrence.
Senator Garling:
– The Minister thinks that fictitious sales have been arranged?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The sales may have been quite bona fide. But it is a fact that properties producing income have by this method evaded payment of income tax. I have already quoted my own experience, and I have shown how I could have evaded the payment of income tax. Some years ago I acquired a property, stocked it, and for about five years I sold off only the male stock, allowing the female stock to remain and gradually increase. At the end of five years I sold for cash on a walk-in-walk-out basis, and took my profit in a lump sum, and under the existing law I could have evaded payment of income tax in respect of my profits on the sale. Would that have been fair ? Undoubtedly it would not. I was a citizen receiving the benefits of citizenship; I was making money each year, and, merely because I refrained from collecting it each year and collected it as a lump sum at the end of five years, I would have escaped my obligations as a taxpayer. I say that that would not be right. I ask the Committee to enable the Commissioner of Taxation to levy tax on profits made on these “ walkinwalkout” sales. Under sub-clause 4 there is a proposal which discriminates.
Senator Garling:
– Yes, between wethers and ewes used as breeding stock.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Breeding stock which may be regarded as a. constant factor on the property.
Senator Garling:
– Many properties carry only wethers.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– That is quite true, but, if a profit is made on selling them, why should not the man who makes the profit pay tax? Why these special pleas that this and that taxpayer should be allowed to escape taxation ? These Bills are not introduced for the purpose of enabling people to escape their obligations, but for the purpose of distributing the obligations of the taxpayers equitably and fairly. A proposal to enable a man, by a little manoeuvring, to secure a profit and avoid paying income tax on it is one which, I hope, will not be entertained by the Committee. I therefore ask honorable senators to support the clause as it stands.
Senator GARLING:
New South Wales
– The Minister’s’ plea is not based on existing circumstances, because he suggests the possibility of a man being able to entirely escape taxation in the case of a “ walk-in-walk-out” sale. Thai would be possible only if we made such a provision in our Income Tax Assessment Act as was interpreted in the case of f the Western Australian Act, which would allow all moneys received from the sale of stock to be treated as capital. I am not making any such plea. I ask the Minister (Senator E. D. Millen) why we should not continue as we have been doing for some years past, and, when there is a winding-up sale, levy tax only on the number of stock sold equal to the average sales of the previous years. If that course were followed, the man would not escape taxation, but he would be asked to pay only what is a fair thing.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The decision in the Hickman case makes it impossible to continue the practice of the last few years.
Senator GARLING:
-It is not impossible for us to alter the law now in the way I am suggesting, and thus insure a continuance of . that practice. I am asking the Committee, by an amendment of this clause, to enable the Commissioner to levy taxation upon these people. I am not endeavouring, as the Minister has suggested, to enable the rich man to avoid his just obligations. It is not fair of the Minister to. say that, because I object to such a sweeping clause as this, I am out to help the rich man.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I did not use the word “rich.” I referred to the man who avoids his obligation, whether he be rich, or poor. I do not want the honorable senator to put into my mouth words which I never used.
Senator GARLING:
– I should be sorry to do so, but I received the impression from what the Minister did say that he Suggested that I was endeavouring to differentiate between those who have and those who have not. My remarks apply to small, as well as large, graziers. His observations were, in any case, unnecessary as a reply to what I had said, because I did not suggest that the Commissioner should not take any part at all of the value of the proceeds of a sale of stock, but that he should tax only what would represent a surplus over and above a normal flock. Let me give some illustrations to show what might happen under this clause. A pastoralist has on hand 20,000 sheep, consisting of 10,000 ewes and 10,000 wethers and their average cost, as accepted by the Commissioner, is 20s. per head. A drought ensues, and he loses his 10,000 ewes, and either gets no lambs or else loses the ewes and the lambs; but he is enabled to keep his 10,000 wethers. Owing to drought conditions he sells out, and he is enabled to sell these 10,000 wethers at a price of 30s. per head. If the method prescribed by the Bill is followed, this will be the result: The 10,000 ewes and lambs having been lost, and their realization or loss having been treated as a capital realization or loss, there is no deduction for the loss. The proceeds of the 10,000 wethers not being exempted in this clause as in the case of breeding ewes, are liable to tax, and as the 10,000 were sold for 30s., or a profit of 10s. per head, the taxpayer will be liable for tax on a profit of £5,000.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– There is an inaccuracy in that statement, because in the case of losses the man would be able to include them in his trading account.
Senator GARLING:
– But he has ceased to trade, he has sold out. If he were continuing to trade from year to year he might do so, but he has reached the stage at which he is compelled to wind up.
Senator Wilson:
– The drought has wound him up.
Senator GARLING:
– It might be death that wound him up, but he is not continuing to trade. On winding up, he is to be taxed under tins Bill on the whole of the stock, as if the proceeds were all income, except in the case of a certain number of sheep that might be used for breeding purposes.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The clause is not limited to sheep.
Senator GARLING:
– I am aware of that; but I am dealing with sheep. I cannot take sheep, cattle, and other kinds of animals together. The true position in the case I have submitted as an illustration is as follows: - On the debtor side -20,000 sheep at 20s., or £20,000; and on the creditor side - sale of 10,000 at 30s. per head, £15,000; loss by death of 10,000, £10,000, showing a loss on the whole transaction of £5,000. So that we arrive at the position that instead of mat - ing a profit of £5,000, this man has made a loss of £5,000, but he will be taxed on an assumed profit of £5,000. Then let us assume that this person does not lose the ewes, but on the sale of the property as a going concern sells the ewes in the middle of a drought at a greatly depreciated price, but obtains a good price for his wethers. Assume that the 10,000 ewes were sold at 10s. per head, and the 10,000 wethers at 25s. per head, the position then would be: - On the debtor side- 20,000 sheep at 20s., £20,000; and on the creditor side - sale, 10,000 at 10s., £5,000; 10,000 at 25s., £12,500, showing a loss of £2,500. Under the Bill, however, the Commissioner would deal with the matter as follows: - Loss on sale of wethers (10,000 cost 20s.)’ sold for 10s., £5,000. This is not considered, as ewes are not included in the expression “ trading stock.” Profit on sale of 10,000 wethers at 25s., £2,500, which under the Bill would be subject to taxation.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The owner would get a deduction of the original cost.
Senator GARLING:
– He gets a deduction not of the original cost, but of some fancy figure fixed year by year for deduction purposes, whilst he has to render in the accounting of his sales the full amount he. receives, and not the average amount for. which the stock would be sold in a series of years. These are cases which might occur at any time, and are quite likely to arise in. actual practice. It may be pointed out that many stations are purely breeding propositions, and they carry practically no. wethers. Other stations carry up to 40 per cent, of wethers,, as the country is< not suitable for carrying more than, a certain proportion of breedr ing ewes. The clause, if adopted, will mean that, there will be a grave discrimination between taxpayers, and that in many instances persons who make losses on realization will be taxed as if they had made profits, whereas others will be allowed deductions on account of part of the stock sold. I therefore urge upon the Committee that there is no good reason why we should not limit the operation of this clause so as to secure what the Department has been content to secure for some years past, and what has been absolutely fair. My proposal is not to allow a man to escape just taxation, but to insure to the Department, in the event of the sale of a business as a going concern, that there shall be returned as income all proceeds of sheep sold in excess of the number of sheep held as the normal flock in average years. The Bill proposes to hit these people very hard, and it differentiates between the class of country on which wethers can be carried and that on which ewes can be carried, whilst there is no reason for the differentiation. The Department adopts fancy methods of dealing with stock-owners, as . though they kept a grocer’s or a draper’s shop, which are quite inapplicable to the pastoral industry. I move -
That paragraph (a) of sub-clause (4) be amended by inserting after the words “ live stock “ . the following words, “ except such live stock . as in the opinion of the Commissioner, Assistant Commissioner, or Deputy Commissioner exceeds the normal carrying capacity of the property.”
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– That is to say, that the taxpayer shall pay no tax at all.
Senator GARLING:
– No. On anything beyond the normal capacity the tax would be payable.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Except by accident, there never would be anything beyond the normal capacity.
Senator GARLING:
– It would be only in cases of fraud that the contingency the Minister suggests would arise, and I certainly am not prepared to say that the bulk of. the graziers of this country are men who would be likely to lend themselves to fraud.
Senator Foll:
– Who is going to determine the carrying capacity?
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The proposal of the honorable senator if carried into effect would undoubtedly result in a number of taxpayers avoiding the payment of any tax whatever. I will give, an illustration of a property “with a normal carrying capacity of, say, 5,000. We will assume that the taxpayer has been making a profit and paying tax on from £700 to £1,000 a year. If at the end of the next year, eleven months of which may have expired, he sells on a walkinwalkout basie, he will escape all taxation for that year. He would only need to have the number of stock that represented the normal carrying capacity of the property, and in that case he would dodge his responsibility to the Treasury.
Senator Garling:
– It would not follow that he would have a normal carrying capacity at that particular time.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Aman might sell out just before the time for him to make up his return, although he might have already obtained his normal revenue for that year ; but because he had sold on the “ walk-in-walk-out ; ‘ principle, Senator Garling says that the incometax gatherer should not lay his impious hands upon him.
Senator Garling:
– If the property were only stocked up to the normal carrying capacity he would simply be disposing of his capital at that time. If the taxpayer is a sheep-breeder, he is only taxed on the lambs and the wool at any time.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Whether the man has sheep or anything else, if the land is stocked to the normal carrying capacity, and the man has been making a steady income but sells out in the eleventh month on a “ walk-in-walk-out “ basis, having made his usual profit for. that year, why should he escape taxation for that particular year? The proposal in the clause is fair. It is evident from the document that Senator Garling has quoted from that he is speaking, not on behalf of the struggling land-holder, but the big man.
Senator Wilson:
– Why should the big pastoralists not get justice?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– This clause is an attempt to do justice to them. If a man has a steady income for nine years, and sells out “in the tenth year, why should he be allowed to escape?
Senator Garling:
– He only disposes of his capital at that time.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I ask the Committee to reject the amendment.
SenatorFAIRBAIRN (Victoria) [9.50]. - I regret that the Minister (Senator E. D. Millen) has introduced a distinction between two classes. As members of the Nationalist party, we should be above such things. The Minister was most unfair. We should give justice to all classes, whether rich or poor. I regret that the Minister has insinuated that there is a desire on the part of some honorable senators to benefit a particular class. The Minister stated that if a man carried on a property for a number of years, and sold out in the eleventh month of the following year, he should be called upon to pay the tax. I shall concede that ; but . when the man sells he has to pay a tremendous tax on the transfer of the land, and if the property is leasehold he has to pay tax on what he gets for. the transfer of the lease.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– What tax does the vendor pay on the transfer?
Senator FAIRBAIRN:
– He always has to pay the tax on the transfer of the stock. The buyer of a station tries to make the seller value the sheep as high as possible, because the seller has to pay the tax on that ; and the buyer tries to get the land valued as low as possible in order to reduce the tax that he has to pay. I remember a man having to contribute as much as 40’ per cent, in taxation after selling a station.
Question - That the words proposed to be inserted be inserted (Senator Garling’s amendment)’ - put. The Committee divided.
AYES: 7
NOES: 14
Majority … … 7
AYES
NOES
Question so resolved in the negative.
Amendment negatived.
Clause agreed to.
Clauses 18 and 19 agreed to.
Clause 20-‘
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I move-
That after the word “ bearer “ the words “ the names and addresses of the holders of which are not supplied to the Commissioner by the company “ be inserted.
The purpose of the amendment is to give effect- to . the present departmental practice of charging a company on so much of the bearer stock, the names and addresses of the holders of which are not supplied to the Commissioner.
Senator GARLING:
New South Wales
– I understand that this is the clause which the Minister (Senator E. D’. Millen) assured us will permit shareholders in companies who do not receive sufficient income to render a return to escape taxation, but I am not at all sure that it will have that effect. While not proposing to move an amendment, I desire to direct the Minister’s attention to the wording of the clause, so that we may be quite clear that certain conditions exempt the small income earners from the operations of this clause.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Paragraphs a and b refer to absentees.
Senator GARLING:
– I do not intend dealing with those, but with the first proviso to sub-clause 2, which sets out that in addition to any other income . tax payable by it, a company shall also pay income tax on -
- interest or dividends distributed in respect of debentures or share stock payable to bearer as if the total amount so distributed were the income of an individual. 1 understand that there is no differentiation between share stock payable to bearer and ordinary share certificates held in limited liability companies. At all events, there is no great difference in principle, but there may be a technical difference between share stock payable to bearer and shares held by ordinary shareholders in a limited liability company. The second proviso to subclause 2 reads -
Provided also that a company shall be entitled to deduct and retain for the use of the company from the interest or dividend payable to any “person who is a holder of debentures or share stock payable to bearer an amount which bears the same proportion to the amount paid by the company under paragraph (c) of this sub-section as the interest or dividend payable to that person bears to the total interest or dividend payable in respect of those debentures or that share stock : ; and a third proviso is worded in this way:
Provided further that, where the Commissioner is satisfied that the holder of debentures or share stock payable to bearer is a person who is not liable to furnish a return, the Commissioner may refund to that person the amount of ‘the tax paid by the company in respect of the debentures or share stock of that person :
It seems to me that it will be an almost impossible task to give effect to the third proviso in sub-clause 2, which permits the Commissioner to refund to that person the amount of tax paid by the company in respect of the debentures or share stock of that person. Seeing that the nerson is supposed to be one who is not liable to furnish a return, I fail to see how the shareholder is to be reached simply by the operation of the further proviso.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The proviso is largely nullity, but it meets the case where the Commissioner becomes aware of the identity of the individual in respect of which the company paid.
Senator GARLING:
– That is the weak point in the whole clause, as there is no certainty that a. small shareholder will get the benefit of any refund at all, because he will not be known to the Commissioner, as he does not furnish a return.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– If he does not know where he is he cannot be paid.
Senator GARLING:
– Let us suppose that the shares are held in a trustee company or in the Bank of New South Wales, the Commercial Bank, or some of the breweries, which have a long list of shareholders, many of whom do not render returns-
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– They are not affected by this provision.
Senator GARLING:
– They will, be affected.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– They can be identified.
Senator GARLING:
– If holders of share stock payable to bearer?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Whose names are not . disclosed ?
Senator GARLING:
– That does not matter. The amendment moved will not overcome the difficulty in connexion with the third proviso, because these persons ‘ will not be sought by the Commissioner. He will naturally make a refund if they ask for it, but how many people would dream of doing that?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– What does the honorable senator suggest?
Senator GARLING:
– I am only pointing out that it is not likely that the small shareholder is to be saved from paying income tax because the Commissioner may refund it. We are holding out a false hope to many people who are paying no tax at all, and who after receiving a small dividend will find that an amount has been deducted to cover the particular tax imposed under paragraph c of sub-clause 2, and will thus, in effect, become taxpayers though their total incomes exempt them from liability.
Senator Keating:
– If sufficiently interested they will secure it.
Senator GARLING:
– They are people whose incomes are perhaps very ismall, and who will have no knowledge of how to proceed to secure the refund from the Department.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Unless we leave the door wide open to evasion there is no way of doing it.
Senator GARLING:
– We are using the word “may” instead of “shall”. The word “ shall “ should be used. Subclause 3 reads -
A company, notwithstanding any contract, agreement, or arrangement entered into by it, may, with the approval of the Commissioner, charge pro rata the amount of the tax actually paid by it against those beneficially interested in the income of the company.
The company may still charge a certain amount to the shareholders, and thereby impose a tax upon people who were not intended to be brought under the purview of this form of taxation at all.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– In spite of the pressure of business and the lateness of the hour I cannot allow the extraordinary statements of Senator Garling to pass unchallenged. Companies are earning profits which are disclosed, and the Bill provides that the Commissioner shall know who is receiving those profits. The Commissioner will levy a tax upon a recipient according to his income. If the companies making a large measure of profit do not disclose the names of the persons to whom the profit is paid, it is only fair that we should tax the company.
Senator Garling:
– I do not object to that.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– This is not a clause which is imposing a liability upon individuals, but one which has been inserted for their benefit. It provides that, although a company is charged, and later it is discovered that the individuals who obtained the profit from the company are known, the Commissioner will allow them a rebate. in excess of the amount which otherwise would have been charged.
Senator Garling:
– Does the Minister anticipate that being done?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Yes, I agree with Senator Keating that those concerned will have sufficient interest to disclose their identity. If we do not include this provision, what will happen? The company will pay the whole amount, and the shareholders’ names will not be disclosed, which will be unfortunate for the small ones, but fortunate for the large’ holders, because the flat rate will be paid by the company and distributed pro rata amongst all the shareholders, with the result that those with a small income will be paying 2s. 5d. in the £1 instead of the proper rate of ls. in the £1.
Senator Garling:
– That is not the case under the present law.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– It would be without this provision.
Senator Garling:
– I do not want this to be in at all.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I . am utterly unable to understand what the honorable senator does want. If by any chance the Commissioner collected from a company because he was unable to locate a shareholder, and later, if the shareholder’s identity was established, he would refund to him any excess charge, would any harm be done? Senator Garling suggests that that is a monstrous evasion of the promise made by the Government.
Senator Garling:
– It is a monstrous illusion.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– If we leave it out, the impost would remain without the machinery for removing it, and I repeat that the provision which has been inserted is in the interests of shareholders, and particularly the small ones.
Senator JOHN D MILLEN:
TASMANIA · NAT; UAP from 1931
– Paragraph c of sub-clause 2 provides that in addition to any other income tax payable by it, the company shall also pay income tax on -
- Interest or dividend distributed in re- spect of debentures of share stock payable to bearer as if the total amount so distributed were the income of an individual.
That is all right in relation to bearer stock held in Australia, but what would be the position of a corporation or company obtaining capital from Great Britain, where the financial exchanges are anxious to sell bearer stock? How would it be possible to disclose the name of the individual. We are practically preventing money from coming into Australia, and something should be added to limit the provision to future operations.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Is the honorable senator referring to absentees?
Senator JOHN D MILLEN:
TASMANIA · NAT; UAP from 1931
– A declaration of the name of the individual bearer holding this stock.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– He would be in the position of those Whom I have just mentioned. If his identity is not known nothing can happen, but if it is, the proviso following sub-clause 2 with operate.
Amendment agreed to.
Clause, as amended, agreed to.
Clause 21 (Taxation of company where distribution not reasonable).
Senator GARLING (New South Wales) why a company exporting butter should be included in this clause and not companies handling other produce which may be equally perishable?
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The provision affects largely the co-operative companies which export their surplus from time to time and retain in their own hands portion of the proceeds to equalize the price of the produce furnished by the whole of their shareholders. The honorable senator means to say that the provision could be applied equally to other co-operative produce. On that point I would not be prepared to argue against him. The provision was put in the Act when this question was very much to the fore, and it has remained there ever since. As it is in, I trust the honorable senator will allow it to remain.
Senator Lynch:
– Will this clause take the place of the much-debated clause 16 (2) of the old Act? Does it apply to a proprietary as well as to a public company?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The clause as a whole applies to any company, proprietary or otherwise.
Senator ELLIOTT:
Victoria
– Certain possibilities have been brought under my notice by some business men in regard to this clause. They have noted that it deals with “ taxable income,” which means “ the assessable income after deducting all the deductions allowed by the Act.” This means that where a company has been called upon to make extraordinary expenditure in a particular year, which expenditure is not allowable as a deduction under the Income Tax Act, such expenditure will not be taken into account in calculating the company’s ability to declare a dividend. Take a concrete case: A’ company’s profits, according to its profit and loss account, are £20,000. In arriving at its profits, however, the company has deducted -
Although the company’s profits are actually £20,000, the Commissioner must assume them to have been £23,500, and he would proceed to apply the clause on that assumption. Should he decide to take action owing to an inadequate dividend having, in his opinion, been declared, he would assess the shareholders on their proportions of the disallowed items. This, in my opinion, would be absolutely opposed to equity. The clause should, it is thought, require the Commissioner to consider whether a company has not distributed to its members or shareholders at least two-thirds of its actual profits. Has the Minister had. that position placed before him?
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– This clause has been rendered necessary by a decision of the Court. It has been declared that taxable income, as even a layman might state it, is “ income not exempt from taxation.” To attain that one only takes the gross income, from which appropriate deductions are made, and there remains as a residue the income which is subject to taxation.
Senator Payne:
– Certain expenditure may have been incurred by the company which is not allowable in the scale of deductions, but which is real expenditure, and has diminished the profits.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– If it is not allowed it cannot be taken off.
Senator Elliott:
– In considering whether a company has acted prudently in distributing a certain amount of dividend the Commissioner should take heavy expenses into consideration.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– They are taken into consideration.
Senator Elliott:
– The case has been put to me in regard to heavy legal expenses. A company would have to make provision for those expenses somehow, and it might be unwise for it to declare a dividend while disregarding them.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– All those facts, surely, come within the range of matters that the Commissioner should take into consideration. That is the practice to-day. I hope Senator Elliott will not push this argument so far that he will expect lawyers to correspondingly reduce their fees.
Clause agreed to. _ j
Clause 22 agreed to.
Clause 23 -
-
In calculating the taxable income of a taxpayer the total assessable income derived by the taxpayer from all sour,ces in Australia shall be taken as a basis and from it there shall be deducted -
- all losses and outgoings (not being in the nature of losses and outgoings of capital) including commission, discount, travelling expenses, and interest actually incurred in gaining or producing the assessable income:
- all rates and taxes (including State and Federal land taxes and State income tax) actually paid in Australia by the taxpayer during the year in which the income was derived, hut not including any tax paid under this Act:
- such sum as the Commissioner thinks just and reasonable as representing the diminished value per centum by wear and tear during the year in which the income was derived of any machinery, implements, utensils, rollingstock, and articles used by the taxpayer for . the purpose of producing income; such wear and tear not being of a kind that maybe made good by repairs.
Senator KEATING:
Tasmania
– I have an amendment to move which is rendered necessary by what I think is an omission. The clause purports to be a re-enactment, and in the memorandum which shows the alterations made in the existing law there is a note which says -
The first amendment made in this subsection consists of the transposition of the words “.incurred in Australia”. The object of this amendment is to limit the deductions to those incurred in Australia. “ Incurred in Australia “ are interpreted as meaning “ decided upon in Australia by the controlling authority.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– That is an error. The error was not noticed, and has gone into print.
Senator KEATING:
– The “clause purports to be a re-enactment of the previous provision, with the transposition of the words “incurred in Australia.” In the proposed re-enactment there are some words omitted. The clause states that -
In calculating the taxable income of a taxpayer the total assessable income derived by the taxpayer from all sources in Australia shall be . taken as a basis and from it there shall be deducted -
all losses and outgoings (not being in the nature of losses and outgoings i of capital) including’ commission, discount, travelling expenses, and interest, actually incurred in gain ing or producing the assessable income.
In the previous provision there were further words. After the word “interest” there were the words “ and expenses.” It is ‘suggested that these words are not necessary, but I think they are very necessary.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– : Are not “ expenses” covered by’ the word “outgoing”?
Senator KEATING:
– They may be. If this provision was being enacted for the first time I should be satisfied with the word “ outgoings “, but the words “ and expenses “ have been in the previous Statute. There is only one inference that a Court could draw from the alteration. It would assume that Parliament intended to vary the meaning. I think it would be very much safer in the interests of the taxpayer to stick to the previous wording, and thus have the advantage of any rulings that have been given. The alteration would not be likely to cause the other House to waste any time.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I shall not oppose it. To my mind, it is merely “;a chip in the porridge.”
Senator KEATING:
– I move-
That in sub-clause (1), paragraph (a), the word “ and “, third occurring, be left out, and that after the word “ interest “ the words “ and expenses “ be inserted.
Senator GARLING:
New South Wales
.- In view of the fact that provision is made to treat beasts of burden and working beasts as plant for the carrying on of the business, I should like to know if, in the event of the death of any of these animals, the loss incurred will be regarded as losses and outgoings of capital. .
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– No. Paragraph e provides for depreciation.
Senator GARLING:
– But in the event of the death of stock there will be a total loss, not depreciation, of capital.
Senator CRAWFORD:
Queensland
– On this question of allowable deductions for losses and outgoings, I remind the Committee that frequently in, the northern portion of Queensland the primary producers suffer very heavy losses through cyclones. I have known of damage to the extent of £250,000 or more to have resulted from cyclonic disturbances in that part of my State, and yet such losses may not be deducted from income.
Senator Keating:
– Would they not come under paragraph e?
Senator CRAWFORD:
– I do not think they would. They are regarded as loss of capital. In some cases such losses represent all the capital a man has in the world, and may mean the accumulation of many years’ income.
Senator Lynch:
– Can they not insure against such losses?
Senator CRAWFORD:
– No. They are risks which cannot be covered.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– This Bill does not tas: capital; it taxes income.
Senator CRAWFORD:
– Well, what is the difference between a trading loss and a loss of capital necessary for the carrying on of a business? If machinery gets damaged and out of repair, the cost is an allowable deduction, but losses of capital through storms are not so treated. I am certain there would be no difficulty in getting an amendment to the Bill if this principle had general application. Storms of the nature to which I refer only occur in the tropical area of the Commonwealth, where it is necessary to encourage settlement.
Senator Elliott:
– What is the difference between losses incurred through drought and through storms?
Senator CRAWFORD:
– If a man loses 1,000 head of cattle through drought that, surely, is an allowable deduction, and is taken into account when he is making up his returns at the end of the accounting period.
Senator Keating:
– It is not allowable as a deduction from income.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– It seems to me that it is necessary to get back to the purpose of the Bill, which is to levy a tax upon incomes. More than once there has been a strong protest against the levying of income tax upon capital, but it is claimed that, while capital shall not be taxed, losses of capital shall be deductible from income taxation. The thing is not compatible.
Senator CRAWFORD:
Queensland
– The principle for which I am contending is recognised already to some extent in the averaging of incomes. If a taxpayer makes a loss in any year of £1,000 or £2,000, he loses capital.
Senator Pearce:
– No, income.
Senator CRAWFORD:
– If a man loses £1,000, he loses capital, and that is taken into account in arriving at the rate at which his income is to be taxed. I contend, therefore, that the principle is recognised, and I am anxious to see some provision made to relieve people in the northern portion of my State.
Amendment agreed to.
Senator FOLL:
Queensland
– I move -
That in paragraph (b). after word ‘” State “ second occurring, the words “ and Federal “ be inserted.
This paragraph provides for the exemption of State and Federal land taxes and State income tax payments, and I think it is only fair that a deduction of the Federal income tax paid in the previous year should also be included. My amendment will have that effect. The taxable income is the net income of a taxpayer. It cannot be contended that the amount paid by way of Federal income taxation is part of any man’s income. It really should come under the same heading ‘as expenses incurred in the carrying on of a business. Provision is made for deducting State and Federal land taxes, and it is only right, in my opinion, that the State and Federal income tax payments should also be deductible.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I do not think the Committee will be disposed to indorse Senator Foil’s proposal. Viewing the amendment from the financial side it would at once withdraw from the field of taxation a sum amounting to £16,000,000, as that is the amount which was collected as income tax last year by the Federal Treasurer. Senator Foll says, in a light and airy fashion, that £16,000,000 should be regarded as a deduction. I submit that if the Treasurer were in a position to get along with such a reduction in revenue as the honorable senator’s amendment would involve, it would be far better for him to propose to reduce the rates of income tax. We have already proposed a reduction of 10 per cent., but if we could give up more revenue it would be more business-like to do so by a further reduction of the rate than by permitting amounts paid as Federal income tax to be regarded as deductions.
Senator Foll:
– Does the Minister mean to say that as the result of my amendment £16,000,000 would be lost to the revenue from income tax?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– No;, what I say is that the taxable area would be reduced by that amount. I say that it would be far better if the Treasurer could forgo the revenue which would be lost by the adoption of the amendment to lower the rate of tax. In that case, the reduction would fall more equitably on various taxpayers.
Senator FOLL:
Queensland
– . The figures given by the Minister (Senator E. D. Millen) may at a glance appear to be very effective. That is the usual custom of Ministers in charge of a Bill, and a private member putting forward a reasonable amendment has little chance of receiving any consideration. The amount of £16,000,000 referred to is spread over a great number of taxpayers, and the reduced amount of taxation that would have to be paid if my amendment were agreed to would not be so great as the Minister has suggested. The Government have met taxpayers who have to pay land tax, which I quite agree with, but I say that even if my amendment did involve the loss of revenue which the Minister suggests, I would still be of opinion that it ought to be accepted. The sooner we take active steps to further reduce taxation in this country, the better it will be for taxpayers generally, and also for men who are out of work as a result of the heavy taxation imposed by State and Federal Governments. I regret thai when I stand up in this chamber in an endeavour to obtain some slight reduction in the amount paid in taxation in this country the Minister in charge of this Bill should treat my proposal as though it were a jest. I am going to advocate here, and also in the country when the elections take place, a reduction of taxation, irrespective of the Government policy. I hope that the Minister will not consider it a subject for jest when an honorable senator submits a sound proposal for the reduction of taxation.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Senator Foll has felt himself called upon to utter a protest, but really the protest should come from me, and not from the honorable senator. This is a
Bill one of the effects of which will be to relieve the taxpayers of a burden amounting to £2,500,000.
Senator Foll:
– I want to relieve them still further.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Senator Foll comes here and reminds us that we are on the eve of an election, and that he is going to protest against the . imposition of heavy and oppressive taxation. This Bill does not propose any tax. It proposes that the people of the Commonwealth shall be relieved of taxation to the extent of £2,500,000. The honorable senator, on the eve of an election, is going to tell the people that he is against this imposition. This is not an imposition.
Senator Foll:
– I did not say anything of the sort. I said I was going to protest against heavy taxation. I did not say anything about this particular imposition.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– This is not an imposition at all. It is a measure for the lifting of an imposition.
Senator Foll:
– How could I call it an imposition if it was not one?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– How the honorable senator could do so is not for me to say. The honorable senator stands up to protest against heavy taxation as if this Government or this Bill was responsible for it. The Government can claim credit, in bringing down this Bill, for proposing to relieve the taxpayers of taxation, and it is the most unfair presentation of the case to convey the impression that this is a Bill to add to the burdens of the people.
Senator Foll:
– I did not intend to convey that impression, but that I am opposed to heavy taxation.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Let me deal with the honorable senator’s amendment. I have already pointed out that it would withdraw from the field of taxation a sum amounting to £16,000,000.
Senator Foll:
– What would be the loss of revenue in the aggregate?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– It is hard to say, because the tax is collected1 at varying rates. Let us take it at1s., and that would be less than the average, and the honorable senator’s amendment would mean a loss of revenue amounting to £800,000 a year. This Bill proposes to forgo £2,500,000 a year, and Senator Foll says, “Let us knock another £800,000 off the revenue.” 1 could as easily . propose, on the eve of an election, further remissions of taxation, but we have to be practical, and the country cannot afford to give up £800,000 of revenue in addition to the £2,500,000 which it is being asked to give up under this Bill. It is easy to make proposals for the redaction- of revenue which would be received with a certain amount of favour outside, but we have a responsibility to the country, and unless the honorable senator can show how we are to get along without the revenue which would be lost by the adoption of his amendment, I assume that honorable senators will not support it.
Senator PAYNE:
Tasmania
– I should like to be able to support Senator Poll’s amendment. Every one would like to see a reduction of taxation. We have to recognise that Australia has incurred very heavy obligations in the last few years, and we have to meet them. I am very glad that the Treasurer (Mr. Bruce) has been able to submit proposals to lighten the burden of taxation. I think that we should be content with what he has proposed. To include . payments by way of Federal income tax in the list of statutory deductions would, as pointed out by Senator E. D. Millen, involve a loss of revenue to the extent of £800,000 at least, and I personally believe that the loss would amount to over £1,000,000. If we accepted the amendment we should have to devise some means of making good the loss of revenue which it would involve. The Treasurer, according to the Budgetpapers, is sailing f airly close to the wind after providing for the reduction in taxation proposed by this Bill. He hopes to be able to make ends meet, but the margin he anticipates is so small that we must very seriously consider any proposal to remit taxation in addition to the remissions provided for in the Bill.
Senator FOLL:
Queensland
– In view of the fact that the Minister is not prepared to accept my amendment, and as he has the numbers behind him, I ask leave to withdraw it.’
Amendment, by leave, withdrawn.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– I am going to ask the Committee to accept a small amendment in paragraph e of this clause, which provides for the deduction of - such sum as the Commissioner thinks just and reasonable as representing the diminished value per centum by wear and tear, during the year in which the income was derived of any machinery, implements, utensils, rolling-stock and articles used by the taxpayer for the purpose of producing income.
I move -
That the words “ (including . beasts of burden and working beasts)” be inserted after the word “ articles,” paragraph e.
Senator KEATING:
Tasmania
– The paragraph which the Minister wishes to amend applies apparently only to persons engaged in manufacturing enterprises, or in agricultural or pastoral pursuits.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– That is so. It applies to. any one who uses those articles in the production of income.
Senator KEATING:
– What about books purchased for libraries?
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– Allowance is made for depreciation of stock in trade.
Amendment agreed to.
Senator KEATING:
Tasmania
– I suggest that progress be reported at this stage. The Minister has done very well to-night, and there is not likely to^ be much further discussion on the Bill.” Honorable senators have been at work for twelve hours.
Senator E D MILLEN:
NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The Senate did not meet until 3 p.m.
Senator KEATING:
– Attending the actual sittings of the Senate and speaking is only a fractional part of an honorable senator’s work. We are now tired, and I do not think there will be very much difficulty in finishing the Bill expeditiously when the Committee resumes to-morrow.
Senator E D MILLEN:
Minister for Repatriation · NEW SOUTH WALES · FT; ANTI-SOC from 1910; LP from 1913; NAT from 1917
– The Committee knows the position Ministers are in. Time waits for no man, and there is an obligation on honorable senators to dispose of the business as quickly as possible, to enable Parliament to rise at the end of the week. I have no objection to an adjournment now, but if a similar request comes to-morrow night at this time it may not be possible to grant it. It will depend on the state of business. I very much doubt if we shall be able to adjourn as early as this to-morrow night.
Progress reported.
page 3555
SENATE ELECTIONS BILL
Bill returned from the House of Representatives without amendment.
Senate adjourned at 11.7 p.m.
Cite as: Australia, Senate, Debates, 11 October 1922, viewed 22 October 2017, <http://historichansard.net/senate/1922/19221011_senate_8_101/>.