31st Parliament · 1st Session
The PRESIDENT (Senator the Hon. Condor Laucke) took the chair at 2.15 p.m., and read prayers.
– Order! It is with deep regret that I inform the Senate of the death on 1 June 1978 of former Senator the Honourable Sir Kenneth Morris, Senator for the State of Queensland from 30 November 1963 to 30 June 1968 and Deputy Premier and Minister for Labour and Industry in Queensland from 1957 to 1963.I invite honourable senators to stand in silence as a mark of respect to the deceased senator.
Honourable senators having stood in their places-
– I thank honourable senators.
– Before proceeding with the business of the day, may I extend to Senator the Honourable Sir Reginald Wright the congratulations of the Senate on being created a Knight Bachelor in the Queen’s Birthday Honours in recognition of his distinguished public and parliamentary service.
Honourable senators- Hear, hear!
– May I also extend the Senate ‘s congratulations and best wishes to Lady Wright.
– I am most grateful, Mr President.
– Petitions have been lodged for presentation as follows:
To the Honourable the President and Members of the Senate in Parliament assembled. The humble petition of the undersigned members and ex members of the Citizens Forces of Australia respectfully sheweth:
Your petitioners therefore humbly pray.
Your Honourable House take appropriate action to resume the award of the several distinctive Reserve Forces Decorations and Medals for Long Service and Good Conduct to members of the Royal Australian Naval Reserve, Army Reserve (C.M.F. and the R.A.A.F. Citizens Air Force. by Senator Thomas, Senator Lewis, Senator Guilfoyle and Senator Webster.
To the Honourable the President and Members of the Senate in Parliament assembled. The humble petition of the undersigned citizens of Australia respectfully showeth:
Your petitioners therefore humbly pray that the Government retain at least the original Medibank Scheme.
And your petitioners as in duty bound will ever pray. by Senator Mcintosh.
To the Honourable the President and Members of the Senate in Parliament assembled. The humble petition of the undersigned citizens of Australia respectfully showeth:
That those who have retired and those who are about to retire, are being severely and adversely affected by inflation and Australian economic circumstances.
The continuance of the mean’s test on pensions causes undue hardship to them.
We call on the Government to immediatley abolish the mean’s test on all Aged Pensions.
To ensure a pension for all on retirement, and guarantee that all Australian Citizens will retire with dignity.
Acknowledge that a pension is a right and not a charity.
And your petitioners as in duty bound will ever pray. by Senator Walsh and Senator Chaney.
To the Honourable the President and Members of the Senate in Parliament assembled. The petition of the undersigned respectfully showeth:
And your petitioners as in duty bound will ever pray. by Senator Scott (2 petitions).
Senator Sir Reginald WRIGHT (Tasmania) I give notice that on the next day of sitting I shall move:
That leave be given to introduce a Bill for an Act to amend the Parliamentary Contributory Superannuation Act 1 948.
- Mr President, I inform the Senate that the Leader of the Government in the Senate, Senator Withers, is on duty today with the McGregor Royal Commission. In his absence I shall take, however clumsily, the questions normally directed to him.
– I briefly indicate also that the front bench of the Opposition is similarly depleted today. Senator Button, the Deputy Leader of the Opposition, is indisposed today and, I believe, will not be present until tomorrow.
– I address a question to the acting Leader of the Government in the Senate. Will the Government investigate the truth of the assertion made by a Mr Bruce Chu, a vicepresident of the government-run Taiwan power company, that uranium safeguards can be avoided because, to use his words, ‘There will always be a free market in uranium. If you have the money, you can buy it. We do it now in America’? If this statement is correct, will this cause the Government any concern as to whether its safeguards policy is likely to be effective?
– I shall certainly request my colleague in another place to make an investigation into the assertion which has been made by a Mr Bruce Chu. I would be interested to obtain from Senator Wriedt the source of his information. Of course, the Government is enormously interested in ensuring that there should be the strongest and the most widespread safeguards that it is possible to achieve in the world. Indeed, one of the basic reasons that the Government has entered into the production, mining and marketing of uranium is that it gives the Government a voice in regard to safeguards which it would not otherwise have. Of course, it is very interested to ensure that the Nuclear Nonproliferation Treaty should be observed to the full.
– My question is addressed to the Minister representing the Acting Prime Minister or, alternatively, the Minister representing the Minister for Immigration and Ethnic Affairs. I refer to the existence in Australia of the extreme right wing political organisation which goes by the name of the National Front. Is the Minister aware that the Australian division of the National Front held its inaugural meeting in Melbourne last Saturday? Is the Minister further aware that the Front sees as amongst its main aims the introduction of apartheid for Aboriginals, the repatriation of all non-white immigrants from Australia, and the propagation of white minority rule in Rhodesia and South Africa? Can the Minister assure the Senate, firstly, that no government department, agent or instrumentality will, in any manner, be involved with the National Front in the fulfilment of these aims; secondly, that the Commissioner for Community Relations will maintain a constant check on the Front’s activities to ensure that it does not breach the Racial Discrimination Act 1975; and, thirdly, that the National Front will not be allowed to violate the conditions outlined in the United Nations Declaration of Human Rights and the United Nations Declaration on the Elimination of all Forms of Racial Discrimination, both of which have been ratified by Australia?
– My only source of knowledge about this matter was, I think, a media item which indicated the formation and activity of such a body. The aims of that body, as outlined by Senator Missen, will be repugnant to almost all Australians. Certainly, if there is one thing that both sides of the Senate can be bipartisan in, it is the belief that extremes of views, whether they be of the extreme left or of the extreme right, are not the norm for the Australian people and are not the way of life which the Australian people seek and respect. I will, of course, direct to the Acting Prime Minister the substance of Senator Missen ‘s question. He asked for three undertakings. I am sure that all members of the Government would want to see the spirit of those undertakings carried out.
– My question is addressed to the Minister acting for the Minister for Administrative Services. By way of preface, I indicate that I am prompted to ask the question by my having received a copy of the prestigious annual report of the Australian Ballet Foundation. As the Government is engaged in an austerity compaign and is asking everybody to tighten his belt, will the Minister give consideration to requesting the many hundreds of statutory corporations to economise by presenting more austere publications?
– I think it is important that we look to economies in cost of printing and publication consistent with the end product being aesthetically reasonably attractive. I will direct this question to the attention of my colleague when he returns.
-I ask the Minister representing the Minister for Aboriginal Affairs the following question: When is the Government going to define clearly who is an Aborigine? Is it not a fact that at the present time anybody who claims to be an Aborigine is considered to be an Aborigine?
– Not true.
– Well, when is the Government going to define who is an Aborigine, particularly in view of the fact that people classified as Aborigines receive so many concessions that this opens up for people the opportunity to obtain concessions to which they are not entitled?
– I understand that the definition of an Aboriginal is ‘a person of Aboriginal descent who identifies himself as an Aboriginal and is accepted as such by the community with which he is associated ‘. That is my understanding of the definition. I do not know that the Government would be seeking to make any other definition or, as Senator Wood might claim, any clearer definition. An Aboriginal is a person of Aboriginal descent who identifies himself and is identified by the community as an Aboriginal. As far as programs, concessions or assistance are concerned, various programs in the States and Territories relate to Aboriginals. Those people who come within the definition I have outlined are the ones eligible to be assisted by those programs.
– I would like to ask a supplementary question. The Minister said that a person is considered to be an Aborigine if he is accepted by the Aboriginal community as such. That being the case, how does the Government make a decision on such a basis?
– As I said, programs and means of assistance are available for Aboriginal people. People of Aboriginal descent who identify themselves and are accepted by the community concerned are the people who are eligible to be assisted by those programs.
– My question is directed to the Minister representing the Minister for Employment and Industrial Relations. I seek information as to whether the Government has given any riding instructions to the tripartite delegation that is attending the International Labour Organisation conference, in view of the desire of the Third World nation delegates to effect a considerable restructure of the ILO?
– The question of a new structure for the International Labour Organisation has been under consideration for some time but has not yet been finalised. Australia has not yet determined what its attitude is to the various proposals. This will be determined after discussions with other Western democratic countries and other members of the Asian group. It is expected that there will be discussion on this matter during the forthcoming ILO conference which will commence tomorrow, 7 June. My colleague, the Minister for Employment and Industrial Relations, whom I represent and on whose behalf I am answering this question, will be in Geneva to attend the conference.
-My question, which I direct to the Minister for Education, concerns an article and an editorial in the
Illawarra Mercury on 2 June 1978 which was critical of the University of Wollongong. Can the Minister explain the circumstances surrounding claims that the University was able to spend up to $80,000 on a duck pond at the same time as it was threatening to discontinue courses because of lack of required finances? Can he assure the Senate that the excellent record, reputation and standard of the University of Wollongong in providing undergraduate teaching is not under any threat?
– I had some notice of the article itself and somewhere have information on the matter. May I respond later in Question Time?
-The Minister for Employment and Industrial Relations will remember that last week I raised with him the question of the retrenchments at the South Australian plant of Chrysler Australia Ltd and the refusal at that time of the Department to provide, as promised, a comprehensive retraining scheme for those employees who would be dismissed over the next 1 8 months. As the Minister will recall, a total of 1 1 ,000 workers are involved, and some have already received notice. As the scheme which has been offered is a very minimal one, and involves only 40 workers, I ask whether something can be done urgently to initiate negotiations between his Department and the union involved to ensure that there will be an adequate retraining program, as promised by the Prime Minister. As I note that the Minister for Employment and Industrial Relations will soon be leaving Australia, I ask whether the matter can be taken up urgently to ensure that, in the absence of the Minister, something can be done to reconsider and review the proposals presently before the union?
-I recall very well the question asked earlier by Senator Bishop in regard to this matter. I assume that it has been passed on to the Minister in the ordinary way, but will certainly check on that. In view of the pending departure of the Minister I will ensure that the question is brought to his attention today.
– My question is addressed to the Minister representing the Minister for Health. I preface it by drawing attention to recent reports that strains of a resistant type of malaria, which is now a major cause of fatality in many parts of Asia, are being imported to
Australia. I ask the Minister whether, in view of the increased risk of this infection spreading, malaria could be reclassified as a notifiable disease?
– The Department of Health has maintained a close watch on the situation with regard to malaria, especially, I understand along the northern coastal region of Australia where the dangers of reintroduction are the greatest, since the eradication of malaria from the mainland in 1962. Both the holds and the cabins of all aircraft entering Australia are sprayed to kill mosquitoes which might be carrying malaria, or other diseases, and all persons from malaria-endemic countries who will be staying in the vulnerable areas are issued with an appropriate course of treatment. In addition, a variety of vector control measures against mosquitoes capable of carrying malaria are undertaken in malaria receptive areas in northern Australia. These include the control of breeding areas- particularly around harbours and airportsspraying by insecticides where deemed necessary, and surveys of mosquitoes and their susceptibility to insecticides. The armed forces have expert teams to assist in both general control measures and in any concentrated program in the event of a local outbreak. I understand that a register of all malaria cases diagnosed in Australia is maintained at the School of Public Health and Tropical Medicine in Sydney. With only one or two exceptions since 1 962, these now occur only in visitors and returning residents. The professor of tropical medicine at the School is a member of the regional World Health Organisation’s expert committee. Discussions were held in 1977 with both WHO and Papua New Guinea to co-ordinate inter-country malaria control measures.
With reference to refugee boats coming into northern ports, arrivals are subject to strict quarantine procedures, both in relation to individuals and to mosquito control on the boats themselves. The whole subject is being kept under continual review both by the Department and by the appropriate expert committees of the National Health and Medical Research Council. I will advise the Minister of the honourable senator’s suggestion that consideration be given to whether malaria should be regarded as a notifiable disease, and will see that the honourable senator is advised of the Minister’s reply.
– I preface a question to the Minister representing the Minister for Aboriginal Affairs by reminding him that a few days ago I asked a question regarding funding for Aboriginal communities at Aurukun and Mornington Island. Can the Minister inform the Parliament whether a decision has been reached in the matter and, if the answer is in the affirmative, what amount has been allocated and how is the funding being carried out?
– I recall the previous question but I do not have with me any details of actual funding. Although in my earlier answer I advised of the setting up of joint advisory and coordination committees, I have not received any figures that I could give to Senator Keeffe at this stage.
– I ask a supplementary question. I ask the Minister when the information is likely to be available and whether it is likely to be available before the House rises.
– The previous question was referred to the Minister for Aboriginal Affairs. I shall see whether he is able to expedite the answer to the question.
-Has the attention of the Minister for Construction been drawn to comments by visiting American architect Jack Robertson that there are serious deficiencies in the unrendered concrete and lightweight finish commercial buildings? Mr Robertson said:
For the first time in history a whole generation of new buildings is going to be obsolete in 30 years because they’re going to be falling to pieces.
Will the Minister seek a report from his Department on the matter to see whether this comment applies in Australia and, if so, to what extent.
-My attention has not been drawn to the article by the American visitor whom the honourable senator has mentioned. Certainly this is a matter of which the Department of Construction ought to be aware so I shall see that the honourable senator’s question is conveyed to the Minister.
– The Minister for Primary Industry probably will recall that in reply to a question last week the Minister for Primary Industry appeared to be opposed to any increase in the price of milk in Victoria, and that the Minister for Transport was even more explicit in a Press release last week when he stated:
Any assistance to the Victorian dairy industry should not be done by imposing a milk price increase.
Does the Minister know that the Prime Minister in a speech to the Victorian Farmers Union on 6 July 1976 complained that milk prices in Melbourne had not been increased enough, and that an extra $40m would have been available to Victorian dairy farmers if Sydney price rises had applied to Melbourne milk? In view of that, I ask whether the Minister for Primary Industry and the Minister for Transport have repudiated that belief of the Prime Minister or whether the Prime Minister has changed his mind.
-The honourable senator’s question relates to a question asked last week concerning milk prices. I was unaware of the comment attributed by the honourable senator to the Minister for Primary Industry that the Minister opposed an increase in the price of milk in Victoria although I had noted a comment on this subject by the Minister for Transport, Mr Nixon, whose electorate of Gippsland is in the area which is facing difficulties at the moment. I think his comment was directed to the Minister of Agriculture in Victoria. I am not aware of the statement by the Prime Minister in 1976 relating directly to a price rise for milk in Victoria, but I do recall the Prime Minister stating last year that if the price of milk in Melbourne were as high as it was in Sydney a substantial benefit would flow to milk producers in Victoria. The honourable senator asked further whether there was any conflict between the statements of the Minister for Primary Industry and the Minister for Transport and the statement of the Prime Minister. I am not aware exactly what the honourable senator means by that.
He further asked me whether there was any conflict between what the Prime Minister said in 1976 and what the Minister for Primary Industry and the Minister for Transport said recently. I think the honourable senator would agree that any primary producer would be anxious to achieve a higher price for his product. In my opinion primary producers, particularly milk producers, over the past eight or ten years have been most reticent in their demands for price rises. One can see that in the price of some of their products such as butter they have placed themselves at a disadvantage by being so cognisant of the need to restrict price rises. However, the current marketing schemes which are proposed by the various State governments and the Federal Government have a relationship to the stabilised price of whole milk production and milk for manufacture in the future. One would hope that flowing from these various agreements between the State governments and the Federal
Government the dairy industry will be placed on a more satisfactory footing.
– I ask the Minister representing the Minister for Employment and Industrial Relations a question relating to the Commonwealth Employees (Employment Provisions) Act. Have Australian Public Service organisations lodged a case with the International Labour Organisation against several provisions of the Act? Can the Minister say whether the ILO has sought further information from the Government on some of the major clauses of the Act and which clauses these are? Finally, has the Government responded to the ILO? If not, when is it expected that the Government will respond?
-Australian Public Service organisations have lodged a case with the International Labour Organisation against some provisions of the Commonwealth Employees (Employment Provisions) Act. The ILO has sought a response from the Government. The Minister for Employment and Industrial Relations has advised me that the ILO did not seek information from the Australian Government on particular clauses of the Act but invited the Government to comment generally on the complaint. The Government’s response to the matter along with others formally on the ILO conference agenda will be discussed by the Australian delegation which is now in Geneva as I have already mentioned.
– I direct my question to the Minister representing the Minister for Primary Industry. Is it a fact that the Government intends reducing the nitrogenous fertiliser subsidy by a further $20 per tonne later this year? Can the Minister advise what steps, if any, will be taken to ensure that a review of all prices is carried out in respect to Australian produced fertilisers using phosphates, nitrogen and potash to ensure that farmers obtain fertilisers at equalised prices throughout Australia?
– I know of no decision by the Government that will reduce the price of nitrogenous fertiliser by the amount that the honourable senator indicated. When the Government introduced various schemes of assistance to encourage the use of superphosphate and nitrogenous fertiliser there was a proviso that from time to time the value of the support given by government would be investigated and, if necessary, a movement up or down would be considered at the appropriate time. However, the honourable senator asked whether there would be a reduction of $20 in the subsidy. I am unaware of the truth or otherwise of that suggestion. Senator McLaren also asked whether consideration would be given to making nitrogenous fertiliser available throughout Australia at an equalised price. There is a sound basis for that suggestion. I shall see that the question is directed to the appropriate quarter. I think that would be the Minister for Primary Industry.
-I ask the Minister representing the Minister for Foreign Affairs: Is it not a fact that trade between Australia and Taiwan has increased from about $208m in 1973 to about $459m in 1977 or, in other words, by 120 per cent in four years? Is the Minister aware that Australia ranks as the seventh most important country trading with Taiwan and that amongst the top ten trading countries it is the only country that does not maintain relationships on any level with Taiwan? Is the Minister also aware that of the top trading countries, the United States of America and Saudi Arabia have full diplomatic relations and that Japan, the United Kingdom, Indonesia, Canada, West Germany, Singapore, Malaysia and Thailand all maintain a de facto relationship? I ask: As Australia does so much trade with Taiwan- a trade that has increased greatly in the last few years- why will Australia not afford some recognition to Taiwan instead of virtually trading through the back door, particularly as it is good enough for countries such as the United States of America, the United Kingdom, Canada and Japan to afford such recognition?
– I am aware, as are all honourable senators, that Australia has a very considerable trade with Taiwan. I believe that, in terms of Australia’s trading position and the dimensions of our trade, what Senator Young has said is correct. My advice as to the present relationship is that when the Australian Government recognised the People’s Republic of China in December 1972, the agreed communique stated that Australia acknowledges the position of the Chinese Government that Taiwan is part of China. This is also the position of the regime on Taiwan. Since 1972 it has been Australian Government policy to avoid official contact between Australia and Taiwan. This policy does not preclude unofficial contact between individuals and organisations in both Taiwan and Australia. Such contacts have continued and have increased. Trade between Australia and
Taiwan has more than doubled in value since December 1972. New items have been added to the list of Australian exports to Taiwan including iron ore and coal. Facilities, such as postal and telecommunication services, have been maintained. Person-to-person contacts have also continued. Students from Taiwan continue to come to Australia privately to study. Tourism between Australia and Taiwan has increased. People from Taiwan attend conferences in Australia in an unofficial capacity. Private organisations fostering relations at a person-to-person level have been established in both Australia and Taiwan.
Clearly against that background it is necessary for me to invite my colleague the Minister for Foreign Affairs to study the suggestion put by Senator Young that there ought to be a more practical, pragmatic link either at a trade level or otherwise between Australia and Taiwan on the basis of his assertion that other countries, including very major countries, have those relationships. I do not seek to comment further. I will relay the question to the Minister for Foreign Affairs and seek a response.
– The details that have been given by Senator Sir Reginald Wright are not known to me. I am unable to vouch for their accuracy. However, as he has asked me to validate what has been stated, I will refer the question to the Minister for Finance and ensure that the honourable senator is advised of the response.
– I direct a question to the Minister representing the Minister for Post and Telecommunications. I refer to the emergency number 000 which is provided for urgent calls to police, fire brigade and ambulance. As this number takes the longest to register and can more easily be misdialled by distressed callers, will the Minister ask his colleague in the other place to give favourable consideration to changing the emergency number to 1 1 1?
-I think that 1 1 1 in accountancy is called a Nelson, for obvious reasons. The suggestion, on the face of it, seems to be eminently sensible. Against the background that there may be technical reasons why the number should not be changed, I will pass the question to my colleague in another place and seek his response.
– My question, which is directed to the Minister for Social Security, refers to people who appeal against determinations of the Department of Social Security and, after receiving a positive recommendation from a Social Security Appeals Tribunal, receive a negative one from the Director-General. Does the Minister intend to make it possible for a further appeal to go to the Administrative Appeals Tribunal? If so, when? When will the Minister announce this decision to Parliament so there can be a debate on it? I ask this question in the knowledge that all members and senators deal each week with clients, particularly those on unemployment benefit and those who generally have absolutely no money at all while the appeals are being investigated, and in the knowledge that the Law Council of Australia believes that the worst of three alternative methods of appeal is that which allows for appeal from decisions of the DirectorGeneral to the Administrative Appeals Tribunal after an appeal to a Social Security Appeals Tribunal has been quashed?
– I have previously said in this place that it is our intention that where recommendations are made by a Social Security Appeals Tribunal and are not upheld by the Director-General the ultimate right of appeal should be with the Administrative Appeals Tribunal. I understand that arrangements are being made for that to occur. I will see that the honourable senator is advised of the likely timetable for that system to be implemented. I understand that the Ombudsman has appeals made to him on Social Security Appeals Tribunal matters where a recommendation is not upheld. He is also dealing with these matters as far as my Department is concerned. I am aware of the suggestion by the law body that the present arrangement may not be an ideal one.
I have said that I would be prepared to reconsider any possible way in which an adequate right of appeal could be given to the people who deal with my Department. We have continued Social Security Appeals Tribunals as a somewhat more informal means of appeal. That system was established, I think, in 1973-74. 1 would want to see the system of a right of appeal to the Administrative Appeals Tribunal functioning for some time to determine whether the clients of my Department have the same right of appeal as those who are dealing with any other Act of the Commonwealth Government.
I am aware also of difficulties with regard to the payment of unemployment benefit and the need to have an early appeal decision on these matters. I have said to Social Security Appeals Tribunals that it would be an ideal situation if an appeal could be determined in the week in which the decision was questioned. I hope, with the appointment of extra members in some States, that some of the delays will be overcome. However it ought to be said that while a person is waiting for an appeal on unemployment benefit he may reregister and become eligible for unemployment benefit. I am glad that the honourable senator raised the matter of appeals. An area of the Department’s work on which I would certainly be open for suggestion is how we could have an adequate appeals system- desirably one that protects the right of each individual.
– I direct a question to the Minister for Education, ls the Government considering the introduction of a student loans scheme? If so, will it supplement or replace the existing Tertiary Education Assistance Scheme and the adult secondary allowance scheme?
– The Senate may recollect that about a year ago the Government set up a committee of inquiry, the Butcher Committee, to inquire into student loans as they operate elsewhere in the world and to report upon them essentially as a supplementary financial aid to students. Of course the Government has a series of student assistance schemes in both the tertiary and the secondary areas. The scheme as put forward by the Butcher Committee had two concepts in mind. The first was an emergency concept to provide a small amount of money to colleges to give emergency loans at the instance of principals. I am bound to say that that happens now. It is usually referred to as maundy money. The second proposal was that there might be a supplementary loans scheme which, with proper guarantees from the Government, would be undertaken by commercial enterprises- banks and finance houses. The Government has not yet introduced the second scheme. It may well do so. It is still under review.
-Mr President, I ask a supplementary question. The question was whether the scheme, if it were introduced, would replace the education assistance scheme or the adult secondary allowance scheme. That is specifically the question and it is very important.
-Specifically, I remind Senator Georges that I referred to the fact that the concept was one of supplement. In other words, the scheme would be not in substitution but by way of supplement were it introduced.
– I direct a question to the Minister representing the Treasurer. Has the Government given serious consideration to the introduction of a minimum income or negative income tax system instead of the present social security system? Will the Minister agree that the system would be more efficient and equitable than the present social security system?
– From time to time there are discussions, both here and elsewhere in the world, on negative income tax. My understanding is that the Government has been following the international debates on minimum guaranteed income and negative income tax schemes. They arise from time to time. There has been an Australian contribution to the debate in the shape of certain recommendations of the Henderson inquiry into poverty. The Government is aware of many virtues claimed for what are called MGI and NIT schemes. However, it is obvious, even from preliminary studies, that there are many fundamental social, economic and financial issues that need the most careful examination before a balanced judgment can be made. The Government will continue to keep the area of policy under study.
-Will the Minister for Social Security inform the Senate whether she has received a report prepared by a First Assistant Secretary in the Public Service Board, Mr B. Hamilton, relating among other things to social security expenditure? If she has, does the report show that $2 50m or 14 per cent of the total social security budget has been wasted in a 12-month period because of maladministration by the Department of Social Security? Finally, does the Minister confirm or deny the implication in this report that there has been what is described as staggering maladministration for which the Minister ultimately must be responsible?
– I have received a report that has been compiled by the team which was set up by the Government last year to review the systems and procedures of the Department of Social Security. Having had interim reports from the Director-General of my Department on this matter, I am now awaiting a final comment from him on the report. Further consultation is taking place between members of the review team and the Director-General as to some of the figures which are contained in the report. Until such time as I have some agreement on the matters in the report, I am not able to comment on it.
I am also not able to comment on the assertions that have been made with regard to maladministration. I believe that the work of the review team which was reviewing the Department’s operation was to look at systems and procedures and to detail ways in which the most effective and efficient administration could be devised for the Department. It could be argued that if there were large increases in the number of staff in the Department, further checking and review procedures could be undertaken with consequent savings in the expenditure of the Department. But that the report on the Department leads to a conclusion of maladministration is not my understanding of the report.
Nor, I think, is it fair to suggest that there is maladministration of enormous magnitude in the Department. It is a Department which deals with two million pensioners and beneficiaries and two million people who receive family allowances. The strain on staff, at present, is exacerbated by the number of changes due to the turnover of staff and by the inexperience of many who were added during the past year or two. When the final report is received by me from the Director-General and when it is considered by the Government, I may be able to make some other statements on it.
– Is the Minister for Education aware of a report on rural schools prepared by the Australian Teachers Federation and the Australian Council of State School Organisations which was presented to the Deputy Prime Minister last week? Is the Minister also aware of Press reports based on a national survey conducted by the Australian Teachers Federation alleging major deficiencies in Australian education, with particular respect to school sizes, backlogs in school building programs and a lack of specialised teachers? Will the Minister tell the Senate what action has been taken with respect to rural schools, in particular Victorian rural schools, to rectify any shortcomings that may be evident in this area? Will the Minister also define for the Senate the extent of Commonwealth responsibility for any of these shortcomings?
– In recent days I have seen a number of statements by, I think, the Australian Teachers Federation, as to both the conditions of rural schools and the result of a national survey. I have not had possession of that survey so I do not know its basis or its nature other than as reported in the Press. The Schools Commission, on its own initiative in recent years and on the initiative of the Government, particularly in the last couple of years, has extended activities into country areas. For example, the disadvantaged schools program- I acknowledge it as a most useful initiative of the previous Government- has been extended by us into rural areas. Full development of that program will be most useful. There is also a pilot scheme in terms of country boarding schools. Senator Tehan will know that there have been major advances in the overall funding of the isolated children’s scheme. Nevertheless, it is true that country children, particularly those in remote areas, are gravely disadvantaged. The sacrifices that are being made for these children by their parents is to the eternal credit of the parents.
As to the nature of the survey itself, for my part I believe that the best survey was carried out originally by the Karmel Committee and subsequently by the Schools Commission. It devised means of establishing norms and progress for resource standards in schools. As all honourable senators know, targets were set by the Karmel Committee and were ultimately modified to 1980 for primary schools and 1982 for secondary schools. I am happy to say that in the government area most of those targets have been reached already. All targets will be reached in the near future. The fact of the matter is that a great deal of dialogue is going on about the need for improvement. Of course there are individual schools and individual classes which suffer disadvantages, and more should be done. But the general dialogue in Australia is turning today to the real question whether we are getting sufficient value for the enormous amount of money we spend- something like $6,000m, or the first $1,000 of taxation each year of 6 million taxpayers. I think we should now be pressing for quality, and that is the goal we are trying to attain.
– I direct a question to the Minister representing the Prime Minister. The Prime Minister has made a call to the United Nations to reduce immediately the stock of nuclear weapons and to prohibit future production of bomb grade material for nuclear weapons. Does it follow then that there was truth in the story presented by an Australian newspaper last year that Australia had been offered neutrality in exchange for sites for nuclear waste and that the Government had accepted the offer?
-I think all Australians, irrespective of their political beliefs, will be delighted that the Prime Minister of Australia representing all Australians has taken the stand that he took at the United Nations.
– Hear, hear! But why be so inconsistent?
-I am delighted that Senator Georges said: ‘Hear, hear! ‘ I believe it is the duty of all Australians to work for a reduction of nuclear weapons throughout the world. The Australian Prime Minister, both in his speech and in his practical approach to getting the maximum control of fissionable materials, is doing a major job on the world scene. The second question, of course, has no basis of fact at all and ought to be rejected out of hand.
– I direct a question to the Minister representing the Treasurer. I preface it by saying that no doubt the Minister is well aware that the cost of printing $ 1 notes is quite substantial and also that the notes do not last a great deal of time, in any way. No doubt the Minister is well aware also of questions I have asked previously relating to Australian coins and notes. I now ask: Has the Minister seen the plans of the United States to issue a small new $ 1 coin which will be about the size of a 10c coin which, it is said, will save the government considerable money and also be of great use to the public in things like telephones and vending machines? When will the penny drop with the Australian Treasury and the decision be taken to change the size of all Australian silver coins to a smaller, more sensible size, and to issue coins of larger face value, even as large as a $5 coin?
- Senator Townley ‘s question reminds me that he has had a long term interest in the nature, size and durability of our currency- both paper currency and minted coins. I was not aware of the intention in America to mint a $1 coin of the approximate size of a 10c coin. I am not sure of the reasons, good or otherwise, of the Australian Mint for its present practices. I will direct the question to my colleague, the Treasurer, and seek information on the various points raised by the honourable senator.
– My question is directed to the Minister representing the Prime Minister and follows the question asked by Senator Melzer. Can the Minister advise the Senate whether any statement has been made by the Prime Minister in which he has given an unqualified guarantee that in no circumstances will nuclear waste be imported into Australia for storage in this country?
– It is my recollection that the Prime Minister has said that Australia will not be used for the storage of nuclear waste. Senator Wriedt is asking for an unqualified guarantee, and he is entitled to ask for it. I will seek such a statement from the Prime Minister. I undertake to let the honourable senator know the answer and I will inform the Senate.
– My question is directed to the Minister representing the Minister for Trade and Resources. A spokesman for the Australian Conservation Foundation claims that because of a severe downturn in nuclear programs throughout the world and as uranium has moved from a sellers market to a buyers market, there was concern that the Australian Government would relax its stringent security and controls and, in an effort to boost sales, would offer sites within Australia for the dumping of nuclear waste. Whilst recognising the necessity for the storage of Australian nuclear waste within Australia, does the Government intend to offer storage sites as suggested by the Australian Conservation Foundation?
– This question follows very closely upon Senator Wriedt ‘s statement.
– How about redrafting the answer now?
- Senator Georges would note and know that I am not relying on supporting information.
– Where is your magnificent passion today? What has happened? Is it your new responsibility?
– It is my responsibility to represent in this place the Minister for Environment, Housing and Community Development. The fact of the matter is that the question asked by Senator Kilgariff contains two elements. One is that there is to be some significant fall-off in demand for uranium fuel in the world. The general evidence is that the market for uranium fuel in the world will continue to grow, and grow significantly, and Australia will have a very important role in providing that fuel under the strictest safeguards. There is no truth at all in any statement which suggests that we would make any kind of trade, that we would weaken our safeguard arrangements in order to make a market. The contrary is the truth.
– Did the Minister representing the Minister for Employment and Industrial Relations see the article by the President of the Australian Council of Trade Unions, Mr Hawke, in the Australian recently in which he gave his reasons for calling on the Federal Government to remove legislative obstacles to the amalgamation of unions? What is the Government’s position on Mr Hawke ‘s call for amendments to section 158n of the Conciliation and Arbitration Act?
– I am rather uncertain as to whether I saw the specific remarks referred to by Senator Sibraa in his question but, of course, I am quite familiar with the fact that those are the views of Mr Hawke and of many other people. I am sure that they are views to which the Government gives a good deal of attention. I will refer the question to the Minister for Employment and Industrial Relations and ask him to provide an early and more authoritative answer than I am able to give now.
– Can the Minister for Social Security confirm that it is still the Government’s intention not to impose a means test on family allowances?
– If I am to be asked questions that relate to Budget considerations, I am not able to confirm or deny the matters raised in those questions. In this period leading up to the Budget there is speculation about many of the items in the budget of my Department, but I am not in a position to make any statement on those matters at this time.
– I ask a question of the Minister for Science. Reports from Mr Chua of the meat research laboratory of the Commonwealth Scientific and Industrial Research Organisation indicate the extent of waste and losses arising from a lack of standardisation in meat cartons. He reports that in 43 meatworks he found 24 different cartons in use for bulk packs, 32 for primal cuts and 15 for chilled meats. What assistance or direction can be provided so that the disadvantages and costs that have been established can be minimised?
-Senator Archer’s question might well be directed to several other Ministers- the Minister for Productivity, the Minister for Primary Industry or the Minister responsible for manufacturing industry. As the honourable senator will know, the Commonwealth Scientific and Industrial Research Organisation has no basic standing in regard to requirements for the standardisation of meat cartons. However, I am aware that a study of the various types of cartons used for meatworks has been carried out by the meat research laboratory of the CSIRO. I believe that that study revealed that a wide variety of cartons was in use. Undoubtedly this has caused unnecessary costs and it does not appear to enable the most efficient handling of meat. The adoption of a single standard size carton, the dimensions of which were chosen so that the system could be geared to the most efficient use of container space, would permit the use of the latest and most sophisticated handling systems. My understanding is that it has been shown that, if the size of cartons were standardised, the rate of carton handling could be greatly increased, the cost of manufacturing cartons would be reduced and the inventory of cartons that meatworks had to carry would be substantially reduced.
The honourable senator has asked a very important question relating to the economics of the handling of the product in which he is interested. As I have said, the CSIRO does not have any regulatory function and can only attempt to persuade industry to change by indicating the inefficiency of present systems and pointing out that there would be substantial advantages in the use of a standard size carton. The results of the study and some recommendations for improving meat handling procedures will be made available, I understand, in the near future in the form of a meat research report which that division of the CSIRO turns out quite regularly. Some of these reports I have had circulated in the Senate previously. They are usually sent to every meatworks in the country and to many other individuals and companies indirectly concerned with the meat industry. I hope that at that time the relationship of the CSIRO to attempts to reduce costs in industry will be taken on board by those who are interested.
SANKEY v. WHITLAM AND OTHERS
-I direct my question to the Attorney-General. What is the current position in respect of what is known as the Queanbeyan case in which certain charges were laid against Ministers of the former Administration?
– This is becoming rather a regular end of session question. If I remember rightly, Senator Wriedt asked me a similar question towards the end of the last session of the Parliament. The matter which he refers to as the Queanbeyan case is, I think, probably better known as the Sankey case which is before the Queanbeyan court. The position is that the magistrate gave a decision on the claims for privilege towards the end of last year. I cannot quite remember what the date was. The informant then took proceedings in the Supreme Court of New South Wales, in general terms, to review that decision, although it was not directly an appeal from the decision. As Attorney-General for the Commonwealth, I then applied for the removal of those proceedings into the High Court for determination by that court of such important matters as claims of Crown privilege that were, of course, made by the Crown in the proceedings in the Queanbeyan court. Argument has been conducted in the High Court on the issues and it has reserved its decision which we are awaiting.
– My question, which is directed to the Minister for Social Security, follows a question asked earlier this afternoon by
Senator Coleman in relation to further appeals following decisions made by social security appeals tribunals. The Minister mentioned appeals to the Ombudsman. Is it a fact that the Ombudsman has powers of recommendation only, but the Administrative Appeals Tribunal, where it has the power to hear appeals, can actually reverse an administrative decision? Is the Minister aware of any recommendation made by the Ombudsman in relation to social security benefits which has not been accepted by her Department?
– I will make inquiries on the matter to see what information has come forward from the office of the Ombudsman and I will see that Senator Colston is advised.
– I draw to the attention of honourable senators the presence in the gallery of the former honourable senator, Mr J. F. Fitzgerald, to whom we tender a very warm welcome back to this chamber.
Honourable senators- Hear, hear!
-Earlier today Senator Baume asked a question about the construction of an allegedly somewhat expensive duck pond at the University of Wollongong. Apparently an article in the Illawarra Mercury of 2 June referred to the possibility of the history and philosophy of science courses at the University of Wollongong being dropped and the University financing a duck pond and associated works with the money saved. I am advised that the University is devoting $80,000 from its grants for minor works to site works and services, that is, lighting, paving et cetera. In addition, it is understood that it will be spending approximately $25,000 on the construction of a drainage pond as part of the drainage system. Funds for this purpose are coming from the University’s own resources and do not form part of the Commonwealth grants for the University. The chair in the history and philosophy of science department has fallen vacant. The University has advised that its normal procedure is to review all positions when a vacancy occurs. The outcome of this review will not be known for some time. Meanwhile the history and philosophy of science course will continue, and the duck pond will drain the site.
– Earlier today Senator Bishop asked a question in regard to meetings that were taking place between officers of the
Department of Employment and Industrial Relations and officials of the Vehicles Builders Employees Federation and I undertook to raise the matter as quickly as I could with the Minister for Employment and Industrial Relations. I now have a reply from the Minister as to the position at the moment.
The Minister informs me that officials of his Department have examined the Vehicle Builders Employees Federation scheme in discussions at a meeting held on 30 May and put forward certain propositions about possibilities of other avenues of achieving retraining goals for Chrysler Australia Limited retrenched workers. This included the question of retraining for both trade and sub-trade level in the retail motor industry. I understand that officials of the union have agreed to meet again officers of the Minister’s Department together with representatives of the South Australian Automobile Chamber of Commerce and the Department of Further Education in the week commencing 12 June. This meeting will endeavour to finalise a total retraining package for retrenched Chrysler employees who can be placed in the retail motor trade. I am informed that this break in negotiations was agreed to on 30 May so that there may be research into availability of existing training facilities and the extent of labour demand that would exist for persons retrained.
– On 29 May Senator Wriedt asked a question without notice in relation to stage 2 marketing arrangements for the dairy industry. The Minister for Primary Industry has provided the following answer: The provisions of the stage 2 marketing arrangements for the dairy industry have been the subject of prolonged discussions in the Australian Agricultural Council and the Standing Committee on Agriculture. It has not been possible, however, to introduce a national aggregate entitlement scheme as recommended by the Industries Assistance Commission because of the difficulties which have arisen in obtaining agreement between the States on the calculation of the size of the NAE and its allocation amongst the States. As a consequence, the Commonwealth Government put forward proposals for a system of selective underwriting as an alternative to the NAE scheme under the stage 2 arrangements. The proposals were considered at a special meeting of the Australian Agricultural Council on 14 April 1978 and the Council decided to refer the proposals to a special working party for investigation and report to Ministers.
However, the State Ministers were unable to agree on a system of selective underwriting. The matter was further considered by the Commonwealth Government and it was decided to introduce from 1 July 1978 a system of selective underwriting for prescribed products for the 1978-79 season. The Commonwealth’s offer to share with the States on a $2 to $ I basis the cost of underwriting prescribed products at the equivalent of 80c per lb butter fat- that is, $1 .76 a kilogram- for the 1978-79 season involves no commitment for the States. They are quite free to either accept or reject the offer. However, if a State does not take up the offer the Commonwealth will meet the full cost of underwriting the production of all prescribed products in that State under the stage 2 arrangements at the equivalent of 75c per lb butter fat- that is, $ 1 .65 a kilogram- at the farm gate for the 1978-79 season.
-I seek leave to raise a matter which may be one of privilege.
– I was going to ask Senator Carrick this question during Question Time but time ran out. The question is this: Is the Leader of the Government in the Senate (Senator Withers) appearing before the Royal Commission in Brisbane at the request of the Commission or by arrangement? If it is at the request of the Commission then perhaps a question of privilege arises. I leave it at that. Mr President, the question of whether Senator Withers is appearing by direct request of the Commission cannot be answered by you. It can be answered only by Senator Withers himself. But it is important to ask that question because today the Leader of the Government is absent and is appearing before the Royal Commission. If Senator Withers is appearing by request- perhaps I should put it harder and say ‘by demand’- then I believe that a question of privilege arises.
– by leave- I shall ask Senator Withers to give a definitive answer. My understanding is that he originally indicated that he would be willing to go before the Commission from the very beginning if the Commission so desired. I imagine that his appearance today is a continuation of his last appearance. I understand that the Commission has recalled Senator
Withers in the normal way. If this is inaccurate I shall ask him to clarify the position when he appears in the Senate tomorrow. As to the second part of Senator Georges ‘s question- that is, whether there is a question of privilege- perhaps Senator Georges could raise it again later and we can take the necessary steps to investigate it.
Senator DURACK (Western AustraliaAttorneyGeneral) For the information of honourable senators I present the interim report of the Industries Assistance Commission on vices. I hasten to assure the Senate that the matter is not one that comes within my jurisdiction as the ultimate censor in the community under the Customs regulations. I also draw the attention of the Senate to the fact that the report actually recommends that the importation of certain vices should not be subject to restrictions.
-by leave -I move:
I resist the temptation to reply at this stage to the remarks of the Attorney-General (Senator Durack) and seek leave to continue my remarks.
Leave granted; debate adjourned.
– I present the report of the Senate Standing Committee on Constitutional and Legal Affairs on the annual reports referred to the Committee.
Ordered that the report be printed.
– by leave- I move:
In this report the Committee has commented on matters raised in eight annual reports which have been referred to it. Most reporting bodies mentioned the difficulties caused by staff ceilings or by reductions in funds. But without undertaking extensive investigations the Committee was, of course, unable to independently assess the problems which they face and accordingly did not consider it appropriate to make recommendations on these matters. The only exception related to the Law Reform Commission. In the course of a public hearing in March of this year in connection with the Committee ‘s reference on Processing Law Reform Proposals, the Committee was presented with sufficient detailed information by the Chairman of the Law Reform Commission, the Honourable Mr Justice Kirby, to enable assessment of the Commission’s difficulties. The Committee has requested that the Government direct the Public Service Board to re-examine the Commission’s application for an increase in its staff ceilings in the light of the fact that it has received eight new references since the ceiling was imposed.
The report of the Administrative Review Council points out that the process of appealing against administrative decisions is a complex one and that this situation is exacerbated by the numerous Commonwealth tribunals and administrative bodies that presently exist. This Committee calls for a simplification of the whole administrative review system and has recommended that the Government should consider transferring to the Administrative Appeals Tribunal jurisdiction from other tribunals where possible. Both the ninth and tenth annual reports on the operation of the Bankruptcy Act 1966 have indicated that amendments to the Bankruptcy Act which will overcome certain deficiencies in the Act were to be introduced into the Parliament. Additional investigation by this Committee found that in January 1 978 the Minister for Business and Consumer Affairs, the Honourable Wal Fife, announced that the Government had approved the introduction of a Bill to amend the Bankruptcy Act. However the Bill has not yet been introduced into the Parliament. In the light of the important amendments contained in this legislation this Committee has recommended that the Bill be introduced into Parliament early in the 1978 Budget Session. The Committee has also examined the annual reports of the Commonwealth Arbitration Inspectorate; the Trade Practices Commission; the Australian Institute of Criminology; the Criminology Research Council; and the Legislative Drafting Institute. The Committee has made a number of recommendations relating to these bodies which it commends to the Senate and to the Government.
The Committee is losing four of its present members, two of them, Senator Devitt and Senator Tehan, by retirement from the Senate on 30 June, 1978 and two others, Senator Button and Senator Wheeldon, because of the pressure of other duties. We are particularly indebted to Senator Devitt and Senator Tehan for their attendance and close interest in hearings on the recent references and in the preparation of the reports of the Committee despite their pending departure and other responsibilities. Senator Button has been a valuable member of the Committee since his election to the Senate in 1974 and has taken a lively interest in the many investigations conducted by the Committee since then. We are sorry to hear of his illness today. Senator Wheeldon replaced Senator James McClelland on the Committee on 24 August 1977 and has applied his keen mind to our various references. The Senate is indebted to the four senators for their services and I am particularly grateful to the Deputy Chairman, Senator Chaney, for his unflagging interest and assistance.
– I do not wish to speak at any length on this matter at the moment except to commend the Chairman of the Standing Committee on Constitutional and Legal Affairs on his report on a very significant matter which has been occasioning concern for a great many years. I think it has been one of the most useful enterprises in which this Committee has engaged. I join with Senator Missen in paying a short tribute to Senator Devitt and Senator Tehan who will be leaving the Senate on 30 June. Senator Devitt, although not a lawyer, had a great deal of interest in these matters. Senator Tehan, with his years of experience as a practising lawyer, was able to be of very great assistance to the Committee in its work. I know the Senate will miss both of them. I seek leave to continue my remarks.
Leave granted; debate adjourned.
– by leave- I make this short statement on a projected plan for the remainder of this session. I know that all honourable senators will be proceeding to make arrangements for the work and travel that they will be undertaking in the recess and I think it is desirable that we all should have some idea of the magnitude of unfinished government business. Towards that end the Government has listed those pieces of legislation that it deems desirable to be passed. I think a list has been made available to the Opposition. The legislation has been divided into four sitting days in a notional attempt to adopt a plan for each working day. It is desired not to impose any hard and fast rules upon the Senate but to seek, by the goodwill of all honourable senators, to work through the legislative program so that it can be completed, and completed with dignity and efficiency. Those who wish to speak will, I hope, be able to make reasonably limited comment. We will be able to see day by day the progress that we are making.
I seek the co-operation of all honourable senators in completing this program. It is planned that the program will be completed by Friday evening, including an evening session. It is true that if the program is not completed by then it will be necessary for the Government to make arrangements to sit next week, but I do not think any honourable senator would wish that to occur. It is equally true that should we make better progress the Senate may be able to conclude its business by the dinner adjournment on Friday evening. Nevertheless, it is a strenuous program and it is planned to sit Friday evening. I simply make this statement so as to inform all honourable senators of the position. I will be happy to supply to those honourable senators who have not yet received it, a copy of the list setting out the legislative program. I seek the co-operation of honourable senators in discharging the business.
-by leave- It is necessary again to make the protest that the Opposition seems to have to make year after year in the last weeks of a sitting. The Senate is now faced with a massive number of Bills. Some very important Bills are proposed to be passed through this place this week. The Government is requesting all honourable senators to truncate their speaking times thereby cutting down their contributions on very important legislation. Over the past two or three years it can be seen that the Opposition has co-operated with the Government within certain limits. Our view is that we will co-operate, but we must protest at the fact that the program that we have to complete in four days covers quite a number of Bills, many of which the Opposition has agreed to debate cognately. In fact, by agreement we have decided to take together 13 Bills- the Northern Territory package of legislation, as it is now called. Okay, we have agreed to do that, but sooner or later the Senate must start to take stock of a familiar pattern that is occurring year after year- Bills coming through the House of Representatives at a rather slow rate in the first two or three weeks of a sitting while the Senate is debating in a leisurely way relatively unimportant matters.
Within four days we will be debating some very important Bills, including Bills which are crucial to self-government in the Northern Territory. I do not blame the Ministers in the Senate; I blame those who are responsible for the progress of legislation through the House of Representatives. They should have been well aware that this situation could arise. These Bills should not have been sent to us in this way. It means that we have to deal with them with dignity and efficiency but in a very hurried sort of way. The Opposition will do its utmost to assist senators to leave on Friday, if that is possible. I believe the Government Whip will agree with me that it is becoming more difficult to deal with legislation that is put before us at the end of each session. We have endeavoured in the Senate not to truncate debates by artificial means. The co-operation of honourable senators on both sides of the chamber has been sought, and the co-operation has been forthcoming.
The program that was laid down early in the year provided for the Senate to finish on 2 June. Unfortunately some senators made arrangements with that date in mind. I think it would be wise in the future for all senators to take the suggested finishing date with more than a grain of salt and to add at least a week to the anticipated finishing date. With this sort of program it might be wise for senators to add a fortnight. I firmly protest that this situation should arise time and time again. I make one further point: The Opposition has accepted that second reading speeches should be incorporated in Hansard. We have accepted longer sitting hours each day, from 10 a.m. to 10 p.m. We have accepted sitting four days a week and sometimes five days a week. Instead of the situation being improved, the situation has become worse. I would like a response, if possible, from the Government as to what can be done to correct the situation which, as an understatement, is lamentable.
– by leave- I do not intend to canvass the matters raised by the Minister for Education (Senator Carrick). I simply make the point that one of the reasons the Senate has started slowly in some sessions is that no business has been left over from the previous session. There has been a feeling that the situation could be improved if the Senate did not necessarily attempt each session to pass all the legislation which came to it from the House of Representatives. It is worth noting that the program set down for this week does not include debate on all the Bills which have come to the Senate. The Bills before us have been divided into two categories. Some of the Bills will remain on the Notice Paper until the next session. This is a genuine attempt to improve the processes referred to by Senator Georges. The Bills for which we seek passage this week are certain essential Bills. Certain other desirable Bills will have to wait over to the Budget session to be dealt with by the Senate as they should be dealt with. I think it is worth putting on record that an attempt has been made to take account of the points raised by Senator Georges in order to improve and protect the processes of this chamber.
– Order! I inform the Senate that I have received letters from the Minister for Education (Senator Carrick) and the Leader of the Opposition in the Senate (Senator Wriedt) requesting that Senators Button, Devitt, Tehan and Wheeldon be discharged from further service on the Standing Committee on Constitutional and Legal Affairs and nominating Senators Cavanagh, Keeffe, Lewis and O’Byrne to be members of the Committee.
Motion (by Senator Carrick)- by leaveagreed to:
That Senators Button, Devitt, Tehan and Wheeldon be discharged from further service on the Standing Committee on Constitutional and Legal Affairs and that Senators Cavanagh, Keeffe, Lewis and O’Byrne, having been duly nominated in accordance with Standing Order 36AA be appointed members of the Committee.
Consideration resumed from 2 June.
Department of Social Security
Proposed expenditure, $14,257,000.
Department of Social Security- Capital Works and Services
Proposed expenditure, $55,500.
Department of Finance
Proposed expenditure, $434,000.
Department of Finance- Capital Works and Services
Proposed expenditure, $22,00 1 , 700.
Department of Aboriginal Affairs
Proposed expenditure, $ 1 , 945,000.
Department of Aboriginal Affairs- Capital Works and Services
Proposed expenditure, $204,500.
Department of Health
Proposed expenditure, $7,680,000.
Department of Health- Capital Works and Services
Proposed expenditure, $347,000.
Department of Immigration and Ethnic Affairs
Proposed expenditure, $5,750,000.
Department of Immigration and Ethnic Affairs- Capital Works and Services
Proposed expenditure. S 1 ,235.000.
Department of Home Affairs
Proposed expenditure, S 1 ,285,000.
Department of Home Affairs- Capital Works and Services
Proposed expenditure, $5,300.
– I believe the jurisdiction of the Department of Home Affairs would include Australian Capital Territory land matters. I am prompted to speak by articles in the Canberra Times relating to a dispute between the National Parks Association of the ACT and the owner of Tidbinbilla station. It relates to whether in the original lease there was a provision relating to possible depredations by kangaroos. Generally from year to year we are asked what acquisitions have been added to the national parks acreage within the ACT. In broad terms I am asking whether we are winding up grazing leases and converting the land to additional ACT national park acreage. I am intrigued whether there is some particular habitat on Tidbinbilla station that the kangaroos find attractive. What are the terms of the lease of the station owner, Dr Shanahan? Will his holding eventually be acquired or will it be enclosed by national park?
– I shall seek that information for Senator Mulvihill. I do not have it available at the moment.
– Honourable senators will recall that when progress was reported in this debate last Friday I was asking questions concerning a section of the Department of Aboriginal Affairs named Applied Ecology Pty Ltd. In the Estimates committee hearings I foreshadowed some questions that I would be asking in the Committee of the Whole. I was subsequently advised that some of the questions had been answered in a document titled ‘Estimates Committee C, Written Replies to Questions Asked During Estimates Committee C Examination of Proposed Additional Expenditure for the Year 1 977-78 ‘. Although the answers given in that document do not entirely relate to the questions that I intended to ask, they do provide some satisfaction in that the progress and initiatives of the turtle farm project and other projects are outlined. I feel satisfied that those answers will do for the moment.
When the Estimates committees meet again other senators and I can go into much more detail about indigenous staff, white staff, turnover of staff and costs. The straight questions concerning Applied Ecology also can be asked. After some 5 years of operation is the project justified? Has it been diversified sufficiently? Has it learned from the errors of the past or has it fallen back into those errors? I ask the Minister for Social Security (Senator Guilfoyle) to make certain that at the next hearings officers from Applied Ecology are present in sufficiency to answer the questions that are likely to be asked. Will the Minister assure us that organisations such as Applied Ecology understand their responsibility to give an account to the Estimates committees and not to hide behind the annual report of the Department of Aboriginal Affairs, which made little or no mention of the activities of Applied Ecology.
I leave Applied Ecology for the moment. At a later stage I shall ask what vessel required a $40,000 refitting so soon after its purchase and how that problem arose. Those questions can be asked later in the year. I merely forewarn the Department and Applied Ecology that the questions will be asked so that they can take the necessary steps to give a clear accounting. I again make the point clear that I do not wish to disadvantage any project of the Department of Aboriginal Affairs which is directed towards assistance to the Aboriginal people; I merely question whether the emphasis should be directed away from a particular type of project to another project which might have more chance of success. Honourable senators will agree that we cannot heap failure upon failure.
At the Committee hearings I raised the question of hovercraft services. Honourable senators will recall that, against good advice, the Department of Aboriginal Affairs committed itself to the purchase and the operation of a hovercraft in the Torres Strait. Local opinion and expert opinion elsewhere considered the area to be far too tumultuous- that is the only way that one can describe it- for the operation of such a craft. I asked why the advice of the supplying company on the advisability of a hovercraft service was the only advice sought. Of course the company was bound to say that it would be a great success. But local people were aware of the dangers, the costs and the problems likely to be met by such a service. In the replies supplied by the Department it is stated:
Between January 1 975 and January 1 976 a hovercraft was tried and tested utilising the services of a UK charter firm, Hoverworth Ltd, and UK air cushion vehicle engineering consultants, Robert Trillo Ltd, who were responsible for maintenance and operational aspects.
Will the Department at the earliest opportunity give me all the costs involved with that project?
The Department advised:
The service was ultimately discontinued, primarily because of: the high cost of chaner and operation.
So it seems that the Department went into a charter operation rather than a purchase operation. Perhaps it is just as well. Nevertheless, let us get the cost of the whole operation. The reply continues: vehicle proved unsuitable up to 40 per cent of the time because of local weather and tidal conditions.
That was the information that was being handed out, not about the hydrofoil, but about the hovercraft. The reply went on: high ‘down time’ associated with operation and delay and difficulty in parts supply.
That was the sort of advice that was handed out at the time. It seems that the Department withdrew from a purchase situation to a hire situation. That may have been the caution. But really the caution should not have been necessary if the advice that it just would not work and that it would be better to look for something else had been taken.
All those problems which were associated with the use of the hovercraft can now, in some way, be related to the helicopter. Can anyone give me any information, or the results of any survey, or any advice received and tell me from whom it was received concerning the operation in the same area by a helicopter? Are we going into another area of expensive operation and cost and subsequent failure? In the Torres Strait area, not only do we have substantial tidal problems, but also we have substantial wind problems. Also, rapidly changing weather conditions in a very remote area may lead to those cautions being taken which will ground the helicopter for a considerable part of the time. Again, if the helicopter enterprise or initiative can be shown to be of an entirely different nature from that of the hovercraft enterprise, then by all means the Senate will support it, especially in an area where communication is absolutely necessary.
I commend the Department, however, on taking up with Telecom Australia the matter of a communication of another kind which does not depend on tide or wind, and that is a Telecom radio communication facility. I do not have the details in front of me, but I think that there is some proposition of that sort. The sooner it is expedited the better. That is the sort of expenditure that can be commended. That, together with some type of radio program, indigenous in character, to serve the people of Torres Strait, Cape York Peninsula and the Gulf of Carpentaria, is an enterprise worthy of support. If we can save money on hovercraft and helicopters, then perhaps we can spend more money in this direction. If we can save many hundreds of thousands of dollars a year on turtle farms and turtle raising, there may be other means by which we can assist the peoples of the area.
-On Friday Senator Georges raised a number of questions. He had drawn to his attention some information that had been provided by the Department of Aboriginal Affairs to the Estimates Committees. The Department has looked carefully at the questions asked by Senator Georges. I have some further information which, at a later stage and with the concurrence of the Senate, I shall have incorporated in Hansard. Senator Georges may then relate his inquiries to the information now being provided and then he will be in a position, during the Budget debate, to bring into account all the questions he may wish to raise and all the requests he may wish to make at that time. The comments made by Senator Georges with regard to the hovercraft and the hydrofoil have been noted.
– Forget about the hovercraft.
– We can forget about that for Senator Georges. With regard to the helicopter service, I am advised that that has been developed in conjunction with the Department of Transport. It is believed that it can give an improved service. However, any questions that Senator Georges may wish to ask with regard to the service can be dealt with in more detail at another time. I understand that the helicopter contract is about to be signed. The pads are being installed at present and the helicopter service will be operated in conjunction with the present air service. It is believed that this will be an improvement on the services that are available at present.
– Is that a private service?
– It is the Thorpe’s service. Mr Chairman, I seek leave to incorporate in Hansard a number of pages of information that relate to the questions asked by Senator Georges.
The document read as follows-
– should like to know what progress Applied Ecology has made. I should also like to know the relationship between payments to indigenous people and payments to, shall we term them, non-indigenous people. I think it is very important to know that. Further, I should like to know what has happened to the environmental impact statement that was to be prepared on the project. I should like to know whether any moneys have been expended to diversify the project from a turtle farming project.
Reply- The present position of Applied Ecology’s projects is as follows:
Turtle Project- Torres Strait, Queensland
The turtle farm project currently absorbs 70 per cent of the Company’s annual budget and a total of 57 Aboriginals and Torres Strait Islanders are engaged on the project. The current research emphasis is on:
research of wild populations;
The Company currently operates 9 communal turtle farms, accommodating approximately 3,000 turtles ranging in age from 6 months to 4-5 years. All farms are equipped with pools to accommodate the turtles and machinery for pumping water. A sea enclosure is nearing completion on Badu Island to handle the growing of large turtles.
The Company has continued to improve its scientific work and systems of monitoring progress to ensure scientifically sound development of the project. Preparatory work is being undertaken in order to lodge a Notice of Intention under the Environment Protection (Impact of Proposals) Act.
The project has a long lead time because of the 8-9 years it takes for turtles to reach maturity.
The project has not been diversified.
Crocodile Project- Edward River, Queensland and Kalumbura Western Australia
The project at Edward River is at an advanced stage and shows prospect of commercial operation in 2-3 years’ time. A permanent crocodile enclosure encompassing 50 acres has recently been constructed which is capable of holding 700 crocodiles in natural terrain.
The Company has been directed to prepare an Environmental Impact Statement pursuant to the Environment Protection (Impact of Proposals) Act on the project and subject to a satisfactory outcome, the Company is developing plans for handover of the project to the local Aboriginal community.
The project at Kalumbura was recently discontinued because suitable, easily accessible food sources were not available and the need to consolidate the Company’s resources within the larger projects of higher priority.
Oyster Project- Palm Island, Queensland
A pilot oyster farming project conducted by the Company proved the practicability of oyster farming at Palm Island. Appropriate arrangements for handover to the local Aborgina community are being considered. When commercially operated it is expected that the project could employ up to 35 Aboriginals.
Emu Project- Wiluna, Western Australia
This project is a relatively new one based on studies undertaken by a CSIRO scientist. The research plan involves breeding and growing emus in captivity to produce hide, tallow and specialist meat for Aboriginals, and eggs for artifacts. Already, preliminary market investigations of emu skins have been undertaken, however, it will not be until further practical research and development is completed that possibilities for commercial operation can be determined.
Plant Nursery- Yorke Island, Torres Strait
The project is a small-scale operation with a majority of plants grown being of a native island variety for sale for ornamental use throughout the Islands. Limited research has also been undertaken to determine the suitability of citrus plants to the Islands which could be of nutritional benefit to Islanders.
The future of the project is presently being reviewed.
Remuneration of Company Employees
The Company currently employs 15 white Australians (5 Administrative and 10 Scientific and Field Staff) and 83 Aboriginal and Torres Strait Islanders.
In 1977-78, salaries represent $443,000 for Aboriginal and Torres Strait Islanders and $171,000 for white Australian employees.
The Company employs turtle farmers and other Aboriginal labour not apparently subject to award. To confirm that the existing remuneration is appropriate to work performed, the Minister recently instructed a work/remuneration review and directed that the team should include, inter alia, representation from the Department of Employment and Industrial Relations and, if necessary, the Attorney-General’s Department.
Environmental Impact Statements ( EIS )
The Environment Protection (Impact of Proposals) Act has implications for two of the Company’s projects- the Edward River Crocodile project and the Torres Strait Turtle project.
The Company recently lodged its Notice of Intention under the Environment Protection (Impact of Proposals) Act and a direction has been made for an EIS to be produced. Guidelines for the EIS have now been determined in conjunction with the Department, the Company, the Department of Environment, Housing and Community Development and the Australian National Parks and Wildlife Service. Queensland authorities were also consulted.
The Company is presently preparing its Notice of Intention pursuant to the Environment Protection (Impact of Proposals) Act for submission to the Department of Environment, Housing and Community Development.
Other projects will be examined in the light of the provisions of the Environment Protection ( Impact of Proposals) Act as the need arises.
Chairman- Would it be in order if we were to have the Department look at whether we could have Applied Ecology included in future in the annual report of the Department of Aboriginal Affairs? It seems relevant if there is an appropriation.
Reply- This suggestion is being examined and a submission is being prepared for the Minister ‘s consideration.
– The question arises because we are now asked to expend some $40,000 on a vessel. We arc also required to authorise certain expenditure on related projects in that area. What might be of use when we are considering the helicopter services that are proposed, is information about what happened to the hydrofoil services. If you would give me those details at a later stage I would be grateful.
Reply- Hydrofoil services have not been contemplated for the region. Between January 1975 and January 1976 a hovercraft was tried and tested utilising the services of a UK chaner firm, Hoverworth Ltd, and UK air cushion vehicle engineering consultants, Robert Trillo Ltd, who were responsible for maintenance and operational aspects. The service was ultimately discontinued, primarily because of:
The high cost of charter and operation;
Vehicle proved unsuitable up to 40 per cent of the time because of local weather and tidal conditions;
High ‘down time’ associated with operation and delay and difficulty in parts supply.
– Could you give us some idea of the value of the boat?
Mr Angel; I am sorry; I do not have that information here.
– Could you find out for us and let us know?
Mr Angel; Yes, certainly.
Reply- The boat ‘Kashan’ was purchased in 1974-75 for $ 1 70,000. Its current insured value is $ 1 70,000.
– While I am dealing with questions raised previously, I wish to provide some information in response to questions asked last week by Senator McLaren with regard to the Australian Rural Bank. Senator McLaren asked how many directors would be employed by the Australian Rural Bank and what their salaries would be. The answer is that there will be 12 directors, including the Chairman. Seven of those directors will represent major trading banks. One will represent the State banks, one will represent the Commonwealth and two will represent the primary producers. The one director representing the Commonwealth and the two directors representing primary producers, together with the Chairman, are to be designated by the Treasurer (Mr Howard), as provided in the Schedule to the Australian Rural Bank Act 1977. The Chairman, Mr Walter Ives, is the only appointment that has been announced. The matter of salaries to be paid is for the Bank to decide. There is at present before the Senate a Bill entitled the Primary Industry Bank Amendment Bill 1978, which will amend the Australian Rural Bank Act. The second reading speech of this amending Bill makes reference to the numbers I mentioned previously. That is the information required by Senator McLaren.
– During the hearings of Estimates Committee C I raised some matters concerning the Department of Aboriginal Affairs. I wish to refer briefly to those matters today. On 5 and 8 May I posed a series of questions to officers of the Department in relation to the Ralkon agricultural company at Narrung in South Australia. I am disturbed to be advised today that the company has been notified by letter from the Minister for Aboriginal Affairs (Mr Viner) that it has now been removed from the list of Aboriginal enterprises entitled to receive grants because the Minister claims that the company has not complied with certain government requirements. Because the management and financial affairs of the Ralkon agricultural company of Narrung, South Australia, have been referred to the Senate Standing Committee on Social Welfare for investigation and report, it is not my intention to debate this matter any further at this stage. I thank the Committee for having taken that inquiry on board.
However, in view of the Minister’s letter to the effect that funding for this Aboriginal enterprise is to cease forthwith, I make a plea to the Minister for Social Security (Senator Guilfoyle), who is in charge of this legislation today, to speak to the Minister for Aboriginal Affairs and to ask him whether he will release an amount of $14,000 for the purchase of superphosphate for the farm pending the Senate inquiry. This is of the utmost importance so that the farm is not allowed to deteriorate through superphosphate not being applied. If necessary, instead of an amount of money being made available a special order could be made out to the company from whom the superphosphate would be purchased. That is to say, if the Department has some doubts as to whether the money would be put to the use for which I make the request, this would be one way of ensuring that the superphosphate was in fact purchased. It is important also that whatever the outcome of the Senate inquiry, this property be maintained in good heart for the future to ensure its stock carrying capacity.
I will not say any more on the matter of the Ralkon agricultural company because I have raised it a number of times previously in the Parliament. However, I hope that the Minister will make the plea on my behalf to the Minister for Aboriginal Affairs for the release of that amount of money in the terms in which I have suggested, in case there is some doubt as to whether it would be put to good use. As I have said, it is most necessary that superphosphate be applied to this property in the immediate future because the season has now broken and superphosphate has not been applied to the farm for a few years. If it is not applied this year, its stock carrying capacity could be seriously jeopardised. This will make it so much harder in the future for the Ralkon agricultural company to be able to run the stock that is necessary to make it a viable enterprise. I shall leave the matter at that.
– I undertake to refer the matter raised by Senator McLaren to the Minister for Primary Industry (Mr Sinclair). Senator McLaren will recall that the Minister has made a decision with regard to the $28,000, I think it was, involved. I can only refer Senator McLaren *s request to the Minister at this stage.
-I refer to the matter of the helicopter service and the information provided by the Minister for Social Security (Senator Guilfoyle) to the effect that the helicopter service is to work in conjunction with the existing service provided by Thorpe’s Transport Pty Ltd. I simply comment that that information in some way lessens my concern, because my experience with Thorpe’s air services has been such that I am convinced that it is a very effective and worthwhile service which has been limited by the insufficient number of airstrips in the Torres Strait. Nevertheless, it is a company which one can expect will do its utmost to see that the proposed helicopter service is successful. So many of my objections may have been answered.
The high cost, however, is an aspect which still concerns me. I am concerned also that the level of subsidy to Thorpe’s air services for the running of this service will necessarily need to be brought under scrutiny. I take this opportunity to mention that on many occasions in difficult circumstances Thorpe’s has been able to assist members of parliament to enter into the area and, often when difficulties have been met in getting out of the area, Thorpe’s has come to the rescue by flying members of Parliament from Thursday Island as far south as Cairns to meet their southern connections.
Proposed expenditures agreed to.
Proposed expenditure, $3,874,300.
Proposed expenditure, $30,000.
Proposed expenditure, $2,846,000.
Department of the Northern Territory
Proposed expenditure, $3,906,400.
Department of the Northern Territory- Capital Works and Services
Proposed expenditure, $ 1 ,000,000.
Proposed expenditure, $8,930,000.
Proposed expenditure, $ 1 ,200,000.
Proposed expenditure, $2,355,000.
Department of the Capital Territory
Proposed expenditure, $ 1 ,349,000.
Department of the Capital Territory- Capital Works and Services
Proposed expenditure, $3,008,500.
– I wish to raise several matters which come under the responsibility of the Minister for Science. The first matter I wish to raise comes under the vote of the Commonwealth Scientific and Research Organisation. I wish to be informed whether any further research has been carried out on a project undertaken earlier dealing with the habits and diet of dingoes. Last year Senator Webster gave me some documents in relation to this matter. I just wonder whether there is any on-going project or whether the research carried on previously has now stopped.
The other matter I wish to raise is concerned with the Australian Capital Territory and has some reference to the Department of Defence. The Australian Wild Dog Association, which has its headquarter kennels at Bargo, loaned a dog to the Royal Australian Air Force base at Fairbairn. The idea was to use a dingo along with other dogs in patrols and as guard dogs. I understand that there were some fears in relation to that particular type of dog being in the custody of a RAAF sergeant for about six months. There were fears about whether there would be a conflict between civilian and Army law or regulations. I know that the ACT has a fairly strict ordinance in relation to dingoes. The question which arises is whether at the end of six months the Department of the Capital Territory will attempt to invoke the ordinance which deals with dingoes following this extensive research in which the dog is involved with its instructor on Army guard procedures. I have written to Mr Ellicott about the matter. I raise it deliberately again now in order to accelerate a response. I think this is a very effective way in which to use canine intelligence. We know that the sense of smell of animals, and dogs in particular, can play a very effective role in combatting terrorism or in detecting heroin pushers. I think it is only fitting that the Australian Wild Dog Association, as a participant in the research, should maximise its efforts.
The final matter about which I am concerned involves Jervis Bay. I have not been to Jervis Bay in recent times to follow up on the projects that were visualised and in relation to which excavations were made. I know that fortunately an idea for the setting up of steel works at Jervis Bay was jettisoned. I am wondering whether the excavations that have been carried out will remain. Are we to have a situation similar to that involving the Hotel Chevron in Sydney? What is to be the ultimate plan? They are the matters which happen to be worrying me.
– I will seek the information which Senator Mulvihill has requested and I will see that he is advised as soon as possible
– I draw the Committee’s attention to the report of Estimates Committee D, and particularly that part which deals with division 543.2.04- Department of Science- Antarctic Division- hire of ships and aircraft, $38,000. During the last three years of the operation of Estimates Committees, I have been a member of Estimates Committee D. In previous years the Department of Science was dealt with by Estimates Committee E, if I remember correctly. I think it is of importance that the Government take note of the fact that the matter of the two ships which service the Antarctic and which are leased by the Department of Science- that is, the Nella Dan and the Thala Dan- has been a deteriorating story, if I can express it in those terms, particularly over the last three years. The report clearly indicates that the Department of Science in the future can expect more and more difficulties. I shall read briefly from the report:
In its report in October 1977 Estimates Committee E observed the failure to investigate alternatives to the hire of ships for Antarctic expeditions. This Committee was told (Hansard, 4 May 1978, page 246) that a critical situation has arisen in relation to one of the vessels hitherto available, and there are no other suitable vessels in the world at present. It is possible that the Commonwealth will pay a very heavy price for the inordinate delay in the consideration of alternatives to the hiring of ships.
I have been following this situation with considerable interest over the last two or three years. When the officers of the Department of Science appeared before the Committee they said that the servicing of the Antarctic is becoming more and more difficult. Yet no obvious action has been taken by government to ensure that at some time in the future the Government will be able to make a positive move. When I refer to ‘a positive move ‘, I believe that it can take no other action than to move more and more rapidly towards the planning and building of a ship which will suit the particular and specialised needs of servicing the Antarctic. I shall emphasise the situation by quoting what the Minister said on page 246 of the Hansard report of the Committee’s proceedings when we were dealing with this matter:
In answer to the question: There are two ships, of course. There are the Thala Dan and the Nella Dan that we hire at the present time, and both ships, we believe, have a limited life. We are facing particular difficulties in this coming year in the chaner of one of those vessels because we take it on a sub-charter from the French, and we have current information which suggests that there may be great difficulty in chartering one of the two ships for this coming year. If that occurs, we will be in considerable difficulty trying to relieve our stations with the one ship. The ship we propose to build, of course, is a long way off. We are only making feasibility studies at the present time and it will be some years before we achieve a ship of our own. There are difficulties along the line between now and then. I would suggest that we will need chartered ships along with the one that we are likely to build for ourselves when that time comes.
A little further on one of the officers of the Department told the Committee that a world survey had revealed that there are really no ships available with the special facilities and techniques that are necessary for servicing our stations in the Antarctic. I believe it is important for me to stress that if we wish to participate in the future of Antarctica it is absolutely necessary that we must be prepared to spend money immediately in planning and in pushing forward plans for building at least one ship for servicing our stations in the Antarctic. The Minister has indicated that even one ship is insufficient. So, no matter how one looks at it, Australia will be in extreme difficulties in the years ahead in servicing our stations in Antarctica. When I say ‘years ahead ‘ I am not talking in terms of four or five years. I anticipate that as from next year Australia will be in difficulties.
– I will refer Senator Kilgariff’s comments about the Antarctic Division to the Minister for Science (Senator Webster) for his attention.
Proposed expenditures agreed to.
Proposed expenditure, $5,745,000.
Department of Industry and Commerce
Proposed expenditure, $7,296,000.
Department of Employment and Industrial Relations
Proposed expenditure, $39,790,500.
Department of Employment and Industrial Relations- Capital Works and Services
Proposed expenditure, $522,000.
Department of Productivity
Proposed expenditure, $3,970,000.
Department of Productivity -Capital Works and Services
Proposed expenditure, $400,000.
Department of Business and Consumer Affairs
Proposed expenditure, $3,485,000.
Department of Business and Consumer Affairs- Capital Works and Services
Proposed expenditure, $273,000.
Department of Veterans’ Affairs
Proposed expenditure, $ 1 1 ,270,000.
– I wish to raise two queries. The first relates to the Attorney-General’s Department. I have frequently asked the Attorney-General (Senator Durack) whether we have improved our methods of checking the mental equilibrium of people who are accepted for certain jobs in organisations such as the Australian Security Intelligence Organisation. The Committee will remember that I questioned Senator Withers and Senator Durack about an ASIO recruit who was involved in a James Bond escapade and who found himself in a Canberra court on very serious charges. I know that the New South Wales railways will not employ a fairly healthy boy who applies to join the railways as a shunter if he is a little bumble-footed, because of the fear that he might stumble in a marshalling yard and lose his foot. I know that I am using a rather lowgrade analogy but appropriate aptitude tests could also be carried out on people joining organisations such as ASIO. Up to the present time I have not been supplied with answers on this matter. Surely we should be looking for certain things when we grade people in security posts.
I recall that the unfortunate habit of a boy who was a little mixed up in the head contributed to the Nowra Fleet Air Arm disaster. I simply say that although there are highly paid surgeon commanders, as well as psychiatrists and psychologists who are commonly known as ‘head shrinkers’ I cannot get any information on these matters. My colleague Senator Brown referred to the case of a chap who, several years ago, was obsessed with the thought that he could see subversion and who, we found out, was on a commission from ASIO. I am mature enough not to argue about the need for security services. However, I would like to believe that we get value for our money and that we do not recruit odd people.
The second matter I wish to raise relates to the Department of Employment and Industrial Relations. I refer to the recent dispute at the abattoirs at Richmond in Victoria which arose because a stockman’s dog was attacked by a man with an iron bar. I think that this matter went before a commissioner of the Conciliation and Arbitration Commission. I would like to know whether I could get a transcript of the evidence?
– I will refer Senator Mulvihill ‘s question about aptitude tests for positions throughout the Public Service and its agencies and see what information is able to be given to him. The honourable senator asked whether a transcript of evidence could be made available to him. I will seek that information from the Minister concerned.
Senator Sir REGINALD WRIGHT (Tasmania) (4.21)- There are two matters that I would have wished the Attorney-General (Senator Durack) to be present to deal with personally because, without any reflection upon Senator Guilfoyle whose presence is always welcomed, there are two matters that were raised in Committee that I think are of fundamental constitutional importance. The first relates to the payment to judges who have retired of a lump sum for long service leave. This question was raised last year in respect of two judges who had been paid lump sums, one of $50,000 and the other $39,000, simply upon the occasion of their retirement when, of course, they ceased to receive a salary but received a guaranteed pension of, I think, 60 per cent of salary for life. It was revealed that the payments were authorised because of a Cabinet minute of 1967 which had recorded the view of Cabinet then that judges who retired and had not taken long service leave should on retirement be entitled to a cash payment in lieu. I protested as to that basis of a payment to a judge, and I was joined in that protest by members of the Opposition- Senator James McClelland and Senator Wheeldon were two I remember. At that time Senator Durack, who was representing the Attorney-General, undertook that the matter would come before the Parliament by way of a Bill so that if a further payment were made it would be made upon a proper statutory basis.
This matter is of most particular importance for the independence of judiciary. We have always insisted upon a life long tenure, or now a fixed tenure up to a specified age, but with a guaranteed emolument fixed by Parliament so that there should be no suggestion that the judiciary is in any way dependent upon the favour or the hate of the Executive of the day. I regret to say- and it is a matter of keen disappointment to me- that after that undertaking was given at a hearing of a Senate Estimates committee last year, that a statute would be placed before us to see whether Parliament would authorise the continuance of these payments, in December or thereabouts a payment of some $38,000 in lieu of long service leave was made to Mr Justice Joske on the occasion of his retirement from the Federal Court. There are peculiar circumstances with regard to the exercise of judicial duties by Mr Justice Joske over the last two years since the establishment of the Federal Court- a new Federal Court- to which he was not appointed, but I do not go into the merits of the payment; I go into the constitutionality of it. Firstly, it is made on the basis of a Cabinet minute. Secondly, it is made by the Attorney-General’s office despite the fact that similar payments had been objected to and, that, on the basis of the debates last year, the continuance of the payments was to be a subject of parliamentary approval. Whether or not the payment was made after being referred to the Attorney-General personally I am not informed, but whoever is responsible, in those circumstances, for the payment ought to be severely rebuked. It is contrary to an undertaking given to Parliament and contrary to the fundamental conception of the Constitution.
I submit that the proper course in this instance is for the Committee of the Whole to request that the item be deleted; that if it is to be proceeded with, that should be done only after Parliament has considered the Bill to vote lump sum payments to judges for long service- judges who, to the day of their retirement, get an assured, sufficient salary and, the day after their retirement, go on a guaranteed lifelong pension of 60 per cent of that salary.
I will not be a member of Parliament when the Bill comes forward, but if I were I would vote radically against it. There is no basis whatever on which a judge who does not take long leave should be remunerated therefor. He has been paid his salary and goes on to a pension, both of which are ample. To make a lump sum payment in the midnight hour betwixt his excercise of office and his retirement is to me completely unjustified. I regret that this practice went unnoticed until two years ago; that even then it was unnoticed by the Estimates committee that considered the relevant item.
One year, when Mr Whitlam ‘s government was in office, Sir Richard Kirby retired from the Industrial Court. We were told at the Estimates committee hearing that in his case, simply as a result of the exercise of personal discretion by the Prime Minister, the equivalent of two years salary was paid to the retiring Chief Justice. It is necessary only to cite those two occassions to show to what extent the improper abuse of this could be put in arranging resignations of judges, and in arranging for the weakening of the independence of the Senate.
If there is any support at all in the Committeeunless I can get more interest in the matter I shall draw attention to the state of the chamber and unless the Attorney-General in reply satisfies me that I am quite misguided in the submission that I make to the Committee- I shall move that the item be deleted.
– Apparently there is no other interest in this matter. During the consideration of the Estimates at this time last year, when I was Minister representing the AttorneyGeneral, there was lengthy discussion in Committee on the point that Senator Sir Reginald Wright has raised. It is dealt with fully at page 2 of the report of Estimates Committee E on this year’s Estimates. That report is now available to the Committee of the Whole. The matter was raised in those hearings by Senator Sir Reginald Wright. I think it may have been the subject of discussion or interest by other honourable senators- I cannot remember- but at all events Estimates Committee E has reported on it carefully in paragraph 4 of its report. The Committee records the position accurately as follows:
At the time, the then Attorney-General -
Last year I was, of course, speaking on behalf of the Attorney-General- agreed in principle that there should be a proper legislative basis for these payments -
That was in relation to payments to judges, upon retirement, for long leave not taken- and assured the Committee that he would give early consideration to recommending amendments to the relevant legislation.
That was the nature of the undertaking. I could not on behalf of my predecessor, or on behalf of the Government, give any other undertaking as to what we would recommend concerning the point that was taken then by Senator Wright, as he then was. He has taken the same point again. He suggested that legislation be introduced to deal with the matter. As Attorney-General, I have taken that matter to the Government. I explained this to the Estimates committee. I have obtained the Government’s agreement to an amendment of the Judges’ Pensions Act to provide a legislative basis for these payments. Whether or not the Parliament agrees with it is another matter, but I have obtained the Government’s agreement to it, and we have proceeded to have legislation drafted.
The Senate Estimates Committee report goes on to say that I had explained that the legislation had not received the necessary priority to permit it to be dealt with in the autumn sittings. Honourable senators will have seen earlier today the list of legislation still to be passed by the Senate in these sittings. A considerable pruning of the Government’s legislative program has been necessary to enable the Parliament to adjourn after a reasonable period, the session having commenced on 21 February. There is nothing sinister about it. The Government has made a decision. The legislation is being drafted and would have been introduced if the legislative program had permitted. It it my hope that it will be possible to include it in the legislative program for the Budget sitting.
As far as the payment to Mr Justice Joske is concerned, as had been explained at earlier hearings of the Senate Estimates committee, payments of this kind had been made to a number of judges in pursuance of a Cabinet decision taken some years ago. It was not only a payment to Sir Richard Kirby but also payments to many other judges. Indeed, last year one of the payments under consideration was that to Mr Justice McTiernan upon his retirement from the High Court. When Mr Justice Joske retired at the end of the year it would have been most unfair to him not to have had the entitlement which all other judges who had retired over many years had received. I cannot for the life of me see why, the undertaking that I gave last year having been met, another payment, similar to many others that have been made over the years, should not be made ahead of that legislation.
Senator Sir REGINALD WRIGHT (Tasmania) (4.35)- I say quite mildly that I protest and regard as completely unacceptable the remarks which have fallen from the AttorneyGeneral (Senator Durack) namely, that he cannot see why a payment for accumulated long service leave should not be made to a retired judge in line with an undertaking given by him. I also protest quite mildly and put on record that I completely reject the notion that payments should be made to judges who do not take late long service leave. No doubt, they take their ordinary vacations. They have had long service leave entitlements for a century, whereas most people have had them in various forms for only 20 years. However, I pass that matter by because it is impossible to do anything about it now. (Quorum formed). While a quorum was being formed I heard some comments about my calling a quorum. Two years ago I notified my colleagues that I would call a quorum inveterately unless the Senate held its proceedings in quorum. I submit that there is no authority and that it is quite wrong for this Parliament to purport to operate as a parliament when it is without a quorum. Our rules in this regard are not the same as those in the House of Commons, where a quorum depends upon requirements of the Standing Orders. In our Parliament it is a constitutional requirement for validity. However, that is not the reason I called a quorum today. I called a quorum because last week important legislation passed through another place when many honourable members were absent and did not know what was being discussed in the chamber.
I raise an item which is of prime importance to me and anybody present can be either interested or uninterested in the discussion. It is an item in division 165 seeking appropriation for the payment of the costs of the defendants in the case of Sankey v. Whitlam and others. The Estimates committee that examined this item considered it to be of such transcendental importance to the Parliament, to the administration of justice in this country and to the integrity of Cabinet that it was a matter proper for debate on the floor of the chamber. I remind honourable senators in regard to this matter that proceedings are pending in the Court of Petty Sessions against former Ministers of the Crown for alleged criminal conspiracy. There have been protracted hearings on this matter and it must not be taken from my comments that I have any opinion adverse to or in favour of the defendants. When the evidence of an alleged conspiracy was discussed in the Parliament I made a speech at the conclusion of the debate. During the debate, for which my colleagues in the Liberal Party and the National Country Party had urged, the view expressed that there was a conspiracy was based upon the outside opinions of Mr Dean, Q.C., of Sydney; Mr Ellicott, Q.C., who was then a Minister; and Senator Greenwood, who was then AttorneyGeneral. I summed up the debate briefly in a speech of 10 minutes and urged upon the Senate that there was obvious evidence of a prima facie case of conspiracy for consideration by the Crown Law Office.
– I must raise a point of order. Senator Sir Reginald Wright is very familiar with the rules of sub judice and must surely realise that this case is before the court. The very matter about which he is talking is the allegation of conspiracy which is being made in the court. To get into a discussion here about the alleged conspiracy and to give the opinions of people on whether there was a conspiracy is clearly breaching the sub judice rule.
– I remind Senator Sir Reginald Wright of what the Attorney-General has said. I think what he has said is true. I ask the honourable senator to bear that in mind.
-I will do so with most scrupulous care.
– The honourable senator has not done so up to date.
-Mr Chairman, I beg to be excused. I have made much less reference- not one per cent of the reference- to the substance of the case than have the defendants themselves in this Parliament without any objection being raised. However, I will strictly observe the respect due to the courts. I was saying that I delivered an opinion which was so impersonal that I received a telegram the next day from none other than Sir Robert Menzies, congratulating me on a splendid speech and saying that my remarks were right on the bull’s-eye. I mention that only to absolve anybody from the inclination to suggest that I am parading a personal opinion. The court proceedings have been protracted over a long period and when the case was last before the New South Wales Supreme Court the bench excited a protest by saying that the delay was undue. While this was going on, the resignation of our then Attorney-General took place. It was the subject of a speech by him on 6 September. I remind honourable senators briefly of what the then Attorney-General said. He resigned, saying:
Cabinet refused to agree that I should have this access.
That is, to the documents.
Cabinet made it plain to me that in its view I should take over the proceedings and terminate them. I took the position that I could not do so unless I first ascertained all the material facts, according to my duty. I also made it clear that only I could exercise the discretion. I have to say that in making this decision I regarded Cabinet as preventing me from exercising my duty. I had an application to take over the proceedings. I needed to know all the evidence. I regarded Cabinet as trying to control me in the exercise of my discretion . . .
He said also that he should not have had the obstruction of Cabinet. He said that he should have every assistance which Cabinet could give and that if Cabinet had confidence in its law officer it would not question him. It was shortly before or after that time that Cabinet made a decision to grant costs to the defendants at the public expense. The Attorney-General resigned and his illustrious successor took office. I protest at any government taking any part in the consideration of criminal proceedings one way or the other. I congratulate Mr Ellicott upon the decision he took to resign from his office in protest at what he said was interference by the political body of Cabinet in the conduct of proceedings.
That is the first thing I want to make clear. The second thing I want to make clear is that the Parliament and the Government must ensure that Senator Durack has available to him in the consideration of the case all the material documents at the command of or in the possession of the Government so that in the administration of the criminal law with regard to this case any decision can be the Attorney-General’s. But, as Mr Ellicott insisted, he should have access to all the material documents and statements of witnesses relevant to the case. I feel bound to lay with emphasis my submission in that respect because of what I think is a most unprecedented step in that the Attorney-General should be elevating a question of privilege as to documents to a consideration in summary proceedings before the High Court. What the magistrate admits in evidence is material only for his consideration of a prima facie case. The admissibility or otherwise of documents would become a relevant issue only if there were a trial and, during that trial, only in considering evidence affecting the defendants.
I want an assurance that all documents will be available and considered by the AttorneyGeneral in regard to this case. In my view, that includes all documents whether privileged or not in the actual court of law. It is for the AttorneyGeneral to form his opinion as to whether he should take into account a privileged document in coming to a decision. Lastly- I am compressing what I have to say because I know that for the Senate time is important- it is without precedent in the history of criminal justice that any political body, mid-way through a case, should come to the financial support of either party alone, in this case ex-Ministers. I protest against the precedent of there being one law for ex-Ministers and another for private citizens.
– Order! The honourable senator’s time has expired.
– In relation to the item for appropriation for the payment of costs of the defendants in the proceedings brought by Mr Sankey, Senator Sir Reginald Wright has challenged the payment of those costs. He has also expressed all sons of views on matters which do not seem to be material to the item. It is a normal practice of government to meet the costs incurred by Ministers and public servants in defending legal proceedings in regard to matters arising out of their office.
– It is defending the Executive.
– It is quite a normal practice for a government to meet Ministers ‘ costs in proceedings which concern their office. Whether the costs of the other party are met by the Government has nothing to do with the situation at all. Those costs may be met by a legal aid scheme of one kind or another. Senator Sir Reginald Wright said that the question of paying the costs of Ministers is a political judgment. That statement is quite irrational. It has no basis in practice, law, experience or anything else. The reason the Government decided to pay costs of the defendants in this case was that the charges which had been made against them arose out of and concerned their activities as Ministers. The fact that they are now no longer Ministers is also irrelevant.
Senator Sir Reginald Wright also commented on what documents should be available. As I have already indicated in answer to a question earlier today, that is a matter for decision by the High Court of Australia. I took the step of referring such a fundamentally important question for the earliest possible decision by the High Court. I do not propose to say anything more on the subject until the decision of the High Court is given.
– I had no intention of entering into the debate at this stage but the matters raised by Senator Sir Reginald Wright prompted me to do so. As the Senate will know, today I asked the AttorneyGeneral (Senator Durack) a question about this matter. I have done so in the past. My suspicions about the Sankey case are reinforced by the comments that have been made by Senator Sir Reginald Wright. I realise that he was expressing himself carefully because of the sub judice aspect of the case. I also suspect that he was speaking more as a lawyer than as a politician. Quite clearly Senator Durack has now spoken as a politician. I also speak as a politician. I have suspected for some months that there are political reasons, not legal reasons, for the delay in this matter. We are all aware of the long background to the events that led up to the Sankey case. I am not here to judge Mr Ellicott. My own impression is that he acted because he believed that as the senior law officer of this country he was obliged to take the step he took. I have always believed that he was overriden by Cabinet for straightout political reasons.
If an appropriation is being made, no matter for whose benefit, either previous Australian Labor Party Ministers or previous Liberal Party Ministers, there can only be the gravest doubts as to the correctness of doing so if that is done for political reasons. I do not know whether Senator Sir Reginald Wright’s contention is correct that, in the history of Australian litigation, this has never been done before. He says it has never been done before. Senator Durack says it is normal practice. I do not know which of the two statements is correct. But I do suspect very strongly that the decision to appropriate these moneys was taken for political reasons to protect this Government, not to protect the previous Labor Ministers, because as time went by it became increasingly apparent, in my view, that the case against the ex-Ministers would be found to be wanting and that something could be uncovered which involved other persons who are members of this Parliament and also members of the present Government. So I think the Government does not want the case to proceed. That being so, the decision to appropriate funds is being taken for political reasons, not for good legal reasons. If that is so then Senator Sir Reginald Wright’s contention is correct and he has every right to raise the matter in the Parliament. I indicate to the Attorney-General that I personally will continue to raise questions, as I have done, until such time as we are satisfied as to the reasons the Government proposes to make these payments.
Senator Sir REGINALD WRIGHT (Tasmania) (4.56)- I am very conscious of the time of the Committee, but Senator Wriedt ‘s comments illustrate perfectly how intervention by a political body in the law administration excites disquiet on one side and dissatisfaction on the other, and why the administration of justice should be left to a proper conclusion. Delay is simply a reproach to the law. If it is exciting the viewpoint of Senator Wriedt as genuinely as it appears to be then it is a matter of the utmost concern. I do not share his view as to the reasons, but the whole point is that we should not have political debate upon this. Political bodies should abstain and leave it to the Attorney-General. Give him all the assistance and all the evidence so that he can make a decision, prosecute the proceedings or go to court and say, promptly: We have no case’.
The only other point I wish to make is that I will weep, first because of my ignorance, if I am wrong in asserting that it is unprecedented that Ministers in the position of defendants should be provided with Crown funds in a criminal case before the trial. Secondly, if that is the position, I shall weep because there are many people of similar status to Ministers who come up for criminal trial arising out of their duties in public office and they should be treated on exactly the same basis.
– I will give you my bill tomorrow.
-That is a most improper remark. The point is that the financial assistance that it is proposed to give in this instance is not in the remotest degree resembling legal aid. Any defendant, ministerial or otherwise, can approach the authorities, and after an independent examination get a decision on certain terms for legal assistance, but this is a straight out Cabinet decision to pay the costs- we were told this at the Estimates hearing- of the summary court, the appeal court of New South Wales, the High Court and continuing costs of the defendants. In my view it is improper to take such a decision before the determination of proceedings.
Depending on whether there is any other interest in the matter, if I am the only one to protest against the item of expenditure I ask that my vote against that item of appropriation for the payment of costs of the defendants in the case of Sankey v. Whitlam and Others be recorded.
-In regard to this item of appropriation I should like to say that it amazes me that the Government takes the attitude that the defendants -
– What item, Senator?
– The item relating to the appropriation of money to meet the legal costs of the defendants- the ex-Ministers. It amazes me that the Government has decided to pay the costs of the defendants but not of the plaintiff. The position is that this matter was of very grave concern to this Parliament and to the nation generally. I do not for one moment want to say that these people are guilty. I am not prejudging the case. In my opinion there are certain people there who would not be guilty. But the matter has been brought forward in this consideration and I recall that it was of very great moment to this Parliament and to those of us on this side of the chamber when we were in Opposition. What concerns me is that the present Prime Minister (Mr Malcolm Fraser) apparently was greatly interested in this matter when we were in Opposition but now when we are in office he has changed his attitude. It worries me that this was a matter of concern to the present Prime Minister when we were in Opposition but once we gained office the matter was of no further interest.
– And you will probably never know the truth- the reason why.
– I take the view that if this was a matter of great moment it should be the aim of the Government to have the whole matter clarified- cleaned up. I think the Government is acting very unwisely in taking a decision to pay the costs of the defendants but not the costs of the plaintiff. It may be that it will be shown that Sankey is doing a job for the country, so why should he not get support? I put it that both sides should be given assistance. As I said, I am not prejudging anybody but I believe the Government should clarify the position. This Government should not be looked upon as a party that feasted upon this incident when it suited it in Opposition but now that it is in office it is no longer interested.
– I would just like to deal with one point that was raised earlier and about which there may be some confusion in something that I said. I had made the point that it is not unusual for the costs of Ministers to be met in cases involving matters arising out of their portfolios. That is a normal practice. Senator Sir Reginald Wright did raise a point that this proposed appropriation involves a criminal case, not an ordinary civil case. I was talking about cases in which Ministers are sued when one normally expects the proceedings to be civil proceedings or proceedings of that character. The honourable senator raised the point about a precedent for the payment of costs in cases of a criminal nature. I just want to clarify this point. I was speaking in general terms about the precedent of meeting Minister’s costs. I do not want it to be thought that I am saying there is a precedent for the costs of Ministers to be met or not met in respect of criminal cases, and of course this case relates to an information for a criminal charge in respect of which there are committal proceedings. I have not been able in the short time available to ascertain whether there is any specific precedent for that.
Proposed expenditure agreed to.
Proposed clauses 1 to 7 agreed to.
Title agreed to.
Bill reported without requests but with a recommendation; report adopted.
Bill (on motion by Senator Guilfoyle) read a third time.
Consideration resumed from 1 1 May on motion by Senator Carrick:
That the Bill be now read a second time.
Question resolved in the affirmative.
Bill read a second time, and passed through its remaining stages without amendment or debate.
Consideration resumed from 25 May on motion by Senator Guilfoyle:
That the Bill be now read a second time.
Question resolved in the affirmative.
Bill read a second time, and passed through its remaining stages without requests or debate.
Debate resumed from 25 May on motion by Senator Guilfoyle:
That the Bill be now read a second time.
– I rise to make a few brief comments on Supply Bill (No. 2). I thought that the two Supply Bills were to be debated cognately. The Opposition has prepared an amendment which it intended to move to Supply Bill (No. 1 ). Unfortunately, we are not able to move that amendment to Supply Bill (No. 2). These Bills provide for the continued supply of money up until the Budget session in August. They permit the Government to maintain its management of the economy or mismanagement as we would call it. We know that the Australian economy at present is in a most depressed condition. Unemployment is increasing at a rate which even the Government itself admits is most undesirable.
It is not my purpose to go back over the last three or four years. I believe it is quite unrealistic for both sides of the Parliament to continue to hark back to the problems of years gone by and to try to blame previous governments for so many of the problems with which we are confronted at present. We know that any government, after it has been in office for 21/2 years, ought to be able to demonstrate that is has the situation in hand. There ought to be signs of improvement not only in the area of unemployment but also in a whole range of areas. That is not the position at present. Let us consider the document entitled Round-up of Economic Statistics issued by the Treasury in April of this year. We find that marginal improvements are taking place in the area of private investment. At page 2 the document states:
Private gross fixed capital expenditure, seasonally adjusted and at constant prices, is estimated to have increased by 1.2 per cent for the half year to December (increasing 2.3 per cent in the September quarter and 1 . 6 per cent in the December quarter), following a decrease of 2.5 per cent for the half year to June.
The document shows that the number of private dwelling approvals has decreased by 3 per cent to a level of 9,000 in February, compared with 9,300 in January and an average monthly level of 9,800 in 1977. The document continues:
In the three months to February seasonally adjusted approvals totalled 27,800, compared with 28,200 in the preceding three months and 29,000 in the three months to August. The value of approvals for alterations and additions to dwellings valued at $2,000 or more (not seasonally adjusted) was $ 129.2m in the three months to February, compared with $166.5m in the three months to November and $ 1 22.3m in the three months to February 1 977.
In no way can anyone say that these statements are suggestive of any healthy signs in the economy. Further on the document states that permanent building society loanable funds rose by $86m in February compared with a rise of $128m in January and a monthly average increase of $110m in the first six months of 1977-78. One could go on and give a great deal more information. I would not wish to do so particularly in regard to the unemployment position because I believe the figures are so well known. Unemployment, on a seasonally adjusted basis, is gradually getting worse, and the prospects are for further increases in the number of unemployed in the 12 months ahead. Probably the most disturbing feature is that the whole of the manufacturing sector is extremely depressed, with only about 75 per cent of manufacturing capacity being utilised at present.
Although the Government admits that its deficit is in an extremely bad position- it has a deficit some hundreds of millions of dollars more than it anticipated it would have by the end of the financial year- the Treasurer (Mr Howard) only today in the House of Representatives stated that the deficit was quite justified because it was caused through lack of revenue and not through the Government’s spending too much. That would seem to me to be a new-fangled theory on the part of the Government to justify the fact that it has seriously miscalculated its revenue position this financial year. Of course that miscalculation will extend into the next financial year. It has ramifications, particularly for the States. That is a matter on which I think there will be further debate in the Parliament before we rise. This is due to the Government’s philosophical decision to depress as much as possible the public sector. One of the spin-offs of that policy has been the effect it has had, for example, on local government. Many of us probably have received a letter from the Australian Council of Local Government Associations dated 15 May in which the Director of the Secretariat, Mr A. N. Walls made this comment:
The Executive of the Australian Council of Local Government Associations, representing 864 local government authorities throughout Australia, has asked me to ensure that you personally receive the attached document.
The letter went on to deal with the Association’s campaign to have its share of personal income tax collections increased to 2 per cent. The letter then stated:
Contrary to popular belief in parliamentary circles, grants from the Commonwealth to Local Government at the end of this financial year will have shown a real decline for the third year in succession when measured at constant (1972-73) prices.
The implications for the people served by Local Government, however, are quite serious if the downtrend is allowed to continue. The real decline in Commonwealth funding, compounded by the restraint in rate increases exercised by Local Government at the request of the Commonwealth, has resulted in an unavoidable and increasing gap between revenue and necessary expenditures.
There is spelled out the position in which local government finds itself at present despite the numerous claims which have been made by this Government that local government throughout Australia has never been in a better position. I imagine that Mr Walls of the Australian Council of Local Government Associations would be the man in the best position to know the sorts of problems that local government is experiencing and the fact that it has experienced a real decline in its finances from the Federal Government over the past three years. Local government is in a position similar to that of the States which are also finding the squeeze being put on them more and more. We will have adequate time to debate that when the legislation on Commonwealth and State income tax arrangements is dealt with here, presumably tomorrow. I do not intend to pursue these points at any length, but I place on record in the debate on these Supply Bills the fact that although we are not opposing them we make it clear that we believe that the Government continues to move in the wrong direction and that if these policies are to be pursued we will not see any recovery in the economy, certainly within the next 12 months, and any recovery is highly unlikely within the next two years.
– in reply- Senator Wriedt has raised a number of matters on these Supply Bills. We could have agreed to have them dealt with cognately if that would have suited the Opposition. I realise that the course which we adopted did not give the Opposition the opportunity to make a request of some kind. Matters have been raised ranging from unemployment and private investment to funding for local government and other things. As Senator Wriedt acknowledges, there will be an opportunity to debate these matters at another time. The one statistic that was not mentioned by Senator Wriedt was the consistent and considerable reduction in the rate of inflation. I believe he alluded to that indirectly when he said that the Treasurer (Mr Howard) stated today that it was a lack of revenue that was showing this year’s Budget to be slightly in excess of last year’s Budget. The reduction in revenue has been caused through the reduction in the rate of inflation and the reduction in personal income tax, in customs and other excise items that have been obtained by the Federal Government. That is a logical and reasonable explanation to put forward at this time. As was said, we are not launching into an economic debate on the Supply Bills. It ought to be understood that the items contained in the Supply Bills are not to be interpreted as an anticipation of the Budget but simply the mechanism that is used in the Parliament to see that funds are available until the passing of the Budget Bills, probably round about November of this year. On this occasion I simply commend these Supply Bills to the Senate. I hope that they have a speedy passage.
Question resolved in the affirmative.
Bill read a second time, and passed through its remaining stages without amendment or debate.
Debate resumed from 1 1 May, on motion by Senator Carrick:
That the Bill be now read a second time. (Quorum formed.)
– The Senate has before it the Income Tax Assessment Amendment Bill 1978 which has caused a great deal of comment and excitement in the community over the past few months- in fact, going back to the time of the previous Government. The purpose of the Bill is largely to attempt to bring an end to a series of tax avoidance schemes as well as to take the opportunity of introducing some technical alterations to one of the most complex pieces of legislation on the statute book.
The main reason for the introduction of this Bill is to close two schemes. The first is the Curran scheme under which share traders create artificial tax deductible losses and reduce their normal taxable income. The second concerns abuses of provisions for tax deductibility of gifts and the third is the practice known as dividend stripping, which involves one company buying shares in a company with accumulated profits, removing those profits by way of dividend and subsequently selling the shares which now have very much reduced value, thereby recouping the cost of the initial share purchase.
The decision to deal with the Curran scheme came about largely because of a decision in the High Court of Australia on 4 November 1 974. That decision held that the scheme of tax avoidance using artificially created tax losses was legal. Following that court decision the then Treasurer, Mr Crean, warned that action would be taken to counteract the High Court decision. Unfortunately the matter was not pursued quickly and there are a number of possible explanations. There was possibly some hope that the warning may well discourage people from involving themselves in a tax avoidance scheme. However, it became abundantly clear that the tax avoidance industry was alive and well and, following Mr Crean ‘s warning, it merely acted on the basis that the hunt was on, so that yet another round in this profitable sport commenced.
There has been a series of objections from sections of the tax avoidance industry about aspects of this legislation. Most of us in both chambers have received telegrams or roneod letters from various firms of accountants and solicitors, particularly in Melbourne, arguing against aspects of this legislation. The arguments are various and detailed.
However, there seems to be much moral rectitude in arguing against back-dating portions of the Bill to 16 August 1977, which was the date of the 1977-78 Budget Speech. In that speech the then Treasurer, Mr Lynch, announced that he proposed to crack down on various tax avoidance measures. A majority of Government senators and, I am sure, a majority of honourable senators on this side of the chamber, have little or no sympathy for people who set about avoiding paying their fair share of tax because, in so doing, they increase the burden for other people, particularly those on low incomes.
It is difficult to be impressed with the moral argument about retrospectivity. It is interesting to note that a senior member of the Australian Law Reform Commission, Mr Russell Scott, recently wrote to the Australian Financial Review and set out very clearly the arguments which undermined the case for not making the legislation retrospective. At one time Mr Scott was a senior partner in the large and well-established Sydney firm on Dawson Waldron, and I have no doubt considerable numbers of his clients sought and received advice about tax avoidance schemes. Thus I believe credence can be placed on Mr Scott’s professional and practical views.
It is worthy to quote from part of Mr Scott’s letter because it sets out some of the legal propositions. On the question of the principle ‘There shall be no penalty where there is no law’, he quotes from Halsbury ‘s Laws of England, which says:
The general rule is that all statutes other than those which are merely declaratory or which relate only to matters of procedures or of evidence are prima facie prospective; and retrospective effect is not to be given to them unless, by express words by necessary implication, it appears that this was the intention of the legislature . . . Fiscal legislation … is subject in general to the presumption against retrospection . . .
This would appear to justify the sort of stand which the tax avoidance industry has taken.
However, Mr Scott points out, in regard to Halsbury ‘s Laws of England:
Many judges are realists, particularly in the field of taxation where the proponents of principle themselves are not always Simon-pure.
He then quotes the famous English tax decision in 1942 handed down by Lord Greene, Master of the Rolls, in which he put into perspective some advocacy of the sacredness of the retrospectivity principle with the following words:
The fact that the section has to some extent a retrospective effect again appears to us of no importance when it is realised that the legislation is a move in a long and fiercely contested battle with individuals who well understand the rigour of the contest.
Mr Scott goes on to say:
Apart from the bracing effect of Lord Greene ‘s healthy scepticism about the virtues (as opposed to the lawfulness) of tax avoidance, the Government’s present proposals do not represent any obvious breach of the principle.
That is a principle which we in the Opposition support. The decision given by Lord Greene is supported by a series of other decisions and, whilst in some of the English tax cases the judges have admitted the right of the tax avoiders to continue with their task, they did not give them the sort of protection which certain persons, including certain persons in the House of Representatives, claim is a right interred in common law.
The Opposition cannot support any of the moves which have been made against the retrospectivity of this legislation and in fact would prefer that the operative date for all tax avoidance legislation be from the 30 June 1977 for all aspects of tax avoidance set out in this Bill.
I have no intention of going into the detail of the various schemes because they are adequately set out in the Bill, and I think they are well known to members of this Parliament.
I think it important, however, to make a number of observations about the tax avoidance industry. There is no doubt that this industry is well established and is nourishing. It provides its services at apparently fairly substantia] fees to people with high incomes such as those in the medical and legal professions. It means that a great deal of this country’s brain-power is exercising itself about increasing the burden of taxation for the groups who cannot afford their services and I suspect that most of the industry is now looking at new ways of defeating the Government’s intended crack-down.
There are some aspects which are not included in the Bill. One of them arises from the exploitation of primary producer averaging provisions. It has been well known that both persons within primary industry and those who buy properties for the purpose of electing to become primary producers in accordance with the Income Tax Assessment Act have also established a series of trusts. These trusts are not dissimilar to those which have been used by people whose names we know, which have been made public and which need not be mentioned again in this place. However in an attempt to reduce the taxable income, persons classifying themselves as primary producers have often created a series of trusts which are unrelated to the actual number of persons directly or indirectly engaged in the enterprise.
We on the Opposition side would accept the principle of what the Government is doing in this legislation. We expressed a point of view as a Government three or four years ago in which we acknowledged that these abuses of the taxation system were taking place. We will, of course, be moving an amendment which I imagine does not alter the substance of our support for the Bill. We indicate that we do not oppose the Bill. But we believe that once this legislation is passed by this Parliament the Government will be duty bound to enforce the provisions and to ensure that the abuses we have seen taking place in recent years will not be repeated.
-This Bill gives effect to several matters. Some amendments will have the effect of liberalising some of the tax laws and some of them will be restrictive, primarily blocking tax dodges. One area that has not received enough publicity, I believe, is the provision that gifts of works of art to public libraries, art galleries, museums and to the Australiana Fund will qualify as tax deductions under more liberal conditions. At present a deduction may be claimed if the work of art has been purchased in the previous 12 months. The deduction is based on the cost to the donor of that work of art or its current value, whichever is the less. Consequently artists who wish to donate a work of art of their own are virtually stopped from doing so because the lesser of the two costs would be the costs of the canvas and the paint and not the cost of their time. The result has been that the arts have suffered quite considerably. I believe that government should encourage the arts and should encourage the giving of gifts so that substantial gifts held by families can be made available for public viewing. Many people believe that the arts should be self-supporting. I think perhaps the best way I can describe how I feel about the matter is to read to the Senate a letter which was published in the Hobart Mercury some time ago. It was written by Dianne Large, who says:
Social welfare should encompass mind as well as spirit. Civilisations are judged in retrospect by their arts. Imagine the Greeks without their sculptures, plays and architecture; Medieval man without his cathedrals; the Elizabethans without their poets, playwrights and musicians; Italy without its art and opera. The effects of the arts reach out to all members of society, engendering thought, enlightenment, comparison and a sense of proportion- very real weapons against the materialism which is at the root of our declining civilisation. It is interesting to note that Marie Curie, when struggling in Paris, thought it worth going without food in order to visit the theatre regularly. There are no longer moneyed private patrons. Because, wealth, through taxation, is spread more evenly, the beneficiaries must shoulder the responsibilities that were once the duties of the rich.
I believe that that letter explains better that I can the benefits which this legislation will bring. I have just explained the present position. This Bill makes it possible for works of art which have been in a family for many years to be donated to the areas I have already mentioned. They may also be donated for the purpose of claiming a taxation deduction at market value. So the artist himself or herself is then able to donate his or her own works of art. The market value must be determined by approved valuers, and committees will be set up by New South Wales and Victoria for the purpose of approving values. As I have said, gifts are able to be made to the Australiana Fund. Donations of works of art, cash or furniture can be made to Government House, Kirribilli House, Admiralty House and the Lodge. The amendments contained in this legislation are to be made retrospective to 1 January of this year. The Bill also contains other liberalising amendments.
However, I wish now to speak about the restrictive amendments which will close the loopholes and which are taken advantage of by the tax dodgers. I am not a lawyer, but I believe that the intention of the law should be upheld. The High Court of Australia has brought down a decision which, in effect, provides that a law need not have the meaning intended by the Government which originally enacted it. I believe that a responsible government must react to that decision, and that is what this Government has done.
Tax avoidance is practised by all sections of the community and not just by the wealthy, as is so often said. It is practiced by pensioners, by low income earners, as well as by the very wealthy people. The very wealthy people can do it just so much better and on a much grander scale. The pensioner can get away with a bit of tax avoidance perhaps by not declaring a boarder. Low income earners can get away with doing odd gardening work, household duties and things like that. The wealthy have been able to get away with tax avoidance on such a grand scale that I believe it is time the Government stepped in and, particularly in the case of the Curran scheme, made the amendments retrospective to the time when it was first announced that such an amendment would be introduced.
Australians have always considered their Government to be fair game. Beating the tax man was just good sport, and if you were able to do it you were just a plain smartie. You were not diddling the Government; you were just being clever. As soon as we closed one loophole we found that in a very short time the accountants or other people located another loophole which was perhaps bigger and better than ever. There has been a lot of talk about the platform of the Liberal Party. We are reminded that part of our platform is to ensure that taxation adjustments do not have a retrospective effect. However, no mention is made of the fact that taxation should be equitable as between taxpayers in similar positions. As that was the intention of the law, I believe the Government has every right to make the legislation retrospective to the time when it first suggested it would close the loopholes. No mention is made in our platform of loopholes. There is no warning about loopholes being closed. I believe that where retrospectivity is mentioned in that platform it refers only to the making of new laws.
I wish to deal with two aspects of this matter. The first is gifts to charities and the second is the Curran scheme. The amendments relating to the Curran scheme are the only ones being made retrospective. However, I wish to speak first about gifts to charities. I believe that great abuse has occurred in this area. The donor makes himself out to be a good fellow. The example which the Minister for Education (Senator Carrick) gave in his second reading speech, I believe, points out just how corrupt some of these schemes have become. A donor can say: ‘All right I will give a $10,000 gift to a certain charity’. He takes $1,500 out of his own pocket and approaches the agent promoting the scheme to lend him $8,500. That makes up the $10,000 donation. So that amount is then given to the charity. The charity, by prior agreement, then returns 98.8 per cent of that $10,000 to the promoter of the scheme who keeps the $8,500 that he lent originally plus a very nice fat interest payment of $1,380 from the charity for the short time that it had that money. That leaves the charity with $120 out of the $10,000. Of course, the donor, who makes himself out to be a good fellow by giving $ 10,000 to the charity, can then claim that amount as a tax deduction. That is the type of person with whom the Government is trying to deal in closing these loopholes. That type of person is just not genuine. He is a tax dodger of the worst sort. Genuine gifts will not be affected by the present amendments. I believe that we should have closed these loopholes some time ago. At least we are getting around to closing them now.
There has been much controversy about the Curran scheme. If we look at gifts made to charity under that scheme we will realise that this activity is just as dishonest- perhaps even more so- than activities involving donations to charity. As far as I am aware, no objection has been made to the fact that we are closing the loopholes taken advantage of by the Curran scheme; the objection is to the fact only that we are seeking to do so retrospectively. Nobody says that that activity should go on. Nobody says that we should not close the loopholes. There is just a great scream that we should not make our amendments retrospective.
In spite of all the lobbying that we have had from all the accountants from all over the place, from lawyers and from other people in these areas- we have certainly received many dozens of representations- I have not had one representation from any accountant from Tasmania, which is my State. I gather that the accountants and lawyers in my own State are more honest that the accountants and lawyers in the other States. They have not been indulging in these schemes.
-There is a certain amount of hilarity amongst the honourable senators from the larger States. I can assure Senator Tehan that there is not one accountant or lawyer indulging in Curran schemes in Tasmania.
– How can you give such an assurance?
– I can give Senator Lewis such an assurance because the Taxpayers’ Association, the President of which is a Tasmanian, has asked around all the accountants in Tasmania and none of them have had anything to do with Curran schemes.
– Do you think they are going to reveal their clients ‘ activities?
– I believe that the President of that Association has done his homework and has done it well. We have not had one representation from any Tasmanian accountant. I certainly have had dozens of representations from accountants in Victoria, New South Wales and the other States. I think that these schemes should be looked at. There has been tremendous abuse of the taxation system. It has been estimated to cost from $ 1,500m down to $500m. If it is $500m, then that is the amount that the Government has just given back to the taxpayers in the latest tax rebates. I believe it is an amount that we ought to look at very hard. We cannot have $500m being taken out of the taxpayers’ pockets.
– We would have to pay it, would we not, Senator?
– We certainly would have to pay it and so would the low income earner. Let us examine the history of this matter. We were given a detailed warning by Mr Frank Crean in December 1974 that this loophole would be closed. The Liberal-National parties agreed with it wholeheartedly- there was no disagreement: So, the taxpayers knew that both sides of this chamber agreed with Mr Frank Crean in December 1974 that this tax loophole should be closed. This was referred to again in the last Budget speech by the then Treasurer, Mr Lynch: There is no doubt that it was referred to and he said that legislation to close this tax loophole would be introduced in the Budget session of Parliament. Just because it was not brought in during that Budget session arid was brought in five months later, people are screaming about the retrospectivity of the legislation. But is this true retrospectivity? I do not believe it is. It is not retrospective to an earlier financial year: There is no penalty incurred; there is no payment of additional tax on income that has already been taxed. I should like to refer to the Taxpayers’ Association manual of 22 April 1978 which states:
What is retrospectivity? … Is the position different if a Treasurer makes a clear and detailed announcement that some action is to be taken as from a certain date? Of course it is -
That is not retrospectivity- and that is what happened with the Curran schemealthough it would now be unreasonable to date the changes back to December 1974. . . . In the context of Budget announcements, normally we accept that they will apply from 1 July- no one regards that hiatus of some six weeks as representing retrospectivity. Had this legislation been introduced in September or October, most with a pecuniary interest would have accepted maybe grudgingly the new law applying for the full financial year. Mr Lynch did say in his Budget Speech that legislation would be brought down in the Budget session. But if Budget session legislation with a 1 July start-date is acceptable, why is it different now that a later date has been selected on the one matter on which a warning had been given? People ‘doing Currans’ knew the risks.
That is what the Taxpayers’ Association points out. It points out that people were well aware of the risks, were well aware of the advertisements offering money back if legislation was made retrospective. The people were aware of the risks and if they cared to go along with the scheme and take risks then I believe that is their problem. They were aware of the risks and they must have allowed for them in their planning. After all, the people involved are not out of pocket. I believe the Government is right in bringing down this retrospective legislation. I have great pleasure in supporting the Bill which is before the Senate.
-This Bill is described by the Treasurer (Mr Howard) in his second reading speech as introducing measures to counter tax avoidance. I will be using the words ‘avoidance’ and ‘evasion’ which I think perhaps I should make clear. Last Wednesday in this Senate Senator Walsh acknowledged a distinction between ‘avoidance’ and ‘evasion’ but he said that the distinction was technical and was not important. I beg to differ with him. I should like to explain the difference in terms that people will be able to understand. Any change in circumstances may affect a taxpayer’s position and could be described as tax avoidance. For example, when a person marries, if his spouse does not work and becomes dependent on him he gets a deduction for her. It could be said that his marriage was entered into specifically for the purpose of avoiding tax. But, of course, that would be nonsense. It could be said, similarly, that if they had a child and could get a taxation deduction for the child that they could be said to be avoiding tax.
On the other hand, an evasion of tax is a simple matter mostly of failing to disclose income. A person who fails to disclose income, of course, does not pay tax on that income and that is an evasion as opposed to ah avoidance of tax. There is a very fine line in this jurisdiction and it comes down to the question of reasonableness. In his second reading speech, the Treasurer said:
It has long been recognised that it is reasonable for taxpayers to so organise their affairs as to minimise liability for taxation. However, the Government believes that some techniques of tax avoidance -
Not tax evasion, but tax avoidance- are so blatant, contrived and artificial as to go beyond the bounds of reasonableness.
He goes on to say:
There may be no absolute community standards by which particular forms of tax avoidance may be judged.
So when a couple marry, clearly that is not contrary to the community standard of reasonableness. When a couple in business go into partnership that could be said to be tax avoidance, but, again, it does not transgress those community standards. What happens when a family company is formed or a family trust is created? One would have to acknowledge that the line is starting to get thin.
I should now like to turn to the Curran-type cases which is one of the major matters this legislation is attacking. In the Curran-type cases, it is simply a question of the taxpayer buying taxation losses and, in many cases, not just for the current year but also for future years. So, if a taxpayer was on a very high income of, say, $200,000 it would be possible for him to buy taxation losses worth $200,000 and pay no tax in that year on his income. Some taxpayers were not satisfied with paying no tax this year. They were prepared to buy tax losses so that they would not have to pay income tax on their estimated incomes in the future. I put it to the Senate that the Government has recognised that this practice is not just across that fine line to which I referred, but is so far across the line as to be, in my view, a fraud on the revenue.
Many representations have been made to members of the Senate and the House of Representatives about whether this legislation is retrospective. Senator Walters referred to the warnings that were given to people who entered into these schemes going back as far as 1 December 1 974. In my view it is difficult for any taxpayers’ adviser to say that he was not well warned of the possibility of this legislation being made retrospective to that date. However, in any event, one is tempted to ask whether it is retrospective when in fact it deals with income earned by a taxpayer to the year ending 30 June 1978, which has not yet arrived. A taxpayer is now well warned of what will happen in relation to his Curran-type tax losses and has an opportunity to reorganise his affairs before 30 June this year if he wishes.
I would also like to refer to the Government ‘s dilemma. One of its problems was whether it should describe this legislation as retrospective. If it had tried not to describe this legislation as retrospective it would have been soundly criticised and condemned by all concerned and outsiders. So the Government faced this situation and acknowledged that in some respects the legislation could be said to be retrospective.
– It did not say so.
– With respect, the Treasurer acknowledged publicly that the legislation was retrospective. I believe that the Government was quite right in taking this action. If there was an element of retrospectivity, the Government acknowledged that retrospectivity and faced the criticisms which people were prepared to make.
I would like to look at the Bill generally which, as I have said, purports to introduce measures to counter tax avoidance, not evasion. The schemes are many. This is a large industry and schemes will no doubt flow from the minds of those who are in this business. I again ask the Government and its advisers to look carefully at an alternative. I have suggested to them previously that they ought to look at the possibility of allowing families to be taxed on the basis of a family partnership. This was actually a recommendation of the Taxation Review Committee- known as the Asprey Committee- back in January 1975. The Committee in paragraph 10.33 on page 139 of its report recommended:
The recommendation was that the scheme be prepared for public examination. Unfortunately, in a reservation Mr Justice Asprey subsequently opposed his own Committee’s recommendation on two grounds. Firstly, he argued that if the result was an aggregation of the family income, that would not be acceptable because the tax would be too high. Secondly, he argued that if the income was averaged, that would bring about a substantial loss to the revenue. In his reservation Mr Justice Asprey acknowledged that everything would hinge upon the rates scale. I say to the Government and its advisers that the Government ought to be looking at some such family unit scheme. In my view, if the Government allowed families to average their income the nonsense about the creation of family partnerships, family trusts and family companies, which all are designed to spread income among husband, wife and children, would no longer continue.
Sitting suspended from 6 to 8 p.m.
– Before the sitting was suspended I had asked that the Government and its advisers consider the possibility of providing for a scheme along the lines suggested by the Asprey committee- an elective family unit system of taxation. There are many ideas that one can put forward about such a system, but the one that appeals to me is that of a family partnership. As a Liberal thinking about liberal philosophies, I believe that one of the things we should encourage is marriage and family development. Yet, from a taxation point of view, we seem to discourage marriage: A couple are financially better off living together unmarried than married.
If we were to introduce some kind of family partnership taxation system, one could imagine a situation where a couple, when they married, would have the total of their incomes averaged and would pay the average income tax rate on that basis. This would mean that if a wife wished to stay at home and mind her children, the family would not be financially disadvantaged by her so doing. At present there is undoubtedly a financial disadvantage in a wife’s giving up her job.
I would go further: I believe that when a couple have their first child the family should be taxed differently again. Because there would be three people in the family, its gross income should be divided by three and each should be required to pay tax on one-third of that income. That suggestion may be a little radical for the
Government to adopt, but certainly it should give serious consideration to adopting the first suggestion. The result of its adoption would be to minimise greatly the prevalence of taxation schemes, all of which are directed to apportioning the gross income of the family among as many members of it as is possible. In that way, under the present scheme, taxation is minimised.
My proposal was dismissed by Mr Asprey in a reservation to chapter 10 of the Taxation Review Committee’s report, on the basis that it would produce a substantial loss of revenue; but, in fact, he had himself said in that same reservation, in the previous paragraph: ‘Everything hinges upon the rate scale’. That would be the answer: It would simply be a matter of devising a rate scale which would be appropriate to the change in circumstances as a result of bringing in the family unit, instead of the individual, as the taxation unit.
I turn now to what I believe to be the most important factor in regard to this legislation, and say that I believe our taxation advisers in this country have let us down. The greed demonstrated by so many taxpayers has meant that their taxation advisers have been concerned, in their representations, to the Government, only with Curran schemes, retrospectivity and attempts to have this legislation delayed. It would seem that they have not really applied their minds to the other provisions of the Bill, which comprises 38 pages and some 24 clauses.
This is where I believe the greatest criticism can arise: The Bill is full of provisions which permit discretion on the part of the Commissioner. I should have thought that taxation advisers who were doing their duty in the community would have been screaming to the legislators about the number of times that some decision is left to the discretion of the Commissioner of Taxation. This is a most iniquitous practice. A person is entitled to know the taxation consequences of his action. For example, if one wanted to buy a new truck for one’s business, one must know the financial consequences of paying cash, of buying it on hire purchase, or of leasing it. That is not an unreasonable proposition. In order to calculate those financial consequences, one must know not only the interest that one will pay under each approach, but also what taxation problems will arise. Then one can work out whether one’s business can afford to pay cash, whether one should buy under hire purchase, or whether one should enter into a leasing agreement. I am not suggesting that that is covered in this Bill, but it is an example of what I am talking about: A taxpayer must know definitely what the taxation laws are, so that he can organise his affairs in accordance with the law.
Under the Bill there are to be an enormous number of cases in which the Commissioner is to have a discretion. My colleague Senator Messner, has spent a lot of time studying the Bill and will be speaking to it later. He has discovered over 50 examples in which discretion is to be allowed the Commissioner of Taxation. I will be very interested to hear what he has to say on that point. I think it is an absolute disgrace that the Bill has been drafted along those lines; it is a disgrace also that the matter has not been brought before the public; that discussion of it has not reached the enormity that has been reached by the discussion about retrospectivity. The legislation presents major problems. For example, if a company were considering raising finance from the public it might say to itself: Will we issue some sort of debenture or will we issue shares?’ In its prospectus, the company, if it were to issue shares, would be required to say when holders of those shares would participate in any dividends, but proposed new sub-section (3) of section 105A, as set out in clause 13, provides:
A dividend paid by a company during the prescribed period . . . shall not be taken into account … if the dividend was paid in pursuance of an agreement . . .
Does that not mean that if the prospectus says that the particular shares which the company intends to issue will entitle holders to participate in a dividend, those dividends shall not be taken into account for purposes of a sufficient dividend? It is clearly an agreement entered into between the company and the subscribing shareholders. I do not know where that will lead us and I hope that in due course the Minister will explain it to us. Clause 3 sets out a very large number of provisions about the costs of shares which are issued in satisfaction of a dividend. We end up with a statement that they shall be assessed in such proportions as the Commissioner considers appropriate. Surely in the three-quarters of a page of legislation which precedes that statement the Government could have clarified the situation properly rather than finally allowing the Commissioner to have a discretion.
Clause 6 proposes many new paragraphs. Proposed new paragraphs (a) to (e) are almost unintelligible. Proposed new paragraph (f) states that the Commissioner may take into account any other matters that he considers relevant. How does a taxpayer work out what will be the consequences of his action? He does not know what the Commissioner will take into account and he will not be able to find out from the legislation. He will not be able to get his legal or accountancy advisers to explain it to him and he will not be able to go to the Commissioner and say: ‘If I do this, this and this, how will you assess it?’ Quite frankly, the Commissioner will say: ‘I am not prepared to advise you on that matter. I can advise only on the facts when I know them ‘. So the taxpayer must go ahead and set up his arrangements and hope that ultimately the Commissioner will not assess his income unreasonably. I think that this terrible Act, the Income Tax Assessment Act, could be replaced by a very simple Act. If we are to allow such wide discretion on the pan of the Commissioner why do we not replace the whole Act with the simple provision that the Commissioner shall have an absolute discretion and the taxpayer shall pay whatever tax the Commissioner of Taxation assesses. I believe that we have been let down badly by taxation advisers, who have failed to bring to the attention of the public and members of Parliament these outrageous provisions. I suggest that each of these clauses should be tightened up so that the provisions whereby the Commissioner has a discretion can be removed entirely.
– The Opposition and I welcome the Bill which is before the Senate and which has already passed through the House of Representatives. However, we consider it inadequate on two grounds. Firstly, it displays selectivity in the schemes of tax cheating scandals to be closed up. It closes up some of the tax cheating loopholes but leaves others open. We would prefer the Government to close them all. Secondly, it does not go far enough in dealing with those tax cheats who exploited the Curran scheme, which, mainly prompted this legislation. Let me make it very clear that the taxation cheats and what my colleague in the House of Representatives, Dr Blewett, called the parasitic entrepreneurs who devise schemes for them were over-endowed with optimism if they ever thought that the Australian Labor Party would join some alleged rebel Government senators in an attempt to defeat this legislation. We approve of it but we criticise it because it does not go far enough. I shall move an amendment later which is aimed at expressing that view somewhat more forcefully.
We might also question the motives of the Government in introducing this legislation. It becomes very clear that it is not motivated by any principle or by equity between taxpayers. It is motivated by its need for revenue. The tax dodging or tax cheating reached the point where it was defrauding the Treasury of hundreds of millions of dollars- I understand that some Government spokesmen have said the Government would lose some $500m in revenue this year- and that is the reason the Government had to do something about it; it is not because it disapproves of tax cheating in principle.
– No principle.
– In response to Senator Missen, I think it is extremely naive to expect a government led by senior ministers who have publicly proclaimed the existence of their own family trusts, explicitly designed to avoid tax, to be motivated by any consideration of morality or equity when introducing this legislation. Tax avoidance is just a euphemistic way of categorising tax evasion. The difference is legalistic and quibbling; it is not a moral difference. The Government has been motivated by its need for cash and this need is greater because the deficit is ballooning. The Prime Minister (Mr Malcolm Fraser) is on record as saying, times without number, how disastrous it would be if the deficit were to increase and how grossly irresponsible it was for the Labor Party to incur a deficit of $2.5 billion or $3 billion. Of course what is now looming is not a deficit of $2.2 billion as forecast in the Budget but a deficit this financial year of $3 billion or more. It seems that the deficit for the next financial year will be even more than that. On 8 December 1 977, in a Press release referring to the Labor Party’s proposition to increase public capital expenditure in the manner now approved by Sir Charles Court, at a net cost of $500m and a gross cost of $800m, the Prime Minister claimed that our proposal would be grossly irresponsible. He also exaggerated the $500m net cost by claiming that it would be $ 1,200m. Then he said:
A budgetary expansion of this order would shatter confidence of overseas and Australian businessmen in Australia ‘s investment prospects. Earlier he had said:
Under Labor we could well see an increase in this year’s Government deficit in the order of $ 1,200m. That is an increase, in just six months, of about SO per cent in the deficit.
I want to make two comments about that. Firstly, the $ 1,200m figure was a fiction of the Prime Minister. The correct figure on a gross basis was $800m and on a net basis $500m. Even taking the gross basis, an increase in the deficit of the order of $800m is what the Government will get even after the Government has enacted this legislation to close up the ludicrous rackets which the Curran tax cheats and a few other tax cheats were working. The Prime Minister said that an increase in the Budget deficit under Labor would shatter confidence of overseas and Australian businessmen in Australia’s investment prospects’. They are the Prime Minister’s words about the sort of increase in the deficit which the Government will have in any case.
I think we can disregard all the cant and humbug about principle having anything to do with the Government introducing this legislation. The Government is motivated entirely by its need for cash- a need which is intensified by the Prime Minister’s previous Neanderthal statements about deficits and the economic ramifications of deficits and deficit increases. There are of course difficulties with taxation -
– Why do you not emulate your leader and show a little politeness and respect sometimes instead of tipping buckets on everyone?
– Politeness and respect to whom? I will show politeness and respect to those who deserve it. There are, of course, difficulties with the Income Tax Assessment Act when the High Court of Australia insists on bringing down absurd interpretations, particularly relating to section 260 of the Act, and stands the English language on its head and says that the words do not mean what they say. Our amendment will substantially overcome even this difficulty. I move:
If the amendment were acted upon, the Government would catch more of the specific Curran tax cheats. It would catch those who set up Curran schemes between 1 July 1977 and 18 August. The Bill does not do this at present. I should also like to see some mechanism devised to prevent the Curran tax cheats of the financial years before 1977-78 carrying forward their losses into future years which, at this stage, they can do so the amending legislation will catch more of the Curran tax cheats. But far more importantly, it will establish the principle that the Government will date all legislation affecting the definition of taxable income in an income year to the beginning of that income year. Therefore, the lucrative tax avoidance industry as it is euphemistically called by some- I think it was far more accurately designated by my colleague, Dr Blewett, as a parasitic entrepreneurial enterprise- will be very short of customers. Who would be willing to pay the enormous fees that the parasitic entrepreneurs demand to set up these tax cheating rackets if people knew that before the end of the financial year legislation could be introduced closing off those particular rackets? Without the misguided knowledge of the Income Tax Assessment Act and accountancy and legal procedures currently being employed in an anti-social way by the parasitic entrepreneurs of the tax avoidance industry and without financial incentive, their skills would not be misapplied in that way. Therefore, the problem of the High Court would largely disappear. Most people who exploit these tax cheating schemes are people on high incomes. They are self-employed or other provisional taxpayers. Therefore, before the end of a financial year, if there were any widespread utilisation of a particular tax avoidance scheme an alert government or Taxation Office would have some notice of it through the revision downwards of the tax payable at the option of the taxpayer in provisional tax due. There would be warning early in April that something was afoot. An alert government or Taxation Office could move to close off the particular loopholes that were being exploited within that financial year. That would be a further deterrent to what is euphemistically called the tax avoidance industry.
It will be argued by some, of course, that the latter part of our amendment embraces the objectionable principle of retrosepctive legislation. I have two comments to make on that. Firstly, it is arguable whether by definition the legislation is retrospective. Tax is levied on an annual basis. I suggest that any legislation passed within a financial year which affects the definition of taxable income or even the rate of tax payable within that financial year is not by definition retrospective. Perhaps that is arguable. The second comment I make is that when I hear particular members of the Liberal Party proclaiming their grave concern about this vital principle which is being violated by what they call retrospective taxation legislation they remind me of those other Liberals- frequently they are precisely the same Liberals- who fomented or pontificated about the liberty of the individual while simultaneously voting for conscription to send Australian youth to the Vietnam war and similar wars. They display the same type of hypocrisy with respect to this principle of retrospectivity that they apply to human rights. They proclaim themselves to be the defenders of the liberty of the individual against the real or potential tyranny of the State while simultaneously voting for the tyranny of the State for which confiscates the personal physical freedom or even the life of arbitrarily selected individuals.
– What did Mr Calwell think about conscription?
– He was very strongly and consistently opposed to conscription from 1917 until his retirement from the Parliament.
– He introduced it.
-What is the honourable senator’s attitude towards the liberty of the individual? In particular, I want to examine the short and rather selective memory of the right honourable member for Lowe (Sir William McMahon) on the question of retrospective legislation. I think he would acknowledge that he was the chief parliamentary protestor about this Bill. When asked on the program AM on 9 May whether he had agonised over voting against the Government the previous night he replied:
No, I didn’t agonise at all. When I realised that not only were they breaking the Common Law -
That is the Government- but also everything the Liberal Party has ever stood for so far as the law was concerned.
There are several precedents for backdating tax legislation. There is one in the early 1950s and at least one other in the 1960s. More importantly, Sir William McMahon had apparently forgotten the Commonwealth Places (Application of Laws) Act of 1970 which made crimes retrospective. That arose from another ruling of the High Court which some people might have thought to be peculiar. The then Gorton Government in which the right honourable member for Lowe was Deputy Prime Minister introduced the Bill which I have named. In his second reading speech the then Attorney-General stated:
The Bill, if enacted, will apply State laws retrospectively in both civil and criminal matters.
That quote can be found on page 2801 of Hansard of 27 October 1970. The then AttorneyGeneral went on to list the matters referred to. They included larceny, burglary, theft, assault, murder and, in fact, just about every crime in the book. The right honourable member for Lowe who, as I have already mentioned, was Deputy Prime Minister took no part in the debate. He offered no criticism of the Bill’s dragnet retrospectivity. On behalf of the Australian Labor Party the then honourable member for Canberra, Mr Enderby, moved an amendment to delete the retrospective provisions of that legislation. The amendment was opposed by the Government and by all Liberal-National Country Party members. That piece of history which made crimes retrospective gives us some indication of the depth or sincerity of Government supporters who protest about the alleged retrospectivity of this legislation.
Senator Lewis said that for effective business management it is highly desirable that the taxation laws be precisely known There might be something to be said for that. He mentioned the specific case of the purchase of a new truck. He said that if at some time after purchasing a new truck a business manager discovered that the purchase would not be allowed as a taxation deduction in the way he thought it would be, then that would affect the efficiency of the business. There is something to be said for the argument which the honourable senator put up. I do not entirely agree with it. I do not entirely accept it without reservation. As changes which are claimed to have retrospective effect to the disadvantage of the taxpayer are held to be undesirable, surely it follows that changes which advantage the taxpayer and which have retrospective effects are equally undesirable.
This is not a hypothetical case. It has particular relevance to the investment allowance introduced by the present Government at the end of 1975 and its application to the Swan Brewery Co. Ltd. The Swan Brewery had announced in September 1975 the construction of a new brewery at a cost of about $50m at Canning Vale, but of course the money had not been spent. However, three months after the brewery had announced that decision the Government introduced its investment allowance policy. I asked a question of 24 April 1976 about whether expenditure on the brewery would qualify as a tax deduction under the investment allowance provisions but I did not receive a definitive answer. Eventually in the business pages of the West Australian of 3 May 1976, and in other newspapers, it was reported that the brewery’s after tax profit of $ 16.566m, which was up from $9.5 14 for the year before the investment allowance, and presumably the brewery will have more benefits to come from the investment allowance next year.
So it is clear that the Swan Brewery gained $414 m from changes to the taxation law pertaining to capital investment which were announced after the brewery had committed itself to that investment expenditure. If the point put by Senator Lewis is in the first instance valid, it is also valid in the second instance. Should the Swan Brewery be allowed to take advantage of that subsequent change to the taxation law to the extent that it has? I am not knocking the Swan Brewery. The Swan Brewery is just taking advantage of a situation which the Government has created. The final irony about it is that as a result of this investment allowance which was supposed to generate an investment-led economic recovery- and those with a very good memories may rememberthe work force of the brewery will be reduced from 1,000 to 350. Yet the investment allowance was supposed to generate employment.
Although the Government has- and I welcome this minor change- taken some action against the tax avoidance industry we still find advertisements appearing regularly in newspapers. In last weeks issue of the National Times and I think the same advertisement is contained in this week’s issue, we find one particular firm of parasitic entrepreneurs calling itself The Small Business Letter advertising details of how to reduce tax through primary production; how to further reduce tax through trusts; how to make director’s salary rises non-taxable; how to make the cost of a new or existing building tax deductible; how to avoid payroll tax- that is getting into another field, but still- how to invest $6,000 and receive a $12,000 tax deduction; how doctors and other professionals can reduce tax; how to reduce sales tax; how to considerably reduce company tax; how to reduce sales tax; how to considerably reduce company tax; and so on. I have two comments to make on that. If those claims are not correct the Government should be prosecuting those people under the Trade Practices Act for misleading advertising. If they are correct the Government ought to be closing the loopholes in the taxation laws and it ought to be closing them as from 1 July 1977 as required by our amendment. If it was known by the people like these parasitic entrepreneurs who put out The Small Business Letter and by their tax cheating clients that the Government would at any time in the financial year legislate to change tax laws, these people would be without clients and the Government would not have to prosecute them for breaching the Trade Practices Act, if that is in fact what they are doing.
That advertisement mentions trusts. It reads:
How to further reduce tax through trusts.
A question was asked of the Treasurer (Mr Howard) on 9 May in the House of Representatives by my colleague the honourable member for Fremantle (Mr Dawkins) in which among other things he asked whether the Treasurer recalled the Prime Minister’s statement of 23 November and whether the Treasurer had included amongst his recently announced proposals amendments to prohibit this practice, that is, avoiding tax through family trusts. The question continued:
If not, is it the Treasurer’s intention selectively to outlaw tax dodging and to tum a blind eye to those schemes engaged in by the Prime Minister?
The Treasurer replied at some length. The answer filled up about a column, which is half a page of Ilansard and essentially what the Treasurer said was yes, he was going to tum a blind eye to those schemes engaged in by the Prime Minister (Mr Malcolm Fraser). I will read the concluding part of the answer.
In reply to the second part of the honourable member’s question, that is, the ‘if not, why not’ part, I would answer in this fashion: The question of what further reforms in the area of tax avoidance are to be undertaken by the Government is a matter which will be considered by the Government from time to time. I would not think that the honourable gentleman or anybody else in this House who is genuinely interested in the cause of eliminating blatant forms of tax avoidance would want a Treasurer or any member of the Government to speculate at large and in advance of any firm decisions having been made about what areas might be the subject of legislative proscription by the Government in the future.
If the honourable gentleman is asking whether, at the present time, -
He came to the point here- the Government has under consideration tax avoidance measures dealing with family trusts as a broad category, the answer is no.
So the Government’s present intention is to continue to turn a blind eye to those tax avoidance measures which are exploited by the Prime Minister, the Deputy Prime Minister (Mr Anthony) and the former Treasurer, and I would expect also, no doubt, by a number of others. The legislation does not go far enough. On the AM program on 23 November 1 977, after there had been a good deal of publicity of the fact that the former Treasurer and the present Deputy Leader of the Liberal Party had set up family trusts for investment purposes for the explicit purpose of minimising tax payable, just like the people who operated the Curran racket- the purpose is the same- the Prime Minister was asked a question and he said:
I think it is entirely appropriate for people to have family trusts.
The Deputy Prime Minister has gone on record in similar vein that members of the Government think it is entirely appropriate to avoid taxation in particular ways.
– Would you concede that family trusts are designed not only for tax avoidance purposes?
– They are designed to avoid probate as well as income, yes.
– And for other purposes as well?
– There might be some fairly obscure examples of trusts where they exist for other reasons. If, however, we were to impose a higher effective rate of tax on trust income or even the same effective rate of tax as is applied to income received by individuals I expect that there would not be too many family trusts left, and I do not expect that you, Senator, would expect too many either.
– I would like to see your tax returns on your properties.
– If you would like me to go into that, I will.
– Would you like me to go into that?
– I would like to see your returns for the last five years.
– I have farmed with my brother and for some years before that with my father without any others in the partnership and the income was split two ways or three ways, if you think that is relevant.
– I will bet you had partnerships.
– Of course I had. I had one with my father and my brother ever since we were adults and for some years after we had been working on the farm. But if you think that is relevant, let us see what the Prime Minister said when he was asked about this. This was reported in the Sydney Morning Herald of 24 November 1977. He was asked:
Do your private family . . . trusts have the effect of lowering the rate of tax that you pay?
The Prime Minister replied:
Family trusts are designed to keep the families assets together, yes.
That was reported in the Sydney Morning Herald of 24 November 1977. That illustrates the morality and the double standard with which the Senate is confronted- a government which because of its need for revenue, a need which has been exacerbated by the neanderthal economic analysis of the Prime Minister, legislates to close a particular type of tax evasion and on the other hand senior Ministers of that government proclaim that it is quite acceptable, indeed it is even commendable, to evade tax in other ways such as through trusts. Yet the Treasurer says that the Government has no plan to do anything about it. This Government has been motivated by necessity, not by principle, in introducing this legislation. Its legislation would be substantially improved if it acted upon the principle that is contained in the Opposition’s amendment. The legislation would be improved even more if the Government acted to close tax avoidance mechanisms used by senior Ministers in the Government as well as those used by people outside the Government.
-The Senate is debating the Income Tax Assessment Bill 1 978. It is an important piece of legislation which deals with changes to the tax laws. The tax laws, with the passing of the years, have become increasingly complex and almost impossible for the average taxpayer or layman to understand. Before I proceed to speak to this Bill I join issue with Senator Walsh on a couple of matters. I say at the outset, for reasons which will become obvious as I speak, that I oppose the amendment moved by Senator Walsh.
– I raise a point of order. During my speech I moved the amendment. I think after moving my amendment the occupant of the chair then changed. I ask now that the amendment be seconded.
The DEPUTY PRESIDENT-Is it the wish of the Senate that I follow that procedure? There being no objection, that procedure will be followed. Is the amendment seconded?
– I second the amendment.
– The amendment is now formally before the Senate. Senator Lewis I thought drew a clear distinction- it is not an easy distinction to draw- between avoidance and evasion. Obviously Senator Walsh does not quite understand the distinction. There is a distinction which I thought Senator Lewis made perfectly clear. I do not want to go over the same ground again. I simply adopt the argument which Senator Lewis so ably put to the Senate.
Senator Lewis also had something to say about the legislation. I agree with him that there is an increasing tendency in various pieces of legislation to frame sections in such a way that a decision depends on the opinion of the Commissioner of Taxation. This is a vitally important matter when we are dealing with far-reaching pieces of legislation such as those amending the Income Tax Act. The legislation itself does not set out what is power or prohibited. It vests an unreasonable power, in my view, and an increasingly greater power in the hands of the Commissioner to allow or disallow certain matters, and I think that the taxpayer, in some cases, is left without a remedy if he wants to argue against the opinion given. Of course, the taxpayer can go to a board of review and that sort of thing. But if the Commissioner says that he has formed an opinion it is very hard to argue against.
I speak on this Bill tonight to voice my disappointment at and disapproval of the arbitrary and selective action of the Government in departing from one of the fundamental principles in our legal system that legislation, particularly revenue legislation, should not have a retrospective effect. As has been put by high legal authority, a man cannot be punished or penalised for doing something which is lawful at the time it is done. I make it quite clear that I support the legislation and oppose all the schemes and devices- call them what you like- which are prohibited and caught up with by this legislation. My sole argument is on a general basis of the undesirability of a government, whether we or the people who are now in Opposition form such a government, to put through any sort of legislation which has a retrospective effect. I attack the general vice of retrospectivity rather than the particular vice in this instance. I will show that the Government has selected this scheme, of seven schemes, to which to give retrospective operation. The Government, in effect, has set itself up as the arbiter of morality in this field.
This Bill deals with some of the schemes or devices- there are others- of which taxpayers, on the advice of their accountants or tax agents, have taken advantage under the existing law, the law as it stands today. Treasurer Crean said in 1974, after the full High Court first pronounced the validity of this law, that he would tie it in with, I think, a capital gains tax, but nothing was done. Similarly, Treasurer Lynch last year made some sort of a statement, which I will quote in detail later, to the same effect. The point I make is that the law, as it stands, permitted these things to be done.
I will deal with the particular matters in summary form: The first, the so-called Curran scheme; the second, gifts to charities; the third, gifts of a work of art or money to buy a work of art; the fourth, share trading losses; the fifth, dividend stripping; the sixth, reimbursement dividends; and the seventh, abuse of the averaging provisions. Of the seven schemes, the Government has seen fit to apply retrospectivity as from the last Budget date only to the Curran scheme. I have no interest, direct of indirect, in any Curran scheme. I know a number of accountants and lawyers who have acted for people involved with Curran schemes. Fortunately, in addition to my own personal interests, I can say that the legal office with which I am committed and which sends away something like 4,000 income tax returns a year has not had anything to do with Curran schemes. I speak quite objectively in this debate. As this scheme, of seven schemes, is selected as the one to which retrospectivity should apply, we must look at the others. In my view, whilst the Treasurer (Mr Howard) has given reasons for his decisions to apply retrospectivity to the Curran schemes, the scheme involving gifts to charities, with the connivance of charitable institutions, could be regarded as equally immoral and equally reprehensible.
– It does not affect the revenue as much.
– One may affect the revenue more, Senator Missen; that is another matter. I am not quite sure of the honourable senator’s interjection. The point I make is that once a government, of whatever persuasion, sets itself up in moral judgment as to the laws of the country and decides to make one of seven schemes retrospective, in my view it is an injustice; it is a departure from and an abandonment of a fundamental legal principal and can lead only to trouble. The Treasurer, in his second reading speech, said:
It has long been recognised that it is reasonable for taxpayers to so organise their affairs as to minimise liability for taxation.
Sir Owen Dixon, possibly the greatest jurist, used those words in various judgments. Plainly, the user of one scheme is no better or no worse than the user of other schemes. Not only did the full High Court confirm the existing legislation as valid in 1974; it was also confirmed as valid in other judgments some 1 8 months ago- again by the High Court. Indeed, the Treasurer, in one of his statements which I have not before me, said that in his view, on the present composition of the High Court, there was no possibility of it declaring the Curran scheme illegal under the existing law; hence the need for an amendment. We are not arguing about the need for amendment here.
A great deal of loose comment has been made in regard to members of the accountancy profession and tax agents. They are well able to look after themselves. If Senator Walsh were in the chamber I would remind him that there are bad apples in every barrel. Just because a small number of unscrupulous accountants and tax agents seeks to advertise tax avoidance schemes in the Australian Financial Review all members of the same race should not be condemned. I refer to the parable in the biblical days of the Pharisee and the publican. In those days the publican was the tax gatherer, a man despised and spurned. As we listen to various people in the Senate and in the other place we note that the wheel has turned completely. Anyone who has anything to do with advising people on their rights under the existing law is said to be a bad man and someone with whom people should not have anything to do. I cannot buy that argument. I think that if the law of the land says certain things an adviser is legitimately entitled to tell his client or his taxpayer customer that that is what the law says. The December 1977 issue of the Australian Law Journal shows that attitudes to tax compliance differ widely. Sir Harold Wilson- obviously Senator Walsh is a disciple of his- speaking in 1959 described practitioners in the field as ‘the parasitical class of tax avoidance experts with which the city is infested’. I think Senator Walsh said something like that.
– That is not a bad quote.
– I am putting both sides for Senator Georges’ benefit. Lord Atkin in 1936 in a House of Lords decision said:
It has to be recognised that the subject whether poor and humble or wealthy and noble has the legal right so to dispose of his capital and income as to attract upon himself the least amount of tax.
Sir Harold Wilson said the opposite. This statement as to the law has been recently approved by the Chief Justice of the High Court in the 1 977 case of Slutzkin v. the Commissioner of Taxation. I cite a further judgment, that of Lord Sumner in Levene v. the Commissioner of Inland Revenue, a 1928 House of Lords decision, in which Lord Sumner said:
It is trite law that His Majesty’s subjects are free, if they care, to make their own arrangements, so that their cases may fall outside the scope of the taxing Acts. They incur no legal penalties and, strictly speaking, no moral censure if, having considered the lines drawn by the legislature for the imposition of taxes, they make it their business to walk outside them.
In my view if it were the Government’s intention to close the gap in respect of Curran schemes as from the date of the last Budget the Treasurer should have said so specifically at that time and in clear and unmistakable terms, instead of making a vague statement which made no mention of Curran cases or of a retrospective date. The Treasurer stated:
Many of the arrangements that taxpayers are being induced to enter into are highly artificial and contrived, but they are causing substantial amounts of revenue to be either lost altogether or deferred for considerable periods of time. The Government takes a serious view of these developments and proposes in these Budget sittings to bring forward amendments to combat these abuses of the provisions of the tax laws.
He made no mention specifically of the Curran schemes. Some of the newspaper comments at the time are pertinent in relation to the fundamental principle which I am endeavouring to uphold in this speech. The Canberra Times stated:
The great danger in making retrospective laws is that of using a lame administrative device to enforce a political decision to cover up inexcusable administrative neglect or to give a semblance of legitimacy to political decisions that have none at all.
The Sydney Morning Herald expressed its view against retrospective laws in the following terms:
They are bad because they impair the right of the individual to have confidence in the certainty and predictability of the law as it stands when he makes a transaction or a decision.
This sort of retrospectivity introduces a new dimension; that is, that a law can be amended retrospectively. The Government, by proceeding with this legislation, in this instance has created a truly dangerous precedent which can cause uncertainty to taxpayers and their advisers in considering their options under the tax laws. It is true that the present Treasurer has indicated that henceforth when he announces reforms in this field he will state at the time of the announcement the date from which any such amendment to the law will operate. He has done that in relation to at least two areas of activity which he has announced are to cease. He has stated that legislation will be introduced to operate from a certain date.
– And that is just an edict of government.
-All right, but at least it gives certainty to law. My argument with this legislation is that it is retrospective without notice. I think the Treasurer’s recent announcements are a vast improvement on the situation. I do not think anyone advising people as to their rights will object to a government stating, when it has the majority that this Government has in both Houses, that legislation will be introduced and be operative from a certain date which is specifies. I do not quarrel with that. After all, if the Government is to set itself up as an arbiter as to the morality or otherwise of a particular law or laws, it can be argued that some or all of those other six matters covered by the legislation should be retrospective. I have already mentioned gifts to charities, family trusts and other fairly well known devices by which the individual taxpayer can minimise the amount of contribution he has to make to revenue. Those matters might also be considered.
The Australian Labor Party by its amendment is suggesting that all the matters in this Bill should be made retrospective- the whole seven of them-from 1 July 1977. That is the path down which I certainly do not feel the Government ought to go. The Liberal Government is committed by its platform against this sort of legislation. Labor’s amendment illustrates the dangers of its policies and shows how far our socialist friends on the other side of the chamber would be prepared to go if they get back into power. In 1974 Treasurer Crean mentioned capital gains tax. It was mentioned here last week in regard to the desirable legislation abolishing probate duty between spouse and spouse, parent and child and grandparent and grandchild et cetera. That is an indication of where the Opposition is going. I thought that at least the people on this side of the chamber would not embark on legislation which creates a dangerous precedent. I support the legislation in principle, but I oppose that provision which makes one section of it retrospective.
– I support the Income Tax Assessment Amendment Bill 1978 in its entirety and express my view that the Treasurer (Mr Howard) deserves the praise of Parliament and the people for the courageous way in which he has stood up to pressure and has proceeded with the legislation as it is. He has not bent one whit to the winds of criticism that have come forward from small parts of the public and which regrettably have swept away some of the nerve of some of my colleagues even on this side of the chamber.
I believe that what this legislation does, very desirably, is to ensure that a number- I think it is six, not seven- of rather crooked schemes which have been concocted to find ways around the tax laws, are put to an end. They include, of course, the Curran scheme which operates by the issue of bonus shares. They include a method by which gifts are given to a fund or an institution, involving the payment of a large procurement fee to the promoter of the scheme, leaving the donor with a huge tax deduction- a particularly objectionable misuse of charity. They include a scheme involving the tax deduction of manufactured or artificial share trading losses. They include dividend stripping, a scheme by which a company buys shares in a company with accumulated profits, strips these profits by way of dividend payments and then sells the stripped shares- another quite objectionable and useless piece of business dealing. They include the reimbursement dividends involving illusory dividend payments to shareholders. Finally, they include the abuse of income averaging provisions by people who have no real stake in a primary production business, and who have become beneficiaries in a primary production trust simply to gain the benefit of the averaging provisions.
The first thing this Bill does is to remove, indeed to destroy, the operation of those schemes. Senator Tehan asked why only one in seven- I think one in six is the correct numberof the schemes has been made retrospective. I say to him that the one scheme which obviously was going to be the greatest bleeder of the taxpayers’ money and the greatest imposition on the ordinary, honest taxpayer of this country, was the Curran scheme- and that is the scheme that has been made retrospective. I shall come later to the argument as to whether it accords with the principles of my party, the Liberal Party for which I stand. I do not invite my colleagues from another Party to tell me the principles upon which my Party is founded.
There has been a massive campaign against this legislation, certainly against the retrospective part of it. One finds amongst the correspondence, particularly that from Victoria, efforts such as a telegram which I produce. It is three feet long and I have shown it to some honourable senators. No doubt it contains someone ‘s whole list of customers. I wonder whether they know anything at all about the telegram. No doubt if they did, they would approve of the telegram. Perhaps the Commissioner of Taxation would have liked to know about this telegram. But probably it will not be of much importance because I suppose that after the Bill is passed, those people will no longer have much incentive for these tax schemes. But as I say, we have had this pressure from people. At the same time, I have found that there are different pressures because many other people, such as solicitors who run respectable practices and who are concerned in this area. They have said to me: ‘You must stand firm. The Government must stand firm on this matter’. Ninety-five per cent of the people are honest and have put aside the Curran scheme. They will not have a bar of them. Of course for the Government to give way on this issue of retrospectivity would mean a tremendous loss of faith, particularly among those decent taxpayers who would not have a bar of such a scheme.
We have heard some interesting arguments tonight. A little bit of an argument went on tonight between Senator Walsh and Senator Lewis. One, of course, looks almost in vain to find something in Senator Walsh’s speech with which one can agree.
– Come on. You have agreed with it to this point.
– Just a moment. Senator Walsh was, I believe, supporting the legislation, although it is very difficult to tell. He could point only to greedy money-making as the reason why the Government was proceeding with this legislation. That is nonsense. It is a matter of principle and the Treasurer is to be commended for that principle. One must of course ask: Why was this legislation not brought in in 1974? Further, one might well ask why the Labor Treasurers who succeeded Mr Crean did not go ahead with the scheme. Who brought pressure to bear on them not to do so? If Senator Walsh likes to suggest that the Government is under pressure or that it is lacking in principle, perhaps he can tell us the reasons why Mr Whitlam ‘s Government did not introduce such legislation. But I am prepared to be generous about this. I will not put the matter on such a basis. I will put it on the basis that there was such a flow of Treasurers, such a change of Treasurers, that the Whitlam Government could not get around to attending to the major matters that affected this country. I am a generous man and I am prepared to give the Whitlam Government the benefit of the doubt.
When Senator Walsh has an argument, as he did tonight with Senator Lewis, about whether avoidance’ and ‘evasion’ are the same thing, I must disagree with Senator Walsh and agree slightly with Senator Lewis. Those words are not just euphemisms; they are of course two different things. While I agree with Senator Lewis I must say that sometimes ‘avoidance’, as it is called, is a much worse thing than evasion. If a small shopkeeper keeps a few dollars of his takings, does not actually put it in his till and does not account for it and so forth and thereby avoids a little bit of tax, that is reprehensible.
– That is evasion.
-That is right, Senator; that is evasion. But then we come to the people who arrange the schemes that try to wreck our economic system. Their activities may result in a $500m loss of revenue to this country which will have to be made up by other taxpayers in this community. I say that their activities are much more reprehensible. It is a much more undesirable course to create these crooked schemes that may have legal validity, but for which we have an absolute moral repugnance, which are useless and which are therefore being knocked down by this legislation. I say to Senator Lewis that there is a difference between ‘avoidance’ and evasion’, but sometimes I think that avoidance is much more important and more dangerous than the minor evasions of life.
Senator Lewis and another honourable senator are also concerned about the discretions in this Act. There are, of course, many discretions in this Act. I too would like an income tax Act which was more simple and I think this should be looked at again. But in dealing with schemes like this, I do not think it is possible to avoid the discretion which must be given to the Commissioner ofTaxation.
– That is an abdication of Parliament.
-Senator Wright will know that where there is an abdication of Parliament, I will be with you. On the other hand, we cannot expect Parliament to sit here exercising all the discretions all the time because we do not meet all of the time and we are not in a position to do so. We must leave it to the public servants who are judging schemes such as this, to act and to make up their own minds on all the material before them- of course, any taxpayer can put such material before them- whether a scheme is an honest and genuine one or one which is merely an evasion or an avoidance of tax. That is something in which we must allow quite a bit of discretion on the part of the Commissioner of Taxation.
There has been an argument in the House of Representatives about one particular matter. Senator Tehan, a member of the National Country Party, suggested tonight that we Liberals were somehow evading our responsibilities under our platform if we did not oppose this retrospective legislation. As one of the writers of the Liberal Party platform I welcome the increased interest in our platform which has been shown in this debate and which is now being shown by other members of other parties. I should like to clear up the matter because in the debate on this legislation, particularly in the House of Representatives, a number of speakers quoted selectively from our platform. I seek leave to incorporate in Hansard a copy of a one page document which sets out the taxation platform of the Liberal Party.
The document read as follows-
While recognising the key function of the tax system in providing revenue to finance government expenditure, the Liberal Party also recognises its significant roles in relation to economic management, minimising social hardship, and encouraging or discouraging specific areas of activity. The system must be easy to understand, simple and inexpensive to administer, fair in appearance and in practice, and subject to continuing review.
The achievement of these objectives requires a tax system in which-
Taxation is equitable as between taxpayers in a similar position.
The tax burden upon individuals has regard for their ability to pay.
Individual incentive is encouraged particularly by ensuring that
the burden of personal income tax is not excessive;
adjustment is made from time to time for inflationary effects.
Direct and indirect taxation is based on principles which will ensure maximum benefits to taxpayers with family responsibilities and those in low-income groups.
The rights of the taxpayer are safeguarded by
minimising discretionary powers and by asserting the fundamental right to be heard;
assuring taxpayers a fair hearing before judicial and administrative bodies;
maintaining confidentiality of information;
ensuring that taxation adjustments do not have a retrospective effect.
Taxation adjustments, undertaken for general economic purposes, take full account of the effects on resource allocation and income distribution.
There is continuity in application as it affects industry and commerce to maintain stability and permit effective forward planning.
Commonwealth taxation policies are developed in harmony with State and local government tax systems.
Taxation avoidance schemes will be eliminated.
Tax evasion is a crime and will not be tolerated.
-The Liberal Party policy is a document that is coming more into currency. I am glad to say that it is coming into its own right. Let us put it in context. As set out in this document, we say we want a taxation system which is simple and inexpensive to administer. It is true that we have not got that yet. We want a system that is fair in appearance and practice- I think we could do much more about that- and subject to continuing review. Honourable senators should note our objectives. What is omitted by those who try to quote the platform is the number one objective, which is:
The retrospective decision here is essential to ensuring that taxpayers are indeed treated in an even degree. Instead of doctors who have made such a practice of the Curran scheme telling people, as they do, that they will not have to pay tax for years to come and instead of doctors not paying tax and the rest of the taxpayers paying more, all taxpayers who can afford to pay should pay. Our platform provides that the rights of the taxpayers are safeguarded by a number of principles. The fourth is:
That, of course, is the important thing. That is one of the principles. It is a general principle but not a universal principle by which we stand: We do not like retrospective legislation in general. Unless there is good reason for it, we will not support it. That is the practice we apply in this Parliament. The Regulations and Ordinances Committee of this Senate of which I am a member, is constantly facing retrospective legislation and retrospective documents which make grants and which increase pay and do other things. They go back to some period because there is some shortage of draftsmen or because somebody has not got around to changing the regulations. We look at the case carefully and in most instances say: ‘Yes, it is justified. It would be unfair not to do it’. But in other cases we say: This is wrong’. Last year we passed an Act which denied American courts the opportunity of actually taking evidence. There is no doubt that it was retrospective legislation. It interfered with rights. But it was believed by the Parliament, without any opposition, I believe, that it was a necessary and desirable piece of legislation. There was not a call at all against retrospectivity in that case.
I think it was Senator Tehan who read a number of quotations in relation to this matter. I think a quotation was read also by an earlier speaker. I remind the Senate again of another Lord- Lord Greene- a noted English judge. In a case in 1942 he stated:
The fact that the section has to some extent a retrospective effect appears to us of no importance when it is realised that the legislation is a move in a’ long and fiercely contested battle with individuals who well understand the rigour of the contest.
Of course, in this case one understands that the rigour of the contest was well known to those people who engaged in the schemes. We know that many people engaged in these schemes with assurances from their accountants that they would get money back, that there would be a refund if the amendment were made retrospective. We know in fact that some of them will get that refund. When one reaches that situation one knows that this retrospectivity, if it is retrospectivity at all, can be justified. I make this qualification: Is it retrospectivity at all? Other honourable senators have asked this same question. In my opinion, it is not. In my opinion, when the Treasurer said that this was retrospective legislation but justified, he was being over-fair and over-generous. In my opinion, retrospectivity applies as a principle when people take steps, incur expenditure and set out their order of life in such a way that they are committed for years ahead. Then, after that, it is said that it is unfair to penalise people for that.
But, in this case, what does the legislation say? The legislation says to those people who have earned their big income this year: ‘After the end of June you will not have an excuse for getting out of the legislation. You will have no excuse for not paying tax. You will pay the normal tax you would have paid in any case. Your little excuse, your little scheme, will fall to the ground’. I do not regard that in any way as being retrospective legislation. But, if on any definition it is, then I say it is essentially retrospective in the public interest, otherwise it will cost the taxpayer a very considerable amount indeed.
At times some people have raised the questionthis was particularly so in the debate in the other House- of how much it would cost. The estimate which the Treasurer gave in relation to the absence of the retrospectivity proposal concerning the Curran scheme was something of the order of $500m. Some people have said that that may be too much. But I draw the Senate’s attention to the words of a particular expert group, the Taxpayers’ Association. In its 3 June 1978 edition of its publication Taxpayer, it said:
But the Treasurer wasn’t able to put a firm figure on it except to say that somewhere around $500m seems a minimum estimate.
Of course we shall never know. If the legislation is passed (and it surely will be), then taxpayers won’t be disclosing in tax returns that they attempted a Curran scheme in recent months.
So we will not know! It is suggested also in argument in various places that it cannot be as much as $500m because that would mean that a lot of income would have to be earned to enable it to be that much. The Taxpayers’ Association went on to say:
Some of the parliamentary debate was along the lines that, if the rumoured high cost of the Curran scheme was well-founded then it would require far more in capital profits than commerce has made.
However that argument fails when it is realised (and this was mentioned in debate on the measure) that ability to finance a bonus issue from revaluations of capital assets gave limitless scope.
There has been talk of companies being ‘reused’ for Curran schemes- by making an up-valuation of goodwill to create enough profits, issuing the shares, and at some notmuchlater time down-valuing goodwill in readiness for the next round.
If that can be done and if it is done, of course it is impossible to calculate how far this can go. Criticism has been made of the failure to give sufficient notice of what was being done. I do not support the Opposition’s amendment which seeks to back date the amending legislation to 1
July. I do not think there is any particular reason why that date is chosen. The date we have chosen is the date of the reasonable announcement made by the Treasurer last year. Nobody in his right senses would not have realised that it was not intended to include that period.
– No, you missed the point of the amendment.
– I remind Senator Georges that the Opposition’s amendment seeks to back date all the alterations to 1 July 1977. That is a neat date but that is the only thing going for it.
– We do not claim it is retrospective if you make it to 1 July.
– I do not see how Senator Georges can say that it makes any difference to his argument whether the date is the date the Opposition has chosen or 16 August. The position is, of course, that the Opposition could say that it wants the amending legislation to date from the time which Mr Crean suggested. However, I think that would be unfair. The real damage has been done to the economy in this financial year, and I think that the date we have suggested is good enough. In the April edition of its publication the Taxpayers ‘ Association said:
Mr Lynch ‘s statement in the Budget Speech on 1 6th August wasn’t as brief as many think it was. Although Curran schemes weren’t mentioned specifically (to do so would have given strength to the view that the warning then was to be limited to Curran schemes), reading between the lines it isn ‘t hard to see that those tax-planning arrangements were a major target. Over the coming weeks, only the naive would envy the position of Parliamentarians having the pressure put on them to back-pedal on a difficult decision already taken.
I do not know who is envying the parliamentarians. I hope that they will stand up to such pressure. By and large I believe that they really have done so. I refer also to what I think might be a good general conclusion on this subject. It is a statement which was made in the editorial column of the Australian newspaper on 20 April 1978. It stated:
For the Senate to even dream of giving the tax dodgers protection at this late date is not in the Government’s interest, not in the economy’s interest and it is certainly not in the interests of ordinary justice and fair play. Above all, it would be a straight affront to the 99 per cent of Australian citizens who pay their taxes as they are assessed, perhaps with complaints and perhaps with resentment, but without hesitation as a social duty.
The Government must stand firm by its just and stated intentions to prevent the tax dodgers from taking advantage of the rest of the Australian community.
I think that in a nutshell puts the case. It puts the case for this legislation and for that part which seeks retrospectivity, if that is what it is, which is included in it. I stand foursquare behind this legislation and behind the retrospectivity provision. I believe it is a desirable piece of legislation. It is certainly not the end in any way to tax reform. Obviously a lot more needs to be done. The Treasurer has made announcements and fortunately there is now a better procedure. But if in the past there have been, as I believe there have, mistaken weaknesses and slowness on the part of governments to take the action taken in this legislation, the taxpayers of this country should not be the people who pay the penalty. They should not be the people who suffer the penalty. It should be the people who have endeavoured by rather crooked schemes and in ingenious ways to get around the tax laws of this country. I believe, therefore, that this legislation deserves the strong support of the Australian people. I believe it will have that support in this Parliament.
Senator Sir REGINALD WRIGHT (Tasmania) (9.18)- I will not speak unless the Senate is in constitutional validity. I call for a quorum. (Quorum formed.) The Senate is addressing itself to an amendment of the income tax legislation.
– We will keep a quorum.
Senator Sir REGINALD WRIGHTHonourable senators believe they can come into and go out of this chamber as they like but this Parliament will sit for the rest of this week according to the Constitution.
– It depends on the standard of your speech.
– It depends upon the Constitution. I shall just proceed with my speech, Madam Acting Deputy President, if I am permitted to do so. AsI said, we are debating an amendment to the Income Tax Assessment Amendment Bill. Great virtue is paraded by governments that want to increase the net and the strength of income tax assessment. When a country establishes a harsh, excessive and unjust system of taxation the individual taxpayer is entitled to flinch and, in the freedom of his own life, say whether he will work or not to produce an income to be taxed for the purposes including parliamentary retirement funds- lump sums commuted to evade income tax that would otherwise be payable on the allowances. The Government, after a belated, negligent and damnable delay is introducing legislation to outlaw these devices which are being used improperly to evade the system. On the other side there are virtuosos of socialism who have all the units of cancerous capitalism among them- the evil groats of capitalism masquerading as the disciples of the working man.
We are operating a system of taxation under which the little man who runs a small business can earn $8,000 a year and, with perhaps three children to educate, may receive an income tax demand of $3,600. Provisional tax would apply. The next year this person may work till 10 o’clock at night and by over extending himself may increase his income to $16,000 a year, for which he receives a demand of $9,600. Does Labor speak up for these people? We operate a system of income tax so outrageously excessive that the Roman emperors would have come back again and, instead of damning us, would have said ‘we are disciples, we were beneficient’. As soon as the wage earner who Senator McAuliffe purports to represent gets above the basic exemption of $3,700 a year, the next dollar is taxed at the same rate as my dollar, which some people think is a huge income, which I think is more than sufficient and which is made up of the parliamentary allowance plus or minus $2,000 to $3,000 a year. Malcolm Fraser and other wealthy people are taxed at exactly the same rate on the first few dollars from $3,750 to $16,000. From $16,000 to $34,000 everybody is taxed at the rate of 46c in the dollar. Slaves or free menthe right to earn above $16,000 and be taxed for half? Slaves or free men? The virtuosos of the tax system applaud every individual who, with any advice, successfully can avoid the outrageously repressive taxation system that the Government is operating against the working man. The only escape for members of Parliament is to commute their retirement allowances to lump sums and the only purpose of that is to evade the taxation system.
The second point I want to make is that certain loopholes are being closed up altogether too late by this legislation. However, many loopholes are still maintained and are open. Loopholes that have been the subject of official reports for years have not been closed. The greatest loophole of all at the moment is the exploitation of retiring allowances in the form of lump sum payments. The report of the Taxation Review Committeeknown as the Asprey report- had something to say about this. I mentioned this matter eight days ago but no one listened. I have been provoked into putting a little spirit into the issue at the moment and I will endeavour to maintain an energy to see that the public understands the situation. Do you remember, Madam Acting Deputy President, that the Asprey Report which I mentioned eight days ago said -
– Who appointed that committee?
– We did in 1 972 and the report was delivered during the term of the Labor Government. However, the Government of which the honourable senator was a supporter did not take the slightest notice of it. The Labor Government ignored it. What I am protesting against is that the Liberal Government, while claiming virtue for these remedies, is ignoring some of the glaring anomalies that have been before it now for two years. I have a limited time in which to speak but I am not disposed to yield a minute of my time when these things are at issue.
– Could I just ask you a question: When you were a Cabinet Minister did you ever raise these questions in the Cabinet?
Senator Sir REGINALD WRIGHT- If the honourable senator puts his question in that form, of course I spurn an answer. Let the honourable senator judge me by my record. Let the honourable senator ask any Cabinet Minister whether I propagated these arguments or not. I am not afraid. You can use their answers against me. They can attest to the confidence in my argument. I will maintain my cause. Do not start interjecting, or disparaging my purpose, because I want to bring to the notice of the public that there are greater abuses of the taxation system still uncorrected than appear in this Bill. Reference to it is made in the Asprey report at page 353.
– What does it say?
– It says:
However, it has lately become clear that the Commissioner is unable to resist claims that section 51(1) authorises the full deduction of retiring allowances paid by publiccompanies where it can be established that the payments are made for one or more of the following reasons:
as a matter of commercial expediency . . .
as a meansof ensuring greater efficiency; or
as a means of inducing executives to press themselves to the limit by giving them the prospect of being treated generously on their retirement.
Once the company has established that the payment was made for one or more of these reasons- and in practice it is not difficult to establish this- then the quantum of the lumpsum payment is for the company itself to determine and it must be allowed a deduction for the full amount. Instances of amounts of up to $250,000 being paid by public companies to retiring executives and deducted under section 51(1) have been brought to the notice of the Committee. In some of these cases the executives have also received very large amounts from the companies’ superannuation funds and also under service contracts. The amounts received by the executives are reported to have been assessable only as to 5 percent . . .
That is of the amount involved. The executives of public companies are trustees for their shareholders, carrying on the big enterprise, just as members of parliament are trustees for their electors, carrying on the national enterprise. They are exploiting the discretions- against my vote in 1964- just as the members of this Parliament, as I pointed out last week, are seeking to exploit lump sum payments to evade income tax.
One honourable senator reproached the primary producers for devising family trusts to avoid income tax. It may be so in large capital enterprises, carried on by companies such as Amatil, or large families that have amassed fortunes, millions; but the idea of creating family trusts, for whom trustees carry on the business and profits flow to the beneficiaries, has gone into the metropolis and has corroded and corrupted. Any ordinary taxation officers- one does not need an official report- or anyone in government with the slightest responsibility, is conscious of the fact that a bush fire is developing that will completely subvert the income taxation system. Everybody will declare that his business enterprise is for and on behalf of a trust, consisting of a number of people without income, and it will therefore absolutely subsume the idea of income tax according to a graduated scale. Family trusts are formed for the purpose of carrying on a business. In a primary production it is not a problem. Very few primary producers are making a cent in taxable income, but what few are doing so are trying to rear their families at an exiguous income of about $5,000. It is because of that absolutely objectional situation that my fire is engendered. I will not stand here to support the idea that this Bill represents a virtuous inspiration from St Paul, belatedly conceived, to condemn the Curran scheme.
I am moved to say that I have no enthusiasm for a government that condemns such a scheme and leaves uncorrected even more rascally evasionary schemes. So far as I am concerned, pity it is- and I will never be permitted to establish it- that it is Parliament that will decide when and what taxes are to be imposed. We may have a snooty Treasurer who says ‘I do not like that scheme; we will avoid it’, but unless he brings it to the Parliament with the same speed and dedication of purpose that was applied to the Parliamentary Contributory Superannuation Amendment Bill last Thursday and Friday, it will be for nought. If he can bring in such legislation for his own benefit, and for the benefit of members of parliament, why can he not bring in promptly a Bill for the judgment of the Parliament as to whether a certain practice should be outlawed. If we allow the Treasurer (Mr Howard) or any other Minister to decide when particular schemes that seem to him to be obnoxious to the taxation system should be outlawed, we will create the greatest system of expediency and patronage that this country has seen.
– What about the previous Treasurer and his family trusts? Tell us something about them. You did not complain about them in here until you offered to retire. You agreed with them.
– It is one of the degrading aspects of Parliament that when one tries to focus debate upon an essential, fundamental level of principle, by the very nature of things one is met with a diversionary thought that is motivated by mere piddling personal politics. I have stated my position with regard to the previous Treasurer. These things are irrelevant. What we must do is arrive at the stage where the taxation system is capable of being understood by us. None of us, least of all me, understand its fundamentals. It has grown into a complexity that is a disgrace to people who, as legislators, draw salaries. We should simplify it. The second thing is that it has to be just, and when all the loopholes for evasion are closed we will be more respected. Section 260 has been in the Income Tax Assessment Act for years. Honourable senators should look at it and ask why we should be bedevilled by all this. Section 260 states, in language that we are responsible for and are maintaining:
Every contract, agreement, or arrangement made or entered into, orally or inwriting, whether before or after the commencement of this Act -
This section came into operation in 1 936- shall so far as it has or purports to have the purpose or effect of in any way, directly or indirectly-
Senator Lewis is no doubt listening; or avoiding ; we should bear in mind the distinction, with great respect to Senator Lewis and his valuable contribution to the debate- any duty or liability imposed on any person by this Act; or
That has been interpreted by various decisions ground out by the judicial process to be a shell, but ours is the responsbility for failing to put back the real ingredients into that section and from time to time to make it applicable by specific phrases to the idea of bonus shares as an actual cost. Ours is the responsibility for not bringing that section into its proper application where the manipulation of artifices within the joint stock company legislation has been demonstrated. All sorts of wealth can be manoeuvred overnight in the boardroom to deprive the shareholder of his rightful place, to the advantage of directors. When we put into the income tax legislation superannuation provisions designed to benefit employees, directors also came for that purpose within the category of ‘employees’ and scooped mighty superannuation benefits. We will have to fight the privilege, so called, and the secrecy shrouds, so called, to prevent information getting through to the public, of which I will be one on 1 July. We put through superannuation provisions designed to benefit the working man whom we called the ‘employee’, but we misguidedly allowed a director to be included in the definition of ‘ employee ‘.
I received a letter from the Commissioner of Taxation dated 30 May in response to inquiries which I made direct to him. In it he said that the available income tax statistics relate only to companies and show that for the year 1975-76, the latest year for which statistics have been compiled, taxable and non-taxable companies were allowed deductions for superannuation benefits totalling $593m. It would appear that the total amount allowed in 1977-78 will be of the order of $800m based upon the figures available. The revenue cost of these deductions will be about $350m. Do not misunderstand me. A significant proportion of that accrues to the benefit of people properly described as employees, but they would represent only 90 per cent of all employees. The remaining ten per cent, the directors, could be deriving a benefit of at least I would guess, based on my intuition gained from a continuing insight into commerce as a result of that evil association attributed to me when I acted as adviser because of my years of experience- a third. That would go to directors, and they would comprise only 10 per cent of employees. That is exploitation of the superannuation system in the commercial field, just as Parliament is proposing to exploit the superannuation system in its own field by converting income into capital and evading the scythe of income tax exaction.
I now address myself to the decision in Curran ‘s case which refers to the position of a genuine stockbroker who acquires shares in a company no doubt with the knowledge that it has a capital reserve. He sees the possibility of putting through a resolution to convert the capital reserve to a dividend for himself which, being a Capital dividend, is non-taxable. He uses it then as a cost to acquire other shares. The High Court by a division of three to one said that he is entitled to the credit he establishes by appropriating his share credit to this dividend from the capital reserve as a cost. I have read with the greatest attention the dissenting judgment of Mr Justice Stephens and the majority judgments, and I must say that I have infinite respect for the reasoning of Mr Justice Stephen who dissented. I fail to understand why any commissioner of taxation, any law adviser from the Crown or any Minister with any information the day after that decision was pronounced would not take the next case on different facts to the court and do this every six months until the facts were finally understood. How in the name of English language and common sense- as Burns said where worth and sense shall prevail’- would that decision ever be applied to any other set of facts concerning even a genuine stockbroker? But this hoodoo whereby it has been applied to stockbroking partnerships created on an artificial basis is just one of those things that by its weakness paralyses one into contempt. I have the headnote of the decision of the High Court in relation to the Curran case. The Senate knows of that decision but for the benefit of those who may read my speech I seek leave to incorporate in Hansard the authenticated report of the decision as the basis of my comment. I have conferred with the Opposition and the Government on incorporating it.
The document read as follows- curran v federal commissioner of Taxation
High Court of Australia
Barwick CJ, Menzies, Gibbs and Stephen JJ 15 August, 4 November 1974-Sydney
Income tax- Losses and outgoings- Loss on sale of share- Purchase of shares in company- Capitalisation of capital profits reserve account- Distributed to members by bonus issue- Sale of initial acquisition and bonus issue with specific consideration for each- Whether loss or surplus realised on sale- Whether value capable of being attributed to bonus shares- Whether deduction allowable for value of bonus shares- income Tax Assessment Act 1936-1969 s 51(1).
The taxpayer, a stockbroker, was engaged in share trading. He maintained his financial accounts so as to take into account as the value all the shares he had on hand at the beginning of the year at the lower of their market value or cost; the cost of all the shares acquired during the year; the amounts received for shares of which he disposed during the year; and, at the lower of market value or cost; the shares which were on hand at the end of the financial year. The difference in the totals of the first two and the second two items represented the gain or loss in share dealing for the year. Dividends received were carried to an income account.
On 28 April 1969 the taxpayer purchased 200 fully paid shares in Stewart Bacon Holdings Pty Ltd for the sum of $186,046.48. The company had a capital profits reserve account of $206,242.76, which represented the proceeds of the realisation of assets not acquired for the purposes of resale at a profit. At an extraordinary general meeting of shareholders of the company, held on 6 May 1 969, it was resolved that the nominal capital of the company be increased to $250,000 by the creation of 150,000 new ordinary shares of $1 each and a special resolution was carried amending the articles of association to give the company the power required for subsequent actions.
Inter alia, it was provided that assets forming part of the undivided profits of the company standing to the credit of a reserve account or in the hands of the company had available for dividend or representing premiums received on the issue of shares and standing to the credit of the share premium account be capitalised and distributed amongst the members; the sum of $205,325 from the capital profits reserve account was to be capitalised and distributed amongst members holding ordinary shares on 29 April 1969 in proportion to their ordinary shareholding; the capitalised sum of $205,325 was applied in paying up in full 205,325 of the unissued $1 ordinary shares to be distributed as a bonus issue; and the said 205,325 shares ranked in all respects equally with existing ordinary shares of $1 as from 6 May 1969.
Later that day the taxpayer was allotted 191,000 fully paid $ 1 shares. The sum of 1 9 1 ,000 was entered by the taxpayer in his shareholding account as the purchase price of the bonus shares. Later still on the same day the taxpayer sold the 200 shares originally acquired for $197.52 and the 191,000 bonus shares for $188,63 1.60. The proceeds of sale were also entered in the record of shares sold. There thus arose a loss amounting to $ 1 88,2 1 7.36.
During the relevant year of income the taxpayer also purchased shares in various other companies which subsequently resolved to issue bonus shares either out of the proceed2s of the realisation of assets not acquired for the purposes of resale at a profit or out of the amount of the revaluation of assets not acquired for the purpose of resale at a profit, or out of a share premium account. The taxpayer in each case debited his share dealing account with the amount of capital credited as paid up in respect of such bonus shares as the price paid for them as well as the cost of the shares in the company originally acquired by him. When the shares and bonus shares were sold the consideration received was credited to the account.
In his return of income for the year ended 30 June 1 969 the taxpayer claimed a loss from his share-trading operations amounting to $206,019, being the balance of all entries of shares purchased and sold with the value or cost of the opening and closing lists of shares on hand, and sought to deduct this amount from dividend and other income derived by him.
The Commissioner disallowed the deduction and made an assessment on the basis of a much smaller loss from the taxpayer’s overall share dealing in the companies which had issued bonus shares during the year. The smaller overall loss resulted from the Commissioner determining a surplus on the transactions in the shares in Stewart Bacon. The Commissioner compared the price paid for the 200 shares initially acquired with the total consideration received on the sale of both those shares and the bonus shares. The purchase price of the bonus shares was thereby deemed to be nil. That comparison yielded a surplus of $2782.64. On disallowance of his subsequent objection to the assessment, the taxpayer requested the matter be forwarded to the High Court of Australia, where Jacobs J stated a case for the opinion of the Full Court.
Held, by majority (Stephen J dissenting):
Per Stephen J, dissenting:-
No cost was attributable to the bonus shares.
The following questions were stated for the opinion of the Full High Court:
In relation to the appellant’s trading in shares did he incur: (a) a loss of $22,573; (b) a loss of some other, and if so what, amount: (c) a profit of $5 56: or (d) a profit of some other, and if so what, amount?
Barwick CJ. The appellant, a stockbroker, during the tax year ending on 30 June 1969, was dealing in shares on his own account. In keeping his financial accounts in connection with that business he treated the shares which he bought as his stock in trade, bringing to account as the opening entry for the financial year all the shares he then had on hand at their market value or cost whichever was the lower, entering to his debit the cost of all the shares which he acquired during the year and to his credit the amounts received for shares of which he disposed during the year, and bringing to account at market value or cost whichever was the lower as a closing entry the shares of which he remained possessed at the end of the financial year. The difference between the total of the first two items and the total of the second two represented his gain or loss in his share dealing for the year. He had also an income account to which he carried the amount of dividends which he receive during the year.
He purchased in the tax year shares in various companies which, after he had become a shareholder, resolved to issue bonus shares either out of the proceeds of the realization of assets not acquired for the purpose of resale at a profit, or out of the amount of the revaluation of assets not acquired for the purpose of resale at a profit, or out of a share premium account, or out of a combination of these elements. The appellant debited his share dealing account to which I have referred with the amount of capital credited as paid up in respect of such bonus shares as the price paid for them as well as the cost of the shares in the company originally acquired by him. Later, when he sold the shares originally acquired and the bonus shares, he credited the account with the amount received on the sales. Over the period of the year, these entries, along with all other entries of shares purchased and sold and with the value or cost as the case may be of opening and closing lists of shares on hand, resulted in what was claimed to be a trading loss of $206,0 1 9.
In his return of income for the tax year, the appellant entered his dividend and other income so far as its receipt constituted assessable income and claimed to deduct the above-mentioned sum of $206,019 as a loss under s. 5 1 of the Income Tax Assessment Act 1936-1969 (the Act)
The Commissioner disallowed this deduction and assessed the appellant on the footing that the appellant had made a much smaller loss from his share dealing in the companies which had issued bonus shares in the year. An objection to this course of assessment by the appellant was disallowed by the Commissioner. Pursuant to the appellant’s request his objection was treated as an appeal to this court where a single justice stated a case for the opinion of a Full Court. The questions asked by the case are as follows:
The parties resolved their disagreement as to the amount to be deducted in respect of dealings in the shares listed in par 24 and consequently have agreed on the answer to the third question.
In the agreed facts set out in the stated case there are 1 1 instances of the purchase of shares in companies, with details as to the various steps by which the bonus shares in such companies were issued. But the parties agreed on the answer to the third question asked in the stated case with a slight variation in the amount of the loss claimed by the appellant. Consequently, it is only necessary to deal with one instance, this as it happens being the instance which involved by far the largest sum claimed as a loss. Accordingly, I set out the basic facts of this instance.
On 28 April 1969, the appellant purchased 200 fully paid shares in Stewart Bacon Holdings Pty Ltd (Stewart Bacon) for the sum of $186,046.48 which was at the rate of $930.23 per share. The issued capital of that company at that date was $2 15. Its assets consisted of $206,619.78 at bank on current account. Its liabilities were $162.02. It had a capital profits reserve account $206,242.76 which represented the proceeds of the realization of assets not acquired for the purpose of resale at a profit. The articles of association of the company were in the form of the regulations in Table A to the Fourth Schedule of the Companies Act 1961 (NSW) with some modifications not presently relevant. Its nominal capital on that date was $ 100,000 divided into 100,000 ordinary shares of $ 1 each.
The appellant was registered as a member of the company on 28 April 1969 in respect of the 200 ordinary fully paid shares in the capital of the company which he had that day purchased.
At an extraordinary general meeting of shareholders held on 6 May 1 969 it was resolved that-
Later the same day, the Board of Directors of the company allotted to the appellant 191,000 fully paid $1 shares, being his entitlement under the above-mentioned resolutions. Later still on the same day the appellant sold for the sum of $ 1 97.52 the 200 shares initially purchased by him and for the sum of $ 1 88,63 1 . 60 the 1 9 1 , 000 bonus shares.
In his shareholding account, the appellant entered the sum or $191,000 as the purchase price of the 191,000 bonus shares and the proceeds of their sale in the record of shares sold. Taking this accounting of the transaction in the shares of Stewart Bacon, there was a loss of $188,217.36, which sum was included in the total of $206,019 claimed to be deducted in the appellant’s return of income.
The Commissioner’s submission is that the correct way to account for the result of the appellant’s transactions in the shares of Stewart Bacon is to compare the price paid for the 200 shares initially acquired ($188,046.48) with the total price received for these and the bonus shares ($ 1 88,829. 1 2 ). Such a comparison shows a surplus on realization of $2,782.64 which the Commissioner claims was the profit made upon the transaction as a whole. Put another way, the Commissioner submits that the purchase price of the bonus shares was nil and that whilst their acquisition should be reflected in the account amongst the purchases, no sum should be entered against them as a purchase price.
The appellant supports the method of accounting which I have described and submits that it properly reflects the financial result of his transactions in the shares of Stewart Bacon.
The appellant begins with the proposition that a company cannot issue shares as wholly or partly paid except against payment of the amount for which they are to be credited as paid up, or without creating a liability in the shareholder who accepts them to pay that amount. Where a company has profits available for distribution it may issue paid up bonus shares to the extent of the amount of such profits, assuming its articles of association allow that course. Whether the company does so expressly or not, the effect of a decision to issue bonus shares paid up to some amount is to declare a dividend of the amount requisite to balance the amount for which the bonus shares are to be treated as paid up; such dividend not being payable in cash but to be credited to the shareholder against the liability to pay the amount for which the bonus shares are to be credited as paid up, a liability which arises from the issue and acceptance of such shares. In general, bonus shares are issued as fully paid up, but I have expressed these propositions so as to cover the issue of partly paid up shares as well as fully paid up shares.
Thus, in more than a formal sense, the shareholder who has been credited actually or notionally with an amount of distributable profits pursuant to a resolution to capitalize them and to issue bonus shares to a total paid up value equal to or less than the amount of such profits, by accepting the bonus shares in terms of the resolution to issue them has paid for the shares. By accepting them he has agreed to the application to the capital of the company of the amount of the distributable profits so credited to him, thus effecting payment for the shares.
For the purpose of income tax under the Act, the amount of the distributable profits thus credited to the shareholder constitutes income. This is so whether or not the company first purports to capitalise such profits before effecting any distribution of them. Having regard to Inland Revenue Commissioners v. Blott (1921) 2 AC 171; (1921) All ER Rep Ext 810, it may properly be said that the receipt of the bonus share, representing an interest in the capital of the company, is not income: but the crediting of the sum of profits used to effect payment for that share is income: see James v. Federal Commissioner of Taxation ( 1924) 34 CLR 404; 30 ALR 293; Commissioner of Taxes (Vic) v. Nicholas (1938) 59 CLR 230 particularly the judgment of Sir George Rich at 240-5; (1938) ALR 192 and Nicholas v. Commissioner of taxes (Vic) (1940) AC744 (per Lord Thankertonat759);(1940 ) 3AllER91.
Thus, where a company having distributable profits impliedly effects their distribution by the issue against them of bonus shares fully or partly paid up, the recipient of the shares, having regard to the definition of ‘dividend ‘ in s. 6 of the Act, must treat himself as having received income to the amount of the profits of the company applied to pay for the bonus shares and, in my opinion, will be entitled to regard those shares as having cost him that amount of money, even though the resolutions of the company do not provide for payment to him of that sum of money. Whether or not the recipient of the bonus shares must pay income tax in respectof the amount credited to him by the company in connection with the issue of the bonus shares depends on the provisions of the Act. But, in my opinion, whether or not he pays income tax on the amount so credited can have no relevance to the question whether he is entitled to treat himself as having paid the amount credited to him by the company as the cost of the bonus shares.
In the present case, s. 44 (2) (b) (iii) of the Act in the circumstances of the issue of the bonus shares by Stewart Bacon exempts from income tax the amount credited to the appellant in respect of the issue of the shares. But that does not mean, in my opinion, that the appellant is not to be regarded as having paid for those shares the amount of their paid up value. The appellant is bound to treat the amount of $191,000 credited by the company as income received by him, though by reason of s. 44 (2) (b) (iii) it is not assessable income. In my opinion, he is also entitled to treat himself as having paid for the bonus shares the amount credited to him by the company in connection with the issue of those shares. He paid for them by means of the credit given him by the company of his aliquot share of the distributable profits of the company derived from the realisation of assets not acquired for resale at a profit. The resolutions of the extraordinary general meeting of Stewart Bacon went to unnecessary lengths in purporting to allot aliquot portions of the capitalised profits of the company to the shareholders before resolving to issue the bonus shares. But it was the resolution described in the side note as a ‘Special Resolution Effecting Bonus Issue of Shares from Capital Profits Reserve’, which included the resolution to apply a capitalised sum in paying in full the bonus shares, which was effective to warrant the appellant in treating the amount credited to him as his share of the capitalised profits, as having been paid by him for the bonus shares issued to him. Consequently, I would regard the appellant’s account of his share dealings in the year of income as accurately reflecting the result of his transactions in the shares of Stewart Bacon. In my opinion, for the purposes of determining his assessable income, the appellant rightly claimed to have suffered a loss of $1 88,2 17.36 on his transactions in the shares of Stewart Bacon in the tax year ending 30 June 1 969.
In my opinion, the questions posed by the statedcase should be answered as follows:-
Menzies J. The Commissioner, for the purpose of taxing the appellant, who is a share dealer, seeks to follow a simple course to determine his profit or loss upon the buying and selling of shares in certain companies. It is to compare the price at which the appellant sold X plus Y shares in a company with the price which the appellant paid for the X shares only, attributing no cost to the Y shares because they were a bonus issue received by the appellant as the owner of the X shares. Accordingly the Commissioner looks only to the appellant’s initial outlay and final receipt.
The appellant on the other hand contends that, although a bonus issue, he paid for the Y shares by the application of a dividend upon the X shares declared by the company so that the amount of the dividend so applied is the cost of the bonus shares and is deductible.
Had the dividend been assessable income of the appellant the Commissioner would have included it in the assessment to arrive at taxable income and would, no doubt, have been content to allow the appellant the deduction claimed as the expenditure of assessable income to acquire shares. The dividend, however, was by virtue of s. 44 (2) (b) (iii) of the Act, not assessable income. Hence this dispute.
In my opinion, although the resolutions of the company relating to the bonus issue disclose some confusion resulting in some inconsistency, it ought to be concluded that they did result in the declaration of a dividend and its application to pay up in full the shares to be issued as bonus shares. By reason of this, and the appellant’s acceptance of the bonus shares, a payment was made for those shares out of a credit created in favour of the appellant by the declaration of the dividend. It matters not that the dividend had to be so applied and was not payable in cash. The significance of this is simply that the dividend was one within s. 44 (2) (b) (iii) of the Act.
I do not think it correct to ignore the part played by the company leading to the allotment of the bonus shares and to treat them as but part of the appellant’s original purchase notwithstanding that the purchase was made with an eye to what was, in due course, done. The appellant is, therefore, entitled to a deduction for what was so paid for the shares allotted to him.
I would accordingly answer the first question in the case stated affirmatively. I find it unnecessary to answer the second question. It has been agreed that the third question should be answered as follows:-
Gibbs J. This case stated raises for our consideration questions in relation to an assessment to income tax based upon income derived by the appellant during the year of income that ended on 30 June 1969. The appellant was a stockbroker and during the year of income he also carried on the business of dealing in stocks and shares on his own account. For the purposes of that business he held, bought and sold stocks and shares in a considerable number of companies. It is common ground that in the circumstances the stocks and shares constituted trading stock for the purposes of the Income Tax Assessment Act 1936-1969 (the Act)- see Investment and Merchant Finance Corporation Ltd v Federal Commissioner of Taxation (1971) 125 CLR 249-and that in determining whether the appellant had a taxable income it is necessary, in accordance with the provisions of s. 28 of the Act, to compare the value of all stocks and shares held by the appellant at the end of the year with the value of those held at the beginning of the year; an excess of the former value over the latter represents income, whereas as excess of the latter over the former is an allowable deduction. However, sales and purchases made during the year must also be taken into account in arriving at the appellant ‘s taxable income; the proceeds of any sales of stocks and shares must be included in the assessable income and the expenditure incurred in the purchase of stocks and shares- which by s. 51 (2) is not to be treated as an outgoing of capital or of a capital nature- is to be deducted. The appellant, with his return of income, submitted an account of his share trading compiled in accordance with these principles. This account showed that the sum of the value of stock on hand at 1 July 1968 (at cost or market value whichever was the lower) and the cost of purchases during the year 30 June 1969 exceeded the value of stock on hand at 30 June 1969 (at cost or market value whichever was the lower) plus the proceeds of sale by an amount of $206,019, and the appellant claimed this amount, which he said represented his loss on share trading, as a deduction; in consequence he sustained a considerable net loss for the year. The Commissioner challenged the appellant’s accounts in one respect only. The appellant included in the amount representing the cost of stocks and shares purchased during the income year the par value of bonus shares in a number of companies that were issued to him during that period. The Commissioner, however, made his assessment on the footing that the cost of acquiring the bonus shares should be shown in the accounts as nil. The result was to convert the appellant’s loss into a profit.
The case as framed raised questions as to bonus issues made by ten public companies and one private company, but the parties have reached agreement as to the answer to be given to Question 3, which relates to the public companies, and it is unnecessary further to refer to the issues made by those companies. Questions 1 and 2 concern the dealings by the appellant in a private company, Stewart Bacon Holdings Pty Ltd (Stewart Bacon), which on 6 May 1969 issued 191,000 bonus shares to the appellant. I find it unnecessary to state in full detail the facts surrounding the making of the bonus issue, because although it may be surmised that the issue was made with an eye to its consequences under the taxation law, it was not suggested that what was done attracted the operation of s. 260 of the Act. The material facts are as follows: At the beginning of the year of income the appellant held no shares in Stewart Bacon. On 28 April 1969 he bought 200 issued shares in that company for $186,046.48. On 6 May 1969, 191,000 fully paid shares of one dollar each in Stewart Bacon were allotted to the appellant. The allotment was made pursuant to a special resolution by which the company, in the exercise of powers given by its articles, resolved that $205,325, forming part of the undivided profits of the company representing profits arising from the sale of assets not acquired for the purpose of resale at a profit and standing to the credit of the capital profits reserve account, be capitalised and distributed proportionately amongst the members on the footing that they became entitled thereto as capital, and that the capitalised sum be applied in paying up in full 205,325 of the unissued ordinary shares of one dollar each in the capital of the company and that the same be distributed amongst the members as fully paid ordinary shares of a dollar each in satisfaction of the capital sum and in proportion to the number of shares then held by them respectively. Later on the same day the appellant sold for $197.52 the 200 shares which he had bought on 28 April 1969 and also sold for $188,63 1.60 the 191,000 shares which had been allotted to him. The appellant’s accounts made for taxation purposes show that these transactions, which were in truth profitable, resulted in a heavy loss. So far as they relate to these transactions the accounts show as follows:
The Commissioner, on the other hand, contends that in these accounts the cost of the 191,000 shares should be shown as nil; if this is done the result will be that the appellant made a profit of $2,782.64 on these transactions.
The Act does not deal fully with the manner in which a profit and loss account is to be kept by a trader, and in particular does not expressly provide as to the manner in which trading stock acquired during the year of income is to be brought into the account. Where the Act is silent recourse must be had to ‘common understanding and commercial principles’ and that method must be adopted which will be calculated to give a substantially correct reflex of the taxpayer’s true income’- of Commissioner of Taxes (SA) v. Executor Trustee and Agency Co. of South Australia Ltd (1938)63 CLR 108 at 154-6;  ALR 81. Speaking generally, common understanding and ordinary commercial principles will require purchases to be brought into the account at their actual cost. The Commissioner submits that where shares have been allotted as a bonus, and not purchased, they have cost nothing, and therefore should be included in the account at a nil value; moreover, he submits that to bring in the bonus shares at par value would lead to a result which would be manifestly unreal and that this supports the view that it would be arroneous to bring them in at par. The appellant, on the other hand, contends that it was not the account, but the Act itself, that led to the result that a real profit was shown for taxation purposes as a loss. The appellant submits that the sum of 191,000 which was applied in paying up the shares was a ‘dividend’ for the purposes of the Act, but was not assessable income.
By s. 6 ( 1 ) of the Act ‘dividend ‘ includes: ‘(c) the paid-up value of shares issued by a company to any of its shareholders to the extent to which the paid-up value represents a capitalization of profits ‘.
Within this definition the sum of $191,000 was clearly a dividend. This ‘dividend’ would have been included in the assessable income of the appellant by s. 44 ( 1 ) of the Act were it not for s. 44 (2) (b) (iii), which provides that the assessable income of a shareholder shall not include dividends paid wholly and exclusively out of, inter alia, ‘profits arising from the sale or re-valuation of assets not acquired for the purpose of resale at a profit … if the dividends paid from such profits are satisfied by the issue of shares (other than redeemable shares) of the company declaring the dividend ‘.
According to the appellant, on ordinary principles, if it were not for s. 44 (2) (b) (iii) the amount of $ 1 9 1 ,000 would have been shown as assessable income immediately on receipt and the bonus shares would then have been brought into the trading account at $ 1 9 1 ,000 because that sum was in effect applied on behalf of the appellant in paying up the shares. On this submission the only reason why the result of the appellant’s accounting seems unreal is because s. 44(2) (b) (iii) prevents the amount of $191,000 from being taxable, and the error in the Commissioner’s approach is demonstrated by the fact that if the bonus issue had, for example, been made out of profits arising from the sale of assets acquired for the purpose of resale at a profit, so that s. 44 (2) (b) (iii) did not apply, the sum of $191,000 would, if the Commissioner’s contention is correct, have been taxed twice-one on the issue of the bonus shares and again on their sale.
In fact no dividend, as that word is ordinarily understood, was declared by Stewart Bacon. The appellant was never entitled to receive in cash his proportion of the capitalised profits. Nevertheless, the effect of the special resolution was that capitalised profits to the extent of $191,000 were credited to the appellant and applied on his behalf in paying up the shares: James v. Federal Commissioner of Taxation (1924) 34 CLR 404 at 416; 30 ALR 293; Commissioner or Taxes (Vic.) v. Nicholas ( 1938) 59 CLR 230 at 244; (1938) ALR 192; Nicholas v. Commissioner of Taxes (Vic.) (1940) AC 744 at 757-9; ( 1940) 3 All ER 91. In a sense, therefore it may be said that the shares cost the appellant $ 1 9 1 ,000 and that it was appropriate to treat their acquisition as a purchase for that amount. However, I do not need to base my decision on that ground. In my opinion it was not possible to arrive at the appellant’s true income without taking the bonus shares into account as trading stock acquired, whether or not those shares could properly be regarded as having been purchased. The appellant’s trading account would not reveal the real situation if it brought in at no value shares which were in fact valuable, because the amount which it would then show as income would include the value which the shares possessed when they were first brought into stock. The case may be compared with that of a trader who takes into his trading stock articles which he received by way of gift or under a bequest. Cases of that kind not falling within s 36 of the Act may be rare, but they can be envisaged. In such a case an account will not reveal the true result of the trading unless those articles are brought in at an appropriate value, eg market selling value. If the account showed that the articles cost nothing, the result would be to increase the amount of the trader’s profit or decrease the amount of his loss by the value of the gift or bequest and in effect to make the trader pay income tax on the gift or bequest. The only practicable way of reaching a true result in a case of that kind would be to bring the articles into the account at an appropriate value as though they had been purchased, and there is no provision in the Act that would require any different approach. To arrive at a true estimate of the appellant’s income it seems to me necessary to bring the shares into the trading account at an appropriate value, which in the circumstances of the case must be their par value. However, it may be said that if this were done it would ignore the fact that the shares came to the appellant as the result of a bonus issue made by a company whose shares formed part or the appellant’s trading stock and that in fact the transactions proved to be profitable. It must, however, be remembered that the transactions had two distinct aspects- first the acquisition of the shares and then the act of treating them as part or the trading stock and selling them. That which made the transactions profitable was the receipt or the shares as a bonus, ir it were not for s 44 (2) (b) (iii), it would have been necessary to show the value of those shares on the income side of the trading account when they were allotted. It is true that it was held in Gibb v. Federal Commissioner of Taxation ( 1966) 1 18 CLR 628; (1967) ALR 527, that the value or bonus shares issued to a taxpayer does not constitute income in the ordinary sense, but the case was not dealing with the position of a person who traded in shares; if there were no such provision as s 44 (2) (b) (iii) the account of a share trader who received bonus shares in the circumstances or the present case would be misleading ir it did not reflect in the account the benefit received. Thereafter the shares, at their par value, would have had to be included in the account together with the purchases, to enable the necessary comparison to be made between stock held at the beginning of the period together with stock acquired, on the one hand, and stock held at the end of the period together with proceeds or sales, on the other. The ultimate result or accounts prepared in this way would have been to show that a profit or $2,782.64 resulted from the transactions relating to the Stewart Bacon shares considered as a whole. However, s 44 (2) (b) (iii) has the effect that the value of the bonus shares cannot be included in the assessable income- it is that circumstance that leads to a result which appears to be distorted. That, however, is no reason for falsely showing the shares to have had no value when brought into the account as trading stock, and an account prepared on such a false basis would lead indirectly to the taxation of the ‘dividend’ which s 44 (2) (b) (iii) declares shall not be included in the assessable income.
In short, it was, in my opinion, right to bring the bonus shares into the trading account at par value and the reason why this leads to the result, at first sight surprising, that the transactions show a loss of $188,217.36, is that s. 44 (2) (b) (iii) had the effect that the value of the bonus shares never became part of the appellant’s assessable income.
It follows that, in my opinion, the account of the appellant, so far as it related to the Stewart Bacon shares, was correctly prepared for the purposes of the Act. I would answer the questions asked as follows:
In relation to the appellant’s trading in shares in the companies listed in par 24 of the case stated did he incur:
A.- Answered by consent: Yes, $22,513.
A.- Unnecessary to answer.
Stephen J. Since in this appeal I have found myself obliged to arrive at a conclusion different to that of the other members of the court, I should state in some detail why I consider that the taxpayer made no loss in his transaction involving shares in Stewart Bacon Holdings Pty Ltd, but, rather, a modest profit in respect of which the Commissioner has correctly assessed him to tax.
The appearance of a loss situation arises only if the taxpayer is regarded as having outlayed not merely $ 1 86,046, the purchase price of his original 200 shares in the company, but also a further $ 1 9 1 , 000, representing the par value of the 1 9 1,000 bonus shares subsequently issued to him. As against this apparent total outlay of $377,046 his recoupment of only $ 1 88,828 on the sale of all of the 1 9 1,200 shares reflects a loss of $188,828. It is nothing to the point, so the argument goes, that having entered the transaction with $ 1 86,046 and no shares in the company, he concludes it, once again with no shares in the company nor with any resultant liabilities but now with $188,828 in his pocket, showing a net gain of $2,782.
Wherein then lies the taxpayer’s alleged loss? It arises, it is said, from that part of the transaction by which he, as majority shareholder, procured the capitalization of the company’s profits and the issue to himself of 191,000 bonus shares; that process involved two relevant steps, the declaration of a dividend and its application by the company, on behalf of members, in paying up the bonus shares issued to them. Although the first of these two steps results in no assessable income in his hands because of the effect of s. 44 (2) (b) (iii) of the Income Tax Assessment Act it is nevertheless said to involve a receipt of income by him: the second step is, on the other hand, regarded as involving him in an outgoing of $191,000, being the ‘cost’ to him of the bonus shares, incurred, apparently, when the company applies the dividend in paying up these shares. This ‘cost’ is to be brought into account as the value of the bonus shares in the taxpayer’s trading account, from which the equal amount of the deemed dividend is to be excluded. To take one of these two like sums into account and disregard the other necessarily throws up a loss of$1 91, 000, which then provides the measure of the total alleged loss when there is deducted from it the modest profit of $2782 earlier referred to.
I ha ve, I believe, correctly stated the critical features of the taxpayer’s case, although I am conscious of the fact that certain of these features are susceptible of varying emphasis. Thus attention may be focused upon what is said to be the effect of the Income Tax Assessment Act in deeming the sum of $ 1 9 1 , 000, used to pay up the bonus shares, to be a dividend (s. 6 ( 1 ) ) saved only from assessability in the taxpayer’s hands by the terms of s. 44 (2) (b) (iii) of the Act. Alternatively the manner in which the acquisition of the bonus shares is shown in the taxpayer’s trading account may be stressed, their appearance in that account at a appropriate value, in this instance par, being said to be necessary so that the trading account may reflect the results of the whole transaction.
Whatever may be the precise formulation adopted, the taxpayer’s case depends, in essence, upon the view that he should not be regarded, for the purposes of his assessment to tax, as having outlayed only $ 1 86,046 and no more, as compared with his admitted receipt of $ 1 88,2 1 8, instead of a total of $377,046.
There appear to me to be a number of elements of the taxpayer’s case which, on examination, stand revealed as erroneous.
I take first what is said to be the effect of s. 44 (2) (b) (iii) of the Act and all that flows from it. It clearly enough excludes from assessable income a dividend paid out of profits such as those here represented by the company’s capital profits reserve account, if it is satisfied by the issue of shares. The taxpayer’s case is that, although the dividend declared by the company does not, because of this effect of s. 44 (2) (b) (iii), form any part of the taxpayer’s assessable income, nevertheless he is to be treated as in receipt of that untaxed income, which is then immediately applied in paying up the bonus shares. This application of the taxpayers ‘s income is, it is said, a real outgoing which he has incurred and which should be reflected in his total taxable situation. Were it not that s. 44 (2) (b) (iii) happened in this instance to operate so as to exclude from assessability the deemed dividend it would, it is said, be very apparent that the application of the dividend in paying up the bonus shares constituted an outgoing and the fact that s. 44 (2) (b) (iii) does here operate in the taxpayer’s favour in no way detracts from the reality of his expenditure on his part, incurred in paying up the bonus shares.
The flaw in this argument is, I believe, the erroneous effect assigned to s 44 (2) (b) (iii), which mistakes the operation of the Act as it relates to dividends. The Act, by its definition of ‘dividend’ in s6, includes within the meaning of ‘dividend ‘, wherever occurring in the Act, the paid up value of shares when that value represents a capitalisation of profits and then s 44 ( 1 ), read in conjunction with the definition of paid ‘ in s 6, operates so as to include such a dividend in assessable income but always ‘subject to this section’. When sub-s (2) (b) (iii) is read it is seen that s 44 as a whole in fact has no operation at all in the present case. The consequence is that this extended definition of ‘dividend’ is entirely inapplicable and the whole procedure involved in the capitalisation of profits and issue of bonus shares never begins to bear the appearance of involving the derivation of an assessable dividend. Nor will it otherwise involve the derivation of any assessable income. The Act thus produces no revenue consequences at all so far as concerns the transaction involved in the issue of bonus shares.
In Gibb v Federal Commissioner of Taxation (1966) 1 18 CLR 628 at 636; (1967) ALR 527 at 535-6, this Court made all this clear when it said, when speaking of the effect of s 44: … it is important to observe that, in terms, sub-s ( 1 ) does not purport to deal with all dividends as defined; it deals, subject to this section, with all such dividends, and we find that sub-s (2) declares that the assessable income shall not include dividends of the description here in question. Consequently it is, we think, erroneous to say that dividends of that character are, first of all, comprehended by sub-s ( 1 ) and then excluded by sub-s (2). On the contrary at no time do dividends of the kind referred to in sub-s (2), by force of sub-s ( 1 ), achieve the character of assessable income. It is, of course, clear that some classes of dividends which, by force of sub-s (2 ) are not assessable income would, apart from that sub-section, be income of the taxpayer. But this is because they would be income according to ordinary concepts, not because the provisions of sub-s ( 1 ) make them assessable income. This, however, is not so in the case of dividends falling within sub-s (2) (b) (iii).’
Thus, neither pursuant to any provision of the Income Tax Assessment Act nor according to ordinary concepts will the transaction resulting in the issue of these bonus shares be productive of any income for the taxpayer. This court described the true consequence of such a transaction when it said, in McRae v Federal Commissioner of Taxation ( 1969) 121 CLR 266 at 271: ‘ . . . the entire transaction consisting of the declaration of dividend plus the crediting of the bonus shares as fully paid had no other effect than that of a transfer of part of the value of the original shares to the bonus shares. The same property which had been the asset backing for 35,000 shares became the asset backing for 60,000 shares.’ If for ‘35,000 shares’ and ‘60,000 shares’ there be substituted ‘200 shares’ and ‘191,200 shares’ this passage precisely describes what here occurred.
In Federal Commissioner of Taxation v W. E. Fuller Pty Ltd (1959) ALR 1233; 101 CLR 403, Dixon CJ said, at 407-8, of bonus shares which had there been paid up out of the revaluation of capital assets: ‘It appears to me that the allotment of shares and the distribution of the share certificates cannot involve a receipt or derivation of income except under some artificial statutory definition of that word and that the appropriation of the aliquot part of the profit fund to the payment up of the shares does not involve the shareholder in a receipt or derivation of income. The objection to considering the allotment of the shares and distribution of the certificates to be income is that it is settled law that they are distributed and received as capital. ‘ In the absence of any artificial statutory definition’ the transaction must be regarded as having no effect beyond what it in fact does, that is, its effect of transferring almost all of the value of the original 200 shares to the bonus shares.
Although in Fuller’s Case the Chief Justice was in a minority his views were preferred to those of the majority (Fullagar and Menzies JJ) when the matter was again examined by this court in Gibb v Federal Commissioner of Taxation. It was there pointed out ( 1 1 8 CLR at 632 ), that his Honour’s view that an issue of bonus shares could not, according to ordinary principles, be regarded as any receipt of income by the shareholder accorded with that of one of the majority, Menzies J, whose views differed from those of the Chief Justice only concerning the effect of the Income Tax
Assessment Act upon the character, as income, of the allotment of bonus shares.
If, then, the transaction resulting in the issue of bonus shares involved no receipt of income by the taxpayer, but only a transfer of values, there is no occasion for regarding the payment up of those shares as any payment by him, or as any outgoing or cost incurred by him. No resort to the alleged realities of the situation can be used to support such a view nor does there appear to me to be any other ground upon which it may be maintained. In McRae ‘s Case it was said (121 CLR at 271 ), that a shareholder who received an issue of bonus shares ‘did not put a penny more into the scheme than her original contribution’, so here the taxpayer’s only expenditure was his original investment of $ 1 86,046.
It is convenient, at this point, to note one supporting argument advanced on behalf of the taxpayer. It was said that had not this bonus issue fallen within s. 44 (2) (b) (iii) the taxpayer would have been assessable on a deemed dividend of $ 1 91 ,000 and it would then have been strange indeed not to regard the payment up of the bonus shares as involving an off-setting expenditure by the taxpayer of a like sum of $191,000. This appeal to the alleged equity of the situation assumes, however, that had s. 44 (2) (b) (iii) been inapplicable the remainder of the total transaction would nevertheless have proceeded as it did, an untenable assumption; the taxpayer would not have paid $ 1 86,046 for his original 200 shares had the only asset which those shares represented, the company’s capital profits reserve, been liable to carry with it into the hands of shareholders a liability to tax as assessable income. Had that been the case the 200 shares in the company must necessarily have been worth far less than they were, perhaps rather less than one-half what was in fact paid for them, paid in the knowledge that no liability to tax would be incurred on the deemed dividend involved in the issue of the bonus shares. Had the initial purchase price of the 200 shares been reduced in this way so as to take account of the inherent liability of tax possessed by the assets of the company, and which any purchaser would have to bear if he were to obtain the benefit of these assets,, any apparent inequity disappears; there no longer exists any seeming injustice in failing to treat as an outgoing of income on the part of the taxpayer the payment up of his bonus shares.
It may be mentioned in passing that, as Dixon CJ pointed out in Dickson v. Federal Commissioner of Taxation ( 1 940 ) 62 CLR 687 at 713-5 and again in Federal Commissioner of Taxation v. W. E. Fuller Pty Ltd ( 10 1 CLR at 408), until the amendment of the legislation in 1924 entirely altered the treatment of bonus shares, they involved the allottee in the derivation of ‘income’ for Australian revenue purposes and this despite Inland Revenue Commissioners v. Blott ( 1 92 1 ) 2 AC 1 7 1 ; ( 1 92 1 ) All ER Rep Ext 8 1 0. But this was because of the then terms of the tax legislation, which specifically included in income ‘dividends, interest, profits or bonuses credited or paid . . . ‘. Thus in James v. Federal Commissioner of Taxation (1924) 34 CLR 404; 30 ALR 293, it was held that although in Blot ‘s Case (( 192 1 ) 2 AC at 179) it had been said of a recipient of bonus snares that ‘he neither paid nor received any cash ‘ yet, because the paying up of bonus shares involved a crediting to the shareholder of profits or of a bonus, that sufficed to include the amount paid up on the shares in the taxpayer’s income for tax. Ever since 1924 this has no longer been the case and nothing in the present taxing Act produces a like effect. Accordingly James ‘ Case and the decision on similar State revenue law in Nicholas v. Commissioner of Taxes (Vic) (1940) AC 744; (1940) 3 All ER 91, appear now to be of no relevance in a case such as the present.
There remains the contention of the taxpayer that the bonus shares should properly appear in his trading account at a value of $ 1 9 1 ,000, if not because this was their actual cost to him, then at least because they must have some value assigned to them and their paid up value is an appropriate value to select for this purpose.
Where shares are acquired as part of a trader’s stock in trade in the course of a year’s trading it is their cost, not their value, which must initially be shown in a trading account if that account is to fulfil its purpose of disclosing the trader’s financial results for the year. Value will be relevant only if, at the close of the year, those shares remain in stock and it is desired, by a departure from original cost, to reflect in the profits or losses of that year the unrealized profit or loss which has resulted from some change in value since date of acquisition. Sections 29 and 31 permit of this, the latter providing for a choice between two bases of valuation as alternatives to adherence to original cost.
The Income Tax Assessment Act contains no prescription concerning the figure at which acquired stock is to be first entered in a trader’s account, just as it is silent concerning the correct figure to ascribe to sales. In Ballarat Brewing Co. Ltd v Federal Commissioner of Taxation (1951) ALR 603; 82 CLR 364 at 368, Fullagar J referred to this silence saying that the consequence was that: ‘The question does not depend upon any express provision to be found in the Act. It depends upon “the conceptions of business and the principles and practices of commercial accountancy” (per Dixon J in Commissioner of Taxes (SA) v Executor Trustee & Agency Co. of South Australia Ltd (Carden ‘s Case) (1939) ALR 81; 63 CLR 108 at 153)’. But the matter cannot, I think, be in doubt; what must be done is to adopt that method of accounting which is ‘calculated to give a substantially correct reflex of the taxpayer’s true income’- per Dixon J in Carden ‘s Case (63 CLR at 1 54), due regard being had to the principles recognised or followed in business and commerce in the absence of any statutory provision to the contrary- and see generally Arthur Murray (NSW) Pty Ltd v Federal Commissioner of Taxation (1965) 1 14 CLR 3 14. In all but exceptional cases only by entering stock in trade at cost will a correct reflex of true income emerge from the trading account of the year of acquisition of that stock. Although not expressly advertised to, this approach appears to me to be consistent with the way in which this court has in the past discussed the proper composition of such accounts: Carden’s Case (63 CLR at 152, 154 and 156); J Rowe & Son Pty Ltd v Federal Commissioner of Taxation (1970) 124 CLR 421 at 434-5 and 448; Investment and Merchant Finance Corporation Ltd v Federal Commissioner of Taxation ( 1 97 1 ) 1 25 CLR 249 at 265 and 27 1 .
An exceptional case will arise should a trader receive stock in trade by way of gift. Such a situation was considered by Lord Greene MR in Craddock v Zevo Finance Co. Ltd (1944) 27 TC 267 at 279; (1946) 1 All ER 523 (n). That rather special circumstance will require special treatment, the acquisition will not have formed part of normal trading activities and the stock thus acquired will have to have a value placed upon it, otherwise its value will be reflected in any profit for the year whereas it truly represents not any profit from trading but, rather, the monetary measure of the donor’s benevolence. However, with this situation we are not here concerned, the present case involves no gift; the taxpayer, when he purchased the 200 shares, paid a price reflecting the value of an aliquot share of the assets of the company, he gained the opportunity of creating the additional bonus shares which when issued to him still, together with his original share, only reflected the value of that same aliquot share. In a very real sense he paid for the bonus shares when he purchased the original 200 shares. There was no change in the ‘wealth’ of the taxpayer before and after the issue of the bonus shares; all that had occurred was ‘a transfer of part of the value of the original shares to the bonus shares’ (McRae’s Case, supra).
What entries then should properly appear in the taxpayer’s trading account in respect of the Stewart Bacon shares? The original 200 shares cost SI 86,046 and must initially appear in the trading account for that year at that figure; the 191,000 bonus shares in fact cost the taxpayer nothing more and might initially appear at nil cost. However unless, as was here the case, the whole 1 9 1 ,200 shares were to be disposed of almost immediately and at the one time such an entry for the bonus shares might prove misleading and it would accord better with the true situation if the transfer of values from the original shares to the new shares were reflected in the account at the time of issue of the bonus shares. The 191,000 bonus shares could thus be shown at an amount being 191,000/191,200 of SI 86,046, the original 200 shares being then correspondingly reduced from their cost of $186,046, at which they had originally been entered in the account, to 200/191,200 of $186,046. Had the whole of the shares not been disposed of during the current accounting year but instead retained into the next accounting year it would be essential, if they were to be carried forward at some valuation figure other than cost, to carry out such a spreading of values; the whole 19 1,200 shares would have to be shown at a total valuation figure and this would, in effect, reflect the transfer of value which had taken place.
However, since the whole 191,200 shares were in fact to be sold on the very day of issue of the 191 ,000 bonus shares none of these procedures is essential; because the cost of the 200 shares is also the cost of the whole 191,200 shares it would suffice to show the 191,000 shares as having no cost attributed to them. When all the shares are then sold the true financial result will be accurately reflected by comparing total proceeds of sale with cost of the 200 shares. By this means ‘the truth and reality of the situation’ (Ballarat Brewing Case per Fullagar J (82 CLR at 369)) will be revealed. If, on the other hand, the course contended for by the taxpayer is adopted and some cost or value additional to the cost of the 200 shares is introduced into the accounts in respect of the 191 ,000 bonus shares, error immediately manifests itself and the result will be that the account no longer reflects the true financial position.
It is for the foregoing reasons that I would have answered the questions posed in the stated case, in so far as they relate to the transaction involving the Stewart Bacon shares, on the footing that the taxpayer thereby incurred no loss but rather a profit of $2,782.
Order that the questions in the case stated by Jacobs J, viz. the following questions:
The respondent Commissioner to pay the costs of the case stated.
Solicitors for the appellant: Giovanelli and Burgess.
Solicitor for the respondent: Commonwealth Crown Solicitor.
-That decision, as a matter of judicial prudence, would never be applied in another case to a different set of facts even in the case of a genuine stockbroker. To think that the High Court by a majority a year later would apply it to the case of an artificial trading situation set up specifically to attract it as a business of stockbroking is anathema to worth and sense, to use the expression of Robbie Burns. On principle, in my view the law still stands and to treat a capital reserve created by a resolution that as a cost is an artificiality that is to be repelled. The law would not be interpreted as applying to any similar facts but only to facts that were exactly the same. Therefore, the Treasury would be better off without this amending legislation arising from the Curran case if it had a purposeful administration of the tax system, a resolute administration of the AttorneyGeneral’s Department and a persuasive and enlightened counsel to put forward the point of view to the High Court as it is composed now.
– Did you disagree with Sir Garfield Barwick’s decision on that?
-When we come into a forum like this we have to submit ourselves to these petty beer-house interjections. I indicated in the most respectful way that on the facts presented I disagree with the majority decision, but as a matter of judicial prudence and proper development, the High Court even as constituted in that case, would never apply the decision in Curran ‘s case as a precendent unless it had precisely parallel facts. Even in the case of a genuine stockbroker it would be anathema to suggest that that decision should apply to artificially created stockbroking trading. This Parliament does a disservice to the equity of the taxpayer by nominating the date of 1 8 August. We should simply say that the provisions of this clause are declaratory and not amending. Therefore, they would apply as a declaration of the continuing law. They would outlaw all the schemes that have been manufactured and in relation to which the assessments are not complete.
This argument has come up. It has to be discussed on thoughtful ground. When we are dealing with an income tax assessment we are dealing with all the component items of the operations of a business over a 12-month period. On one side there are profits; on the other side there are losses. It is not until the end of the year that the whole subject of the assessment is composed.
It is completely legitimate in the proper principles of retrospectivity in the case of income tax to take the entirety of that year’s transaction and for the Parliament during that year to indicate what at the end of the year shall be legitimate items to be included in it. When one sells a case of apples it is a question of whether they are true to guarantee at the date of sale. Even though they are put into the case eight months before -
– They must be Geeveston apples.
-Of course, I will always be interrupted by purveyors of beer. If a composite quantity of steel, which is not a perishable commodity, was deliverable on 30 June but was not manufactured until 17 August, it would not be paid for if it did not comply with standard on 30 June. I have sought advice on the principle of retrospectivity. No assistance on this matter has been forthcoming from the Crown advisers. I put forward the point of view that until the close of the assessment year it is for Parliament to say what should be the constituent items of the assessment.
– You are only taking off the Labor Party. That is our amendment.
-I have tried to put forward my view in a reasonable, balanced way. For the reasons I have given I strongly support the Government. I wish the date of 18 August 1977 had not been inserted because in my view, on a proper application of the law, if these provisions were made declaratory and not amending they would extend to invalidate all Curran schemes that have been artificially created under the misguided basis that they could be adopted in that artificial sense.
– in reply- This debate on very important measures has ranged over a large number of issues, as one may well expect. On behalf of the Government I am pleased that by and large the Senate seems to be supporting the legislation.
– Order ! It being 10 p.m., in conformity with the sessional orders, I put the question:
That the Senate do now adjourn.
– I will not detain the Senate for a long period. Mr President, if the words of affection being expressed to Senator Wright would cease for a moment I would be able to carry on. I want to raise again in this chamber the problem of the takeover of approximately 40 farms in the Mount Larcom Area of Queensland. I have a number of documents which you, Mr President, and the Attorney-General (Senator Durack) have kindly agreed to allow me to incorporate in Hansard, so that will considerably cut down the period of my contribution. Amongst the points I have raised with the responsible Minister in suggesting a way of trying to finalise the matter to the benefit of the farmers of Mount Larcom are the following: First of all, the development is subject to a franchise agreement. This was the first franchise agreement introduced in Queensland. The second was introduced to allow Mr Iwasaki to take over large areas of land. The first franchise agreement was introduced to deprive farmers of their properties in the Mount Larcom area and even farmers whose property was not required by the mining company would have been ruined because of the development that was to take place on the adjacent farms.
Another problem which the people have had right from the start is that although there was a hearing and a mining warden’s report was compiled, that report has been suppressed by the Queensland Government and nobody knows the contents of it. According to reliable leaks to us the report is opposed to the granting of a licence to mine in the area. There has also been no satisfactory environmental impact study carried out. Of course in all mining ventures this is supposed to be one of the essentials if the interests of both the mining organisations involved and the people concerned are to be protected.
I am given some fortitude in raising this matter again because of an article that appeared in the Australian of Tuesday 9 May 1978 headed: ‘MP calls on Government to intervene in bid’. It has a sub-heading: ‘Small Marrickville holders at risk’. The article reads:
Marrickville Holdings Ltd is likely to come under the scrutiny of the Federal Attorney-General following a complaint by the Federal member for Murray, Mr Bruce Lloyd (NCP, Vic), who claimed minority shareholders may be disadvantaged by the Southern Packers takeover.
With only one day left for Southern Packers to make an offer to the minority shareholders, Mr Lloyd said he was concerned with speculation that the bid may not eventuate.
Southern Packers gained SO. 1 per cent of Marrickville last October with a bid of $ 1 . 1 0 a share and undertook to make a bid for the rest of the shares within six months, subject to funds being available, 90 per cent acceptance, approval of the minority shareholders and merchant bank Hill Samuel.
It appears that so far as Queensland is concerned a similar takeover has occurred in the Mount Larcom area. This raises a whole lot of new problems which obviously come within the responsibility of the corporate affairs organisation and the Trade Practices Commission. Mr Alex Lucke, the Secretary of the Mount Larcom and District Mining Protest Group wrote to me on 19 April 1978. 1 briefly quote from that letter. It is addressed to me. It reads:
For quite some time 1 have been persevering and trying to get the recent share listing of the North Australia Cement Co. I have established that legally they must make available the listing, but they have been stalling and making excuses and suppressing information.
The last listing made available is to 2nd February (just before the big rush of trading in that Company) this was available even back on 24th February.
However, I have determined Queensland Cement and Lime now own 43. 1 per cent and Adelaide Steamships 29.8 per cent. North Australia Cement say the next biggest shareholder is Mutual Life li per cent. (This company held shares and did not divest them during the trading rush).
Since Queensland Cement and Lime and Adelaide Steamships each held 1 7.5 per cent on the 2nd February, and their combined tally is now 72.9 per cent this leaves more than 25 per cent said to be held by very minor shareholders. These two purchased 38 per cent of the sale between them. If Queensland Cement and Lime have formed an outside alliance with another Company or investor to evade the Trade Practices wrath at least another 7 per cent of trading must have occurred. Therefore if 45 per cent or more volume of sales occurred between 2nd February to 20th February scope existed and indicates such a course of events. That Company may be Holderbank CMPS of Switzerland who have publicly declared a verbal commitment to the Gladstone Project.
Unfortunately, I have been unable to determine the total volume of sales during this period ( 1st February to 20th February) other than Brisbane exchange (398,900) or almost 20 per cent.
Over a period of weeks I also have endeavoured with the aid of my research assistants and others who are worried about this to find out to whom the balance of those shares have been sold. There has been great secrecy and almost a conspiracy between the companies concerned and the Queensland Government. Mr Lucke informed me late this afternoon that he has been advised that there has been no application under consideration for the import of foreign funds and no one has any knowledge about any proper environmental impact study. I draw the attention of the Senate to the fact that in February 1 978 or thereabouts Mr Knox, currently the Deputy Premier of Queensland- I do not know for how long he will retain that position- said that takeovers by interstate companies would not be allowed in Queensland. I seek the leave of the Senate to incorporate in Hansard the three relevant documents which set out in fairly great detail all the aspects of this problem.
– Have you shown them?
Leave granted. the documents read as follows-
P.O. Box 70, Mt Larcom. Qld 4695 20th April, 1978
Office for the Commissioner for
G.P.O. Box 895,
Dear Mr Woodford,
Could you please send a copy of the regulations pertaining to an individual ‘s right of access to a recent share listing of a public company.
) Give a definition of a recent share listing
In event of a company refusing to supply such a listing what legal procedure is available to enforce access.
If, in event of a breach of regulations and circumstantial evidence of malpractice in relation to share trading which could be confirmed by perusal of a recent share listing, what authority is available to investigate such circumstances?
What would be the likelihood of its enforcement?
Can a board legally delay transfer of shares following their sale.
Could you please forward a copy of your answers to Senator Jim Keeffe, Parliament House, Canberra, as well as to me.
Thanking you, Yours faithfully, ALEX LUCKE
DETAILS OF NORTH AUSTRALIA CEMENT SHARE TRADING
Queensland Cement & Lime at 2.2.78-17.5 per cent; Adelaide Steamships at 2.2.78-17.5 per cent (35 percent of total issued capital).
The top 20 listed companies as at 2.2.78 appear to have sold by parcel lot without being recorded in stock market sales.
Equitable life 1.5 per cent and Marion Curtis 0.5 per cent did not sell, therefore 1.5 per cent + 0.5 per cent = 2 per cent 25.81 -2 = 23.81 actually purchased.
Sales Brisbane Stock Exchange 2.2.78-15.2.78 = 398,700 or about 20 per cent.
Between 2.2.78-15.2.78 QCL increased to 42.8 per cent and Adelaide Steamships to 29.2 per cent.
Dual purchases 2.2.78-15.2.78 = 37 percent known to be purchased.
North Australia Cement is declining to make available recent share listings other than: Queensland Cement & Lime 43.1 per cent; Adelaide Steamships 29.2 per cent; Mutual Life 1.5 per cent (third biggest shareholder); Add Marion Curtis 0.5 per cent and these listings equal about 74 per cent of the total issued capital.
The key has to be in this 26 per cent (too big a percentage to have survived from an original 40 per cent takeover) 7 per cent (43.1 plus 7 = 50. 1 per cent) would have given QC1 majority control. With 6.81 demonstrated as a discrepancy figure, another company (perhaps nominee) could be involved. Possible volume sales may have exceeded 50 per cent.
The Mt Larcom project is non-viable, requiring an artificially created market situation to permit development. Queensland Cement & Lime outlayed more than $2.5m in share trading while attempting to procure finance for expansion. The $2. 5m would be jeopardised if the remaining minor shareholders were vulnerable to Adelaide Steamships.
Private contact with shareholders as of 2.2.78 who held 0.2 per cent, 0.3 per cent or 0.4 per cent may reveal parcel shares sales to an as yet undetected company.
NORTH AUSTRALIAN CEMENT COMPANY
Details of Major Shareholders
20 largest shareholders hold 60.8 1 per cent of total issued capital (2,059,426) shares.
Adelaide Steamship Company holds 17.5 per cent of total issued capital.
All shares sold transferred since on either 24 February 1978 or 31 March 1978.
P.O. Box 70, Mr Larcom. 4695 3 May, 1978
Trade Practices Commission,
I hereby submit to the Trade Practices Commission the following information both actual and circumstantial in a bid to demonstrate that infringements of the Companies Act has occurred and also further investigation is warranted.
The allegations include anomalies in share trading between the 2-15 February, 1978 in North Australia Cement, and also the consistent failure of that company to make available a recent sharelisting for perusal.
Queensland Cement and Lime is identified as the company to benefit from the irregularities concerned.
North Australia Cement shares were selling at $3. 1 5 prior to the takeover bid by Adelaide Steamships who offered $4.80. Share prices reached $5.18 during the 2-15 February and Queensland Cement and Lime increased their holdings to 42.8 per cent.
Reference is made to the enclosed list of top 20 shareholders in North Australia Cement as of 2.2.78 and details of sales and subsequent purchases.
Of the 60.81 per cent held by the 20 major shareholders, 35 per cent was commonly held by Queensland Cement and Lime and Adelaide Steamships. Sales appear to have been made by parcel lots and not been recorded in stock market figures. Equitable Life approximately 1.5 per cent and Marion Curtis 0.5 per cent approximately did not sell, therefore:
(N.B.) Other parcel lot sales may have also occurred, increasing the volume of turnover.
Queensland Cement & Lime now own 43. 1 per cent and Adelaide Steamships 29.2 percent.
The media reported Trade Practices Commission warned Queensland Cement and Lime it could not purchase a majority shareholding in North Australia Cement, therefore it may be possible an outside alliance has been formed with another shareholder, holding 7 per cent or more. The discrepancy figure of 6.81 per cent is perilously close to that margin. Since no one would purchase $3. 1 5 shares at $5 plus for investment purposes, any transactions above 37 per cent immediately lays substance to claims of manipulation, particularly if those sales reach or exceed 7 per cent above the 3 7 per cent purchased by Queensland Cement and Lime and Adelaide Steamships.
Queensland Cement and Lime outlayed more than $2.5 million in those purchases while actually negotiating for finance for development of their Gladstone Project, (a $90 million venture). Queensland Cement and Lime’s annual profit has been within the region of $3 million for the last few years.
Holderbank Financiers Glaris SA have publicly declared their willingness to invest in the Gladstone Project. Should investigation disclose they own shares in North Australia Cement, it must surely breach Trade Practices regulations?
The outlay of $2.5m by Queensland Cement & Lime at such a crucial stage of negotiations, indicates the importance they attached to preventing Adelaide Steamships from becoming a strongly influencing factor in the Queensland Cement trade. Adelaide Steamships is reputed to have surplus supplies of clinker. North Australia Cement recently quoted Equitable Life * Vi* per cent as the third largest shareholder in their company. If this is true, it would mean:
This would then not give any security to Queensland Cement & Lime as Adelaide Steamships could still purchase a majority holding or form an alliance with another investor for the same purpose. Just no one outlays $2.5m without securing it in some manner. Mr Elphinstone (Chairman Queensland Cement & Lime) gave the negotiations for finance of the Gladstone Project as one of the prime reasons for his company’s action.
Since Queensland Cement & Lime is currently involved in attempting to raise finance with selected institutions for their Gladstone Project it is highly likely they have revealed certain information relating to their advantageous position, which read in conjunction with these allegations may reveal their true creditability in North Australia Cement trading.
The establishment of whether any of the remaining 25 per cent of minor shareholders as of 2.2.78 actually sold shares by parcel lot and to whom could also disclose additional evidence.
On the 24th February, 1 perused the listing of shareholders in North Australia Cement as of 2.2.78 and was told the next available listing would be in early March. I persevered, both at Head Office, Townsville, and Brisbane to have a recent sharelisting made available without success. Others have also endeavoured on my behalf and I enclose early written confirmation of the Company’s attitude.
I believe certain incriminating evidence is being suppressed by these actions. I believe also, unless a recent sharelisting of 100 per cent of the shareholders is made available, that some transfers may be indefinitely held over, and should the Gladstone Venture fail, they again surface without the intermediate shareholder ever being recorded as such.
The remaining 25.7 per cent should also be available as minor shareholders certainly did not buy en masse. If they did not sell, no hold ups should apply for transfers et cetera.
The evidence against Queensland Cement & Lime although perhaps largely circumstantial, is nevertheless conclusive.
Yours faithfully, ALEX LUCKE
– I appeal to the AttorneyGeneral to make sure that a proper investigation is carried out to ascertain whether there has been collusion in the selling of shares and whether there will be consistency in the alleged statement by Mr Knox in February or thereabouts of this year that this sort of takeover would not be allowed. If that statement were correctly reported, the takeover should not be allowed. The livelihood of approximately 40 farmers and their families is at stake. It is possible that when the mining operations are carried out none of the land will be useful in future for agriculture. In any case, the area is one of the most valuable districts near the large provincial city of Rockhampton. Over the years it has proved to be virtually the food bowl for the growing of vegetables, the production of eggs, bacon and what have you. So it is a fairly rich little community. The farmers are terribly disillusioned because of the offhanded treatment which they have received most of the time from the Queensland Government and its Ministers. There have been occasions when the farmers have been reluctant to permit mining officials to come on to their land to carry out boring and other surveys. At one stage the police were called in to stand over the farmers in an endeavour to use the land for mining purposes.
Some of the farmers in this area have been there for three generations. They have been successful farmers. It will be a great pity if there is collusion in breaking the law, to allow a mining company to come in and take over the area at the expense of people who have made a living there for so many years. I hope that the AttorneyGeneral will be able to do something about this matter. I think that most of the people in Queensland today are totally fed up with the standover tactics of the Queensland Government and the manner in which that Government operates not on behalf of the farmers any more but on behalf of the wealthy mining interests even if it means trade collusion in order to make sure that the mining companies are able to stamp on farming communities generally. The Mount Larcom area is a prime example of what is going wrong in our State of Queensland.
Senator Sir REGINALD WRIGHT (Tasmania) ( 10. 10)- I regret that my address to the Senate has the attention of only one member from the Government side, namely the AttorneyGeneral, Senator Durack, and about five Labor senators. I want to raise, as is appropriate to the adjournment debate, a matter that is timely and of national historic interest. On 9 June, as I understand it a few days hence- the son of Sir Charles Kingsford-Smith will land in Brisbane to re-enact the epic flight of his father across the Pacific 50 years ago. I shall be very brief because no words of mine, which probably, with this audience would detract from the excellence of his -
– Do you want a quorum, Senator?
-No. The Senate would not be capable of forming a quorum; the House would be adjourned if a quorum were called.
– Is that what you are afraid of?
– Yes. I ask honourable senators to remember that this Parliament accepted a wonderful gift from Mr Austin Byrne five or seven years ago, a gift which represented 20 years of work and a contribution of great individual wealth, to emblemise the historic flight of Sir Charles Kingsford-Smith. I simply ask you, Mr President, whether you will consult your joint Presiding Officer to consider- I hope that you will not be dismayed or deterred by the difficulties which will no doubt be presentedhaving that display brought out of the dungeon and put into Kings Hall. This would show that the Parliament was conscious of the contribution of the hero of that heroic flight 50 years ago. In that way the people who visit here on 9 June shall see the consciousness of Parliament displayed in that magnificent gift to this nation by Mr Austin Byrne. The presentation will readily be seen for what it represents, a pioneer of courage and success in aviation for Australia.
– I shall have the honourable senator’s suggestion investigated to ascertain whether the proposal can be acceded to.
– I respond briefly to Senator Keeffe who earlier this evening referred to me matters he has raised on the adjournment debate in the Senate. Certain details have been incorporated by agreement into Hansard. From the documents incorporated it is seen that the honourable senator raises a matter of some complication particularly in relation to share trading activities of companies, and also the difficulty of ascertaining what shares have, in fact, been traded. The complaint was made that it has not been possible to find out details about some shares in this trading exercise. The matter has also been brought to the attention of the Trade Practices Commission. One of the letters incorporated is directed to the Commission.
In the time available I have not been able to get any more than a general response from the Department of Business and Consumer Affairs, the Minister for which I represent in the Senate. It may well be that some matters raised come within the jurisdiction of the Trade Practices Commission, which in turn comes under the jurisdiction of the Minister for Business and Consumer Affairs (Mr Fife). Probably the majority of matters raised by Senator Keeffe concern company law and the rights of shareholders under company law to obtain details of share transactions and so forth. That, of course, at the moment would not be a matter for which the Minister for Business and Consumer Affairs or I would be responsible. The administration of company laws is carried out in the State concerned, which in this case would be Queensland.
However, the matter has been raised, as I have said, with the Trade Practices Commission. One of the matters- the lessening of competition or attempted monopolisation- may raise a question under the Trade Practices Act. In the time available it has not been possible to really check out the matter in such a way as to give a satisfactory response in the Senate this evening. However, I have drawn the attention of the Minister for Business and Consumer Affairs to the matter and hopefully a more satisfactory response will be made as soon as possible.
Question resolved in the affirmative.
Senate adjourned at 10.16 p.m.
Cite as: Australia, Senate, Debates, 6 June 1978, viewed 22 October 2017, <http://historichansard.net/senate/1978/19780606_senate_31_s77/>.