Mr McMULLAN (2:13 PM) —My question is addressed to the Treasurer. Can the Treasurer confirm that companies making golden handshake payments claim them as an expense and receive a full tax deduction for them? Doesn't this mean that taxpayers foot $3 million of every $10 million paid by a business? Does the Treasurer recall claiming yesterday that the government could not or would not act on this matter because all such payments are tax deductible by companies? Treasurer, isn't it true that there are already laws that do not allow some payments such as entertainment, corporate yachts and corporate club membership as tax deductions? Isn't it also the case that, for many years, under the existing taxation law excessive employer contributions to superannuation funds for directors and senior executives have not been tax deductible? Why won't the Treasurer apply the same principle to excessive executive handshakes?

Mr COSTELLO (Treasurer) —The information which I also gave yesterday was, of course, correct. The statement misrepresenting it and claiming to the contrary by the member for Fraser today is false. The taxation law provides that `expenses necessarily incurred in the conduct of a business are tax deductible'. If it is an expenditure of a private nature, it is not necessarily incurred in the carrying on of a business. So to say that, in relation to private memberships or private yachts, they are not tax deductible is merely to illustrate the point that they are not expenses necessarily incurred in the conduct of a business. The general law—it used to be section 51; it has a different number under the new tax act—provides that `if it is necessarily incurred it is tax deductible, but not if it is of a private nature, or not if it is carved out for some other reason of public policy,' as occurs from time to time in relation to amendments to the tax law, `but absent any specific provision, the fact that it is necessarily incurred in the conduct of carrying on a business makes it tax deductible'.

That was the case yesterday, that was the case under 13 years of Labor government, that has been the case since the Income Tax Assessment Act was written in 1936, and that is the principle underlying Australia's taxation law: companies are taxed on profits being income after expenses. As I said yesterday, if the Australian Labor Party believes that payments to employees, which are fully taxable at the full marginal rate of 48½ per cent in their hands, should also be taxable in the company's hands—that is, one should bulk up the 48½ per cent plus the 30 per cent company tax rate and have a marginal tax rate on employee remuneration of 78½ per cent—and if it wants to support a 78½ per cent taxation rate, then it should say so. It is entitled to do that. It is entitled to support 78½ per cent taxation rates.

But what we do not believe the Australian Labor Party is entitled to do is to slip around with the suggestion that maybe it is in favour of that but, every time it is pinned down, deny that that is its policy. If the Australian Labor Party wants to come out and support 78½ per cent marginal tax rates, let it say so, and we will engage it in that debate. The people of Australia will be entitled to determine it. But let us not have this slippery, slidey opposition coming around, trying to walk both sides of the fence, trying to hold one thing out but never actually announcing a policy. Let me ask this question: does the Australian Labor Party support a 78½ per cent taxation rate or does it not? Would it please inform the public what its position is, and would it clarify the matter? This side of the parliament does not support it, as Labor did not during 13 years, as has not been the case throughout the course of the Income Tax Assessment Act 1936 and as has not been the case since income tax has applied to companies.