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Wednesday, 24 October 1984
Page: 2378

Senator GARETH EVANS (Attorney-General)(9.53) —Although the terms of this legislation deal rather narrowly with terms and conditions and related personnel matters, the debate at various stages has ranged rather far and wide as a result of some latitude granted by the Chair, and quite a number of very rude things have been said about the Labor Party's general defence policy. Accordingly, I cannot let the debate simply subside back into a discussion purely about personnel matters without at least briefly demolishing some of the contentions that have been advanced by speakers on the other side. The reality of the matter is that defence self-reliance is the central objective of Labor's defence policy and it is that objective that governs our approach to procurement , defence industry and force structure. The Hawke Labor Government has been obliged to develop this policy against the background of the previous Government 's total failure to address and correct a massive backlog in the forward procurement program, which is at the heart of course of any viable defence policy in this country. The Fraser Government in 1976 had a defence program for the next five years. By the end of that five years, however, decisions worth some $3,000m had been deferred. The Hawke Labor Government has had to pick up the pieces and is now heavily committed to equipment expenditure which will modernise the defence forces. Some of the more serious deferrals of the Fraser Administration, which have created such difficulties as there are within our defence structure at the moment were these: The first squadron in service of the FA18 tactical fighter aircraft was delayed by four years to 1986-87. The modernisation of HMAS Swan and HMAS Torrens was deferred for four years. The 105mm Howitzer was deferred for six years. The 155mm Howitzer was deferred for three years. The very low level air defence missiles were deferred for six years . The Australian frigate program was deferred for three years. (Quorum formed) I was retailing, when I was so rudely interrupted, the sad record of neglect by the Fraser Administration of the needs of the defence forces of this country, which took its most visible form in an endless series of deferrals of major equipment procurements. I said that the very low level air defence missiles were deferred for six years and the Australian frigate project was deferred for three years. The fleet underway replenishment ship was deferred for six years. That completes that very long list.

It is in contrast to this record of neglect that the Hawke Labor Government has dramatically improved expenditure on defence facilities and equipment. For the second year running this Government has considerably increased expenditure on defence. In its first Budget defence under Labor received a real increase of 4.1 per cent. This year the Government boosted defence spending in real growth terms by 3.3 per cent. This contrasts sharply and devastatingly with the 2.5 per cent average under the Fraser Administration.

Senator Chaney —Mr Deputy President, I take a point of order. It appears to me that the Attorney-General is indulging in debate which is a long way short of the subject matter of this Bill. The Attorney-General has been known to nit pick in this place about relevance. I would like you to draw his attention to the scope of the Bill and bring him back to it.

The DEPUTY PRESIDENT (Senator Hamer) —Order! There is a previous ruling by the President that the scope of the Bill covered the performance of the defence forces and Opposition speakers have covered that; so the Attorney-General is entitled to reply.

Senator GARETH EVANS —I am indebted to the Leader of the Opposition for his contribution. It is one that I made myself in almost precisely the same terms at an earlier stage this evening when his own cast were on their feet embarking on an extravagant series of rude and wholly unsubstantiated allegations about the state of the nation's defences.

Let me conclude by saying that these rises were given at a time of severe budgetary constraint when the legacy of the $9.6 billion deficit of the Fraser Government curtailed many of our more ambitious programs. This is tangible proof of the Hawke Labor Government's commitment to maintaining a viable Defence Force to ensure Australia's security and I reject out of hand claims to the contrary that have been made by the doomsayers and electoral beater-ups on the other side of the chamber. Let me return to the more immediate substance of this legislation.

Senator Walters —I raise a point of order. Could the Attorney-General refer to correct deficits when he is speaking in the debate?

The DEPUTY PRESIDENT —That is a matter for debate; it is not a point of order.

Senator GARETH EVANS —The points of order are getting even less articulate and coherent as the evening wears on, which is not surprising, given the general state of morale on the other side of the chamber.

The DEPUTY PRESIDENT —Order! I have ruled on the point of order. The Attorney- General should carry on with his speech.

Senator GARETH EVANS —I appreciate that, Mr Deputy President. Let me return to the terms of this legislation in respect of which there have been two major matters raised by way of a second reading amendment and a foreshadowed Committee stage amendment. Let me deal with each of them in turn and in terms that will not require me, I believe, to repeat the points in the Committee stage of the debate. The first matter that has attracted attention in the form of an Opposition second reading amendment concerns the lump sum termination tax that is to be payable in respect of Defence Force benefits. The basic situation, of course, under the general law is that a lump sum paid on severance of employment attracts tax at the rate of 30c in the dollar, but if it is received at the age of 55 or more, the tax involves a payment of only 15c on the first $50,000 so received. (Quorum formed) Mr Deputy President, there are certain signs that people in this place are going stir crazy at the moment and not least the Leader of the Opposition, whose behaviour in calling quorums is childish in the extreme .

Senator Chipp —You have had a day's holiday in Melbourne.

Senator GARETH EVANS —A day's holiday. I have been in Tasmania and that is no holiday. The lower 15 per cent rate of tax is intended to produce a more even- handed tax outcome between those settling into permanent retirement with the help of a superannuation pension and those doing so with a lump sum benefit.

It is in relation to this policy-that is the one of general application rather than as it specifically refers to the defence forces-that the Government decided that the retiring age of 55 from which the 15 per cent rate is to apply is a fair and broad base on which permanent retirement could be considered to occur. This age also provides a practical administrative mechanism to overcome the potential of double benefits. It is further the case that it is a feature and rationale of the general scheme that persons retiring before this age could be expected to re-enter the work force and receive a second lump sum payment on later retirement. The Government has not wanted a situation whereby a person can receive a lump sum before age 55 taxed at the lower rate and then a further lump sum after that age also taxed at the lower rate. These principles are of general application and they do not permit exemption or special treatment for particular sections of the community who might terminate employment before age 55. These people will have access, though, to the 15 per cent rate if they put their lump sum into an approved deposit fund until age 55.

As to the special circumstances of the Defence Force in relation to the application of these principles which have been the subject of attention from the Opposition tonight, let me say this: The Government has recognised the special nature of Defence Force life and the need to provide a suitable remuneration package on discharge. We therefore propose to introduce arrangements for increased commutation of pension to offset the effect on Defence Force personnel of the new lump sum termination of employment tax. In considering the treatment of Defence Force personnel under the new tax arrangements, the Government took account of the Jess Committee conclusions on the need for people leaving the Defence Force to have a capital lump sum. The Government decided, therefore, to amend the commutation arrangements for Service personnel to ensure that, on retirement, they will receive approximately the same lump sum payments after the deduction of the new tax as they would have received under the previous tax arrangements. The Bill incorporates appropriate amendments to the commutation provisions to this effect.

I emphasise that this concession has not been made available to any other sector of the community. Persons exiting from other forms of employment before age 55 with a pre-tax lump sum payment similar to that of a Defence Force member will receive up to 30 per cent less in that lump sum payment after tax when the new tax arrangements are fully operative. There will be some reductions in residual pensions. This will be minimal in the early years, increasing in 20 years time but, even then, to no more than 6 per cent in the extreme cases. By that time, however, the additional one year of commutation as proposed in the Bill will be available and, if invested, for example, could return in excess of the reduced pension.

Senator Walters —That is unduly harsh.

Senator GARETH EVANS —It is not unduly harsh if the honourable senator had listened to the point I have just made. If a person so adjusts his financial affairs in the way that a rational person might when confronted with this system , it is not necessarily going to be harsh in any sense at all, let alone unduly harsh. The Opposition's proposal, which is to reduce from age 55 to 45 the age at which the 15 per cent tax will apply to Service personnel would have very little effect. I think in many cases this is the bottom line, despite all the huff and puff we have heard from the other side, as more than 85 per cent of members exit from the Defence Force either without commutation entitlement or before reaching the age of 45. So even if the age were lowered to 45 it would not affect the vast majority of defence personnel other than officers. The Opposition is essentially here embarked upon a cosmetic enterprise.

The other point, of course, is that lowering the age to 45 at which the 15 per cent tax will apply would undermine the principle that the lower tax is to be applied to persons not retiring at an early stage of their working lives but rather persons settling into permanent retirement. The new commutation proposals in the Bill preserve the principles underlying the new tax and ensure their even -handed application to all groups but, at the same time, recognise the special needs of members of the Defence Force. That is the basis by which the Commonwealth Government defends the course of action that has been taken.

As to the suggestion that there has been some breach of promise involved in all this, I make the point that the Government has made no promises to the Defence Force on the taxation of lump sums except to amend the amount available to commutation which this Bill is doing. In talking about promises, the motion before the Chair is obviously referring to a promise that was made by the Minister by Defence, Mr Scholes, at the last election that there would be no change to the Defence Force Retirement and Death Benefits Fund under Labor. Mr Scholes has repeatedly drawn the distinction, which is a real and legitimate one , between the scheme itself and the tax payable upon its operation. It is on that point that I strongly resist and rebut the suggestion that there has been anything in the nature of a broken promise of the kind that is referred to in this amendment.

The remaining matter which attracted debate on this occasion was the hoary old favourite of the Australian Democrats about overseas service for Australian troops. I want to make it clear from the outset that there are a great many things said by Senator Mason about Australia's participation in the Vietnam war with which the Labor Party wholly and totally agreed. But the matter with which we are dealing is the role to be played by the Parliament in making these sorts of decisions. In the course of the debate Senator Mason was obliged to acknowledge that, given the composition of the Parliament as it existed in the Senate in the mid 1960s, it would not have made a hap'orth of difference to Australia's involvement in the Vietnam war had this amendment been in force. It does depend on the vagaries of the composition of the Parliament from time to time and that, indeed, is one of the problems about building in a requirement of reference to the Parliament before Australian troops are committed overseas.

Many things could be said about the larger constitutional principles involved here and about the different roles under the traditional Westminster system of the Executive as distinct from the legislature. I put those sorts of considerations, however, to one side and focus simply for the purposes of this debate on the acute practical difficulties which would be involved were there to be an acceptance of the terms of the Democrats' amendment. The reality is that the amendment proposed by Senator Mason would create severe practical difficulties for the Defence Force activities both in peacetime and wartime, and practical difficulties that are of a kind that I think should be appreciated by Senator Mason. They are not simply beat-ups by way of unjustified and unjustifiable defence of some sort of procedural status quo. These are real problems and problems of a kind that even Senator Townley, who is trying to interject, would be able to appreciate the force of.

The amendment proposed to the Bill could severely constrain the operational effectiveness of the Defence Force in such routine circumstances as the hot pursuit in the Australian fishing zone beyond territorial limits. It would also complicate arrangements for the employment of Defence Force personnel in other countries under the Defence co-operation program and in other instances where the Defence Force may be involved in providing humanitarian or disaster relief assistance. These circumstances are not covered by the exceptions in the amendment foreshadowed tonight by Senator Mason. While no doubt his list of exemptions could be expanded and further amended, it would be difficult to arrive at a list which is both comprehensive and clear in its coverage of routine peacetime activities. As far as periods of actual or threatened hostilities are concerned, the amendment would preclude purely defensive activities such as the protection of Australian shipping. The amendment also calls into doubt certain strategic options, notably pre-emptive or deterrent deployments in the period of tension leading to a possible conflict prior to public knowledge of the existence of an emergency.

It is unlikely, in the event of hostilities, that the military defence of Australia and its territories would be limited to Australian forces serving within Australian territory or territorial waters. Our ships and aircraft could be expected to operate outside Australian sea and air space. The amendments would allow for this only after either resolution by either House of the Parliament or proclamation by the Governor-General. An exercise like Kangaroo 83 demonstrated, however, that it is difficult, even after hostilities have begun, to decide in advance the limits of required deployments. In practical terms that responsibility lies-and it has to lie-with the Government's management of the defence emergency. It would normally be expected that the government of the day would publicise its actions. There are, however, circumstances in which deterrence would not be served by the release of information which may be detrimental to the security of the forces deployed. Moreover, the required declaration of emergency before a deployment took place may be regarded as provocative in the particular defence situation which there arises.

There are many more points of that kind which could be made, but it is not the time, given the circumstances in which we are debating this matter, to pursue it to its ultimate limits. What I have said, I believe, is sufficient for the rejection of this motion, both in its general form in the second reading stage and its more detailed form in which it will be moved in the Committee stage of this debate, on which I do not propose to speak if I can possibly help it.

Question put:

That the words proposed to be added (Senator Hamer's amendment) be added.