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Thursday, 20 May 1965

Senator HENTY (Tasmania) (Minister for Civil Aviation) . - in reply - We have roamed over a number of subjects during this debate. I have taken note of most of the subjects that have been raised and I would like honorable senators to know that even if I do refer to them they will certainly be recorded by the Department of the Treasury. I wish to reply to some of the points that have been raised and particularly to the matter of taxation and the Ligertwood Committee's report to which Senator Wright referred. I must say that I like the delightful way in which he makes legal questions appear so simple. As a member of a Cabinet committee which has spent many days on this subject, in company with the best qualified technicians that we have, I can assure the honorable senator that we have not found this facet of taxation nearly as simple as he appears to think it is. I would not like the Senate to think that we have not given long and earnest consideration to the proposals made in the legislation, nor would I like the Senate to think that we would introduce the legislation without first having explored exhaustively every avenue open to us.

It is not simple to write into the very complex taxation legislation a simple definition to cover avoidance of taxation in every set of circumstances. We tried to do that. Over and over again we tried to get a precise definition to meet a particular set of circumstances. When we had a definition on the table and our legal advisers felt that it was legally watertight and a sound and simple exposition in the circumstances, the taxation people would say: " Well, what about this situation? If two or three companies did such and such a thing what would happen?" We would have to say: " Yes, it does not cover that. Certainly there is a gateway there." They would say: " And what about this position?" And we would have to say: "Yes, there is a gateway there ". That happened time after time when we were trying to arrive at definitions to cover this very complex matter of taxation.

Senator Wrightsaid that section 260 of the Income Tax and Social Services Contribution Assessment Act could be used to meet the position. That is not what our legal advisers have told us. They have had some very sorry experiences with section 260 and they do not regard it in the blithe and happy spirit in which Senator Wright appears to see it. In fact, I should say that if we were to use that section as a waddy, one of the first to rise to his feet in the Senate and complain would be the honorable senator. If the section were to be used as he suggests it would be the most arbitrary use of it.

I say to the Senate that this has not been an easy matter to deal with. In common with every other member of the Cabinet committee I hate the idea of taxation laws which provide for discretions if there is any other way out. But we have had conferences with a number of the most expert and able bodies and in discussions on these matters they have said: " We cannot provide you with an answer that does not leave a multitude of gateways through which the shrewd boys may pass or which does not do harm in genuine cases or destroy many small sections of the community. People would be hurt if you made a precise and detailed attack on one facet." That is the problem we came up against after spending many hours on this matter with the best technical advisers we could find. I say to Senator Wright that if he can come blithely into the Senate and put forward solutions to these problems we will use them with the greatest of pleasure provided that they are sound, because that is the kind of advice we are really looking for.

The honorable senator spoke of leases. The general effect of the amended income tax law is that capital sums paid for leases will be neither assessable income of the recipient nor allowable tax deductions for the purchasers. What does that mean? It means that we have gone back to the old position where such a sum is regarded as capital. It is a capital increment and not taxable. Certainly we shall lose the taxation on that sum, but at the same time we shall not lose the taxation which was deductible in the hands of the man who bought the lease. The one almost balances the other. This is a very complex field in which the best brains of a number of professors - and I do not say that they should not be employed in this field - set out legally to avoid the incidence of taxation. It has been the experience of taxation authorities over the years that no matter how precise are the provisions that are written into this very complex legislation, openings will be found by shrewd persons. It is either that or hurting people who in the opinion of the Commissioner of Taxation should not be hurt. So these discretions are provided. I believe that the discretions will make for a greater measure of justice in the long run. As I have said, we have not been able to find a precise definition and therefore we have not been able to employ one.

We have had a great deal of assistance in this matter from competent outside bodies. I have had a long personal correspondence with a very keen and interested solicitor in this field. He said to me at the end of the correspondence which extended over two or three months: " I have objected to this principle. I still loathe it but I must say to you in honesty that I am darned if I can devise one which will fit the circumstances better than the system of discretions." The guide lines which will be given in the public information bulletins and which I think are very worthwhile, will assist in overcoming the problems. They will not overcome all the problems, of course. There will be cases which will be heard by boards of review. I thank Senator Wright for raising the point that the boards of review take two years to deal with matters. That is far too long. In my view we should consider setting up more boards of review so that matters may be dealt with more expeditiously. I do not want the honorable senator to think that I have overlooked that point.

The position regarding leases is that a premium paid will be regarded as a capital gain. It will not be taxable iri the hands of the recipient nor will it be an allowable tax deduction for the person who pays it. Honorable senators will understand full well that the market place will settle this sort of thing because, as I have said, no longer will the premium be allowable as a deduction to the person who pays it. He will not be able to pay £10,000 believing that £5,000 will come back to him in the form of a tax deduction, and the other man will receive it as a capital gain. I believe that lease premiums will gradually disappear from the field of commerce, or that at least their number will be very limited. There are already signs that that is happening in the commercial world.

I have worked on this problem for many weeks. Some of my colleagues worked on it for 12 months before me; I joined the Cabinet committee only a few months ago. Having studied the problem, I am not silly enough to believe that there will not be cases in which companies will believe that they have been singled out for unfair treatment. Of course there will be anomalies. It is because we have had to make a long study of the advice that has been given to us by outside bodies that we have not yet been able to prepare legislation for the consideration of the Parliament. We tried earnestly to have it prepared, but it will not be ready until the next session, the Senate will then have an opportunity to consider the amendments. I should not like anybody to think that this is an easy problem to solve. Would that we could implement section 260, as Senator Wright suggests. If only that could be done our problems would be solved, but our legal advice is that it does not apply in many cases.

It was stated that in New South Wales a premium was paid prior to 1957 under the pegged rent rules. The New South Wales rules were altered in December 1946. Now the landlord and the tenant may agree upon the rent an dno premium need be paid. The tenant is able to claim his rent as a deduction and the landlord is taxed on it. Senator Wright has interested himself in many other facets of the taxation law. Indeed, he blows a breath of fresh air through it whenever he rises to speak on the subject. I do not criticise his keen interest in this field. Perhaps it is because his capacity is so much greater than ours that he treats the various problems as being easy of solution. I am not competent to reply to many of the points he has raised, and I do not propose to do so. I repeat that the amending legislation will be introduced in the next session.

Senator Aylettreferred to the Coolangatta airport. I should not like him to think for a moment that we are trying to force any council to take over an airport. Admittedly, we have a local government ownership scheme which is designed to enable us to stretch as far as we can the limited amount of money that the 1 1 million people of Australia are able to provide. We encourage local government authorities, even in areas where airports may not be a payable proposition for years, to assist us in the provision of airport facilities. Tomorrow I am going to Winton, which is in the far west of Queensland, to open a new airport. I agree with Senator Benn when he says that the airport at Brisbane is a first class airport from the viewpoint of navigation. I agree with him when he says that the facilities they have there are good. But I point out that we have had to spend money in other areas of Queensland, too, because it is a highly decentralised State. In the north there are the great cities of Townsville, Mackay and Cairns. Indeed, we are now spending £600,000 on the runways at the Cairns airport.

To come back to the Coolangatta airport, we told the council in question that we would like it to study the local ownership scheme. We said that we were prepared to bring the airport up to Electra standard before we handed it over by spending £390,000 on it, the sum of £320,000 to be spent on the runways and £70,000 on the pavement. We have offered the council ownership of the airport. Under this proposal we would find forever afterwards half the cost of the maintenance of the airport and the council would be entitled to levy whatever charges it liked. It would be entitled to the revenue derived from any kind of concession it liked to put on the airport.

Senator Cavanagh - It would get this money from Senator Aylett.

Senator HENTY - Having known Senator Aylett for a long time, I am sure he would not mind paying a little extra to provide a good airport in the area in which he is now interested. I must say that I was sorry to hear him, as a Tasmanian, say that we had done certain things for Launceston. Has he forgotten so soon the place that has returned him to this House for 27 years, and is he now prepared to run down the Launceston airport in favour of the Coolangatta airport? The Launceston airport is the sixth biggest airport in the Commonwealth. Launceston has had to put up with two little huts for years and years.

Senator Aylett - We moved those huts when we were in office. What is wrong with the Minister?

Senator HENTY - You did?

Senator Aylett - Yes.

Senator HENTY - The terminal, which is occupied by both the major airlines, is quite insufficient for the passengers and freight that move through that airport. I repeat that Launceston is the sixth largest airport in Australia and that for years it has had to put up with the kind of facilities that I have mentioned. It is entitled to have spent on it the money that is being spent at the present time. There is only one other matter I want to mention. I think every honorable senator is pleased to see Senator Aylett back here in much better health. He lays the credit for this at the door of a chiropractor. That is all right. I like the way in which he fought for this profession. I could not help but smile at the fact that he sought assistance for members of this profession so that the fees he had been charged could be deducted on his income tax return.

Senator Aylett - And on the return of everybody else.

Senator HENTY - Of course. How that will help the chiropractors I have not yet worked out. I merely mention that in passing. Senator Aylett's point is well made. I am sure that the Senate is delighted to see the honorable senator back here again in such good health and with fighting spirit. I have often seen him fighting in the passageway, as Senator Benn has described it, for something in which he believed.

Question resolved in the affirmative.

Bill read a first time.

Sitting suspended from 5.46 to 8 p.m.

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