Mr TUCKEY (5:44 PM) —The Australian farm has traditionally and typically been occupied and operated by successive generations of the same family. Its value is of no consequence to them because there is no intention that it be realised. As a business, its value increases constantly because to remain competitive the occupier must purchase ever larger and more efficient machinery at considerable cost.

Wise farmers have learnt that the seasonal and cyclical factors of farming preclude excessive borrowing. So machinery, whilst of a capital nature, represents a continuous drain on gross farm income. It is not unusual in my electorate today for the replacement of a tractor to cost $200,000 and for the replacement of a self-propelled header to cost $300,000, and farmers are now finding it necessary to purchase self-propelled spraying equipment valued at $250,000. We continually hear of increased productivity and all the new farming techniques that exist, but the reality is that this highly expensive capital equipment simply allows grain growers, particularly in the marginal areas—which, by any international comparison, is most of the Australian grain growing areas—to get crops into the ground with the first shower of rain.

I was inspecting a work training proposal the other day in a major engineering works in Perth, and we were looking at a piece of seeding equipment which can achieve seeding at the rate of one acre per minute. Crops can be put in quickly and can benefit from following rains, and that is a major contributor to the crops that are being produced in the country today. But that does not alter the fact that the farmer's balance sheet looks brilliant. On face value, they are very wealthy people, but in fact there is a constant demand on their cash flows simply to keep up with the demands of new machinery. In other words, whilst farming is technically asset rich, it is typically net cash flow poor, even in a good season. Consequently, modern-day farming simply lacks the net profit—notwithstanding assets measured in the hundreds of thousands of dollars, if not in the millions—to support retiring members of a family .

Australia's social security laws apply both income and assets tests to the granting of age pensions. The ownership of a family farm obviously resides with the retiring partners or the senior members of the family. So a pension is not available simply on the measure of the assets tied up in a farm that nobody really wishes to realise. The Social Security and Veterans' Affairs Legislation Amendment (Retirement Assistance for Farmers) Bill 1998 —with the conditions I will mention—is aimed at changing that situation. As the member for Burke (Mr O'Keefe) has advised the House, it is not generous but it is the first time any government has attempted to address the problems I have just identified.

The member for Burke quoted from the media that we claimed that there would be some 10,000 farmers eligible. The media may have said so but, in the documentation provided to me by the Department of Social Security and the minister's office, we said at the time that only 1,800 farms would be eligible with possibly another 300 being eligible for the Department of Veterans' Affairs pensions. So it is not fair to say that 10,000 farmers were told they could be eligible. I am quite happy to accept the fact that at this stage only 14 people have made themselves available in nine months, but that has to be read in the context of the complexities of transferring one's farm. It is not just a case of ringing up Social Security and saying, `I've made a decision that the kids can have the farm; send the pension,' there are all the complexities that still exist in terms of transferring the family farm. There is also the problem of the conservatism of the older owners and whether they really want to take this step. Notwithstanding the assistance that arises from them no longer being a financial burden on the farm and leaving it to the younger members to support their own families, they worry about what their children might do—whether they will mortgage the farm, whether they will sell it the day after it has been given to them and so on. So there are many reasons why this might not happen.

This measure was targeted to those people whose net assets were not in excess of $500,000. I have already acquainted the parliament with the fact that in my electorate that much money could represent two pieces of machinery. It is nothing. But then there is the fact that many of those people who would fit this criteria are those where the pressures of borrowing—due to drought or for whatever other reason—have risen to the point where they might be occupying a property with a marketable value of $1.5 million but they owe $1 million. If that sounds a ridiculous situation, let me say that many farms in my electorate would have to outlay $250,000 just to put a crop in the ground. If it does not rain, that just disappears in front of your eyes and you are back there next year having to spend another $250,000. So you can see how quickly those sorts of debt levels can arise.

There is absolutely no doubt that this measure will help some people—probably not the 1,800 or 2,100 who are eligible. We cannot criticise positive measures, but we can point out to the government in this forum that it probably does need to be revised in certain ways. It should be recognised that, for the measure to have a broader effect, particularly in the farming activities in my electorate, we need to look at capital values that are substantially higher than $500,000—$500,000 of net assets and all the various applications that can be made to that to increase that figure through partnerships, et cetera. We can probably in all cases leave the income measure where it is, which offsets that.

If a family farm is able to deliver a comfortable living to the retiring parents and the incumbent children, I do not think too many of them are going to swap that for the pension. If a farm of considerable value generates very low profits to the retiring parents—in the concept that has been put forward in this legislation, we say that the income they have been taking out of the place should not exceed the pension levels—that could be left as a test that better measured the hardship. But it should be recognised that the farm could still be worth $1 million. As I have explained, that is not much in farming. And it is of no value whatsoever unless you intend to sell it. This is an issue that we need to look at—an increase in the actual value or limits put on the asset value, but there is not necessarily a change to the other side of it.

I want to make one exception to that, which was drawn to my attention by a constituent, that is, where the retiring member of the family is, for instance, occupying a nursing home. Remember that they are asset tested out of all the support that a typical pensioner would receive in a nursing home. But the payments the incumbent family on the farm have to pay to keep their retired family member or members in a nursing home are vastly more than the pension. As such, it is a rather unfair measure, where people meet that sort of cost and are then told, `Well, you are well off.' Clearly, they are not. The constituent who contacted me had to take up farm work as a shearer to make up the difference between supporting his mother in a nursing home and supporting his own family on a farm that had an asset value well in excess of the limits that are replaced by this measure.

I am also concerned that we did not give people the opportunity—particularly considering that this is a finite measure; I think people have to take this decision within three years—to place their affairs in this thing called a trust that everybody wants to blackguard these days. Trusts are ideal for families to manage their property assets and to allow them to transfer from generation to generation without having to go back to the state land authorities and pay very substantial transfer fees and stamp duties in the process. A trust is for that purpose.

It is about time people realised that all of the tax advantages of a trust are available to a partnership. All the advantages of a trust or a partnership in terms of income splitting are available to a PAYE family where four or five people have separate incomes. The fact that they earn them separately from different employers gives them the same right to access additional tax free thresholds. The fact that three or four family members might work on a farm but take the income back through a trust is no different. It is really time outside of the big end of town that the use of a trust is not maligned in the way it is in terms of tax results.

As a measure, why not say, `Look, we understand how a family farm works. We understand what it is and that it has no value because you do not want to sell it. Why don't we just let it get into a trust situation and then say that, as such, it is not an asset that affects, in its capital sense, the rights of one-time beneficiaries of the trust to a pension'? It is a simple fact that farming has always been difficult, but with prices today that in real terms are substantially below what they have been in the past it is impossible for successive generations. There could be three generations quite simply trying to get income out of the same property. I think we recognise that these people are in hardship and they should have access to the pension.

I would like to think that the Minister for Finance and Administration (Mr Fahey), in considering this issue for the future, will take some of my representations into account. But I do reject the views of the member for Burke when he said that it was a cruel hoax. You cannot say that any positive measure is a cruel hoax. The facts are on the table. If some people's expectations were substantially above that, they cannot complain that they were hoaxed because the conditions were put out. They can be improved as time goes by. I thank the government for what it has done so far.