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Tuesday, 12 June 1984
Page: 2862


Senator WATSON(9.05) —The Senate is debating cognately, with some time constraints, two Bills relating to income tax. The first is the Income Tax Assessment Amendment Bill (No. 3) 1984, which is the major Bill, and the second is the Income Tax (Companies, Corporate Unit Trusts and Superannuation Funds) Amendment Bill 1984. Ever since the Hawke Labor Government came to office it has attacked that section of the community that has saved or attempted to save money or has accumulated capital. The first on the hit list was the lump sum payment. The latest is the assets test on pensions. It is almost 13 months since the first announcements were made on the changes to taxation on lump sum payments when a person retires or terminates his employment.

After a great deal of community debate and debate within the Australian Labor Party the Senate, at long last, has before it a Bill to amend the law. That Bill has been introduced in the dying hours of this parliamentary session. Under existing legislation only 5 per cent of lump sum payments received in a single amount attract tax. However, because the Government has treated this as a Budget Bill, the amendment before us tonight unfortunately will have to pass this Senate, despite the horrendous impact it will have on an estimated two million Australian workers and their families. I think we have to acknowledge that, in the past, approximately 80 per cent of people who have been involved in superannuation have opted to receive, or have been entitled to receive, a lump sum payment. The changes are going to be horrendous. In future it just will not be worth people taking a lump sum instead of an annuity. After July 1984, accumulations will be assessable to the extent, not of 5 per cent, but of 15 per cent on amounts up to $50,000 and 30 per cent on amounts above $50,000. This measure will literally force hundreds of thousands of ordinary Australian people to convert an otherwise lump sum payment into a pension or an annuity.

I do not think the Government has looked at the cost to its revenue of this exercise because lump sum payments are far cheaper to the Government than are pensions. It is a tragedy. I believe that we should have been presented with an acturial comparison of the cost to government over a period of years of lump sums compared with pensions before this Bill was brought into this Parliament, as I said, in the dying hours of this parliamentary session and after the House of Representatives has risen. I believe that the Government has an ideological commitment to making an increasing number of people within this community dependent on pensions and therefore dependent on government. It is an attack on the independence of the individual. It is an attack on a person who wants to try to make his own way in life. The Government is trying to care for people from the cradle to the grave. It is taking away people's discretions, ambitions and rights to be different.

In the past retirees have used their lump sums to buy, perhaps, a fishing shack or maybe a little holiday cottage at the beach or in the country. Perhaps they have used it to purchase a new motor car. It may be the first new car they have been able to purchase in their lives. Other people, who are more conscious of their needs in the home, may have used it to refurnish the house so that in their retirement years they can live in comfort. Others may have opted to use that money for travel-either interstate, to see a little of Australia, or overseas. One has only to look at the people travelling around Australia to see that a large number of them are retired people. Others may have used the lump sum to discharge a mortgage. They may have been buying a house all their lives, saving day after day and year after year. The lump sum provides them with the opportunity to pay off their house. The mortgage may not be large; they may have bought their house a few years ago. They are able to clear the mortgage so that in their twilight years they can say: 'Yes, this is completely mine. I owe nothing to the bank or the building society'. In other words, they wish to leave their families unencumbered when they pass on.

It is unfortunate that the Government has taken this step and placed a great burden and a great tax on the future wage earners of this country. I believe that this measure has been sold to the electorate in the ideological belief that it is the Labor Party's responsibility to attack the wealthy. We hear the term ' the tall poppies'. This measure has been sold to the electorate on this belief of attacking the wealthy-the airline pilots and the naughty businessmen. But it is really no more than a tax slug on the middle and lower income earners in Australia. These are the people who will feel it most.

I will give the Senate some figures. If one looks at figures derived from the report of the Commissioner of Taxation for 1982-83, one can calculate, electorate by electorate, an average after tax income. I will cite two examples from my home State of Tasmania, the divisions of Bass and Wilmot. The other divisions in the State are not far away. The net income, from the Commissioner's figures is approximately $10,000. I am referring to the middle and lower middle income earners. These are the people who will feel this tax slug because, after all, these are the wage earners and this is their income. They are not the guys who are ripping off society. They are the people who are paying their taxes day by day and year by year. They are looking forward when they retire to a lump sum payment, a nest egg, that will give them a little independence and discretion. I use this statistic to show you, Mr Acting Deputy President, my colleagues in the Senate and others who are listening to the radio, that the sorts of people who will really be affected by this Labor Party tax are the ordinary wage earners of Australia.

The previous section introduced many years ago was referred to as section 26 D of the Income Tax Assessment Act. It was a simple, straightforward provision. But the changes proposed by this amendment run into many pages, with the result that the law is now more complex and less understood by ordinary people. We should be trying to simplify our laws and to make them more easily understood by the families who we in the Senate are supposed to represent. What are we doing? We are making life more complex, more costly and we are ripping off more tax from them.

This amendment to increase substantially the tax on lump sum payments is also a clear repudiation of the electoral undertakings and undertakings that were given shortly after the election by this Government. In fact, one has only to look at the Australian of 22 April and the Australian Financial Review of 18 April to see those undertakings in black and white. This amendment is a clear repudiation of those undertakings. It is unfortunate. Mr Howard, the honourable member for Bennelong, in the other House referred to the 148-page explanatory memorandum on the proposed changes to what was the simple section 26 (a) of the Act. This came back to people's intentions if they acquired property and subsequently disposed of it. It is not really surprising that we have seen a great deal of wrath from lawyers and accountants at the manner in which these provisions have suddenly been rushed through this Parliament.

A further provision in proposed new section 25A gives the Commissioner of Taxation a discretion far wider in impact than any other discretion he has in the Act. Many people think that it is not a good idea to give the Commissioner such widespread, sweeping powers of discretion. In the past it was generally the tradition that when the Commissioner exercised that discretion it tended to be in favour of the taxpayer. But that situation has now well and truly changed. Under this new provision, when he exercises a discretion he will be obliged to do so not in favour of the taxpayer but in favour of the revenue. That sub- section (3) of this new provision creates an enormous uncertainty. It is an essential feature of any taxation system that there be certainty before the law in taxation matters.

What have we seen from this Labor Government? We have seen, first, attempts to introduce in this Parliament a tax retrospectively, one going back 10 years or more. This Senate has saved the day. There must be certainty before the law. The Government tried retrospectivity. What is it doing now? It is giving the Commissioner of Taxation very wide discretionary powers. Wide discretionary powers take away from the individual a certainty before the law in taxation matters. If this starts with taxation matters, it will inevitably creep into other legislation. Where does the individual in society fit in when he is faced with this sort of rule, this sort of bureaucracy and the sorts of laws enacted by this Government?

I draw a further matter to the attention of the Senate. I believe we should take timely warning of a matter that was raised by Mr Connolly, the honourable member for Bradfield, who, I acknowledge, has taken a very close interest in superannuation. Of all parliamentarians, he is perhaps the most informed on retirement incomes. Mr Connolly warns of the powers that this Bill gives to the trade union movement through an involvement in superannuation. There is also no evidence to date, and certainly none in the amendments before us today, that trade union superannuation funds will have the same statutory controls and the same regulations, and be subject to the uniform provisions that apply to the life assurance companies and the like. There are differences. Life assurance companies are not treated in the same way as credit unions. In other words, there are different rules relating to banks, insurance offices and the like.

It is a well known fact that presently the trade unions have only limited obligations to reveal their financial positions or their assets and liabilities. Where is the trap? I do not include all unions, but should unions such as the Builders Labourers Federation become involved in superannuation and have at their disposal for investment millions of dollars of superannuation funds which at their discretion they could invest in companies and so on? This could lead to a great deal of coercion, not only against employers, in the form of the take- over threats, but also against employees, to keep them within that organisation.

I believe in portability, the right of a person to take his pension from one job to another. But I find it rather strange that these special provisions are suddenly granted to the trade union movement but are denied to the employer organisations. Why should that be so? Surely there should be uniform provisions. If one were cynical, one could suspect that this Government has made a bit of a trade off-'We will implement the 15 per cent and 30 per cent, but we will compensate the union movement by allowing it to move into the so-called lucrative superannuation funds'.

There is also a further anomaly, which is unfortunate, in the treatment of recognised life assurance companies and building societies compared with the treatment of credit unions and so on, during the operation of what are known as the initial or roll-over provisions. In other words, we have tighter versus lighter requirements depending upon the organisation concerned. Surely this is unjust and inequitable. Surely it is not right. Why is this Government pandering to the trade unions in relation to these superannuation-type provisions? Why is there this unfortunate anomaly in the different types of treatment in relation to those sorts of organisations that can accept approved superannuation deposits ? The legislation before us is full of anomalies.

Unfortunately, my time has expired. I say in conclusion that the community will live to regret the impost that this legislation will produce for the ordinary worker.