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Wednesday, 3 October 1984
Page: 1155


Senator RYAN (Minister for Education and Youth Affairs)(6.48) —I move:

That the Bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows-

On 2 May 1984 the Government introduced into this chamber a bill identical in all respects with this Bill. That Bill resubmitted measures contained in the Income Tax Assessment Amendment Bill (No. 5) 1983, which the coalition parties in this place and some other senators combined to reject outright.

Honourable senators will recall that the Bill introduced on 2 May 1984 was effectively rejected by the decision to defer consideration of the measures contained in it. The government is not prepared to let the matter rest there.

As was clearly described in second reading speeches on the introduction of the earlier Bills this legislation is aimed at the shabbiest of schemes. Some proprietors of businesses, after establishing Superannuation funds purportedly to provide Superannuation benefits for their employees, wind-up the funds in circumstances where the accumulated assets of the funds are paid out, not to the employees, but to the proprietors themselves.

This happens after advantage has been taken of the considerable tax concessions provided for Superannuation contributions and the income of the funds.

One technique adopted is to terminate the unsuspecting employees' employment under some pretext or another shortly before they would otherwise become entitled to substantial Superannuation benfits from the funds. Even some long serving and loyal employees have been dealt with in this fashion.

Another variation is to make tax deductible contributions to a fund for workers who, in the ordinary course of events, do not stay long with their employer. Typically this can occur in relation to people who engage in seasonal work-hence the notorious label ''Cherry Picker'' schemes that has been attached to these arrangements.

The benefits that are ''forfeited'' are then allocated to the proprietors who, technically as the sole remaining employees, take the whole of the accumulated assets.

The funds, having been wound-up in this way, are not then able to meet any tax liability which, under the existing law might fall to be met by them once all the facts have emerged.

Not only does the revenue, and therefore the Australian taxpayer, suffer by these particularly distasteful practices, but the unsuspecting ordinary employees of companies are deprived of Superannuation benefits accumulated in their name and ostensibly for their benefit.

As we have said before, it is difficult to imagine a more brazen abuse of the taxation law and no sympathy should be wasted on those who have sought to take advantage of devices ingeniously planned to give the appearance of bona fide Superannuation arrangements but hollow in reality.

The intended losers are the taxpayers of Australia while the intended winners are those who would seek to enjoy the benefits and privileges of living in this country without meeting their rightful share of the fiscal burden.

A carefully defined policy of retrospective application of anti-tax avoidance legislation was one which we put before the people of Australia on 5 March last year and on which we were elected to government. Yet the Opposition parties continue to frustrate the government's attempts to give effect to a clearly stated and endorsed election commitment.

While the Commissioner of Taxation is vigorously seeking to challenge these schemes under the existing law the appropriate response, the only response certain to be wholly and speedily effective, is that proposed once more in this Bill.

A technical explanation of the proposed section 26AFA is contained in the memorandum that was circulated to honourable senators at the time of introduction of the Bill containing the original measure. I commend the Bill to the Senate.

Debate (on motion by Senator Reid) adjourned.