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Wednesday, 23 March 1994
Page: 2080


Senator HARRADINE (3.56 p.m.) —I have a proposed amendment to clause 40. I want to say something about this amendment which has been distributed for a couple of days now. I hope that honourable senators have had a chance to focus on this amendment. In effect, the amendment was accompanied by an explanatory note which details why I feel the amendment is necessary. It is a technical amendment designed to correct an erroneous view of the law which is being put forward by the Commissioner of Taxation in draft taxation ruling TR94/D8 on child maintenance trusts. The commissioner has adopted an extremely narrow technical interpretation of the phrase `pursuant to' which would prevent any person in the country from ever enjoying the benefit of the exemption which parliament gave to the children's income from child maintenance trusts.

  It should be borne in mind that parliament made this decision and the effect of the proposed taxation ruling would be to deny the exemption in a way that was not intended by parliament. The purpose of the exemption was to prevent children's incomes from maintenance trusts being taxed at penalty rates.

  The government itself has acknowledged the absurdity of the situation in a press release on the matter. However, according to the press release, the government does not propose that the law be amended to give effect to the original intention of parliament in relation to child maintenance trusts established before 7 March 1994. This amendment should not cause people too many problems. It is, after all, an attempt to restore what parliament intended.

  One issue I want to raise with the committee is the way in which the commissioner has used the ruling system to attempt to impose upon taxpayers a blatantly artificial and contrived interpretation of the law which deprives them of that exemption which parliament clearly intended to give them. If the ruling system is to be used in that way—that is, to impose upon taxpayers views of the law which are not soundly based—parliament may have to consider the question of whether taxpayers should be subjected to any detriment where they choose, on better advice, to prepare their tax returns in a manner at variance with what is, after all, only the commissioner's view of the law.

  Another issue is the tax treatment of family income transfers generally, but that is not a subject matter with which the committee needs to be involved at this stage. I do flag that at some stage I will be raising that matter. I again say that this is an effort to overcome the effect of a ruling by the Commissioner of Taxation which was to deny what parliament clearly intended to occur.

  I reiterate that the commissioner's ruling is merely his view of the law. His extraordinarily narrow view of the phrase `pursuant to' may well be corrected by a court taking a purposive interpretation as in the Cooper Brooks case. However, it would be a waste of administrative and judicial resources to test by way of a set of legal disputes a futile interpretation of a law which no-one argues was the parliament's purpose. It would also wreak havoc amongst taxpayers. Parliament can correct this manifest error in administration and ensure that the intention of the law is fully carried out in regard to all child maintenance trusts established since the introduction of the original legislation. That is the purpose of my amendment.

  I believe I have gone no further than restore what I believe to have been the intention of the parliament, which was superseded by the Taxation Commissioner's ruling. I have not actually moved the amendment at this stage. I will do so, however, depending on any response that the parliamentary secretary might give to my explanation in foreshadowing that amendment.