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Tuesday, 25 November 1941


Mr CHIFLEY (Macquarie) (Treasurer) . - I move -

That the proposed new section 102a be omitted with a view to insert in lieu thereof the following proposed new sections: - "102a.- (1.) Where after the twenty-ninth day of October, One thousand nine hundred and forty-one the wife of a taxpayer has acquired or acquires any property, whether directly or indirectly, as a result of any gift by the taxpayer or any transfer by him without his receiving fully adequate consideration, and the taxable income derived by the wife during the year of income is in excess of Two hundred pounds, the Commissioner shall-

(a)   assess the taxpayer to pay the amount of tax which would be payable if the rate of tax applicable to his taxable income were the rate which would be applicable if there were added to his taxable income an amount equal to so much of the income from that property as is included in the taxable income of the wife; and

(b)   assess the wife to pay the amount of tax which would be payable by her if-

(i)   the rate of tax applicable to so much of the income from that property as is included in her taxable income were the same as the rate at which the taxpayer is assessed in accordance with the last preceding paragraph; and

(ii)   the rate of tax applicable to the remainder of her taxable income were the rate of tax which would be applicable to a taxable income equal to that remainder, and the taxpayer and his wife shall respectively be liable to pay the amounts so assessed. (2.) For the purposes of this section, the part of the income from the property included in the taxable income of the wife shall be the amount remaining after deducting from the income from the property -

(a)   the deductions allowable under this act from that income; and

(b)   where the property is abusiness such amount as, in the opinion of the Commissioner, represents the value of any services rendered by her in carrying on that business. 102b. This Division shall continue in operation so long as the National Security Act 1939-1940 continues in operation and no longer.".

On this very controversial question the Government has carefully weighed the merits of the proposal against its demerits, and has recognized that, if effect were given to the proposal in the bill, some injustices and inconsistencies would result.In furtherance of the Government's desire to avoid injustice, the right honorable member for Yarra (Mr. Scullin) and I conferred withthe Leader of the Opposition (Mr. Fadden) and the right honorable member forKooyong (Mr. Menzies), and it has been agreed that proposed new section 102a should be replaced by the proposed new sections which have been circulated amongst honorable members. It is realized on all sides that some check must be placed upon the avoidance of income tax that occurs when income-producing assets arc transferred by a taxpayer to his wife. This principle is expressed in the provisions now circulated and they will have the effect of causing the same amount of tax to be payable on the income from anyproperty transferred after the 29th

October of this year as would have been payable if the husband had retained the property. For example, if a taxpayer transfers to his wife property from which a net income of £500 is derived and the taxpayer himself derives an income of £2,000, tax will be payable by the husband on £2,000 and by the wife on the £500, at the rate appropriate to a taxable income of £2,500. If the wife derives income from sources other than the property transferred to her by her husband, she will be assessed on that income at the rate of tax applicable to that income. To extend the example which I have already cited, if the wife receives, say, £400 from sources outside the property transferred to her by her husband, she will be taxed on that £400 at the rate applicable to £400. This, of course, will be in addition to the tax on the £500 from the transferred property.

It is not proposed that this new law should haveany application to transactions which occurred prior to the 30th October last.. There is little doubt that the higher rates of tax which are likely to prevail for some years will provide the incentive to a taxpayer to divide his income-producing assets between his wife and himself. The new provisions will prevent the loss of revenue which would result from future transfers of this nature. The Governmentdoes not desire to interfere in those cases where a taxpayer quite legitimately and with no purpose of avoiding income tax desires to provide his wife with an independent income in order to give her some security for her future. To meet these cases it is proposed that the provision shall not apply where the taxable income of the wife does not exceed £200, irrespective of the source of the income.

No doubt, cases will arise in which the transferred property will consist of a business in the conduct of which the wife will take an active part. There is every justification, in cases of this character, in determining the net income of the business for the purpose of applying the provision, for making due allowance for the value of the services of the wife in carrying on the business. The value of these services will be determined by the Commissioner of Taxation, having regard to the facts and circumstances of each particular case. As wartime taxation has prompted this proposal, it is provided that the clause shall cease to he operative when the National Security Act is repealed. Some of the arguments advanced warranted the action proposed in the amendment. The force >f the argument advanced by the right honorable member for Kooyong (Mr. Menzies) about a wife's personal exertion income could not be denied. Similarly, it was recognized that it would be a hardship to treat in the way originally intended the income of a wife who had helped her husband in developing a business or some other enterprise. Those arguments were pertinent and they demanded action, but other arguments scarcely influenced me. For instance, ohe argument about morality passed me by. It was suggested that the original proposals would discourage marriage. I scorn to take that argument seriously, because I know that no woman who wants a marriage certificate will let such little things as this stand in the way. I do concede that some men might try to use the proposal as a means whereby to avoid carrying out. promises made in the moonlight. I took no more notice of that argument than I did of the argument that the proposal made the wife a chattel. T say quite frankly that many of- the people who talk in that strain Iia ve evaded taxation by transferring property to their wives and have made slaves of domestic servants.


Mr Harrison - The Treasurer will admit that the clause strikes .at the roots of the Married Women's Property Act-


Mr CHIFLEY - I almost scorn to answer that interjection. Cases have been brought to my notice of husbands who have transferred property to their wives and made with their wives agreements of which the Commissioner of Taxation knows nothing, whereby the whole of the income from that property goes to the husbands' accounts and whereby, if the wives die, the property is bequeathed back to the husbands. I agree that in seeking to catch people who evade taxation, injustices and anomalies are likely to occur, but we are engaged in war and many more things are at stake than sentiment and plati tudes. One of the important things that has to he done is to tax people who have the ability to pay taxes. A dark picture has been painted of my part in this matter, hut agreement has been reached, largely as the result of the fair approach of the Leader of the Opposition and the right honorable member for Kooyong. They agreed that there must be no further evasion. They were not prepared - and I. appreciate their attitude - to dig into the past in. order to find out how wives had acquired certain property. In any case, administrative difficulties would arise in doing that. I heartily concur with the proposal emanating from the committee which is expressed in the amendment.







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