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Wednesday, 26 November 1941

Mr HOLT (Fawkner) .- The purpose of this measure is to increase the rates of estate duty on estates of a value of more than £20,000. Having regard to the long interval of time which elapsed between the imposition of the first rate of estate duty and its revision in 1940, when the honorable member for Warringah (Mr. Spender) was Treasurer, it is appropriate that some investigation be made of the conditions under which this tax was imposed, and of the considerations which have led to the introduction of this bill. The honorable member for Warringah, and the officials of the Taxation Department, will admit that the revised rates which were introduced last year were drafted rather hurriedly, so that there was little opportunity for honorable members to investigate in detail the history of the operation of the estate duty. The original Estate Duty Act was passed during the war of 1914-18. Mr. Fisher, who was then Prime Minister, said, in introducing the bill -

We all admit that the proposal means the super-imposition of a heavy tax on State taxation but it is a class of taxation to which no one can object, because one doubts whether the accumulation of large estates- is- beneficial to a country, or even to the people who inherit them.

Mr. JosephCook had this to say about the bill-

In my opinion this proposal is .penal and almost predatory . . . There is no need for this orgy of taxation. It means that we are systematically penalizing success, which cannot be good for a young country like this.

Nevertheless, the act was passed and it remained on the statute-book without any alteration being made to the rate of duty until 1940. In that year the then Treasurer revised the rates in order to raise funds for war purposes, and also placed the method of imposing the duty upon a more scientific basis. That basis is not affected by this measure, except for the fact that the rate on estates of more than £20,000 is increased until a maximum levy of 27.9 per cent, is reached by progression, as the value of the estate rises to £500,000. The average revenue from this duty in past years has been £1,500,000. The alterations effected last year were designed to add another £850,000 to that sum, and the variation which is now proposed will produce, in a full financial year, an extra amount of £650,000. Therefore, the amount of revenue collected will be twice what it was two years ago. Honorable members must bear in mind the fact that estate duty levied by the Commonwealth' is in addition to taxes imposed upon estates of deceased persons by State governments. It is interesting to note, from the table which has been circulated by the Treasurer, that taxes upon estates in Australia at the present time, both Commonwealth and State, are much more severe, except in the case of very large estates, than those which operate in Great Britain. No doubt that will surprise honorable members who have held the belief that the rates of estate duty in Great Britain are particularly onerous. In order to give point to this fact, I direct - attention to the total collections that would be made from an estate of £30,000 in Great Britain and a similar estate in Australia. In Great Britain an amount of £3,900 would be taken from the estate by way of duty. In Australia, the combined Commonwealth and State duties, in the highest taxing State, would be £5,522. In Great Britain the collections from an estate of £100,000 would be £25,700. In Australia the combined Commonwealth and State levy would be £38,980. It will be seen that the levies are considerably higher than those imposed in Great Britain. Only when an estate reaches a value of £1,000,000, which is a rare occurrence in this country, is the British impost higher than the Australian. I emphasize these points, because we are doubling the Australian impost within a two-year period. It becomes of the utmost importance, in these circumstances, that the incidence of the tax shall be closely examined in order to avoid anomalies or to correct any that may have revealed themselves. In this connexion, I refer to the position in respect of the estates of persons who may be killed on active service. In introducing the original Estate Duty Bill in 1914, the then Treasurer, Mr. Andrew Fisher, said -

We might reasonably consider the point as to whether the estates of persons who are fighting the battles of this country should be taxed. I think that they should be exempted. They are taking exceptional risks on the battlefield while we are stopping at home. Whereas those who remain at home should be called upon to bear the full tax, those who are at the front should, in my opinion, be exempted.

At the committee stage of the bill, the following provision was inserted to meet the point: -

Nothing in this act shall apply to the estate of any person who, during the present war or within one year after its termination, dies on active service or as a result of injuries received or disease contracted on active service with the Military or Naval Forces of the Commonwealth or any part of the King's Dominions.

That provision operated during the period of the last war and it remained in the act until it was replaced in the act passed last year by a section which is intended to operate during the period of this war. The effect of the new provision is that an estate of a person killed on active service is exempt from duty if its value is not more than £5,000. The anomaly exists, however, that an estate valued at £5,001 would be liable to the full amount of estate duty. Thus, the beneficiaries of such an estate would he in a much less favorable position than the beneficiaries of an estate of slightly less than £5,000 in value. I trust that the necessary steps will be taken to overcome this anomaly.

When the Government considers the subject, I ask it to consider also the system operating in Great Britain in relation to similar circumstances, for I consider that the British method is much more scientific than the system that we have adopted. I think it only fair to state that the relevant provision in our act was hastily drafted and introduced, and was not given the consideration by the House that its importance deserved. In moving the second reading of the bill, the then Treasurer, the honorable member for Warringah (Mr. Spender), made passing reference to it, and the then Leader of the Opposition (Mr. Curtin) merely noted the observation that had been made. The subject was not debated. The relevant provision in the British act provides for the remission of estate duties in respect of property passing to the widow or lineal descendants, or lineal ancestors, including brothers and sisters, and descendants of brothers and sisters, of the deceased, under the following conditions : - {a.) Where the value of the property does not exceed £5,000 - the whole of the death duties leviable in respect of that property.

(b)   Where the value exceeds £5,000 -

(i)   in respect of the first £5,000 - the whole of the death duties; and

(ii)   so much of the duties leviable in respect of the remainder as exceeds the sum which, if accumulated at compound interest at the rate of 3 per cent, per annum from the date of death with half-yearly rests would, at the expiration of the period of the normal expectation of life of a person of the age of the deceased at the time of death (calculated in accordance with Tables of Mortality of Government Life Annuitants, 1912), amount to the whole of the duties so leviable.

I do not expect honorable members to follow the meaning of that involved verbiage. Stated in simple terms, the position in Great Britain is that estates of persons killed in action arc exempt from duty up to a value of £5,000, and that estates in excess of that value are exempt in respect of the first £5,000 and on the balance are leviable in accordance with a calculation based on the expectation of life of the deceased person at the time of death. The theory, apparently, is that because a person comes to an untimely end on active service it would not be proper for the Government to receive, much earlier than would normally be the case, the estate duty that would apply to such a deceased person's property. I suggest that the Government might consider the propriety of including such a provision in the Commonwealth law on this subject.

I asked the officers of the Taxation Department to be kind enough to prepare a statement comparing the duties that would be payable under Commonwealth and British laws respectively on the estates of persons dying while on active service. I was provided with the following table: -


Comparison of amounts of duty payable on estates of a taxable balance of £5,000, £10,000 £20,000 and £50,000 in the case of a single man, aged 25 years,at date of death, dying as a result of wounds contracted on active service -

(a)   under the existing provisions of the law and at the proposed rates of duty; and

(b)   if sections 1 and 2 of the British Death Duties (Killed in War) Act were incorporated in the Estate Duty Assessment Act, and at the proposed rates of duty.

The figures were prepared hurriedly and have not been checked, but they may be taken to be approximately correct.

Mr Jolly - Do they take into account only the estate duties levied by the Commonwealth ?

Mr HOLT - Yes.

Mr Jolly - Then there should be added to them the amount of estate duty levied by the State governments?

Mr HOLT - That would be so, if it were desired to arrive at the full amount of estate duty payable; but I have been content to compare the Commonwealth law with the .British law.

Several other points arise in relation to estate duties leviable on the estates of men killed on active service. One pointthat should be considered is the effect of quick succession. There is no provision in the Commonwealth law to vary the estate duty when there is a quick succession in an estate. It happens, at times, that two persons may succeed to the same estate in quick succession, in which case, as the law is, estate duty would be payable in both instances. The diminution of the value of an estate so affected is considerable, and it will become greater under the heavier imposts now being provided. Steps have been taken iu Great Britain, and also, I believe, in Tasmania, to mitigate such hardships. It is provided in the British law that when the Commissioners of Inland Revenue are satisfied that estate duty has become payable on any land or business passing on the death of any person, and that subsequently within five years estate duty has again become payable on the same property, or any part thereof, passing on the death of the person to whom the property passed on the first death, the duty payable on the second death shall be reduced as follows: -


I suggest that the Government consider the desirability of incorporating a similar provision in the Commonwealth law on the subject. It may happen that two brothers on active service may be killed in quick succession, and property which has passed from one to the other after the first death, and subsequently passes to other relatives on the second death, will be greatly diminished in value because of the estate duties levied upon it. I do not think that any of us would desire to embarrass beneficiaries unduly in such circumstances.

In respect of this measure generally, I. remind the Government that the new and heavier rates are being imposed in order to provide money for war purposes, and should therefore be regarded as emergency war-time imposts and not an enduring feature of our estate duty legislation. As the effects of these new provisions are likely to be severe in many cases, I ask that this measure be reviewed as soon as circumstances permit. Should death occur during the period of the war, those who derive an interest as beneficiaries are to be taxed in comparatively greater measure.

The Opposition, whilst not opposing the passage of the measure, asks that the particular points to which I have directed attention shall be sympathetically examined by the Government. I suggest that, in the interval before the next sessional period, when a supplementary budget is likely to be introduced, the Treasurer have a thorough overhaul of the law relating to estate duty, and bring before Parliament provisions adopting principles which apparently are operating satisfactorily in Great Britain.

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