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Wednesday, 6 May 1942


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

The bill be now read a second time.

When the Estate Duty Rates Bill was before this House last year, the Opposition raised the question of the exemption provided for in the Estate Duty Assessment Act in respect of the estates of persons killed on active service. The Government undertook to consider the liberalization of the exemption inserted in the act by the previous Government. Having done so, it has arrived at the conclusion that the existing provision should be liberalized. In arriving at this conclusion, the Government considered the provisions in each of the State death duty acts which grant some special benefit in respect of the estates of members of the forces and the provision in this regard in the law of the United Kingdom. It has decided to adopt in such cases a method of granting a special benefit which conforms largely, but not wholly, to the provisions of the law of the United Kingdom, and also conforms in part to the laws of some of the Australian States. Under the provision contained in the bill, a flat exemption of £5,000 will be given in all cases, irrespective of the value of the estate. This exemption will apply to estates which pass to the widow, children, grandchildren, parents, brothers, sisters, nephews and nieces of the deceased. The amendment, it is thought, will give appropriate relief to estates even in the higher ranges. An estate of £5,000 will, of course, receive an exemption of 100 per cent. of the duty otherwise payable; an estate of £10,000 will receive an exemption of 50 per cent. ; an estate of £20,000 will receive an exemption of 44.6 per cent.; and an estate of £50,000 will receive an exemption of171/2 per cent. In addition, it is proposed to insert in the act a provision which will ensure that, if the same property again becomes liable to estate duty because of a second death on active service, there shall he full remission of the duty otherwise payable in respect of that particular property on the second death. This latter provision conforms wholly to the practice in the United Kingdom.

Advantage is being taken of the opportunity afforded by the necessity to amend the principal act for the above-mentioned purpose, to introduce into that act several very necessary amendments for the purpose of blocking loop-holes that result in the loss of considerable revenue. All the amendments in this regard comply with recommendations made by the Royal Commission on Taxation, which in 1934 presented a report in regard to estate duty. No government has previously found a convenient opportunity to give effect to these recommendations. The need for revenue at the present time is so great, however, that it was decided that these matters should not be postponed any longer.

Under the existing law, a life insurance policy taken out by a person in favour of his wife or any other member of his family, and upon which he pays the premiums throughout his life, cannot be included in his estate because of certain provisions in the laws of the various States which make the proceeds of such policies trust property belonging to the person in whose favour the policies are taken out. However, such proceeds equitably form just as much a part of the deceased's estate as do any other savings made by him for the benefit of his family. A clause has, therefore, been included in the bill, making the proceeds of such policies a part of the estate of the deceased in those instances in which the deceased has paid the premiums. Where the premiums have been only partly paid by the deceased, a pro rata proportion of the proceeds of the policy will form a part of the estate.

The matter of the valuation of shares in private companies, for estate duty purposes, has always been one of difficulty for the department, because of the restricted market for such shares duc to restrictions upon their transfer generally contained in the articles of association of such companies. This matter was overcome in New South Wales by the introduction of a special provision in the Probate and Administration Act giving the Commissioner administering that act the power to ignore such restrictions in valuing these shares. It provides that the Commissioner can value them on the basis that they were qualified to be placed on the official list of a stock exchange. The Royal Commission on Taxation recommended that a similar provision should be inserted in the principal act. Effect to this recommendation is being given in this bill.

Another recommendation of the royal commission was that the time within which gifts inter vivos made by the deceased should form a part of his estate should be extended from one year prior to death to two years, or, alternatively, to three years, with an appropriate reduction of the value of the property. In New South Wales the period is three years, and it is proposed to adopt the same period for Commonwealth purposes also. The bill contains a provision to give effect to this proposal.

Another matter that has given considerable trouble in the past is the very restricted provision in the principal act regarding the amendment of assessments. The Commissioner, under the present law, cannot amend assessments after one year subsequent to the payment of the duty on the assessment, or, in certain circumstances, after eighteen months subsequent to that date. Oases have frequently arisen in which additional asset* or liabilities have been discovered outside the time within which the assessment can be amended, and the law does not permit, in such cases, of any duty being levied or refunded in respect of these additional assets or liabilities.

The royal commission recommended that this difficulty should be overcome by permitting amendments to be made in such cases within three years of the due date for payment of duty on the original assessment, except in the case where there was an avoidance of duty because of fraud or evasion, in which event the assessment might be re-opened at any time. This recommendation would bring the provisions regarding amendments of assessments in this act into line generally with the provisions existing in other taxation acts. Accordingly, the bill contains provisions to give effect to this recommendation.

There are several other minor and machinery amendments contained in the bill which do not require lengthy explanation. One of them is to correct an anomaly that has revealed itself in the provision granting the statutory exemption. Another is to confine objections to amended assessments to the increased liability in the amended assessment. Yet another is to extend the benefit of the estate passing to the widow, children or grandchildren of the deceased to such estate which passes by right of survivorship. This amendment will give legislative sanction to a practice followed by the department under ministerial authority pending the amendment of the law. The last of the minor matters dealt with by the bill is an amendment of subsection 5 of section 8 of the principal act, which exempts bequests to funds established and maintained for the purpose of providing money for religious, scientific and educational institutions, &c. The amendment is to enable bequests for the purpose of establishing these funds to be exempted, as well as bequests to such funds already established. It is proposed, before proceeding with the debate on this bill, to refer it to the special committee of senators and members which will consider the Gift Duty Assessment Bill.


Mr Holt - Has the Government considered the situation which will arise in regard to duties on estates of civilians killed as the result of enemy action?


Mr CHIFLEY - No. We have looked into the matter of soldiers' estates, but have not yet considered the position in regard to civilian estates.

Debate (on motion by Mr. Holt) adjourned.







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