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Tuesday, 29 September 1942


Mr HARRISON (Wentworth) .- Although this bill is essentially a measure for consideration in committee, I desire to direct the attention of the Treasurer (Mr. Chifley) to various matters so that he may 'have an opportunity to draft the necessary amendments. When the uniform income tax legislation was being debated, I pointed out the complications that would result from the system of rebates which was then introduced, instead of the usual concessional deductions. I informed the House that no ready reckoner would ever be able to cope with the new form of rebates, and that every assessment would have to be dealt with individually. I also indicated the different formulae for calculating the rates of tax on income from personal exertion and from property, and I believed that the experience of the Taxation Department in dealing with these matter-; would result in the introduction of amendments to overcome the difficulties. Every individual should have the opportunity to follow intelligently his own personal assessment. He should have some knowledge of the amount of tax that he will be required to pay, and should not be expected, if his assessment be a little complicated, to seek advice from taxation experts. But that will happen under the present method of computing personal assessments. I should like the Treasurer to say whether he will evolve a simplified method, so that every taxpayer may have a knowledge of the way in which his assessment is calculated.

The bill provides, inter aiia, for the partial exemption of income derived from certain rnining operations. In my opinion the allowable deduction of 20 per cent, is little enough. Most mining companies, particularly those engaged in tin mining, have wasting assets, and the present, method of taxation makes it impossible for them to repay the capital subscribed during the life of the mine. In many instances 50 per cent, of the capital of the company will be absorbed by taxes. Whilst I agree that 20 per cent, is a useful concession for most companies, it is not excessive, and it will not be completely equitable. Where cases of hardship occur, the Treasurer should be prepared to grant to them lenient treatment.

One anomaly seems to have passed unnoticed. It appears in section 122 of the Income Tax Assessment Act and has been repeated in clause 6 of the bill. The clause provides that mining companies shall be allowed a deduction of 20 per cent, from the taxable income as a depletion allowance, and this exemption will extend to dividends paid wholly and exclusively out of profits represented by the special allowance. Another allowance is provided in section 122 of the Income Tax Assessment Act which reads -

Where a taxpayer who derives income from carrying on mining operations in Australia (other than coal-mining) expends capital in necessary plant and development of the mining property from which that income is derived, a proportionate part of the amount expended, arrived at by distributing that amount proportionately over the estimated life of the mine as at the date of the expenditure, shall be an allowable deduction.

The section provides that the allowance shall extend over the capital consumed during the life of a mine. As this represents capital,' I submit that when a dividend is paid wholly and exclusively out of such funds, that dividend shall be exempt in the hands of the shareholders. That anomaly should be rectified. Earlier I was under the impression that it would be ironed out, but evidently no attempt has been made to do so.

Proposed new section 72b provides that expenditure incurred in connexion with air raids precautions shall be an allowable deduction ; but sub-section 2 states - (2.) Where any such expenditure creates an enduring benefit to the taxpayer, other than the benefit of such protection, the deduction otherwise allowable under the last preceding sub-section shall be reduced by an amount equal to the value of the enduring benefit so created.

Whilst I am in accord with that provision, I consider that it should not be left to the Commissioner of Taxation to determine what constitutes an enduring benefit. A board of referees, who shall be specialists, should be appointed to judge whether the work undertaken, such as air raid shelters, will be of enduring benefit to the firm. The Commissioner of Taxation may have no knowledge of this subject. I feel sure that the Treasurer will see the wisdom of this contention.

Proposed new section 81, which relates to deductions for members of the defence forces, is one of the most contentious provisions of the bill. At present, the military pay of a member of the Australian Imperial Force beyond Australia is exempt from taxation, and this amendment seeks to extend that exemption to all soldiers whose military pay does not exceed £250. By a series of graduations, the exemption disappears when the military pay exceeds £350 per annum. From time to time, honorable members have directed attention to anomalies created by the Income Tax Assessment Act. A pilot may operate a bomber based at Horn Island or Darwin. Over Port Moresby his machine is met by a screen of fighters. He unloads his bombs upon enemy targets, and returns to his base. The fighter pilots at Port Moresby arc not required to pay taxes, but the pilot of the bomber is not exempt. This anomaly is inexplicable, but I concede to the Treasurer that, regardless of where the ceiling may be fixed, anomalies will occur. The only solution is to create one force, and to tackle the problem on that basis. The Treasurer should try to overcome the problem by adopting the most liberal basis. Doubtless he will inform me that the Government could not afford to forgo the revenue that the adoption of my suggestion would meaD. The exemption should be granted to all soldiers in operational units or in operational areas. Though the scope is wide and will involve a large sum of money, I remind the Treasurer that the greatest taxable field in Australia is still untouched. It is only fair that men who are laying down their lives for their country should receive some consideration. I do not know how my proposal can be given effect, or whether it will be possible to apply a scheme whereby all those in "cushy" jobs shall be compelled to contribute to a fund to reimburse the Treasury for the loss of revenue incurred by granting the exemption to members of the forces. Some workers are earning £15 a week, and enjoy security and comfort, whilst soldiers are laying down their lives for a much smaller remuneration. Many of them will return to Australia so injured that they will be unfit to work. They should receive protection. The income-earning groups under £400 a year constitute a field of £590,000,000, which contributes comparatively little by way of taxes.


Mr Lazzarini - Does the honorable member say that the man who is earning £15 a week is not taxed!


Mr HARRISON - No ; but he is not being taxed on the same basis as is the soldier.


Mr Lazzarini - Many workers would have enlisted for service overseas if they had been allowed to volunteer.


Mr HARRISON - Does the Minister suggest that they should pay little or no taxation, while the soldier is penalized?


Mr Lazzarini - The honorable member referred to men in " cushy " jobs, who are shirking their duty.


Mr HARRISON - I did not say that they were shirking their duty. The Minister should not misrepresent me. I said that those men who had remained in industry still enjoyed the comforts and security of civil life. The soldier abroad has no security and very little comfort. Their conditions are not parallel. Whilst I realize the difficulties, I contend that some portion of that taxable field of £590,000,000 should be earmarked for the purpose of defraying the sum that will be lost to the Treasury if military pay and allowances be exempt from income tax. I have no doubt that the Treasurer is aware of the anomaly, but he should be reminded of it from this side of the House.

I am not unmindful of the fact that the introduction of the uniform income tax has necessitated a tremendous amount of collation and co-ordination in order to restore our system of taxation to an equitable basis. The Treasurer must grant to private companies a greater measure of justice. If he neglects to do so, many of them will be forced to adopt means to evade their obligations. Some private companies pay the primary tax of 6s. in the £1 and other taxes up to 18s. in the £1, with the result that they ultimately pay at a rate exceeding 20s. in the £1. This forces them into partnerships, and to adopt various methods to evade the payment of taxes. People who by initiative and enterprise have developed valuable businesses and have formed them into private companies should not be penalized. They must not be forced into bankruptcy because their taxes amount to more than they earn.


Mr Calwell - Does the honorable member not think that the principle of private companies is bad?


Mr HARRISON -Certainly not.


Mr Calwell - The proprietary company gets all the benefits and bears none of the disadvantages of the public company.


Mr HARRISON - The honorable member apparently believes in monopolieswhich swallow all the small concerns. I always had the impression that the honorable member's party was opposed to monopolies.

Another matter which ought to occupy the Treasurer's attention is the fact that costs incurred in unsuccessfully fighting a legal action are not allowed as deductions from the income of companies in the assessment of their income tax. Having been expended, the money cannot be distributed as dividends. These legal expenses must have slipped by the attention of the Treasurer's advisers. They were allowable under the New South Wales Income Tax Management Act. Under section 141, which relates to private companies, the expenditure was allowed for the purpose of arriving at the amount of undistributed income; but the uniform income tax legislation cuts across that. The Treasurer also ought to give his attention to the expenditure of companies on gifts. This expenditure is not allowed as a deduction; but I think it should be.

In his second -reading speech, the Treasurer said that the Government had decided to refer to the Special Committee on Taxation for consideration a recommendation of the Taxation Advisory Committee that periodical payments of alimony and maintenance be treated as assessable income in the hands of the recipient, and that a deduction of the amount paid be allowed to the payer. The Treasurer should ensure that the amount of alimony paid to the nonguilty wife who is keeping herself and the children of the guilty husband should not be so reduced on account of taxation that the wife was not able to rear her children in the manner befitting them. In an endeavour to do justice to the man the Treasurer may do an injustice to the wife, and I know that is not his wish. The Treasurer is working towards a just income tax system; but I suggest that the system would work more smoothly if the formula were simplified.







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