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Tuesday, 29 September 1942

Mr SPOONER (Robertson) .- The provisions of this clause are much misunderstood. In order to put the subject in proper focus, it is necessary for us to consider what has been done in the last few months, particularly in relation to the uniform income tax policy. The introduction of uniform taxation involved the discarding of legislation dealing with concessional deductions. In future, rebates are to be made to taxpayers at the rate of tax paid by them at personal exertion rates. The representations made to honorable members by persons responsible for the management of charitable institutions appear to be based on the assumption that, in the future, taxpayers will not be allowed any consideration in respect of gifts for such purposes. That is a misstatement of the position. It is true that, as gifts become classified as rebates instead of as concessional deductions, the taxpayer will not receive as much as he did when the amount was a deduction from his gross income. But it would he quite wrong to say that the benefit of the deduction will disappear entirely. Actually, it will still be very considerable. At the rates of tax that now operate, a taxpayer with a substantial income will receive by way of a deduction in respect of a gift, immeasurably more than he received before the war. That point has to be driven home. I have seen letters from institutions which may be genuinely under the impression that the taxpayer is to lose the benefit of the deduction. That is not the ease. Take a taxpayer whose personal rate is 15s. in the £1. The deduction of a gift to a charitable institution might mean that in the first place the taxpayer would pay on so much less income, and in the second place the whole of the income would be reduced to a lower rate because of the reduction of the net amount. As against that, such a taxpayer will in future obtain a deduction, at the rate of 15s. in the £1, of the gift that he has made. In other words, if a taxpayer has made a gift of £100, and the personal rate of tax on his income is 15s. in the £1, he is to be allowed a deduction of £75 from his tax because of the gift. Thus, the 'Commonwealth Government will pay £75 towards that gift of £100. Let tie matter be stated in proper perspective. It is not a fact that the taxpayer is losing the whole of the benefit of the deduction, or that the alteration will be so considerable as to affect gifts previously made to charitable institutions; but it is a fact that in cases such as I have cited the taxpayer who makes the gift -will receive from the Government by way of deduction from his income tas, no less than 15s. in the £1 on the gift that he makes. The bill very wisely leaves the position as it was in the uniform tax legislation introduced last May, so far as concerns individuals. There is no case for an alteration. The Government has provided that, in respect of the year 1941-42, the full concessional deduction shall, be applied ; because it has been represented that, prior to the introduction of this legislation and the uniform tax legislation, certain taxpayers had already made gifts and expected to receive the full concessional deduction in respect of them.

Mr Holt - By implication, does not that mean that they will get a lot less on the next occasion?

Mr SPOONER - If the man who made a gift of £100 received the full deduction from his gross income, he might benefit to an amount of £80. If, on the other hand, the deduction were by way of rebate at his personal exertion rate, he might benefit to an amount of only £75. He says to the Government, " When I made the gift, I did not know that you were going to alter the incidence of the tax ". The Government says, " All right ; because you did not know that, and you claim that you are entitled to what you thought you were to get when you made the gift, we will allow you the deduction of £80 for last year; and if you make the gift next year you will still receive not less than £75 ". From the observations .that are being made, and circulars that I have received, one would think that the Government was withdrawing the whole of the deduction. That is not so. The Government has fairly decided to regard gifts as a concessional deduction for last year only. The taxpayer is being treated very well if in the future he is given a rebate of the amount of the gift at the appropriate personal exertion rate.

The amendments now circulated go farther, and provide that in respect of companies such gifts will be not a rebate but a deduction from the gross income. There is a reason for that, which it is very hard to avoid. It is somewhat similar to what I heard the honorable member for Wentworth (Mr. Harrison) refer to earlier. He mentioned that legal expenses are not taken into account foi the purpose of arriving at the tax on undistributed profits, notwithstanding that they have been paid in cash, and that consequently a company cannot obtain a deduction on their account because they are not of such a nature that they can be deducted from the gross income. The position in regard to gifts is very similar. If companies cannot be given, in respect of gifts, a deduction from their gross income their position in relation to the tax on undistributed profits, the war-time company tax, and the super tax will be affected, and will have to be put right. The advantage that the individual derives in respect of a deduction on account of gifts will be far greater than that of a company; because a company pays at the flat rate of 6s. in the £1. Therefore, the advantage of a gift to a company is the flat rate of 6s. in the £1, plus any indirect effect the gift may have upon the tax on undistributed profits. But the benefit to an individual may be at the rate of 12s., 15s., or even 18s. in the £1. It also happens that a company is not affected by any other form of concessional deduction. It does not have deductions in respect of dependants, or life insurance. The position in regard to companies can be simplified by the deduction being made from the gross income. For that reason, the bill very wisely restores the position so far as the companies are concerned, and also very wisely leaves - for the future at all events - the position in regard to individuals that was contemplated by the uniform tax legislation.

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