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Tuesday, 2 May 1961

Mr WILSON (Sturt) .- The purpose of this bill is to provide encouragement or incentives to superannuation funds and life assurance companies to invest a greater proportion of their funds in public securities. The policy of this Government, which has been so successful over the last twelve years, has been to bring about a high rate of development, a high intake of migrants and a high level of employment. In maintaining those three important principles a very great strain has been imposed upon the capital of the community and from time to time the Government has taken measures to encourage saving.

On many occasions in the past when it has been felt that an objective was nationally desirable, the Government has given incentives to encourage that nationally desirable objective. The concessions that are given to superannuation funds and life assurance companies is the clearest evidence of that policy. Persons contributing to superannuation funds or to life assurance companies are entitled to a deduction of up to £400 a year from their assessable income for taxation purposes. That is a tremendous concession to people who contribute to those organizations and it has been availed of to a very great extent with the result that the amount of savings going into superannuation funds and life assurance companies has increased very rapidly. Those people who claim that it is improper to use the tax machine to provide incentives for a nationally desirable objective are opening their mouths rather late in the day because for many years governments of every kind have introduced incentives for one desirable purpose or another. For example, not only are payments to superannuation funds and life assurance companies permissible deductions, but also the superannuation funds themselves have been exempted from taxation on their income and life companies have been given very valuable concessions. Further, provision has been made that the first 2s. in the £1 interest on government bonds is tax free. To attract money into Commonwealth bonds governments of the past have provided tax concessions. Australian governments have long realized that, in the national interest, all forms of primary production must be encouraged, and they have provided many tax concessions for primary producers which are not available to other sections of the community. Tax concessions are granted, for instance, to farmers who build homes for their workmen, or who clear land or build dams on their properties. Various other items of capital expenditure have been allowed as deductions for purposes of taxation, simply because the government responsible for those concessions has realized that in the national interest the primary industries involved must be encouraged. I am amazed, therefore, at the number of persons in the community who are holding up their hands in professed horror because it is proposed, by means of this legislation, to grant tax concessions to life assurance companies and superannuation funds that are prepared to invest in a direction that is considered nationally desirable.

The Treasurer (Mr. Harold Holt) has directed attention to the decline in savings that has been noticeable in this country for some years. He has told us that between 60 and 66 per cent, of all moneys required for public works have now to be provided from revenue, because the savings of the community have declined, or because the savings that are available are not being directed into public channels.

I mentioned previously that the policy of this Government is one of rapid development, an extensive immigration programme and a high rate of employment. To achieve these objectives we must have a high level of savings, and a large proportion of those savings must go into public investment. It would be completely useless to encourage overseas industries to establish themselves here if we did not have schools in which to teach the children of the employees in those industries, if we did not have hospitals in which those employees and their families could be cared for when they became sick, or if we did not provide electricity and water services for the industries themselves and for the homes of their employees. It is just as important from the point of view of the private sector of the economy as it is from the stand-point of the public sector that enough money should go into the public sector of investment to provide the essential services of the community.

Every honorable member of this House receives great numbers of requests from electors which would involve the increase of money available for expenditure in the public sector of the economy. People come to us asking that we expedite the installation of telephones for them, or asking us when they can have sewerage or water services connected to their homes, or when is another school going to be built in a particular district. In other words, the private citizens, those who rightly support private enterprise, would like to see enough money provided for the public sector of the economy, so that public services can keep pace with the development of private industries.

I believe, therefore, Sir, that it is essential in the present circumstances not only to increase the volume of community savings, but also to ensure that a larger and larger proportion of those savings is channelled into the public sector of the economy, so that public services can catch up with private enterprise throughout the country. 1 believe experience in the post-war years has shown that while production by private enterprise has caught up with demand, public services are still lagging behind to a considerable extent. Whether we are strong believers in private enterprise or strong believers in socialism, if we are realists and are willing to face facts we must support a policy which will ensure that our public services will always be adequate for the requirements of private industry, or at least that they will not lag too far behind.

For these reasons 1 see nothing wrong with this bill, the purpose of which is to grant incentives, by way of tax concessions, to superannuation funds and life assurance companies that are prepared to assist the nation by investing a specified proportion of their funds in public securities. I believe that this is a principle that is wholeheartedly supported by the people of Australia, having been followed for many years in respect of a variety of Australian industries.

Let us now consider the actual provisions of the bill before us. In the past, contributions to superannuation funds by private individuals have been allowable deductions for income tax purposes. Contributions by employers on behalf of employees, to the extent of £200 a year in each case, have also been allowable deductions for taxation purposes. The incomes of the superannuation funds themselves have been free from tax. This bill will not operate retrospectively so far as the superannuation funds are concerned. If they prefer not to take advantage of these legislative provisions they may disregard them. It is a purely voluntary scheme. If a fund remains outside the scheme, contributions to it will still be exempt from taxation. Contributions by employers will remain exempt. The income of the fund from its past investments will remain free from taxation. The only difference is that additional income from in vestment will become taxable, just as investment income by other organizations is taxable, if the fund does not invest to the specified extent in public securities.

This is, of course, an income tax act, and the Government does not and cannot deal with capital funds. It has therefore decided to use the income of the superannuation funds for the year ending 30th June, 1961, as a basis. The Government then says: " If a fund does not come into the scheme, its yearly income will remain free of taxation until it reaches the level of its income for the year ended 30th June. 1961. Income in excess of that amount will become taxable if the fund does not invest according to the prescribed pattern." It further provides that if insurance companies invest in the required manner, which is believed to be in the national interest, the whole of their incomes will remain free of taxation.

Trustees will still have an absolutely free choice in the interests of their beneficiaries. Personally, I believe that in the past some of them have acted most unwisely. They have departed from the common law principle of investing their money in trustee securities. One major superannuation fund recently lent £60.000 to a land company that subsequently went bankrupt. I believe it was about time, Mr. Deputy Speaker, that some of these superannuation funds and life assurance companies were asked to stop and consider whether they have not been acting unwisely bv investing so much of their funds in speculative securities.

But the purpose of this bill is not to restrict the trustees in that way although I believe it will have the effect of making many of them think. The purpose of this bill is to give an incentive. In future, the trustees of a superannuation fund will have to sit down with pencil and paper and compare the return they will get from government bonds or local government securities with the return they are likely to receive from ordinary shares or other avenues of investment. They will have to take into account the tax concessions which are offered if 30 per cent, of their funds are invested in public securities. I do not regard that as a difficult thing for the trustees to have to do. I think it is very proper that they should do it. Their decisions will be accepted or rejected by their beneficiaries according to whether the beneficiaries believe their trustees have acted in their best interests. So, Sir, although I would most strenuously oppose a bill providing for compulsory control of insurance companies or superannuation funds, I can wholeheartedly support this bill because it is voluntary, and it is not retrospective.

Mr Haylen - Is there not an element of squeeze in it?

Mr WILSON - There is an incentive, and I suppose every time you offer an incentive you can say there is an element of squeeze. The fact that we offer incentives to primary producers if they clear their land or make dams or build houses for their employees could be regarded as a squeeze in a certain direction. They are not spending that money perhaps on luxury motor cars and other things. So there is a very fine distinction between an incentive and a direction, but there is a difference. The trustees of these superannuation funds will remain absolutely free to make their decisions in the light of the concessions and advantages that are available under the alternative proposals.

When we come to the life assurance companies, we find that under this bill they will benefit tremendously. In the past, their superannuation funds have always been liable to taxation. In future, if they keep accounts of their superannuation funds separate from their ordinary life business, the income from those superannuation funds will be free from income tax provided they conform to the set pattern of investment. They are not bound to do it, but if they do. they will receive this concession which is one that they have never had before. Then another concession is provided which also has never been available before. This will enable the life companies to make themselves entirely free from taxation if they increase their public holdings up to a certain figure. So I feel sure that all life assurance companies will give wholehearted support to this bill when they understand it thoroughly.

It is true that there are in the bill what the Treasurer chose to describe as " disincentives" or penalties. In other words, if a life company does not comply with the pattern of investment by investing 30 per cent, of its funds in public securities within a reasonable time, the life company will lose some of the benefits that it now derives. But when it is realized that these benefits are concessions that other companies do not have and that they are given to life assurance companies only because it is realized that they are carrying on a nationally desirable activity, I feel sure that the life assurance companies will say, " Although we will suffer if we do not comply with this pattern, if we choose not to comply it is only reasonable that we should lose some of the concessions we have had in the past ".

I believe that there is nothing contrary to Liberal principles or national principles in this bill. It is simply offering a pattern that has been adopted by various governments in Australia over quite a term of years, and I feel sure that when it is thoroughly and fully understood by the people of Australia, they will say it is a jolly good bill. Therefore, I commend the bill to the House. I say again that I would have been vehemently opposed to it had it been compulsory or retrospective in its operation. But as it leaves a free choice to the trustees of the funds or the directors of the insurance companies, and as it deals with a matter by incentives, I believe it is a bill that should receive the wholehearted support of members of this House and of the general public. It has been pleasing to note that of all the speakers who have spoken in the debate, only one has been against the bill. It has received the wholehearted support of all members of the Liberal Party who have spoken except one, and of all members of the Australian Country Party who have spoken. It is pleasing to note, too, that for once we have received the support also of members of the Australian Labour Party.

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