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Wednesday, 24 November 1965

Mr WILSON (Sturt) .- Mr. Deputy Speaker,I find I am unable to support this Bill because it contains certain principles or certain provisions which I regard as entirely contrary to all the principles of taxation, justice and liberalism. Therefore, I cannot support the Bill in its present form. I do support some portions of the Bill. I am not prepared to oppose the Bill as a whole. I have endeavoured to get the withdrawal or postponement of the obnoxious part of this Bill without success. Therefore, I am in the position of being left with no alternative but to say that I cannot support the Bill and that I will be unable to vote on it.

The obnoxious provisions to which I refer are proposed new section 6 (8.) and the Seventh Schedule of the Bill. The combination of the section and the schedule imposes a completely vicious tax upon the most worthy section of the community - workers and employees who have been thrifty and who have contributed to superannuation funds. The tax imposed is a tax of 50 per cent, of the income of the funds. Let us see how vicious it is by comparing it with the tax that would be payable by an individual. An individual with a taxable income of £400 would pay a tax of £16, but a superannuation fund, which was established for the benefit of the employees of an industry, would pay £200 under the Seventh Schedule.

The Treasurer (Mr. Harold Holt) in introducing the Bill attempted to justify the provision by referring to the report of the Ligertwood Committee. The Treasurer said -

The Bill also declares special rates of tax under legislation introduced last year following the Government's consideration of the report of the Commonwealth Committee on Taxation 1959-61, commonly referred to as the Ligertwood Committee.

Let us look at the report of the Ligertwood Committee. I refer to paragraph 742 on page 155 of the Committee's report. Dealing with superannuation funds, the report states -

Remedial action, whilst necessary, should not prejudice the operation of bona fide superannuation funds.

The Bill now before the House places a penalty tax of 10s. in the £1 on all superannuation funds. Then the Income Tax Assessment Bill, which is not before the House at present, contains certain escape clauses which will, if complied with, enable an escape from the tax. But in my opinion this Bill flagrantly flouts the decision of the Ligertwood Committee in that it prejudices the operations of bona fide superannuation funds. The report of the Ligertwood Committee continues -

However, the remedy to be adopted must be sufficiently strong so as to prevent existing abusive practices and to overcome possible future exploitation of the Revenue.

I am sure that every honorable member will agree with those sentiments. The report goes on -

We consider that any alteration to Section 23 ay-

That is the relevant provision - should, to some extent, restrict the exemption of future earnings of funds which have hitherto been created to exploit that Section.

The Committee says that the exemption of income of these funds should be restricted. Not one word is said by the Committee about a penalty tax of 50 per cent. In other words, if a fund does not comply with the provisions of the Income Tax Assessment Act, the Ligertwood Committee says it should lose this benefit. However, the Seventh Schedule says something entirely different - not that the fund should lose its exemption but that it should pay a penalty tax of 10s. in the £1.

The Ligertwood Committee's report continues -

Our plan provides for a series of tests to guide the Commissioner of Taxation as to which funds should continue to qualify for full exemption or which funds should be given a partial exemption - subject always to the provisions of the new Division 9b.

What the Ligertwood Committee had in mind was that superannuation funds, which are created for the benefit of employees in industry, which encourage thrift and which provide capital for the development of this country, should receive exemption from income tax when they are bona fide funds. But the Ligertwood Committee says that, when they are not bona fide funds, they should lose their exemption. The Bill before the House does not follow the recommendations of the Ligertwood Committee. It imposes a penalty tax of 10s. in the £1 on all superannuation funds, and then the Income Tax Assessment Bill provides that, if the funds are altered to meet the requests of the Commissioner of Taxation, they can be exempted from the penalty tax of 10s. in the £1.

I know that substantial discretions are given to the Commissioner of Taxation and

I for one cannot speak too highly of the manner in which he administers the legislation. I have always found him to be most considerate and willing to hear points of view and my strong opposition to this Bill is not in any way a reflection on the Commissioner of Taxation or the administration of his Branch. What I believe is that employees should not be placed in the predicament of having their bona fide funds made subject to a tax of 10s. in the £1. Let me give an example. The Commissioner of Taxation has the right to exempt a fund from the penalty tax of 10s. in the £1 provided the employer makes a contribution to the fund in every year. The fund may have been in existence for 20 years. Employees may have contributed their ls. or 2s. to the fund each week and the fund may have been subsidised by the employer. There may now be thousands of pounds in the fund to provide retirement benefits for the employees. But next year, if the employer says: " I will not contribute to the fund this year ", the fund loses its exemption. Who is punished? The employer who has not contributed is not punished, but the employees who for 20 years have been contributing to the fund are punished. All of a sudden the income of their fund becomes liable to a tax of 10s. in the £1. Therefore, I find myself completely unable to support the Bill while this provision remains in it.

The section of the Income Tax and Social Services Contribution Assessment Act 1936- 1964 to which I refer is section 121 ca. I will not read all of the provisions of the section, because they are lengthy, but I will deal with the marginal note. The section refers to the assessment of income of superannuation funds to which section 23f applies. Section 121cb applies to the assessment of income of superannuation funds established for the benefits of employees and other persons. Section 12 Ida refers to the assessment of the income of other superannuation funds. The Seventh Schedule to the Bill contains the following provision -

The rate of tax in respect of the taxable income of a superannuation fund in respect of which the trustee of the fund is liable, in pursuance of either section 121ca, section 121cb or section 121da of the Assessment Act, to be assessed and to pay tax is fifty per centum.

Those are three sections that I have just mentioned.

What amazes me is that members of the Australian Labour Party, who claim to be the champions of the workers and employees, have not raised their voices in any way to protect the interests of workers in superannuation funds to which many of them have contributed for a great many years. On the contrary, the honorable member for Melbourne Ports (Mr. Crean) and other honorable members opposite who have discussed the matter in this House on previous occasions talked about removing the tax advantage in respect of superannuation. I find myself completely at variance with members of the Labour Party on this issue. 1 believe that superannuation provides one of the finest means of financing the development of this country and of providing capital for its growth. By this means the savings of employees are marshalled to provide a substantial sum which, when invested in government bonds or semi-government securities, provides capital for the development of this country. Therefore, I have always advocated incentives for superannuation and given wholehearted support to the Government's action in providing such incentives. To the best of my recollection, when the present Government took office a tax deduction of only £100 was allowed in respect of insurance and superannuation combined. Since this Government has been in office that incentive has been increased in stages to £400. The country has gained tremendously from this.

Having supported year after year incentives for saving, I now find it quite impossible to support a measure that contains a provision designed to impose a penalty on saving. I am just as strongly in favour as is any other member in this House of action needed to prevent tax avoidance and to make tax avoiders pay what they should pay. What I object to in this Bill is that it will make employees pay for the misdeeds of somebody - whether an employee, an employer or a trustee - who does not comply with the rules laid down by the Commissioner of Taxation. When we come to consider the Income Tax Assessment Bill 1965 I shall deal with this matter at greater length. 1 could not let the present measure pass, however, without placing on record my emphatic protest against a Bill that will impose a penalty on superannuation, which provides capital for the development of this country. Nor can I support a provision that will penalise thrifty employees who provide for their old age. In this House I have consistently supported all forms of superannuation. I have advocated national insurance and national superannuation. After having advocated them all my life and supported superannuation schemes and incentives for superannuation, I cannot now be a party to supporting a Bill that will in effect impose a tax penalty on thrift, especially in respect of the lower paid section of the community.

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