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Thursday, 25 November 1965


Mr COLLARD (Kalgoorlie) .- This Bill amends the Income Tax and Social Services Contribution Assessment Act. I was hopeful that at long last, as a result of the many requests made over several years, the Treasurer (Mr. Harold Holt) would see fit to amend section 79a. of the Act to remove anomalies, but once again the Treasurer has failed or has refused to do so and consequently many people will continue to be denied a taxation relief that is properly theirs. Section 79a. allows a reduction in the taxable incomes of taxpayers in certain areas of the Commonwealth who have resided there for periods of more than six months of the income year. As I have pointed out previously, the words "of the income year " have caused the anomaly. Taxpayers can be resident in one of these areas for nearly 12 months and yet not qualify for any zone allowance.

There are two zones in which the reduction is allowed. In zone A a reduction in taxable income of £270 is allowed plus onehalf of the deductions allowed under sections 82b. and 82d., which relate to deductions for a spouse, children and so forth. In zone b a reduction of £45 is allowed plus one-twelfth of the deductions allowed under sections 82b. and 82d. The provisions relating to zone allowances were inserted in the legislation in 1945 by a Labour Government. They were provided as a recognition of the disabilities suffered by taxpayers in certain areas of the Commonwealth, such as uncongenial climatic conditions, isolation and high costs of living. It was felt that these disadvantages were such that a taxation concession was warranted. It is a great pity - and certainly most unfortunate for many people living in those zones - that a Labour Government was not returned long before now and given the opportunity to pursue the purposes of the allowances.

The late Mr. Chifley introduced the zone allowances when he was Treasurer in the Labour Government in April 1945. He said -

The Bill also contains special concessions for taxpayers who live in the remote parts of Australia. Honorable members will recall the discussion last session regarding the taxation of district and regional allowances. These allowances are paid to employees as compensation for the disabilities of uncongenial climatic conditions, isolation, or relatively high living costs. They are taxable in full; consequently, the absorption by taxation of a substantial portion largely defeats the purpose for which they are paid. If complete exemption were granted, serious anomalies would arise as between taxpayers living in the same district. However, it is considered that some measure of relief should be granted not only to employees but also to all other taxpayers who live in the remote parts of the Commonwealth.

Then Mr. Chifley stated the areas to which the allowances were to apply. He continued -

In prescribing the areas of the respective zones, the factors taken into consideration in determining "climatic conditions, isolation and high cost of living " were rainfall, latitude, distance from centres of population, density of population, predominant industries, rail and road service, and cost of food and groceries. These factors gave a general pictures of the areas in respect of which the allowance should be granted.

I suggest it is clear from the remarks of Mr. Chifley that a very close study had been made of the needs of the people and the conditions under which they had to work and live. Even so, it was still realised that anomalies might arise, that boundaries might require alteration or that amendments might be necessary to ensure that justice was done to people living within or close to the boundaries first determined. I suggest this was made quite clear by Mr. Chifley when he said -

In general, the zones contain only those areas for which the justice of the allowance can be demonstrated. Some areas of doubt occur along the boundary lines, but, looked at broadly, I think it will be acknowledged that a genuine attempt has been made to provide a reasonable concession for residents of the more remote areas of the Commonwealth.

Surely those words can mean only that if it were found that the amount of the allowance was not sufficient, or the boundaries did not include areas that should be included, or that people within the boundaries were not receiving justice, it was the intention of the Labour Government to take necessary action. And why not? Surely that is the only proper way to handle this sort of thing. Surely anomalies should be removed wherever and whenever they appear. There are anomalies in relation to section 79a as it now stands, and the Treasurer has for some time admitted that the anomalies exist. But he continually refuses to do anything about them. On 10th September 1963 - more than two years ago - in reply to a question on notice about zone allowances, he said -

Yes, it is possible for a taxpayer to reside in a zone area for almost 12 months in a period covering part of two succesive years of income without residing in that area for more than onehalf of one or either year of income.

The requirement that persons seeking entitlement to the zone allowance reside in or be actually in a zone area for more than one-half of the year of income has existed since the allowance was first introduced by the previous Government in 1945. Consideration has been given on a number of occasions to amending this requirement to meet particular anomalies but to the present no alternative has been found which would not either produce further anomalies or open the way to exploitation of the allowance by persons visiting zone areas for brief periods for holiday and similar purposes. The question will, however, continue to be examined.

So the Treasurer admits that anomalies occur. The Bill now before us covers 47 pages and contains 42 clauses so it would appear that a thorough examination has been made of the existing Act. We find that it is proposed to amend sections 79 and 79b. One would, have thought that if the Government was in any way concerned about the anomalies that flow from section 79a or if it had any intention to correct those anomalies, now would surely be the appropriate time to do so. We on this side of the House have always had some doubt whether the Government is at all interested in examining the boundaries of zone areas or in correcting anomalies. I would go so far as to say that the Government would rather do away with zone allowances altogether. I say that because in the 16 years this Government has been in office it has done nothing to remove existing anomalies, and also because members of the Liberal Party and the Country Party were against the provision of zone allowances of any description in 1945. They were very critical of the measure that was introduced in 1945 by the Labour Treasurer, the late Mr. Chifley.

In 1945 the present Prime Minister (Sir Robert Menzies) was Leader of the Opposition. He led for the Liberal-Country Party Opposition in the debate on the Income Tax Assessment Bill, which provided for inserting into the Act for the first time provisions in relation to zone allowances. The right honorable gentleman spoke on that occasion for 37 minutes. The report of his speech covers 6i pages of "Hansard". Of those 6i pages more than five are devoted to opposition and criticism of the zone allowance. The right honorable gentleman did not argue that the amount of the allowance should be more or less, that the boundaries of the zone areas should be extended or reduced or that the Bill was badly drawn. He was completely opposed to and critical of any zone allowance at all. Early in his speech, referring to the estimated amounts that would apply, he said -

A glance at those figures will show that easily the largest, and probably the most contentious, is in relation to the proposal to grant a special deduction to all taxpayers resident within particular zones marked out on the map which has been distributed to honorable members.

He gave notice at the start that the legislation would not go through without opposition. He then referred to other aspects of the Bill and launched an attack on the zone allowance. His attack, as I said earlier, covered about 5i pages of " Hansard ". He said -

The major item in the bill is that of £1,000,000 taken up by the proposed zone allowances - a flat rate deduction from income of £40 in zone A and of £20 in zone B, with no deduction of the rates in the rest of Australia. However interesting this proposal is as a novelty, it seems to me to be fundamentally unsound as a taxing method.

So the present Prime Minister made it clear from the outset that he did not like the proposition. He further said -

The second objection I offer to it is that it will open the door, for the first time so far as I know, to the activities of pressure groups in Australia, organised upon a geographical basis.

As far as I am aware there have not been any pressure tactics brought to bear, unless the Prime Minister suggests that the respectful and genuine requests made in this House for the removal of anomalies are pressure tactics. I am sure he would not suggest that. Speaking in the debate on 2nd May 1945 the right honorable gentleman continued -

My third objection to the zoning principle as a matter of policy is -

He went on to make it known that the Country Party and Liberal Party could not support the proposition as a matter of policy. He continued his speech by saying -

On the matter to which I have drawn particular attention, I have thought it proper to put the House in possession of my views in some degree of fullness, because I believe that if we at this stage adopt a system of taxation based on geographical lines we shall make the most retrograde step that any national parliament could make.

So there is no doubt where the present Prime Minister stood on this issue. Now let us see what the present Treasurer (Mr. Harold Holt) had to say in 1945 when speaking in the debate on the Income Tax Assessment Bill. He said -

There is only one point in relation to the details of the measure to which I desire to address myself at this stage, and that is the zoning system embodied in the bill. I question whether a more unsound principle has ever been introduced into our taxation legislation.

Regarding the high cost of living, most honorable members who have travelled widely in Australia find it very difficult to believe that the cost of living is higher in the areas indicated as zone A and zone B than in some other places. At various times I have been in each of the zones, and I am convinced that the cost of living is higher in Sydney than in any other part of the Commonwealth which I have visited. The third reason was uncongenial climate. Honorable members who, like myself, come from Victoria, and particularly those of us who live in Melbourne, will take a lot of convincing that Melbourne has not the most uncongenial climate in the Commonwealth.

According to the Treasurer it is more pleasant to live in the Kimberleys, near the iron ore deposits or on the gold fields than in Melbourne. All I can say is that the Treasurer must have been in zone A during the winter months. He certainly could not have been there during the wet season.

There is no doubt that in 1945 members of the Liberal Party and the Country Party were completely opposed to the provision of zone allowances. This has been their attitude ever since the Government which they support came to office. The fact that they have refused to do anything to remove the anomalies that flow from section 79a, which they admit exist and which they concede react unfairly against many people, shows that they still hold the views that they expressed in 1945. If the Government is still opposed to the principle of zone allowances and is not disposed to amend the existing provisions to correct the anomalies with regard to residence and boundaries, the Treasurer should say so rather than continue with the pretence that the matter will be examined at a later stage. If these provisions are unconsitutional, as the Prime Minister suggested they were in 1945, and if they represent a most retrograde step, the Government should have the courage of its convictions and should remove the provisions from the legislation. If, on the other hand, the Government's views have changed since 1945 and it now supports the principle of zone allowances, the Treasurer should take immediate action to correct existing anomalies and to grant justice to the people concerned.

I would like the Treasurer or some other honorable member opposite to avail himself of the opportunity in this debate to tell the House what is the Government's attitude in relation to this matter. Let us clear the air once and for all. I point out that as the Act stands a single taxpayer who resides in zone A for 6i months, all of that time being within the year of income, and whose taxable income before application of the zone allowance was £1,500, is allowed a tax deduction of about £70. A married man in the same circumstances would be allowed a tax deduction of about £85. But a taxpayer, whether single or married, whether he has half a dozen children or none at all, who remains in the same area and perhaps on the same job for a period of up to 12 months receives no tax relief at all by way of zone allowance if that period does not include more than six months of the particular income year. Surely such a ridiculous position should not be allowed to continue.

I understand that we would be out of order in moving an amendment to make the necessary alterations to the section of the Act because while it would not increase expenditure it would reduce revenue, which amounts to practically the same thing. Therefore I suggest to the Treasurer (MrHarold Holt) that if he and his Government now support the principle of zone allowances he should arrange for the necessary correction to be made when the Bill is presented in another place. If it is claimed that an amendment in relation to boundaries requires further consideration, that is O.K., but no such further consideration should be required before removing the anomalies in relation to the length of time a taxpayer must reside in a zone area. If, of course, the Treasurer is not prepared to take this action we can only conclude that he stills holds the views expressed in 1945, and that while this Government remains in office nothing will be done.

Now I wish to refer to the proposed new section 26ba, the purpose of which, according to the Treasurer, is to provide a measure of relief to wool growers whose assessable income in the 1964-65 year of income includes the proceeds of the sale of two wool, clips as a result of advanced shearing made necessary by the drought that has occurred in certain areas of Australia. This proposal apparently will allow such wool growers to decide whether they wish the profit from the second shearing to be assessed as income for 1964-65 or 1965-66. They can please themselves. I fully support the idea, but I cannot understand why the Treasurer should deem it necessary to restrict the provision to the 1964-65 income year or to conditions brought about by this one drought. It seems quite certain that the proposal is purely for the purpose of meeting the unusual conditions which have resulted from the very rare circumstance of a severe drought over a particular area of Australia. These circumstances and conditions are not expected to occur again for at least several years, and because they are not expected to occur for some time the Government believes, apparently, that it is not necessary to extend this provision to cover anything but the 1964-65 income year.

I believe that this measure should have application at all times and not just in respect of this one year, because while it may be unusual to have a general drought condition over the pastoral areas of Australia as a whole, or even over one State, or even over a large portion of one State, it is certainly not unusual to have pockets of drought areas in some parts of Australia practically every year. Certainly this is so in Western Australia. It was so last year and this year and no doubt it will again be so next year and the year after that. Drought will occur perhaps not in the same areas each year but certainly in some areas. Sometimes perhaps only two or three pastoralists will be affected, particularly in places where the holdings are large. At other times numerous pastoralists may be involved. I should imagine that these conditions would occur also in the other large States.

Surely a provision such as the one now proposed should be extended to cover any wool grower who is affected, not just this year but in any year. Certainly it should not be one which applies only on odd occasions or only when a large number of wool growers are affected in some particular area. The effect on a wool grower whose holding is situated in a drought pocket in a particular year can be just as severe as the effect on wool growers in large drought stricken areas where many growers are involved or where drought occurs only on rare occasions. 1 agree that it is proper for a wool grower who is obliged to shear twice in one income year and who does not shear in the following year, or at best has only a short period clip, to be allowed to carry over the profit of the advanced shearing and include it in the income of the following year if he so desires. But if it is proper to give this choice to those affected by drought last year, then surely it is proper to extend it to those who happen to be affected in a similar way this year or next year or in some future year. If there are no provisions for this concession in future years - and it appears that there are not - then I suggest that the Treasurer should recognise the need for them and have the measure amended accordingly in another place. Surely it would be better to do this than to have to insert a provision whenever it becomes necessary for a particular area or a particular year. It must be obvious that if only two or three wool growers are affected in a particular drought pocket, they would experience considerable difficulty in convincing the Treasurer that a special Bill should be brought down to insert a special provision in the Act to meet their particular circumstances. It would be much easier to do the job now, and there seems no reason why it should not be done.

I wish to raise another point which I suggest is closely related to the proposal we have before us with regard to advanced shearing in the case of drought. I refer to conditions that arise as a result of fire. A wool grower can, of course, insure against loss of sheep or wool by fire. There is also a legislative provision covering circumstances in which it is necessary to over-sell stock as a result of fire or certain other causes, allowing the income from that overselling to be spread over the next four or five years. But as far as I can ascertain there is no provision at all for carrying over the profit from an advanced shearing which results from fire. Advanced shearing may be obligatory when sheep have to be sold after a fire. For instance, a fire in a burr or other noxious weed area may, because of the resultant loss of feed, cause a wool grower to sell all or a large portion of his flock. The sheep must, because of laws relating to burrs, etc., be shorn before sale. The sale must be off shears. If the area involved happens to be a dry area, or the following season is dry, the sheep may not be replaced, or at least not to anything like full capacity, for a couple of years or more. In the year following the fire, therefore, the profit from wool is well down and the wool grower is in a position similar to that of wool growers in a drought area and he should have the right to carry forward his income from the advanced shearing into the next year.

The only other matter I wish to refer to at this stage is that of the taxing of district allowance payments made to workers in certain areas of the Commonwealth in respect of which the Conciliation and Arbitration Court or Commissioners have decided that some extra payment is warranted because of certain disabilities and disadvantages, such as a high cost of living as compared with metropolitan areas. Of course the Treasurer, if he still holds the views he expressed in 1945, would not agree that district allowance should be paid at all, because he claimed at that time that living costs were highest in Sydney and that Melbourne had the most uncongenial climate. Apparently he would consider those two cities to be less desirable places of residence than the Kimberleys, the Northern Territory or north Queensland. Fortunately for the workers, however, the courts have other ideas and have in their wisdom awarded varying amounts as district allowances to workers in outback areas to compensate them for what we considered to be conditions worse than those in the capital cities.

To illustrate my point I will take a case in which a district allowance of £2 a week has been granted. Under our present tax laws that £2 is fully taxable. If a worker had a taxable income of £1,400 without any district allowance, his income tax would be increased by 10s. a week after the district allowance was added. Looking at the position from another angle, this means that the £2, which the court decided was a reasonable amount to make up for the disabilities, is reduced to 30s. As a result the action of the Commonwealth Conciliation and Arbitration Commission in compensating the worker for the conditions in which he works and lives is largely defeated. It seems to me to be wrong that part of the worker's allowance should be lost purely as a result of taxation. If a tribunal finds that a worker in the city should receive £20 but that a man doing the same job in the north or north west of Australia should receive an additional £2 a week, surely the worker in the latter category should receive the full benefit of the allowance. If he does not he is not actually receiving compensation for the conditions in which he works.

The wage tribunals in their decisions cannot make provision for taxation by adding some further amount to the allowances they award. In the first place, that would be a payment by the employer and not related to the conditions of the job; secondly, the tribunal would not know what each worker's income was going to be; thirdly, it would not know when the Government was going to amend the taxation rates or whether it was going to move them up or down. I appreciate the difficulties of this matter, and I appreciate that all taxpayers in these areas, employee and employer alike, are entitled to compensation for what they have to suffer in relation to climate, costs and such things. I suggest therefore that the action of the Labour Government in 1945 in granting zone allowances was the correct move. If this Government will not correct the anomalies arising from the zone allowance provision in relation to residence and also will not give consideration to zone boundaries it simply means that many workers in receipt of a district allowance component in their wages are paying out in tax part of their allowance. Unlike other workers in receipt of a similar allowance they are not receiving any compensatory relief by way of taxation zone allowances. I suggest that because of that we have a further anomaly flowing from this matter of zone allowances. I put it to the Government that there are very good reasons why the section of the Act relating to zone allowances should be amended, and I respectfully suggest that the Government take immediate action to do so.







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