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Tuesday, 30 November 1965


Mr BOWEN (Parramatta) .- by leave - I move -

1.   After the definition of " asset " in sub-section (1.) of proposed section 79, insert the following definition: - " ' dependant ', in relation to a member of a superannuation fund, includes the spouse and any child of the member; ".

2.   In sub-section (2.) of proposed section 79, omit "the Commissioner is satisfied that".

3.   In sub-section (2.), paragraph (c), of proposed section 79, omit "and was communicated in writing to the member either before, or at the time when, contributions were first paid to the fund in respect of the member or of bis dependants", insert " and notice in writing of the existence of that right was given to the member not later than the time when contributions were first paid to the fund in respect of the member or of his dependants or the thirty-first day of March, One thousand nine hundred and sixty-six, whichever is the later,".

4.   In sub-section (2.), paragraph (d), of proposed section 79, omit " will be ", insert " is to be ".

5.   In sub-section (2.), paragraph (e), of proposed section 79, omit "will be" first occurring, insert " are to be ".

6.   In sub-section (2.), paragraph (e), of proposed section 79, omit " will be " second occurring, insert " are to be ".

7.   Omit paragraph (g) of sub-section (2.) of proposed section 79, insert the following paragraph: - " (g) the reasonableness of the benefits that have been, are being or may be provided for members of the fund or their dependants from the fund, or from any other fund being -

(i)   a fund of a kind referred to in paragraph (jaa) of section twenty-three of this Act;

(ii)   a fund any income of which is or has been, or, but for Division 9b of this Part, would be or would have been, exempt from income tax by virtue of paragraph (ja) of section twentythree of this Act; or

(iii)   a fund to which this section or section twenty-three r of this Act applies in relation to the year of income or has applied in relation to a previous year of income; ".

8.   After sub-section (2.) of proposed section 79, insert the following sub-section: - " ' (2a.) Where a deed or instrument relating to a superannuation fund contains a provision the purpose of which is to avoid a breach of a rule of law relating to perpetuities, the provision does not prevent the fund from being treated as an indefinitely continuing fund for the purposes of paragraph (a) of the last preceding sub-section.".

9.   In sub-section (6.) of proposed section 79, omit "the Commissioner is not satisfied that an undertaking approved by him in relation to a superannuation fund for the purposes of paragraph (d) of sub-section (2.) of this section was complied with ", insert " an undertaking approved by the Commissioner in relation to a superannuation fund for the purposes of paragraph (d) of subsection (2.) of this section was not complied with ".

10.   Omit paragraph (a) of sub-section (6.) of proposed section 79.

11.   After sub-section (6.) of proposed section 79, insert the following sub-section: - " ' (6a.) Where it appears to the Commissioner that an undertaking referred to in the last preceding sub-section was not complied with during a year of income, he shall inform the trustee of the fund in writing of the respect in which, in the opinion of the Commissioner, the undertaking was not complied with.".

These amendments relate to clause 17 which deletes the old section 79 of the principal Act and inserts new section 79. In the main the new section reproduces the old but some minor amendments have been introduced by the Government. Again we find that this relates to superannuation funds. It provides that 5 per cent, of the cost of assets of superannuation funds established for the benefit of employees or for other persons is an allowable deduction. Again, in order to obtain this allowance - the deduction of 5 per cent, of the cost of assets - the fund has to pass a number of tests. There are nine tests but they are not quite the same tests as were provided in section 23f. However, the test in paragraph (d), which is amended by the Government proposal, relates to the case where members of a fund have ceased during the year to have a right to benefits. The condition as it stood previously was that these benefits had to be allocated to the remaining members of the fund.

The amendment proposed in the Bill is similar to that in relation to section 23 p, namely, that an undertaking to make an allocation to the satisfaction of the Commissioner will be a sufficient compliance with that condition. The Government Members Taxation and Finance Committee again considered that this new proposed section 79 had in it conditions which were somewhat too stringent so far as genuine funds were concerned, and the amendments I am moving are those which have been put forward by the Committee.

The first proposes a definition of dependant which corresponds with that which I mentioned earlier in relation to section 23 f. Amendment No. 2 deletes reference to the satisfaction of the Commissioner. This again, consistently with our earlier amendment, seeks to make compliance with these conditions depend upon the actual facts and not upon what might be the opinion of the Commissioner about those facts. Amendment No. 3 relates to the condition which requires communication to each beneficiary of a fund of the terms and conditions which give rise to his right. This amendment will make it sufficient to give notice in writing of the existence of the right and to provide a date on or before which existing funds would be entitled to give that notice, the date being 31st March 1966. That is a mat ter on which the Bill itself is silent. The next three amendments are purely verbal and consequent upon the other amendments.

Amendment No. 7 relates to the question of aggregating the benefits of the members of a fund. The honorable member for Melbourne Ports (Mr. Crean) wanted further light to be thrown on the difficulties that genuine funds might have in complying with these conditions. This, perhaps, might serve as one simple illustration. If the honorable member were a trustee of such a fund he would no doubt claim for the fund, after 30th June in a particular year, that it was exempt from tax, in order to get that benefit for his beneficiaries. The honorable member, if he were a trustee, would not know whether some of the members of this fund were also members of some other fund. If they were, and if their benefits when aggregated with the benefits they had under his fund would give those particular individuals an excessive retiring allowance, he would find, quite inadvertently as far as he was concerned, that the entire income of the fund he was administering would be liable to tax at the rate of 10s. in the £1. All his beneficiaries would be liable to 10s. in the £1 because one or two of those people belonged to other funds without his knowledge. That is one difficulty I mentioned as an example to the honorable member for Melbourne Ports.

What is sought to be done by amendment No. 24, is to make reasonable benefits in the case of funds dealt with in section 79 of the Act depend upon aggregating only the benefits which a member of that fund may have under funds which receive tax exemptions. It excludes any aggregation of funds which are themselves liable to ordinary rates of tax. Amendment No. 25 proposes to include in section 79 provision regarding the rule against perpetuities similar to that in favour of which I was speaking in relation to section 23f. I do not repeat my argument in favour of that provision. This provision is necessary to make sure that a genuine fund can pass the first condition which is in paragraph (a), otherwise there would be a difficulty for some funds in passing it.

Amendment No. 26 deletes a further discretion in the Commissioner relating to the question of whether an undertaking to allocate lesser benefits has been complied with or not, and makes it depend on the fact of whether or not it has been complied with. There are then certain consequential amendments dealt with in the amendments circulated on my behalf, Nos. 27 and 28. They are consequential to the change dealing with the satisfaction of the Commissioner as to the undertaking. I commend these amendments to the Committee.

Amendments agreed to.

Clause, as amended, agreed to.

Clauses 18 to 21 - by leave - taken together.







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