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Thursday, 4 June 1970


Mr BURY (Wentworth) (Treasurer) - I move:

That the Bill be now read a second time.

This Bill should be read in conjunction with the States Receipts Duty Bill (No. 1) 1970, the States Receipts Duty Bill (No. 2) 1970, the States Receipts Duty Bill (No. 3) 1970 and the States Grants (Receipts Duty) Bill 1970 which I shall be introducing shortly. The purpose of the group of 5 Bills is to provide the legislative framework for the imposition by the Commonwealth, at the request of the States and for their benefit, of a duty on business receipts so as to achieve the general result that the States do not lose revenue as a consequence of the High Court decisions invalidating the receipts duty legislation of the States in its application to certain types of receipts.

The Commonwealth has long accepted that, when the States are faced with large abnormal budgetary difficulties through circumstances beyond their control, it may be necessary for the Commonwealth to consider special measures of assistance. Accordingly, when the High Court decision in the Hamersley case cast doubt on the constitutional validity of the receipts duty legislation of the States in its application to certain types of receipts, the Prime Minister (Mr Gorton) indicated last September that the Commonwealth would see that the States did not lose revenue in 1969-70 in the event that this doubt was confirmed. At a special Premiers Conference held an 18th November 1969 to consider the position, the Premiers said that the States had expected to receive a total of about $70m in 1969-70 from their receipts duties. About $40m of this revenue was estimated to come from duty on the proceeds of sale of goods - the area that was considered most likely to be held invalid. The Premiers estimated that, if the States' receipts duties were discontinued altogether, the loss of revenue to the States in 1969-70 would be up to $50m. It was recognised that, if there were a substantial revenue loss and no replacement tax were introduced, the inflationary effects on the economy would be severe. The outcome of the Conference was a request by the Premiers, to which the Commonwealth agreed, that in the event of the receipts duty of the States being found invalid in some or all respects, the Commonwealth should introduce legislation, with operation retrospectively to 18th November 1969, to impose a like tax for the benefit of the States.

At a further Premiers Conference held on 26th February 1970 following the High Court decisions given on the previous day, the Premiers requested, and the Commonwealth agreed, that the Commonwealth legislation should have continuing operation beyond 30th June 1970. It was also agreed that the Commonwealth legislation should apply only to business receipts, which are the receipts in respect of which the great bulk of the invalid area of the existing receipts duty legislation of the States falls.

The 5 Bills give effect to the arrangements I have outlined. The legislation is being introduced at the request of the States and for their benefit, with the proceeds of duty collections under the legislation being payable to the States as section 96 grants. Before proceeding to outline the contents of the legislation, I feel I must strongly emphasise the importance, particularly in view of existing demand pressures in the economy, of ensuring that there is not at this stage any substantial loss in budgeted revenue collections such as would occur if the Commonwealth did not legislate on the basis requested by the States. In this connection I might mention that the Premiers have indcated that, in the absence of Commonwealth legislation to impose receipts duty where it is in the nature of an excise, the States would be unlikely to be able to impose receipts duty where it is not in the nature of an excise. in these circumstances, it would clearly be dangerously irresponsible to allow a retrospective reduction in tax revenues at the rate of some $70m per annum.

The legislation will, in accordance with the arrangements I have outlined, have retrospective applicaton to 18th November 1969. However, provision is made for an exemption from liability to duly under Commonwealth law if State duty - whether or not validly imposed - has been paid, .or within a specified t me is paid, under State law in respect of receipts during a transitional period from 18th November 1969 until a date to be proclaimed under the Commonwealth legislation. Receipts specifically exempted under thc provis'ons of existing State Acts - or to which these Acts do not. validly or invalidly. extend - will also not be liable to duty under the Commonwealth legislation during the transitional period.

The effect of this in the case of Queensland warrants special mention. The rate of duty under the Commonwealth legislation will be lc in SIO, or 0.1%. This is the rate applying under the State legislation at present in operation in all States other than Queensland. In Queensland, the rate at present in operation is 2c in $100, or 0.02%. A practical effect of the provision I have referred to is that, for receipts in Queensland during the transitional period, there will be no liability for duty under the Commonwealth law if duty is paid to Queensland at the lower rate or if the receipt is under $20 and for that reason not subject to Queensland duty. From the end of the transitional period the combined effect of the Commonwealth legislation and legislation already passed by the Queensland Parliament will be that the rate on receipts dutiable under either law will be the same its in other States - that is, lc in $10.

The Commonwealth's approach to the legislation before the House has been that, as it is being introduced at the request of the States and for their benefit, with the Commonwealth acting in a sense as agent for the States for the purpose, it has been essentially for the States collectively to say what detailed provisions should be included in the Commonwealth legislation within the framework of the agreed arrangements. Accordingly, the detailed provisions have been agreed collectively with the Slate governments. This has necessitated a large amount of give and take as between the various States because the Commonwealth legislation must of course apply uniformly in all States and there are innumerable differences in the detailed provisions of the existing legislation of each of the Stales. To a large degree it has been a matter of achieving an amalgam, acceptable to the States collectively, of the varying provisions of the existing State legislation.

After the Commonwealth legislation conies into effect the States will continue to impose receipts duty on those receipts that remain validly taxable under their own legislation and to the extent that they are not subject to duty under the Commonwealth legislation. Queensland is so far the only State to have taken legislative action for its receipts duty to conform to this pattern. The other States intend to do so when they can. Until they do, they will take the administrative steps necessary to ensure that no double duty arises after the date when the Commonwealth legislation comes into effect. 1 understand that State governments that have not already made this clear will be making announcements on this point. The numerous differences - many of detail but some of substance - between the provisions of existing legislation of the individual Stales have made it unavoidable that the provisions of the Commonwealth legislation do not in all respects coincide with those of any of the States. Within the practical limits, however, the endeavour of the Commonwealth and the States has been, so far as taxpayers are concerned, to restore as nearly as possible the position that would have applied if receipts duty had continued to be imposed wholly under State legislation.

This has been the aim both as to liability for duty and to arrangements for its payment. While the Commonwealth Commissioner of Taxation will be responsible for the general administration of the Commonwealth legislation, the day to day administration will continue to be carried out by State officers in conjunction with their administration of the State legislation. Duty under the Commonwealth legislation will be payable only through the lodgment of periodical returns and not through the stamping of receipts. The returns, accompanied by payments of duty, will be lodged with State officers who, for the purposes of the Commonwealth legislation, will be appointed as collectors of receipts duties for their respective States. In practice, the return period for each taxpayer will generally be the period applicable for purposes of State law. For a business that has not been lodging State returns, the return period will be 1 month or such other period as is determined on a basis appropriate to the particular case.

Where a taxpayer during a return period receives money that is subject to duty under Commonwealth law and also receives money that is subject to duty under State law or - and I would expect there to be few cases of this kind - receives money part of which is subject to Commonwealth duty and part of which ls subject to State duty, the taxpayer will be able to furnish to the appropriate collector of receipts duties the one return showing separately the amounts subject to duty under Commonwealth and State laws. Payment of the one amount in satisfaction of the total liability to the duty under the two laws will be accepted.

As I have already indicated, the application of the Commonwealth legislation will be limited to the taxation of what I have broadly referred to as business receipts. Subject to specified exemptions, duty will be payable under Commonwealth law in respect of money received, or deemed to have been received, in Australia by a person in the course of carrying on a business in a State. Carrying on a business will, for the purpose of the legislation, have its ordinary general meaning and will include engagement in a trade or profession, but not as an employee.

All money received - or deemed by the legislation to be received - by a company residing, or carrying on a business, in a State, will be regarded as being received in the course of carrying on business. This rule will also apply to partnerships, although there will be no liability to duty on amounts received by a partner from a partnership in his capacity of partner nor by a partnership from a partner in that capacity. A company is defined by the legislation to include incorporated and unincorporated bodies, but exemptions are provided for the receipts of a wide range of organisations such as unlicensed clubs, charitable institutions, prescribed marketing authorities and prescribed public authorities. Provision is also made for rebates of duty where the duty has been paid on moneys received but subsequently repaid. This may occur where, for example, repayments are made of money that has been paid as a tender deposit or for goods that are later returned to the seller.

The legislation contains special provisions relating to principals and agents, including solicitors and their clients. The broad purpose of these provisions is to ensure that the interposition of an agent in arrangements for payment of money by one person to another does not cause any greater liability to arise than would accrue if the payments were made directly. As is the case under the receipts duty legislation of the majority of the States, the primary liability for duty will fall on the agent rather than the principal. There are, however, likely to be cases where it will be more convenient to the parties for the principal, and not the agent, to pay duty on amounts received by the agent on behalf of the principal. Provision is made in the legislation for the principal to arrange that, subject to administrative approval, the primary liability for the duty may be transferred to him in these cases.

Under the Commonwealth legislation duty will be imposed on money received in Australia in the course of carrying on a business in a State, and the amount of section 96 grants payable to each State will be the amount of duty collected in respect of money received in that State. However, one arrangement included at the request of the States is that, where goods or services are supplied in one State but payment for them is received in another State or in an internal or external territory or overseas, the receipts are to be included in a return lodged, and duty is to be payable, in the State in which the goods or services are supplied. Goods will be regarded as being supplied at the place where the property in them passes. One effect of these provisions is that, while duty is not being imposed in the territories, avoidance of duty by arrangements designed to take advantage of that fact should substantially be prevented.

A person will be regarded as having received money irrespective of whether the receipt is in the form of cash, or of cheques, other bills of exchange or promissory notes. However, a transaction that is merely an equal exchange of money for money - for example, the cashing of a cheque or the exchange of notes for coins - will not be treated as a receipt of money by either party. Payments by a person into his current or savings bank account and withdrawals by him from such an account are also exempt.

There are circumstances in which a person will be regarded as havi ng received money for the purposes of the legislation, although in a strict sense he may not have done so. A deposit by a person to the bank account of another person, or a debit of an amount against a person's bank account transferred to the credit of another person, will be treated as a receipt of money by the other person. So too will the receipt by a creditor of a consideration other than money in the settlement of a debt or part of a debt. Money will also be deemed to have been received by a creditor where his debtor does not pay him in cash but instead, with his authority, credits him with the amount of the debt or part of it.

In common with other Commonwealth taxing legislation, the legislation provides the machinery for a taxpayer dissatisfied with his liability as determined under the legislation to object against the liability assessed. If the objection is not allowed, the taxpayer may request a hearing by a taxation board of review and may appeal to the Hi gh

Court from a decision of such a board as to any question of law involved. The legislation is so drafted that a person who wishes to dispute liability in this way may request the Commissioner to issue an assessment of duty so that he may have the matter with which he is dissatisfied considered by an independent tribunal. The enforcement provisions in the Bill are modelled on comparable provisions in other Commonwealth taxation laws.

I have, in this introductory speech, explained the general background to and framework of the Commonwealth legislation, and in addition have attempted to indicate in brief and broad terms the main technical provisions embodied in the legislation. However, particularly in view of the complex nature of the legislation, I am having circulated to honourable members an explanatory memorandum setting out more detailed informati on on technical and procedural matters. I commend the Bill to honourable members.

Debate (on motion by Mr Crean) adjourned.







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