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Monday, 26 November 1973
Page: 3816


Mr WILSON (Sturt) - I rise to support the amendment moved by the Deputy Leader of the Opposition (Mr Lynch) to add to the Bill now being debated a series of riders. The Opposition, whilst not declining to give the Bill a second reading, wants to express that the House is of the opinion that the provisions are in contravention of the Government's electoral undertakings not to increase taxes. We list a series of items about which we wish to express our concern. In the time available in this debate it is not possible for any one speaker to touch upon all the items to which the Opposition wishes to draw attention. This afternoon, however, I wish to deal with 3 of those items and they are those lettered (a) where we say that we are most unhappy because the Bill imposes unwarranted taxes on pensioners; (e) because it places inflexible rules on the sale of property which take no account of reasons unconnected with profit motives, such as illness or additional family responsibilities; and (g) because it places added cost burdens on Australia's wine and brandy producers, especially the smaller producers of wine grapes.

First, I want to deal with those provisions of the Bill which impose unwarranted taxes on pensioners. The Prime Minister (Mr Whitlam) and his colleagues during the election period gave an undertaking to the Australian electorate that their Party, if elected to office, would not raise taxation, would not increase the tax burden of any individual taxpayer. That undertaking has been broken on a number of occasions and is yet to be broken again in this Bill because of the manner in which age pensioners are being dealt with under the proposed legislation. Prior to the introduction of this Bill pensions paid to people eligible for them under the means test were exempt from tax. In addition pensioners or non-pensioners who qualified by age were entitled to have their tax assessed according to an age tax allowance.

This allowance was originally introduced to take account of the fact that some in the community received tax-free age pensions, whilst others deprived because of the means test of eligibility for a pension received taxable income and under the ordinary rates scale were liable for taxation at rates which reduced their income below the income of someone in a similar position, except that they were on a pension in contrast to the person who was in receipt of an independent income. The age tax allowance, therefore, was brought in to introduce equity as between one group of aged persons in the community and another group of aged persons in the community. There is no doubt that its introduction created anomalies with regard to the aged when compared with those who did not qualify by age. But that is a different question and I shall in a few minutes direct the attention of the House to that question also.

The effect of making pensions taxable is to impose a tax burden on many persons today whereas last year they were not liable for such tax. Insofar as that tax is imposed upon them today where it was not their responsibility last year, it is a breach of the Labor Party's election promise. No one can object to the concept of means-test-free pensions being made taxable, but it is very strange that those pensioners who this year are receiving means-tested pensions should be informed that they are to be liable for tax this year and yet next year they will have means-test-free pensions. The effect of the imposition of tax upon their incomes will work a considerable hardship. Many of them - on the Treasurer's estimates, 20 per cent of pensioners - will become liable to lodge tax returns and a high proportion of that 20 per cent will become liable to pay tax - and to pay tax at rates higher than were chargeable under the old age tax allowance.

I have drawn the attention of the House to the reason why the age tax allowance was originally introduced and I have underlined the fact that the way it operated caused a number of anomalies. But if the Government relied for its decision on the Coombs task force report - a report on which it has relied for many of its decisions - it seems harsh that it would now take the more severe of the 2 alternatives put forward by the task force. The task force said:

One possibility would be immediate abolition of the allowance. Unless some 'no loss' provisions could be devised, however, that would mean that some aged persons would be made worse off by the amount of the tax. Rises in pensions already foreshadowed by the Government would offset the loss in some but not all cases.

The rise in pensions may have offset the loss in money terms, but it has deprived that section of the community of income in real terms because it, too, is experiencing the difficulties of inflation. The way in which this age tax allowance abolition works means that a pensioner who has a non-pension income of $19 a week up to $44 a week is liable, under this legislation, to pay tax whereas under the previous Government's age tax allowance that person would have paid either no tax or considerably less tax than is imposed by this legislation. The medium to low income earners are being asked to pay the cost of the introduction of this new system of taxation for one or two years at the most, because at the expiration of the 2-year period if, and only if, the Government carries out another promise which it made - that is, to abolish the means test - that test is abolished, those pensioners will be in receipt of means test free pensions, and the new system of taxation will work in a fairer way.

There is another aspect of the new tax system to which I wish to draw the attention of the House. It is the introduction of a rebate system. One might wonder whether the system is a precursor of other proposals yet to be introduced into the House. If it is, it has inherent in it many serious implications. The rebate which is allowed to certain aged persons - I underline 'certain aged persons' - is $156 off their total tax, assessed at normal rates. When that $156 is deducted, the balance of tax is paid up to a certain limit, and only up to a certain limit, because once the limit of a taxable income of $3,224 is reached the rebate begins to phase out. The effect of the phasing out is that the rebate is reduced at the rate of 25c in $1. The tax concession is reduced by 25c for each $1 of income over and above $3224 a year or $60-odd a week. That reduction in the rebate must be added to the marginal rate of tax charged at that level of income, and the marginal rate of tax over phased out incomes varies from 24.4c to 25.6c in $1. So aged persons who are in the income range of $3224 to $3847 pay a marginal rate of tax of nearly 50c in $1, a rate of tax payable by taxpayers whose taxable income is $12,000 a year. If it is not a crazy system of taxation to impose on low income earners a marginal rate of tax as high as that paid by those in much higher income brackets, I do not know what is.

The taxation system is in need of total review. This is not the first occasion on which I have spoken in the House on this matter. I have spoken on this question both from this side of the House and from the other side of the House. The tax system, as it bears upon the young family man, is in grave and urgent need of reform. Last year the lowest income on which tax was paid, or the threshhold of tax, was lifted so that no one with an income under $1,120 a year paid tax. There, too, we see a crazy system of phase - in whereby people whose income is above the threshhold, or on the lowest incomes which bear any tax liability, pay tax at a rate of 66c in $1 until the concessions which were granted to them are phased out, and then their rate is reduced to 14c, 15c or 16c in $1. At the general level, at the threshhold for the young family or the young income earner, we have this absurdly high rate of marginal tax payable which is destroying all incentive to work to gain an income above that level. By virtue of the introduction of the rebate system there is an equally crazy system of tax whereby people who pay a very high rate are on relatively low incomes.

I turn now to the provision which makes taxable profits on the sale of certain assets within 12 months. I express my concern at the inflexibility of the provision. There can be no argument that if someone buys an asset for the purpose of re-sale the profits on that sale should be taxable. There can be no disputing that it is sometimes difficult to tell a person's intention. Therefore it is necessary for legislatures to say on occasions: 'We will assume that it was a profit making purchase if the second sale which returns the profit takes place within 12 months of the original sale or first purchase'. To place an imposition on those who sell a house merely on the ground of changed employment is a totally inadequate reason. Think of the young family which comes to Australia from overseas and which wants to buy a house in its new country. I am glad that the Minister for Immigration (Mr Grassby) is present. I hope that he will take note of the point which I am making. How many migrants has he heard of who have bought houses in the excitement of the first arrival, obtained a job, then found that they are a long way from their place of employment and have wanted to sell their house to buy another? Because of an inflationary real estate market they make a profit. This Government will prevent that young family improving its situation in its new country by preventing it from buying a house in a community closer to the place of work. This Government will tax the young family for the 'profit' which it makes on the sale. Likewise, where a young couple buys a block of land with the intention of building a house, then lets out the plans to a builder, gets a price, finds that the price is too high, and chooses within 12 months to sell the block of land and buy a ready built house, if they make a profit on the land they are taxed on that profit when it is really the transfer of one asset in the form of a block of land into another asset in the form of a block of land on which there is a ready built house.

There are other cases in cities such as my home city of Adelaide where one person could change a job and, seeking the benefit of this provision of the Income Tax Act, could claim that the profit made on the sale of his house should not be taxable. His next door neighbour could have been working at the same place all the time and could have been travelling a long distance, say from Tea Tree Gully in my electorate to the Chrysler factory in a southern Adelaide suburb. He could decide to move closer to the Chrysler factory. He has not changed his employment. His next door neighbour has. Because one was working somewhere else before moving to Chrysler he pays no tax on the profit he makes in merely transferring his limited savings from one house to another. The other is unable to take the full capital gain with him. I am sure that the Government will find that there is absurd inflexibility in that proposal in the Bill.

The third matter to which I wish to draw the attention of the House relates to the changed tax provision for the assessment of stocks held by the wine industry. I draw to the attention of the House headlines which appeared in Adelaide's newspapers late last week. In the 'News' of Friday huge 2 inch headlines said: 'Dishonoured: Dunstan Hits Out In Wine Row.' Saturday morning's Advertiser' said: 'PM Dishonoured Promise on Wine, says Dunstan.' I have a copy of a letter which came into my hands during the election campaign showing that the Premier of South Australia, claiming to be the Chairman of the Australian Labor Party Federal Election Finance Committee, wrote to members of the wine industry asking them to forward donations upon the basis that they would send that money to the Labor Party on hearing that the Prime Minister had given an unequivocal assurance during the election campaign that any government led by him would abolish the excise and not replace it with a sales tax or any other imposition. At the time I called the Premier of South Australia a law broker and a man who was prepared to go out into the electorate and seek contributions to election funds in exchange for legislation. That law broker is screaming today. In fact I think that law broker is running out of the country. He is quickly going overseas before this Parliament can embarrass him any further because his undertakings given at the request and on the instructions of the Prime Minister have been broken.

This legislation will cause irreparable harm in an industry which has been enabled to build itself up and do a great deal not only within Australia but also outside Australia. The industry is being asked to pay a restrospective tax. It is being called upon to pay tax on stocks that were taken into account years ago. By virtue of that the wine industry will have very severe cash and liquidity problems. The Government needs to look at the situation. I hear of the sort of promise that the South Australian Premier tried to make on account of his Prime Minister's promising legislation in exchange for money. I hear of Caucus reversing the Labor Government's decision on the gold industry. I wonder how much bad gold was provided to the Minister for Services and Property (Mr Daly) for .the Labor Party's funds in order to gain that decision. The Labor Government needs to look at this sort of legislation objectively and to assess the harm that it is doing to an industry that has served and is serving this country well. It needs also to examine the merits of introducing retrospective legislation which will drive many small wine and brandy producers out of business.

I urge the Government to look at the situation and to consider amending the legislation in a manner which will not have a retrospective effect even if it wishes to change the legislation for its future effect. I also draw the attention of the House to the dangerous implications of the change not merely to the wine industry but to every other industry where stocks are valued at considerably less than their market value.

Mr DEPUTY SPEAKER (Mr Drury)Order!The honourable member's time has expired.







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