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Tuesday, 19 May 1936

Senator A J McLACHLAN (SOUTH AUSTRALIA) (Postmaster-General) . - I move -

That the bill be now read a second time.

Honorable Senators, I am sure, will welcome this measure, though it may be regarded by some as a belated step in securing the simplification and harmonization of the income tax laws of the Commonwealth and the States. It marks a milestone in the history of our taxation law, and gives effect to principles which are gratifying to me personally, and which, I am confident, will strongly appeal to honorable senators. It has always appeared to me that our income tax law should be as simple as possible. It touches every section of the community. Few amongst those who are highly skilled in business have really understood the complexities of Federal and State taxation, and some of us, at the bar, reaped rewards in consequence.

Honorable senators are aware that the introduction of this bill is the outcome of the work of the Royal Commission on Taxation. Prior to its appointment, insistent requests had been received from all sections of the taxpaying community that something should be done to harmonize, and simplify, as far as possible, the taxation laws of the Commonwealth and the States. To this end, Sir David Ferguson, a former justice of the Supreme Court of New South Wales, and Mr. E. V. Nixon, C.M.G., a chartered accountant, of Melbourne, accepted a commission to make the inquiry on behalf of the Commonwealth and the States. The results of the royal commission's labours are contained in the four reports published at different dates during 1934. The first three reports cover the subject of income tax, whilst the fourth and final report relates to land tax and estate duty. The Government has already, more than once, made public acknowledgment of its appreciation of the work performed by this commission, and, on the occasion of the introduction to this chamber of such an important bill as this, I should be lacking in my duty if I failed to .acknowledge again, the thanks of the Government for the thorough investigation conducted by these gentlemen into this difficult and complicated legislation, and for the clear and excellent report and sound recommendations that they have put forward.

To win acceptance by the States as well as the Commonwealth of the recommendations embodied in the royal commission's reports, several conferences were held during 1934 and 1935. These were attended by Ministers, as well as taxation commissioners and their officials, to discuss the recommendations of the royal commission, as' affecting the various income tax laws. The bill now before the Senate represents, generally speaking, the principles that have been agreed upon at these conferences, and accepted by the Commonwealth Government. In the interests of uniformity, the royal commission went out of its way to submit a model draft bill for the acceptance of the Commonwealth and the States. The bill, after consideration and amendment to meet the detailed requirements of the

Commonwealth and the States, it has been reviewed at the various conferences so that the clauses in this measure may be said to have the imprimatur of the taxation experts and the royal commission. The Government is hoping tha t no departure will be made by the States from the principles and the drafting adopted in the various uniform bills now before the various parliaments without prior consultation and agreement. Having arrived at what is regarded as the maximum uniformity attainable at the present juncture, it is earnestly desired that all possible means shall be used to retain that degree of- uniformity, and even to increase it in the immediate future.

The royal commission, and the delegates at the various conferences, have kept in mind the ideal of one return and one assessment for each taxpayer. While this ideal is not attainable for all taxpayers, because of constitutional limitations and necessary variations in the respective States owing to peculiar local conditions, as well as revenue needs, a great advance in the standardization of returns and assessments, generally, has been achieved.

Honorable senators will gauge, perhaps more adequately, the value of the work accomplished and embodied in this bill by comparing it with a similar attempt, that has been made in the United Kingdom in connexion with Great Britain's income tax problems. According to a recent cable published in the Australian press, it appears that an Income Tax Codification Committee, appointed in 1927, under the chairmanship of Lord Macmillan, which has been sitting continuously ever since, has been able to bring its work to a conclusion only this year. The purpose of the committee was to make the British law as intelligible as possible to the taxpayers, and it has now produced two blue books of 826 pages. The report concludes " A simple code, intelligible to the layman, is a vain hope ". The second volume includes a draft bill, the largest ever submitted to the British Parliament. The fact that the royal commission in Australia had to deal with the laws of six different States as well as that of the Commonwealth makes its achievement even more meritorious and creditable.

There is a proposal, following upon a recommendation by the royal commission, for the Commonwealth and States to establish an appellate tribunal, to he presided over by a single judge of Supreme Court status, to deal with appeals for Commonwealth and State purposes. Such a tribunal will supersede the present Federal Income Tax Board of Review, as well as the various State courts to which, at present, State appeals* are referable. I am aware that, from time to time, honorable senators have been receiving representations from various bodies in the community which are opposed to the abolition of the Federal Income Tax Board of Review. The bill before the Senate does not make any alteration in that direction, and simply repeats the present Commonwealth provisions with regard to that board. Honorable senators, who desire to debate this proposal will have the opportunity to do so when the bill, to give effect to that recommendation of the royal commission, is brought before the House. For the information of honorable senators, I may state that the constitution of the proposed appellate tribunal has yet to be finally agreed upon with the States, and, until an agreement is reached, it will be impracticable to substitute an appellate tribunal for the Board of Review. Meanwhile, the Commonwealth Government proposes to extend for a further twelve months the term of appointment of the present members of the Board of Review, which expires in June of this year.

The first report of the Royal Commission on Income. Tax dealt mainly with proposals for the simplification of the provisions relating to the taxing of companies and dividends. These proposals were made the subject of the 1934 amending Income Tax Act, and are already in operation with general benefit to the taxpaying public and the department. The amendments were peculiarly Commonwealth matters, and do not affect the States. This bill contains a repetition df those sections since no alteration in the principles embodied in them has been found necessary.

The second report of the royal commission dealt, in the main, with subjectmatters peculiar to the States, and particularly with the vexed problem of apportionment between the States, of profits derived from a trade or business carried on in more than one State. The Government regrets that one of the principal objects for which the royal commission was appointed was not achieved, and that one of the main recommendations on which it was peculiarly fitted to make a decision was not accepted by one of the States. As it is specifically a State concern, the Commonwealth Government feels that it is unable to carry the matter any further, but it feels deeply disappointed that a disability under which the trading and business community generally suffer at the hands of the States should continue. However, as the various Chambers of Commerce are still pursuing the matter, there is yet hope that a solution acceptable to all. the States will ultimately be reached.

The alterations and amendments being effected in the Income Tax Assessment Act by the present bill are mainly the outcome of the recommendations of the third report. This report deals in detail with the main general provisions of the income tax laws - for example, classification of exemptions, defining the assessable income, and the specification of the trading and business deductions. In addition to these three main divisions, there is the review and standardization, in conjunction with the States, of the provisions dealing with such matters as the assessment of live-stock, and carrying forward of losses, the treatment of leases, partnerships, trustees, the general machinery clauses of the act, and the special sections required in connexion with the assessment of shipping, insurance, banking, mining and co-operative companies.

I shall mention some of the more important alterations contained in the bill, but in respect of the numerous minor matters, I refer honorable senators to the explanatory memorandum issued to them by the Treasurer (Mr. Casey). This memorandum gives a ready reference from the clauses of the bill to the present sections of the Income Tax Assessment Act, that are being replaced, amended or adopted in their entirety..

The explanatory notes are designed to give honorable senators a ready comprehension of each amendment of any substance. The bill represents a re-draft of the wording of the existing law to meet both Commonwealth and State requirements, and an attempt to express, in the simplest and clearest language possible the various provisions of the law. There would be no advantage in explaining what are merely alterations in the verbiage of the act, designed only to clarify and simplify expression.

An important virtue of the bill is the arrangement of the various divisions. This permits of subjects being dealt with in a common sequence for Commonwealth and State purposes, and has eliminated the weaknesses of existing acts, as to the arrangement of the various liabilities for assessment or concessions . by way of deduction. These are sometimes provided for in disconnected clauses and in the most unexpected places. The royal commission has attempted to make each division self-contained, so that, for example, the division on leases or partnerships, trustees, &c, will give in itself comprehensively the whole of the provisions relating to that particular phase of taxation. Even though the necessary variations between the Commonwealth and State provisions, prevent an exact sequence of clauses with the 3ame corresponding numbers, comparisons by taxpayers dealing with the same subject of taxation for Commonwealth and State purposes will be greatly facilitated by reference to -the divisions covering the same subjects in the same sequence of clauses.

At the first glance, honorable senators might be somewhat perturbed by the large number of clauses in the bill, namely 266, compared with 100 sections in the present act. The volume of printed matter in the bill, however, is no greater than that contained in the present act. The increase of the number of clauses is a drafting arrangement, whereby the reading of the bill is made easier and the interpretation more obvious.

Without traversing every division in the bill, I desire to give honorable senators a general idea of the comparatively major alterations made in this measure. The draft uniform bill has not been framed for the purpose of increasing or reducing taxes. Actually the concessions embodied in the bill will bring about a definite reduction of revenue during the next financial year, but in achieving' uniformity with the States, a spirit of give and take has been' adopted, and it is quite possible that in a particular case, or in particular circumstances, a slight increase of taxes may result, or on the other hand, there may be a# slight decrease. There has been a levelling up and levelling down. I am sure, however, that in view of the very considerable benefit to be derived by the community, as a whole, honorable senators will not cavil, at the results achieved.

Taking the subjects in the order in which they appear in the bill, I should mention an important factor which has arisen, in connexion with those carrying on operations abroad, namely, the rate of exchange. The variation of that rate between Australia and Great Britain, as well as other countries, is of such importance as to affect, quite considerably, the calculation of the taxable income. When the exchange rate approximated par, the difference between the £1 sterling and the Australian £1 had no particular significance, but with the increase of the exchange rate to 25 per cent, and 30 per cent., the department has found it necessary to insist upon the conversion of the £1 sterling into the £1 Australian before applying the rate of taxation. Although the department considers that it has power under the act to do so its right has been challenged unsuccessfully in the Australian courts in the Payne case. The decision of the High Court in that case has been carried to the Privy Council, where it is now awaiting hearing. In order to remove the anomaly that would be created by an adverse decision of the Privy Council, it has been thought advisable to express the right of conversion in a specific clause in the bill so that, in the future, the' liability will be definitely known.

There has been considerable argument as to whether wives and divorcees should be taxable upon moneys received as separation allowance or as alimony, in view of the fact that such moneys have previously been taxed in the hands of the separated or former husband. It has been argued that if husbands and wives are called upon to pay a tax upon what is regarded as .the same assessable income, such a liability is in the nature of a double tax. In 1932, the Government incorporated an amendment in the Income Tax Assessment Act, exempting separation allowances paid to a wife living apart from her husband, pursuant to a decree of the court. Subsequent representations have been made that the same consideration should be extended to all alimony paid to a woman by her divorced husband. The royal commission which inquired diligently into this subject held that a strict legal line of demarcation was to be drawn between these two classes of women, and that the grounds for the exemption of alimony were not sound. Notwithstanding this, the Government has, in this bill, placed both classes of women in the same category, and in their cases, exempted the income from tax, preferring to recognize, not the legal difference between these two classes, but rather the actual similarity, according to popular understanding.

Following a recommendation of the royal commission, an alteration has been made in the act whereby there is to be taken into account the value of any residence or quarters provided by an employer for the use of his employee. Under the present act, an- employee is not liable in respect of such an allowance, except in specific circumstances. The view of the royal commission is that, when two employees receive the same amount of wages or salary, the one who enjoys, as an additional benefit, the occupation of a residence, rent free, or the enjoyment of free quarters, is the better off and able to bear a higher incidence of tax. In the same manner, allowances in the form of meals and sustenance, which, under a recent High Court ruling, had been found not to be assessable in particular circumstances, have been now made liable under all circumstances.

One of the most complicated and difficult problems for which the royal commission sought a solution was the variety of ways in which live stock were brought to account by primary producers under the Commonwealth " as well as under the various State laws. Uniformity in this connexion was long overdue, and that the necessary reform has been attained and accepted by the Commonwealth and States is a matter for congratulation. I trust that the headaches and irritation induced by taxation matters will be considerably diminished in the future as the result of the uniform provisions that have been adopted. All livestock on hand at the beginning and end of the year are, in future, to be brought to account. At the present time an option exists whereby primary producers, who so elect, may omit to show the natural increase on hand at the beginning and end of the accounting periods, and only bring them into account when realization takes place at the time of sale. In order that the change over to the new system, however, will not adversely affect any primary producer who has hitherto omitted to bring to account the natural increase on hand, he is to be given an opening and closing value for such live stock to correspond with the closing debit. I think it can be assumed, speaking generally, that, in the case of a station property that carries on breeding operations, approximately the same numbers of live stock are on hand at the beginning and end of each year, except, perhaps, when properties have been subjected to drought or other special circumstances have arisen.

In view of the fact that the values for the present Commonwealth and State returns are on a different basis, special provisions have had to be incorporated in order to bring these values into line without prejudicing the taxpayer. The principle followed is to allow the taxpayer concerned the option of adopting either the Commonwealth or the State value for both returns, and where the option involves a reduction of his assessable income, provision is made to spread it over a period of five years. Similarly, if the choice exercised means an increase of the assessable income of a particular year, the increase will be offset by deductions spread over the same period of five years. The provision, however, is not a compulsory one. 'The taxpayer lias the option of bringing the values into line or not. If he prefers to remain on different bases for Commonwealth and State purposes, thereby incurring the trouble of keeping two separate live stock accounts, he is quite at liberty to do so.

In the uniform draft bill a greater measure of elasticity with regard to live stock provisions is being provided than has prevailed in the past. Taxpayers will be allowed to change from one basis to another, provided that the Commissioner's consent to the change is obtained. This consent would not be withheld in bona fide cases. The limits within which a taxpayer may select a cost price with relation to natural increase are also being extended so that trustees, in particular, may be able in future to make the figures in their income tax returns harmonize with their trust accounts. Any person, in future, who neglects to exercise his option to select a cost price will automatically be given the lower limit in the various ranges provided. Thus annoying correspondence delays will no longer clog up the assessment work of the department.

In view of the practical difficulty of primary producers separating from their live stock accounts working beasts and beasts of burden, these animals are, in future, to be treated as part and parcel of the ordinary live stock. This will not, generally speaking, adversely affect any primary producer, although the depreciation allowed on such animals may fail lo be allowed in different years.

The profits on the sale of live stock used for breeding purposes are, under the present act, exempted from tax when sold in connexion with a walk-in walk-out sale. Though this concession is being continued in respect df such animals as are at present on hand and are the natural increase bred by the taxpayer, the concession will not be continued in respect of the sale of breeding stock acquired after the new act comes into force. This alteration is the outcome of the recommendation of the royal commission which contended that the differentiation between breeding stock and trading stock was not a. practical one from the taxation point of view. The acceptance of the recommendation by the Commonwealth and the States will tend greatly to simplify livestock accounts in the future. The present provision for separating the value of the wool from the value of the sheep when sheep are purchased in the wool is also being deleted from the act. This particular provision, which existed only in the Commonwealth act, has proved to have a very limited application. lu the past, different treatment has been accorded to merchants, under the respective Commonwealth and State acts, with regard to goods imported into and sold in Australia. .Under the various State taxation laws a non-resident trader is held liable for tax on this class of sale if made through the instrumentality of an agent. The present Commonwealth practice depends upon two out of the following three factors occurring in Australia-: -

(a)   place of contract;

(b)   place of delivery;

(c)   place of payment.

By arranging for two out of the above factors to take place outside Australia, taxation has been consistently avoided by certain classes of non-resident manufacturers and merchants. The adoption by the Commonwealth of the State test of instrumentality should prove to be a more satisfactory basis, and it should prevent, in the future, the leakages ' of revenue that have occurred in the past.

There has always been considerable controversy over the classes of deduction allowable under the act in respect of expenditure in' gaining or producing assessable income. There are many items of expenditure which, though necessarily incurred in carrying on the business, do not come within the existing category of expenditure incurred in producing assessable income. The royal commission has recommended that the clause dealing with this expenditure be widened sufficiently to include this class of outgoing, and this has been done. The bill disallows as deductions expenditure of a capital nature and expenditure of a private or domestic nature, as they are disallowed under the present act.

Honorable senators are probably aware that a considerable amount of controversy has ranged around the use of the word " necessarily " in relation to business expenditure deductions, because of the fact that New South Wales has failed to include this word in the corresponding clause of the bill introduced in the Parliament of that State. As the other States concerned, however, are unwilling to run the risk of broadening this clause, to the detriment of revenue, to too great an extent, this Government, in the interests of uniformity, decided to follow the majority of the States. If, as certain sections of the community urge, the inclusion of the word "necessarily " should lead to any inequities, the Government will not hesitate to reconsider the clause. For the present, honorable senators are asked to accept the wording, as drafted, as a liberal concession, compared with the limitations under the present act.

Although no alteration of substance lias been made . in the principles of depreciation allowed under the act, the Commonwealth and State commissioners, of their own initiative, have taken steps to reconcile their rates of depreciation, with a view to having one common schedule for the whole of Australia. This, I am given to understand, has been achieved. Machinery clauses have been embodied in the act to facilitate, the harmonization of the values of plant and machinery on hand for the purposes of the Commonwealth and State assessments respectively. The principle followed in this connexion is to take the lower of the two values and to allow an extra rate of depreciation in the assessment for the difference between the previous higher value and the value adopted, spread over a term not exceeding ten years. This harmonization of values and rates of depreciation will prove a particular boon to the trading community.

Under the present act, losses by embezzlement or larceny are not regarded as expenses incurred in producing the assessable income and are, therefore, not allowable. To meet complaints in connexion with, this allowance, the Government has consented to a clause being inserted in the bill to provide for a limited deduction under this heading, provided the embezzlement or larceny is of money, and is carried out by an employee in the taxpayer's business. All losses by embezzlement or larceny, however, are not allowable, as such would cover misappropriations by partners, and also losses and outgoings of a capital nature.

The basis for deduction in respect of subscriptions to associations has been widened in order to lessen administrative difficulties, and to minimize vexatious queries issued to taxpayers in respect of small amounts. It is the practice of the department, under the present act, to analyse the expenditure of an association, and to allow only that proportion of the subscription which corresponds to that part of the association's expenditure which would properly be incurred by the taxpayer if the activities carried out by the association had been carried out by the taxpayer himself. In future, amounts in excess of £10 10s. only will be subject to this analysis.

Gifts and contributions to public charities and similar bodies have been left in much the same position as under the present act, apart from minor alterations. The only important principle affected by the bill in this connexion is a provision that, in lieu of requiring the payment to be made out of the assessable income of the year - a provision requiring detailed analysis to differentiate between capital and income - the payment is allowable so long as the gift or contribution does not exceed the assessable income of the year.

Honorable senators will appreciate that, at present, there is a variety of concessional deductions under the Commonwealth and State acts. An attempt has been made to bring these into harmony, and in this connexion the Commonwealth's contribution has been to concede a deduction of £50 to a married man in respect of his wife, or, where the taxpayer is a widower, in respect of a female relative having the care of children under sixteen years of age, provided that the wife or relative is a resident and is wholly maintained by the taxpayer. This concession, it is estimated, will cost the Commonwealth from £300.000 to £350,000 revenue in the next financial year, but it was regarded as a proper deduction to be made in the interests of the married section of the community, as well as in the interests of uniformity.

Previously, deductions in respect of life assurance premiums have been limited to £50. but, in the case of superannuation contributions, to £100. Under the bill before the House these two concessional deductions have been combined, and a maximum amount of £100 has been allowed. Though this, at first glance, might appear to be a restriction of concessional deductions, it is, broadly speaking, a more liberal deduction in respect of the majority of taxpayers, since a larger number of persons will receive the extended benefit of the life assurance premiums from the increase of life assurance premiums from £50 to £100, than will be restricted by the reduction of the present combined total of £150 for superannuation and ' life assurance premiums to £100. However, £100 is regarded as a reasonable limit for the combination.

Another important principle followed in connexion with these concessional deductions has been one, recommended by the royal commission, that the deduction should be allowed irrespective of the amount of income. In some cases, both in the Commonwealth and States, the allowance is limited to a taxpayer whose income does not exceed a stated amount. If the allowance is justified, the royal commission considered it should be granted in all cases. The following is an extract from the report in 1920 of the British Royal Commission on Income Tax:-

The amount of tax on the allowances may be a negligible .quantity in the budget of a very rich man, but it is certain that it is an item worth consideration to taxpayers with incomes far higher than those in which the allowances now apply, and we think that the recognition of these family obligations should have a place in the income tax scheme in regard to all incomes of whatever amount. It seems to us evident that the bachelor with £5,000, or even £10,000, a year should be taxed more than a married man with a family who has the same income, and Ave recommend that family allowances should apply to all incomes of whatever amount.

The Commonwealth act is the only one at the present time which can be regarded as making reasonable provision foi* carrying forward losses. The States have been won to an acceptance of the principle, and have agreed to carry forward losses for three years as compared with the losses of four years in the Common-wealth act. It has been agreed that, when the States have implemented the provision, and the carrying forward of the three years' losses has become fully effective, the Commonwealth, in the interests of uniformity, will, by proclamation, reduce its period of four years to three years.'

The Commonwealth provisions with regard to the taxation of leases have been altered in two important directions only. The first is a provision for taxing the lessor upon the value of the improvements erected under covenant. The argument in favour of this amendment is that, if the lessee is given a deduction for the improvements he is required to make in the interests of the lessor, the lessor should be submitted to a corresponding liability for the value of the improvements as income.

The second important principle affecting the assessment of leases, is an amendment made in the House of Representatives in connexion with Crown leases held by a taxpayer for more than seven years. In such a case the liability of the vendor of the lease is to be limited to such an amount as has been conceded to the taxpayer by way of deduction in respect of the lease. It has been with some reluctance that the Government has accepted this amendment. While it is admitted that there is much to commend the liability in respect of various types of Crown leases to the sympathy of the Senate, the complicated drafting required to cover the various phases of leases is such that, until the full effect of any alteration has been thoroughly investigated and made clear, it is considered inadvisable to make any alteration at the eleventh-hour which would tend to spoil the harmony achieved by the Commonwealth and the various States in the uniform draft bill. In response to eleventhhour representations, the Treasurer had promised that a further investigation would be made in an effort to meet the particular circumstances of all Crown leases, and it is with much regret that the Government has accepted the decision forced upon it by a majority in the House of Representatives before the further impartial investigation promised has been undertaken. It is not improbable that the Parliament will be invited during the next- session to amend further the law with regard to Crown leaseholds. 1 may have to ask the Senate to remodel the provision which was agreed to in the House of Representatives.

In view of the fact that one of the principles of the bill is to abolish the averaging of income for rating purposes after 1938, so far as all classes of taxpayers, other than primary producers, are concerned, it was found necessary to provide for what is known as a " notional income " in respect of premiums on leases, to take the place of the averaging provisions. A detailed explanation of the manner in which this notional income is ascertained is set out in the explanatory notes to the bill, circulated by the Treasurer (Mr. Casey) in March of this year. Suffice it to say that, generally speaking, the notional income provides, in an approximate measure, an average rate based upon the unexpired period of the lease.

Honorable senators will notice that separate divisions in the bill are allotted to life assurance companies, co-operative and mutual companies, mining companies, overseas shipping companies, and Australian businesses controlled abroad. None of these divisions, however, contains any provisions which are different in any material respect from the present provisions of the Income Tax Act.

The view of the royal commission in respect of the mining provision was, that the concessions were a peculiar matter for 'consideration by the respective governments concerned, and that the mining conditions and outlook in each State would probably justify differential treatment.

Some of the States provide for the registration of tax agents. The recommendation of the royal commission was, that all States should make provision for this registration or, alternatively, that the Commonwealth should assume the responsibility on behalf of all the States. Upon examination of the matter, and because of the doubt as to the power of the Commonwealth under the Constitution to legislate in this connexion in the Income Tax Assessment Act, it was thought preferable to leave the matter with the States. Provision is made in the bill, however, for an agent, who prep«7cs a taxpayer's return, to sign a certi ficate, setting out the sources of information from which the return has been compiled. By this means, an additional check upon the accuracy of the return can be exercised, a check which, I think all honorable senators will agree, is highly desirable.

Very bitter criticism has been expressed in the community from time to time because of the retrospective powers of taxation exercised at times by the department. That such powers are necessary for a department functioning in so many directions as the Taxation Department does, honorable senators will readily appreciate. Retrospective powers are exercised in favour of the taxpayer as well as in favour of the revenue. The general limitation, with respect to amendments due to clerical errors or questions of fact, has always been three years, and this provision is still retained.

There is one type of retrospective amendment which it has been decided to abolish, namely^ that class of amendment which is due to alterations in the interpretation of the law. In future, whenever the High Court makes a pronouncement which has the effect of causing a new interpretation to be applied to any section of the act, assessments will not be re-opened, irrespective of whether the amendment would be in favour of the taxpayer or the revenue. This limitation, it is hoped, will tend to give more general satisfaction. ' No limitation has ever been placed upon the amendment of an assessment where fraud or evasion has taken place. This absence of limitation is continued as a feature of the present bill.

There is a type of amendment intermediate between the two types of cases just referred to, namely, the type of case in which a taxpayer has failed to keep proper books of account and has thereby failed to return his correct income. This type' of case is subject to amendment within a retrospective period of six. years under the present act, and this provision has also been maintained in the bill. The test of keeping proper books of accounts has been changed to one based upon a more satisfactory principle, namely, whether or not the taxpayer has made a full disclosure of all the material facts necessary for his assessment. Ignorance or inadvertence cannot be regarded as a satisfactory excuse for the short-payment of tax within the period of six years stipulated.

A period of sixty days has been generally adopted for the lodgment of objections and appeals. At present there is some disparity in the periods operating in the Commonwealth and State acts, and the standardization of these periods should prove a convenience to taxpayers generally. On the whole, the periods of time adopted represent a liberalization of the present prescribed periods.

The Board of Review has been given the power to review all the decisions and determinations of the commissioner, with one exception. That exception relates to tlie remission of the penalties prescribed in the various sections -of the act for failure by the taxpayer to lodge returns, pay tax, or include income in his returns. Yielding to representations in this regard, however, the Government has conceded the Board of Review the right to review where the amount involved exceeds a penalty of 10 per cent, per annum. Penalties lower than this stipulated amount, usually appertain to minor offences against the act which, from an administrative viewpoint, do not justify consideration by a tribunal higher than the commissioner.

I have refrained from going into further details in this second-reading speech because the minor alterations, although numerous, are of such a nature as to lend themselves more appropriately to discussion during the committee stages.

Honorable senators will appreciate, from a study of the bill, the immense amount of detailed consideration that has been given to almost every clause, and from the knowledge that I personally have of the detailed work involved, in , presiding at one of the conferences of Ministers and officers, I assure honorable senators that the arrangement of the bill and the drafting of it are in them- selves accomplishments of no little importance. The bill represents the hard work and considered opinion of some of the most expert legal and taxation minds in the Commonwealth, and to the many contributors to the bill as it now stands, who have rendered advice and help in an honorary capacity, this Parliament, as well as the people of Australia, is greatly indebted. Of such importance do I regard the drafting work of this bill that I now specially appeal to honorable senators not to interfere in any manner with the wording of it, unless the matter at issue is one of principle or of outstanding importance. Illconsidered phrases and interpolations can undo the work of the best draftsmen, destroy the structure of the bill, and render its application, in intended directions, inoperative.

There are several amendments that the Government desires to introduce into the bill during its passage in the Senate, and these , will be printed and circulated among honorable senators for their prior consideration. The most extensive of them is one which is required to correct the phraseology adopted by an amendment of the House of Representatives relating to leaseholds.

It has also been decided, when the bill has been passed, to print in the margin opposite each section a reference to. the corresponding section of the old act. This will greatly facilitate the work of the legal and commercial community, in connecting the past history and rulings of the High Court with the current law on the various aspects of taxation.

I regret having misled Senator Duncan-Hughes in regard to the reprinting of the memorandum. I am now informed that the original memorandum was so voluminous that it was found impossible to revise it in respect of amendments made by the House of Representatives in time to submit it to honorable senators. I am sure, however, that the material which I have is all that honorable senators will need for the consideration of the measure.

Debate (on motion by Senator Collings) adjourned.

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