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Wednesday, 20 May 1936

Senator A J McLACHLAN (SOUTH AUSTRALIA) (Postmaster-General) . - I cannot see how this alteration will operate injuriously to any one. On page 46 of the memorandum, the variations of the existing law in respect of this clause are set out as follows: -

(i)   Growing crops and crop-stools are brought into the category of trading stock in the case of sale or disposal. This results in the purchaser obtaining a deduction for the purchase price as well as the vendor being taxed upon it.

(ii)   Assets in the nature of trading stock disposed of by testamentary disposition are specifically dealt with in clause 37.

(iii)   In a business of primary production working beasts and beasts of burden are treated as trading stock - see definition of " live-stock " in clause 0.

(iv)   The exemption relating to profits made on the sale of live-stock' used for breeding purposes is withdrawn.

The removal of the exemption under (iv) above is in accordance with the recommendation of the royal commission, which gave very serious consideration .to this item of the exemption in the interests of Commonwealth and State uniformity. The royal commission pointed out that, when breeding stock is sold in the ordinary course of business, the proceeds of the sale are included in the taxpayer's assessable income in the usual manner. The exemption of profit on the sale of breeding stock sold for the purpose of putting an end to a business, or a part of a. business, rests on the argument that the breeding stock is equivalent to plant, and that when the breeding stock is sold, the proceeds represent the realization of a capital asset. To this the royal commission replies that when the breeding stock is purchased, the purchase cost is nil owed as a deduction ; similarly in the case of breeding stock, which is bred by the taxpayer, he receives a deduction of the working expenses of the station property incurred in rearing live-stock. The view of the royal commission is that live-stock possesses the characteristics of a fixed asset and a trading asset, and though an animal may be acquired primarily for breeding or wool-growing purposes, its ultimate sale is by no means a minor consideration. No justification, therefore, exists for a continuance of the concession, as in all cases the full cost of every head of stock purchased or reared has been allowed as a deduction, and the recommendation of the royal commission is that the proceeds of breeding stock sold upon the realization or discontinuance of a business, from any cause whatsoever, should be included in the assessable income of the taxpayer. The profit on the trading stock realized by a merchant in similar circumstances is not exempted from taxation. The State Ministers in conference all supported the recommendation of the royal commission.

The elasticity provided by the revised livestock clauses has been made possible only on the assumption that the ultimate profit or loss on the sale of live-stock would be brought to account.

Clause agreed to.

Clauses 37 to 43 agreed to.

Clause 44 (Dividends).

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