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Wednesday, 20 May 1936


Senator E B JOHNSTON (Western Australia) . - This is an example of how thoroughly the policy of the present Government differs from that laid down by Mr. S. M. Bruce when he was Treasurer of the Commonwealth. I am opposed to the amendment, which is designed to restrict, in more specific terms, the rebate allowed in respect of business incomes in the hands of individuals or partnerships. The original intention of section 30 of the existing act was to place an individual taxpayer or partnership on a basis more comparable with that of a company. Its intention was made clear in a speech delivered by Mr. Bruce in October, 1922, but in the administration of the act that intention has never been given full effect. The Supreme Court of Victoria held, in effect, in the case of Kiddle v. The Commissioner of Taxation, that the section should apply in cases in which some part of the taxpayer's income was retained for the development of the business. The amendment will completely override that judgment. Repeated applications by taxpayers to the department on this subject have met with a large proportion of refusals. From an economic point of. view it is desirable that individual traders and (partnerships should be placed on the same basis as companies in regard to their ability to retain some part of their income for development and expansion, without being subject to further tax, and it is suggested that an appropriate way to do that would be to exclude subclauses 2 and 3 entirely. I shall read some of the evidence given by Mr. McKellar White, president of the Taxpayers Association of New South Wales, before the Royal Commission on Taxation on the 21st November, 1932. In respect of section 30, sub-section 2 of the act, Mr. McKellar White said -

It is recommended that sub-section 2 of this section be deleted. That is a matter which was referred to the other day, and it may be of interest to know that since then the Supreme Court of Victoria has given a decision under section 30 allowing the rebate that the Commissioner refused to allow. I have a. copy of the judgment in that case, which I will hand in for the information of the commission.

The Government now proposes to alter the law in order that other taxpayers may be deprived of the benefit of that judgment. Dealing with this matter, Mr. McKellar White said -

In connexion with this particular matter I have looked up federalHansard in connexion with the debates in Parliament at the time that the section was originally introduced in 1922. In introducing section 30 of the act in October,1922, the then Prime Minister, Mr. Bruce, stated-- " Relief or benefit is to be afforded to partnerships and to those carrying on individual business. At present a private company, although it may be to all intents and purposes a partnership, has a considerable advantage over the individual or partnership carrying on business. The private company pays tax at the company rate only on any part of its profits which is retained in the business and placed to a reserve, whereas individuals engaged in business, whose rate exceeds the company rate, are obliged to pay on the whole of their profits at whatever is the appropriate rate for their own income. The Government are desirous almost above anything to encourage the expansion and stabilizing of business by the placing to reserves of amounts which will help to effect these two objects; and in this bill, in order to give some encouragement to the individual or the partnership, and to place both a little more closely upon the terras enjoyed by the private company, provision is made by which. 15 per cent. of the profits earned by the individual or the partnership can be taxed at the company rate (of 2s. 5d.) instead of at the rate appropriate to the individual or partnership if the latter is higher than the former."

My only regret is that, in this amendment, the Government is so thoroughly departing from the opinions expressed by that eminent statesman upon this matter. Mr. McKellar White, in evidence, said -

There wo have a definite statement by the Prime Minister at the time, that it was the intention of the Government to give some relief or some encouragement for the expansion of business. This section was specifically inserted for that purpose, but in administration it has been found that the rebate under section 30 is practically a dead letter. We suggest that it should bo eliminated, and that the original intention of the section should bc given effect to.

I regret that the committee is adopting the proposals of the Minister instead of inserting amendments which would give effect, to the intentions of Mr. Bruce when he was Treasurer.

Amendment agreed to.

Clause, as amended, agreed to.

Clauses 161 to 164 agreed to.

Clause 165-

(   1 ) Any person who charges directly or indirectly any fee . . . shall sign a certificate . . . setting out the sources of information from which the return was compiled.

(2)   . Every person carrying on business shall furnish particulars . . . setting out the sources of information from which the return was compiled.







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