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Wednesday, 11 November 1964


Senator WRIGHT (Tasmania) .- I move -

1.   That the Bill be referred, for consideration and report, to a select committee to consist of seven senators to be appointed in a subsequent resolution.

2.   That such committee have power to send for persons, papers and records, and to move from place to place.

3.   That the committee report to the Senate not later than 31st March 196S.


Senator Lillico - I second the motion.


Senator WRIGHT - I urge the Senate to adopt this motion. I listened to Senator Henty, the Minister representing the Treasurer (Mr. Harold Holt), when he closed the second reading debate. However, I would like the Senate to consider a few matters in relation to the setting up of a select committee. Honorable senators will recall that when the Ligertwood report was tabled it was accompanied by an announcement that its provisions would be made the subject of amending legislation which would have effect as from the date the report was tabled. It will be remembered that Mr. O'sullivan, who in the three years that have intervened retired from the position of Commissioner of Taxation, was appointed as advisor specially to examine the Ligertwood report and to make submissions to the Treasurer.

Although I have asked from time to time whether Mr. O'Sullivan's recommendations would be made available, they have been regarded as secret advice to the Government and have not been made available. In many important respects the decisions and recommendations of the Committee have not been adopted. The reasons for the Government's decision may be inferred to be the recommendations of the former Commissioner of Taxation, Mr. O'sullivan, to which we have not had access. I believe that the Senate ought to know whether any reference back to Mr. Justice Ligertwood took place. I am one who has a profound respect for anything that comes by way of decision or recommendation from Mr. Justice Ligertwood. He occupies in the judicial structure in this country a place of very high eminence. I would like to know whether his views have been sought upon the propositions that have been rejected. I would also like to have a closer understanding of the principles underlying Mr. O'Sullivan's recommendations. I have no doubt that if a select committee of this chamber were appointed, the Government would agree that Mr. O'sullivan, if he were willing, should attend and yield to us the views that he holds and the reasons for them.

I am disquieted by the continued enjoyment of taxation deductions by great companies for the whole of building costs of very expensive metropolitan buildings over the terms of leases made before October 1964. I view with great disquiet the inequity that is created in favour of the big metropolitan companies at the expense of the ordinary taxpayer. I am provoked to say that when there is no unusual anxiety on the part of the three large insurance companies to whom .'the Minister referred in his reply - and who can remain nameless -

I entertain the shrewdest of suspicions that they arc the chief beneficiaries of the deductions for leases for metropolitan building construction. Although I am a policy holder in one of the large insurance companies, I am here to dispute their right to inequitable deductions. I am quite unsatisfied with thu situation disclosed in the administration of the Taxation Branch in regard to the application of these deductions for income tax purposes. I know that the officers of the Taxation Branch will do what they think right according to the interpretation which they place upon the Act. But Mr. Justice Ligertwood had no doubt in stigmatising these arrangements as devices.

Section 260 of the Act provides -

Every . . . arrangement made or entered into . . . shall so far as it has or purports to have the purpose or effect of in any way, directly or indirectly -

(c)   defeating, evading, or avoiding any duty or liability imposed on any person by this Act; be absolutely void, as against the Commissioner

If we take the case to which 1 referred in the report of the Ligertwood Committee concerning a lease arrangement between a company and a subsidiary, until a judgment of the court has been obtained I will not yield in my opinion that these arrangements would be defeated under section 260 of the Act. Therefore, when we introduce a special clause in this Bill to preserve the enjoyment of the deduction during the remainder of the lease, I fear that we impair the operation of section 260. In my opinion, if the section were applied to these arrangements it would itself operate to defeat tax avoidance. Premiums on leaseholds have been taxed since 1936. Their exemption was not recommended in the Ligertwood report. In this Bill complete exemption from taxation is given to all leasehold commercial premiums. Surely in the interests of a proper balance of equity as between the lessor and the lessee, the Senate has the right to satisfy itself upon the subject by means of the select committee procedure.

Another matter on which the Senate would want to satisfy itself is that, in the incidence of this Act to leases, leases arc unaffected if they were made before October 1 964. The trusts affected by this Act are not trusts made for family provision or even charitable provision. If the benefit of a charity is dependent upon any condition at all, it is taxed to the extent of 10s. in the £1, even though it was made perfectly bona fide in the year 1963, or at any time before October 1964. The axe comes down in regard to the present year of income and the Commissioner continues to confiscate 10s. in the £1 of the income during the remainder of the life of the trust. One must realise that trusts are often created in favour of a multiplicity of people, or of people contingently entitled, such as infants or persons who have been confined through temporary mental illness. One cannot cancel trusts as one can cancel leaseholds. So the income is taxed to the extent of 10s. in the £1 for every year that this legislation remains in operation until the accumulation in the trusts ceases to be effective.

I am not impressed with the suggestion that the select committee procedure is going to involve undue delay. That argument comes from Ministers who have had the responsibility of considering this matter. It took them three years to consider the matter. They have given Parliament less than three weeks to consider it. We would not be discharging our duty if we took less than three months on select committee procedure, especially when one remembers that the Bill which would emerge from the select committee would not need prolonged consideration. The Senate would know that every opportunity had been given to a Committee of its own members to examine the matter and recommend appropriate provisions. The procedure would ensure that nol one penny of revenue was lost. We would bc satisfied that the measure, before it went on to the statute book, was equitable.

The argument against this procedure is that the Bill has to be passed so that people may know their position. There has been a declaration from the Treasurer as to their position in the " Hansard " record of this Parliament since August 1961. They have had to suspend the re-arrangement of their affairs since the report of the Ligertwood Committee was brought down three years and three months ago. The Treasurer says that the passage of this Bill is not final. If reliance is to be placed on his undertaking, he and his officers are going to subject this measure to continuous scrutiny. If that scrutiny is real, at the end of three months it will reveal matters which require amendment. How false and illusory it is to induce people in the next three months to rearrange their affairs on the basis of an amendment now being formally passed, to the accompaniment of an undertaking, given in another place and repeated here purposely and deliberately, that the whole matter will be coming up for review at the end of three months.

If the Senate is a responsible House of the Parliament, as it is, I suggest that a just and much more practicable approach to every section of the community would be to defer the final passage of this Bill until a committee consisting of members of this chamber had an opportunity to examine it closely and in detail and to bring up a report not later than 31st March 1965.







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