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Wednesday, 7 September 1983
Page: 510


Mr BRAITHWAITE(5.48) —I do not want to take up too much of the Committee's time. I wish just to reinforce some of the matters discussed in the second reading speech. I come to the imputed dividend, where it has been suggested that the arrangements apply to quasi-liquidations and quasi- distributions. It is also suggested that there is no penalty in doing it in this way; but I suggest that by the manner in which the Act at present indicates that a dividend is to be imputed, there is a penalty written into that method of calculation. I say that because if it is a quasi-liquidation, no self-respecting accountant would liquidate a company in a normal sense in this way. Having in mind the accumulated profits and, if it is a private company, the fact that there is only a 20 per cent distribution required, I think that in a normal distribution an accountant, in conducting that arrangement, would do it in such a way that the imposition of taxation would not fall on to a dividend distribution in one lump sum at a certain time.

I would think that it was general practice in the accounting world, for those specialising in taxation, to handle a liquidation so as to deal with the penalty rates of tax that are brought into the Act. It is enumerated, I think, right back to 1971, that this is in itself, a penalty because of the manner in which it is imputed. I suggest that to describe it as a liquidation is not true. If that is to be so, it must be recognised that in the method of taxation of this imputed dividend there is a huge penalty. In my speech in the second reading stage I suggested that that penalty amounts to 82c of every dollar of income earned. That is the only manner in which it would be retained. I understand the principles that the Minister is trying to explain in that regard. I believe that this matter should be more carefully looked at.

The other aspect that worries me is the fact that trustees can be assessed for taxation purposes in certain circumstances in which they hold shares. As I see it, there is nothing in the legislation which limits the liability of a trust to the assets of the trust only. In cases in which the liability is in excess of trust assets, the trustees may be called upon personally to bear that liability. I am wondering whether the Minister will assure not only myself but also the people outside that there will be no further penalty on a trustee as an individual. Will the Minister indicate to me whether this is a fair interpretation of an imputed dividend and whether the trustee has a continuing liability if the trust cannot meet the commitment.