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Tuesday, 30 November 1965

Mr BOWEN (Parramatta) .- by leave - I move -

1.   Before the definition of ' employee ' in subsection (1.) of proposed section 23p, insert the following definition: - " ' dependant ', in relation to an employee, includes the spouse and any child of the employee;".

2.   In sub-section (2.) of proposed section 23p, omit " the Commissioner is satisfied that".

3.   In sub-section (2.), paragraph (b), of proposed section 23p, omit "in respect of that employee ".

4.   In sub-section (2.), paragraph (e), of proposed section 23 p, omit "and was communicated in writing to the employee either before, or at the time when, contributions were first paid to the fund in respect of the employee or of his dependants", insert "and notice in writing of the existence of that right was given to the employee not later than the time when contributions were first paid to the fund in respect of the employee or of his dependants or the thirty-first day of March, One thousand nine hundred and sixty-six, whichever is the later,".

5.   In sub-section (2.), paragraph (f), of proposed section 23f, omit " will be ", insert " is to be".

6.   In sub-section (2.), paragraph (g), of proposed section 23p, omit " will be " first occurring, insert " are to be ".

7.   In sub-section (2.), paragraph (g), of proposed section 23f, omit " will be " second occurring, insert "are to be".

8.   Omit sub-paragraph (Hi) of paragraph (h) of sub-section (2.) of proposed section 23f, insert the following sub-paragraph: - " (iii) the benefits, pensions and allowances that have been, are being or may be provided for the employee or his dependants from any other fund to which this section applies in relation to the year of income or has applied in relation to a previous year of income; and".

9.   After sub-section (2.) of proposed section 23f, insert the following sub-section: - " ' (2a.) Where a deed or instrument relating to a superannuation fund contains a provision the purpose of which is to avoid a breach of a rule of law relating to perpetuities, the provision does not prevent the fund from being treated as an indefinitely continuing fund for the purposes of paragraph (a) of the last preceding sub-section.".

10.   Omit sub-section (6.) of proposed section 23f, insert the following sub-section: - "'(6.) Where a requirement specified in subsection (2.) of this section has not been complied with in relation to a superannuation fund in relation to a year of income but the trustee of the fund satisfies the Commissioner that, by reason of special circumstances that existed in relation to the fund during that year of income, it would be reasonable for this section to have effect as if that requirement had been complied with, this section has effect as if that requirement had been complied with.".

11.   In sub-section (10.) of proposed section 23f, omit " the Commissioner is not satisfied that an undertaking approved by him in relation to a superannuation fund for the purposes of paragraph (f) of sub-section (2.) of this section was complied with ", insert " an undertaking approved by the Commissioner in relation to a superannuation fund for the purposes of paragraph (f) of subsection (2.) of this section was not complied with ".

12.   Omit paragraph (a) of sub-section (10.) of proposed section 23f.

13.   After sub-section (10.) of proposed section 23f insert the following sub-section: - " ' (10a.) Where it appears to the Commissioner that an undertaking referred to in the last preceding sub-section was not complied with during a year of income, he shall inform the trustee of the fund in writing of the respect in which, in the opinion of the Commissioner, the undertaking was not complied with.".

14.   In sub-section (16.) of proposed section 23F., omit "the Commissioner is satisfied that".

15.   In sub-section (16.) of proposed section 23f., omit " that " second occurring.

This clause deletes section 23f which was inserted in theAct in November 1964 and inserts a new section 23f. The old section provided for a tax of 10s. in the £1 on superannuation funds of employer-employee type unless they could pass each of nine tests that were set out in subsection (2.). If they could not pass these tests a discretion was vested, by subsection (6.), in the Commissioner of Taxation under which he could treat them in special circumstances as though they had passed, although they had not passed. It was thought that some of these nine conditions were unduly stringent and that genuine and old established superannuation funds might, in many cases, have difficulty in passing all the tests.

The Government has recognised this fact by the amendment it has brought forward in the Bill. For example, in paragraph (e) of these tests there is provision for the allocation of rights to benefits which have ceased. These have to be allocated to employees who remain in the fund. Because of the burden of administration placed on trustees in giving effect to this, the amending provision brought in by the Government now provides that this condition is complied with if an undertaking is given to the satisfaction of the Commissioner to make an allocation in future, even though this is not immediately made in the year of income or two months thereafter as the earlier provision provided. The Government Members' Committee on Taxation and Finance, of which I am

Chairman, was concerned that some of the other conditions in section 23f(2.) as proposed in the Bill were still too stringent to be met by many genuine superannuation funds. The Committee was also concerned at the extent to which matters were made to depend not on what the facts were but upon what opinion the Comm issioner might form about the facts. It gavemuch consideration to these matters and conferred with senior officers of the Taxation Branch to see what could be done to remove what were felt to be real points of criticism. The amendments I propose are the result of that consideration and those conferences with senior officers of the Branch.

Perhaps I might comment on them. Amendment No. 1 makes a similar change in the definition of dependant as was made by my amendment to clause 7. It makes it clear that dependant includes the spouse or any child of the employee. Amendment No. 2 omits the words "the Commissioner is satisfied that " which govern all the nine conditions. If the words relating to the Commissioner's satisfaction are deleted then the exemption from tax will depend upon the actual satisfaction of those conditions. Suppose that a dispute arises with trustees of a particular superannuation fund and they disagree with the Commissioner as to whether or not they have complied with these nine tests. If the Bill be amended as suggested they will have a right to appeal not only to a board of review as they have in the provision introduced by the Government, but, alternatively, a right to appeal to the Supreme Court of the State or, if they choose, to the High Court of Australia. As I have said, they still will be able to go before a board of review. Even if it is held that they cannot comply with conditions as laid down, under the Bill the Commissioner has discretion to waive compliance in special circumstances.

Amendment No. 3 relates to one of the conditions which has presented some difficulty to superannuation funds. I refer to the condition laid down in paragraph (b), which requires that an employer should make a contribution in each year of income in respect of each employee. This was designed to ensure, particularly where there were employees either coming in or leaving over a period immediately before or after the end of the accounting period, that contributions were in fact made in respect of each employee. The amendment seeks to mitigate the stringency of that condition as it affected genuine superannuation funds, by deleting the words "in respect of that employee". If the amendment be adopted, there will not be a breach of the condition simply because contributions have not been made in respect of every employee.

Amendment No. 4 concerns another condition relating to a communication in writing to employees of their rights. In the Bill as drawn there is no direction as to the time within which this communication has to be made by existing funds. One purpose of the amendment is to provide a date for this notification. The date chosen is 31st March 1966, on the assumption that the Bill will be passed before the end of this year. If the Bill is delayed that date will need to be altered. The amendment provides also that it is sufficient to give notice of the existence of the right rather than requiring notice of details of the terms and conditions of the right to be given to the employee. Amendments Nos. 5, 6 and 7 are consequential verbal amendments, and I do not take any time on them.

Amendment No. 8 is of some significance. It relates to paragraph (h) which provides that if the aggregate of the benefits to which an employee is entitled under a fund which may be under consideration and the benefits to which he is entitled under another fund would give him an excessive benefit, the whole of the income of the fund under consideration loses the exemption. This seems to be a harsh provision. The amendment suggests that this provision should apply only where employer-employee funds are aggregated. They are described as funds to which proposed new section 23F. applies. Amendment No. 9 refers to the requirement that a fund should be of indefinite duration. This requirement presents a difficulty where there is a duration related to human life. One life may be of uncertain but definite duration. There are provisions in many deeds designed to prevent the application of the rule against perpetuities which make them depend on the duration of a multiplicity of lives. The provision set out in amendment No. 9 is designed to ensure that such deeds will not be brought into conflict with the condition in paragraph (a). Amend ment No. 10 simply relates to the discretion of the Commissioner to grant exemption to a fund notwithstanding he is not satisfied that the conditions have been complied with. The amendment retains the discretion but relates it to factual compliance. Amendment No. 11 carries through the notion of making the matter depend on actual fact, not on the opinion of the Commissioner. Amendments Nos. 12, 13, 14 and IS are consequential on the other amendments I discussed. They are essentially of a recasting and verbal character. I commend the amendments to the Committee.

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