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Wednesday, 4 March 1970

Mr BURY (Wentworth) (Treasurer) -I move:

That the Bill be now read a second time.

This Bill to amend the Estate Duty Assessment Act will provide reliefs from duty on estates of deceased primary producers and remove restraints on the powers of the Commissioner of Taxation to grant extensions of time for payment of duty. The amendments proposed by the Bill were foreshadowed in the 1 969-70 Budget Speech and. were explained in detail by the former Treasurer in a' statement he. made in. this House on 24th September 1969. Thereliefs from duty will apply to estates of primary producers who, at the time of death, were domiciled in Australia. They will be available against duty on estates resulting from deaths on or after 25th September 1969.

The Bill contains two basic tests for determining whether an estate is eligible for the reliefs. Broadly stated, an estate will be eligible if, firstly, disregarding any encumbrances or other debts, the gross value of rural property included in it is more than one-half of the gross value of the whole estate and, secondly, if more than one-half of the deceased person's gross income in the 5 years before his death was earned from carrying on a business of primary production. Rural property will include land, or interests in land, used in a business of primary production, together with improvements on the land. It will also include livestock, produce and farm plant and machinery, or interests in these assets. One of the reliefs is to be in the form of a 20% increase in the level of exemption from duty provided for small estates.

The level of outright exemption, which is usually described as the statutory exemption, is to be raised from $20,000 to $24,000 for eligible estates passing wholly to the widow, children or grandchildren of the deceased, and from $10,000 to$1 2,000 for eligible estates which do not pass to any of those persons.

Where the value of a primary producer's estate passing to his widow, children or grandchildren is greater than $24,000 the statutory exemption will be reduced by $2 for every $8 by which the value is greater than $24,000 and will, as a result, cut out where the value of an estate is $120,000. The same basis of shading out will apply for the smaller estates that do not pass to close relatives. This will mean that the new statutory exemption of $12,000 for these estates will be reduced where the value of an estate is in excess of $12,000 and will cut out completely where the value is $60,000. I mention that these bases for shading out the exemptions are the same as those that apply under the present law.

The other relief is to be in the form ofa partial rebate of duty. It will be available where the dutiable value of an eligible estate is less than $250,000 and will be calculated as a proportion of the part of the duty that is attributable to the rural property included in the estate. The rate at which this rebate will be allowable is to be determined by reference to the value of the estate before the allowance of any statutory exemption. Where this value is not greater than $140,000 the rebate will be 50% of the part of the duty that, by a process of direct apportionment, is attributable to the rural property. If the value of the estate is greater than $140,000 but less than $250,000, the 50% rate will be reduced by one-tenth of 1% for each $220 by which the value of the estate exceeds$1 40,000.

The Bill contains provisions under which estates of primary producers whose business activities had been conducted through a family company may qualify for the reliefs. In these estates, the allowance of the concessionswill primarily be conditional upon the gross value of the company's rural property being greater than the gross value of its other assets and upon the capital of the company being held wholly,or almost wholly, by the deceased and his relatives.

If the primary conditions are satisfied by a company, the administrator of an estate may elect to have shares owned by the deceased in the company included as rural property of the estate to the extent that the value of the shares is attributable to rural property owned by the company. If the administrator makes this election the shares must, however, be valued by reference to their 'assets-backing' value for all estate duty purposes, including the general liability to duty and the proportion of duty attributable to rural property.

The 'assets-backing' value will, in broad terms, represent the amount that would be received in respect of the shares in the event of a voluntary liquidation of the company, without any allowance for costs of liquidation. In effect, it will therefore be the market value of the property represented by the shares. This will mean that, when shares are treated as rural property for the purposes of the rebate, the property which they represent will, for all duty purposes, be included in the estate at a value corresponding with the value that would have been so included if the property had been owned personally by the deceased instead of by the company. This is also a feature of the probate duty rebate scheme of the State of Victoria and is designed to provide equity between primary producers who have conducted their businesses on a personal basis and those who have conducted them through companies.

One of the eligibility tests I have referred to earlier is that the income of the deceased for the 5 years preceding death was derived principally from a business of primary production carried on by him. The 5-year period will be either the 5 full income tax years that preceded the death of the person or, at the option of the administrator, the 4 full income tax years together with the part year that ended with the death of the deceased. Where a deceased person had carried on his business through a family proprietary company, income received by him from the company in the form of dividends, salary or wages, bonuses or director's fees in each of the 5 years before death may be regarded as income from a primary production business carried on by him. This income will be so regarded if the company's own income in each relevant year was derived principally from a business of primary production and the deceased was a shareholder in the company at the time he derived his income from it. In the case where a primary production business had been conducted by the trustee of a trust estate in which the deceased person had been a beneficiary, a share of the trust income received by the deceased will, to the extent that it was paid out of the primary production income of the trust estate, be regarded as income from a business of primary production carried on by the deceased.

The purpose of the provisions I have just mentioned is to ensure that an estate that is comprised principally of rural property will not be excluded from the reliefs because the primary production income of the deceased person was derived through the medium of a proprietary family company or a trust estate. The Bill* ensures that the existing rights of administrators to contest decisions of the Commissioner before a board of review, a valuation board or a court, where those decisions affect the liability of the estate for duty, are available in relation to the allowance of the proposed rebate. It also contains provisions under which an election made by an administrator to have shares in a proprietary family company included in the rural property in the estate may be withdrawn, if, for example, their inclusion at an 'assets-backing' value would, even with the allowance of the rebate, result in an overall increase in the duty payable by the estate.

I turn now to the other important feature of the Bill. Under the present law, the Commissioner may not extend the time for payment of duty except upon receipt of sufficient security for payment. The law also requires that the whole of the estate duty payable shall1 be paid within a period of 2 years. The Bill will remove these restrictions so that an extension of time for payment of duty may be approved by the Commissioner in the light of the particular circumstances of an estate. This will apply for the general body of estates - not only the estates of primary producers - and will bring the estate duty law in this area into line with the comparable and more widely applied provisions of the income tax law.

The amendments proposed by the Bill will result in a significant reduction in the duty payable on smaller rural estates. In the Government's view, they will provide valuable assistance to the heirs to farm properties and will do much to discourage the breaking-up of economic farm units to obtain finance to meet estate duty. An explanatory memorandum dealing with the provisions of the Bill is being circulated for the information of honourable members. In view of this, and the detailed statement that has already been made in the House by the former Treasurer, I do not propose to say more about the measure at this stage. I commend the Bill to the House.

Mr Crean - BeforeI seek the adjournment of the debate I would ask the Treasurer to make available the statement of the former Treasurer. It is true that the statement is enshrined in Hansard but it would make it easier to study it if the Treasurer were to make it available separately.

Mr BURY - I will do my best to make it available.

Debate (on motion by Mr Crean) adjourned.

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