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Tuesday, 25 November 1941

Mr SPOONER (Robertson) .- Before progress was reported on this clause I had moved an amendment to clause 6 to omit the words " subparagraphs (i) and (ii) " and to insert the words " sub-paragraph (1) ". I explained that this was preparatory to a further amendment, which I proposed to submit at a later stage on the assumption that the first amendment would be agreed to by the committee. The position will be made more clear to the committee if I state now the purport of the amendment which I propose to introduce later. Clause G introduces a new principle; it seeks to tax dividends received in Australia from profits earned outside of Australia by companies operating outside of Australia, or by ex-Australian companies.

Mr Hughes - Whose profits may already have been taxed.

Mr SPOONER -Yes, they may have been taxed in other countries. The dividends resulting from these profits will he taxed in Australia. Honorable members will realize that many Australians have invested their money in companies operating outside of Australia, let us say, for the sake of argument, in New Zealand or in the South Sea Islands. Some of these companies are subsidiaries of Australian companies. This bill proposes for the first time to introduce the principle of taxing such dividends in the hands of Australians as the dividends reach this country. Thebill proceeds further, in the second sub-clause, to tax dividends that are paid in Australia and which result from the sale of capital assets. This will apply even when the assets have been compulsorily resumed by the Government so that the previous owner has earned a book profit on them, and in due course must distribute the amount amongst the shareholders, whether he wanted to make the sale or not. The Opposition does not raise any issue about the principle concerned. This is the Government's measure, and the Government wishes to obtain certain revenue by taxation for the purpose of augmenting the funds which it requires for the prosecution of the war. But the Opposition asks the Government not to make the effect of this clause retrospective. If it does so, hardship will be imposed upon the people who have received the class of dividends affected during the year which ended on the 30th June last. The transactions which gave rise to such dividends may have been carried out in perfectly good faith by people who had invested their money on the understanding that dividends would not be taxable in Australia; but now they become aware for the first time - sixteen months after the transactions took place - that between now and June, 1942, income tax assessments will be issued in respect of those dividends or profits. For that reason the Opposition asks the Government to accept the amendment, which proposes to remove the retrospectivity from this clause. The amendment that I propose to move later, on the assumption that the committee will agree to this one, will provide that the amendments proposed to be effected to the act by the clause as it now stands, shall notapply to any dividend paid, credited, or distributed, if the dividends were declared prior to the 30th October, 1941. I repeat that no issue is raised concerning the policy of the Government's amendments. The Opposition accepts that as the policy of the Government, and does not contest the nature of the change that the Government desires to make. It merely asks the Government to accept this amendment for the purposes of removing the retrospectivity of the clause and making the profits or dividends taxable only if they become income in the hands of the taxpayers subsequent to the 30th October, 1941, which was the approximate date of delivery of the budget.

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