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Tuesday, 30 November 1965

Mr CREAN (Melbourne Ports) . - I find some difficulty in comprehending the arguments coming from one or two honorable members opposite when they say that some embarrassment will be caused to funds because they have to submit to the tests prescribed. There seems to be an impression in some minds that all these funds are set up by good employers to control bad employees. After all, there are two sides to these funds. They are made up of joint contributions of employees and employers. In fact there is a third aspect of the matter, because the contributions are allowed as deductions for taxation purposes, and the statistics given in the report of the Commissioner of Taxation for the year ended June 1962 show that about £33 million of contributions were allowed as deductions under the income tax legislation. This probably resulted in a loss to the revenue, if one likes to consider it in that light, of some millions of pounds.

I cannot see anything unreasonable about these nine bases of scrutiny of the funds. A point that does intrigue me a little is that of the total assets of about £311 million of these funds at June 1962, £204 million was held in assets other than those that are called gilt-edged securities. I was a little disturbed to read in the Press this morning that certain so-called reputable insurance companies had recently made what have turned out to be rather bad investments. The Australian Mutual Provident Society, I think, and one other company as well as M.L.C. Ltd. invested in the rather notorious concern, H. G. Palmer (Consolidated) Ltd. I think it is time that a little consideration was given to the holdings of some of these funds. What sort of assets are represented by this £204 million that is in other than gilt-edged securities? To my mind these funds are attaining such a magnitude that they can no longer be regarded simply as the preserves of small bodies, however well intentioned. The honorable member for Parramatta described these bodies, perhaps rather colourfully, as amateur trustees. Well, they may be amateur in their trusteeship, but at least the magnitude of these undertakings is now such that I believe there should be a little more scrutiny given to them than has been given in the past. It is easy enough to say that some funds have behaved well and some badly. Even those which have behaved well apparently are capable of making mistakes, and when the mistakes are made it is not the trustees who suffer, it is the so-called beneficiaries of the funds.

In my view there is still too little serious consideration given to what happens when a person who has been persuaded to join a fund is forced, for good and sufficient reasons, to leave the fund. What the Government is doing now is to suggest that any equity in the fund in respect of such a person, other than what he takes himself, should somehow or other be scrambled and distributed amongst the rest of the future beneficiaries. I cannot see that this is necessarily an equitable procedure. If I leave a fund and all I get is the contribution I have made, while the contribution the employer has made, which has been allowed as a deduction and in respect of which the taxation revenue has lost something, at the discretion of the trustees and subject to certain reservations provided in one of these tests goes into a pool for the benefit of the surviving or remaining members of the fund, this scarcely seems to me to be necessarily and always an equitable procedure. All I am suggesting here - and I am adopting a view in this connection opposed to that of some other honorable members - is that I do not resent what the Commissioner of Taxation is to do, although I have suggested that the strain put upon him is a little too great in terms of the other tasks that he is called upon to perform. But at least I think that there should be some umpire or arbitrator other than the fund itself. We have certain statutory provisions here in these nine gateways, if one likes to regard them as such, plus ultimately the discretion of the Commissioner as to whether the tests have been complied with. It has been suggested by the honorable member for Sturt (Mr. Wilson) that it is almost impossible for any fund to get through these nine gateways.

Mr Cleaver - All nine of them.

Mr CREAN - I would like to know in what respect it is impossible to fulfil these tests. As I see it, the main argument hinges on a rather difficult point - and I submit there are some difficulties where you have some hundreds of employees and you have to make a declaration as it were, in respect of every individual employee. I think that the amendment that has been suggested is at least sensible in that direction. The Treasurer having guaranteed to accept that amendment, I should like some other honorable members to point out which of the other conditions they find to be onerous as far as funds are concerned. It is easy enough in this House to talk about good funds and to suggest that people are being penalised. I should like to have a little more concrete demonstration of how these nine conditions are found to be offensive. To which conditions is it virtually impossible for good funds to adhere? I should be interested if perhaps later in the debate an honorable member could throw a little more light on that aspect.

Amendments agreed to.

Clause, as amended, agreed to.

Clauses 10 to 14 - by leave - taken together, and agreed to.

Proposed new clause 14a.

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