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Wednesday, 16 December 1914

Senator PEARCE (Western Australia) (Minister of Defence) . - Senator Millen has raised a point which, of course, is an interesting one as a matter of debate. On the face of it, it would look, and it certainly occurred to me at the time that it would be better to say, " Al] leases shall be taxable except the following," but when one goes into the matter, as I find that the draftsman has done, it becomes clear that with six varying State Land Acts it would be necessary to have a list of exemptions five times as long as this Bill if we were to put them in. I have before me the Queensland Land Act of 1910. On two pages I find semi-leases, which will be exempt if the Bill is passed in its present form, but which would have to be epitomized if the suggestion of Senator Millen were adopted. That is the position in regard to one State alone, and I venture to say that a similar position would arise in connexion with other States.

Senator Mullan - It wo::d be more difficult and complicated in the case of other States, because the Queensland Act is a consolidated one.

Senator PEARCE - Section 104 of the Act creates a perpetual lease selection. That is not a lease in the first stage. It only becomes a lease when certain conditions have been complied with.

Senator Millen - You do not exempt that.

Senator PEARCE - Yes, because it is not, in the first period, a lease. Section 105 of the Act creates agricultural homesteads. That, again, is not a lease in the initial stage. It becomes a lease when certain conditions have been complied with. Again, we find that the Act creates a free homestead, a grazing selection

Senator Millen - If it is not a lease, what is it?

Senator PEARCE - It is not a lease, but a right to graze on land.

Senator Millen - That is all that a lease is.

Senator PEARCE - Subject to certain conditions having been complied with, it becomes a leasehold. The Queensland Act provides for prickly-pear selections, which are not leaseholds, so the legal authorities say, though they may become such.

Senator Lynch - They are leases in the making.

Senator PEARCE - Yes.

Senator Millen - If they are not leases, the clause means that they are liable to taxation.

Senator PEARCE - No.

Senator MILLEN - It provides that) leaseholds shall not be subject to taxation. You say that these are not leases, and, therefore, they must be taxable.

Senator PEARCE - In the clause we say that leases shall not be subject to taxation except certain leases, and we epitomize what those leases are.

Senator Millen - If these are not leaseholds they will not be covered by the Bill.

Senator PEARCE - It is not clear that they are not leaseholds, but they are not the kind of leases that we are trying to tax. It is not desirable that they should be taxed. If we had gone through all the State Land Acts to epitomize every kind of lease, we should have had a very long list to include in the Bill. It has been found more convenient to follow the system which. has been adopted in this measure. Senator Bakhap speaks of timber leases issued for closer settlement purposes. These are granted subject to onerous conditions which involve expenditure by the lessee. This expenditure is indicated as of such a character that the lessee gets little or no return for it.

Senator Bakhap - In every case of the kind within my knowledge no dividends have so far been paid.

Senator PEARCE - The answer to that is that if there are no returns there will be no tax. The expenditure in such a case is really the rent which the lessee is called upon to pay. What is the economic rent of such leases?

Senator Bakhap - The rental in some cases is a peppercorn; a royalty has to be paid on the timber, and there are special clauses in the lease requiring a certain area of cleared land to be returned to the State every year for the purpose of closer settlement.

Senator PEARCE - Quite so, but all those obligations and the expenditure they involve has to be set against the economic value of the land, and it is not conceivable that such lessees would be required to pay any taxation under this Bill any more than they would be required to pay income tax. In arriving at the taxable value of such leases, the conditions of the lease -must be taken into consideration. I think it is clear that the holders of such leases would not have to pay any tax under this Bill, and so the honorable senator need not concern himself about them.

Senator ALBERT GOULD (NEW SOUTH WALES) -Colonel Sir ALBERTGOULD (New South Wales) [11.59]. - Senator Bakhap has referred to a class of leases in connexion with which the holder is required to comply with certain conditions in respect of land which reverts to the Crown. The lessee in such cases has no interest in the land at all. He has a right only to the timber on the land, and no land tax as such can be imposed upon him. In the case of ordinary timber leases in New South Wales, the lessee acquires the right to enter upon land in order to cut and remove timber of certain dimensions. He is given a right to graze the stock necessary to enable him to carry on his work of cutting and removing the timber. It cannot be said that that is a lease of the land which the Government are entitled to tax under this Bill. The only valuable asset the lessee has is the exclusive right to cut and remove the timber.

Senator LYNCH - The honorable senator does not maintain that that right has no value?

Senator ALBERT GOULD (NEW SOUTH WALES) -Colonel Sir ALBERTGOULD. - I do not, but I do maintain that it cannot be the subject of a land tax. The lessee's right is not in the land at all, but is -a right to the timber upon it. I take the case of land with buildings upon it in the city. The owner desires to erect a better building, and in order to enable him to do so he advertises that the existing buildings are for sale, with a right to the purchaser to enter upon the land, and, if the work should take time, to occupy it for the purpose of the removal of the building. That is on all-fours with the case of a man allowed to go upon land to remove the timber upon it. The Ministry might introduce a measure to enable them to tax the profits derivable from the cutting and removal of the timber, but that would not be a land tax.

Senator Pearce - In Western Australia the holder of a timber lease is given a right to let the land and charge rent for it, and to put up buildings on the land and charge rent for them.

Senator Lt Colonel Sir ALBERT GOULD - The Minister means that he is allowed to sell the grazing right and to erect and let houses to people whom he engages to cut the timber.

Senator PEARCE - To anybody - storekeepers and others.

Senator Findley - What difference does it make if the people to whom the houses are let are engaged in getting the timber or not?

Senator Lt Colonel Sir ALBERT GOULD - It may make a great deal of difference. A man getting a job to cut the timber may see that he has two or three years' work in hand, and may take his family to the place of his work if he can obtain a house for them, instead of a tent.

Senator Findley - But the revenue goes to the holder of the lease, whether the houses are occupied by persons engaged in cutting the timber or not.

Senator Lt Colonel Sir ALBERT GOULD .- We cannot tax any land the property of a State, but the Government are in this measure trying to impose taxation which will not be against the Constitution, but will at the same time enable them to derive revenue from the value taken from land by the exercise of an occupation right given by the Crown. If that is a valid tax at all, it is certainly not a land tax. A land tax is taxation of the land, but in this case the land is the property of a State, and, as such, we cannot tax it. The Minister of Defence has explained that a principle has been laid down by which to ascertain the taxable value of leaseholds for the purpose of this Bill. In the western division of New South Wales we have leases with a forty-two years' tenure, and subject to periodical re-appraisement. A Board is appointed to assess the fair rental value of these leaseholds.

Senator Lt Colonel O'loghlin - How often are they revalued ?

Senator Lt Colonel Sir ALBERT GOULD - I think about every seven years, but I know that they are subject to periodical re-appraisement. The Commonwealth Government now say that they desire to impose a tax upon those holdings. Their proposition is to tax the difference between what has been declared to be the fair rental value of the land by a Board appointed for the purpose and the fair rental value as decided by some other valuator appointed by the Commonwealth. Honorable senators must see that this will open the door to a great deal of difficulty and trouble, whilst it is more than probable that the Commonwealth Government will obtain little or no revenue from the imposition of this tax. They will have to bear the cost of the inspection and valuation of these lands, and possibly of conducting proceedings in connexion with those valuations. If the original valuation by the State authority is a reasonable one, and it is made only after full inquiry, unless exceptional circumstances arise in the meantime, the Commonwealth Government will find, after all their trouble and expense, that there will be nothing available for taxation. The lessees may be put to trouble and expense in appearing with their witnesses before a Court to determine the valuations, and, though it might be said that the Government would meet the expense, I ask why we should place ourselves in the position of having to meet heavy expenses when it is probable that there will be no taxable value in these cases upon which to impose this tax ?

Senator Lynch - One valuation would serve for a number of years.

Senator ALBERT GOULD (NEW SOUTH WALES) -Colonel Sir ALBERTGOULD. - That is so. One valuation by the State authorities serves for a number of years. But if the valuation by the State authority is a fair one, the valuation by the Commonwealth authority must be the same, and the Commonwealth Government will be put to expense in the pursuit of a phantom economic rent on which to impose this tax. For a time, excellent seasons prevailed in the western division of New South Wales, and people were induced to take up leaseholds -there and stock them. Things went on -well for a few years, and there was then a succession of years of drought. As a -result, properties that were at one time worth £40,000 or £50.000 were going begging in the market for £1,000 or £1,500. Three-fourths of the leaseholders' stock died, and the balance was practically given away. The holders of -these lands are now to be faced with the payment of a tax under this Bill. It might be possible to impose such a tax in -prosperous seasons. Of course, it may be urged that the leaseholder may come Along and disclose to the Crown that he is suffering, for example, from the effects of a drought, and may obtain relief from the payment of the tax. But while that is being done a. gross injustice is being inflicted on the individual. If honorable senators were acquainted with the western lands of New South Wales, they would know that there are thousands of acres there which are not worth halfacrown an acre.

Senator O'Keefe - What has the honorable senator's argument to do with the amendment of Senator Lynch in regard to timber leases?

Senator Lt Colonel Sir ALBERT GOULD - It has a great deal to do with it, seeing that it relates to leases generally. Assuming that we have the constitutional power to impose this tax, we are justified in impressing on the Government the futile character of such legislation. What is there to prevent a State Government - after a valuation of these leases has been made by Commonwealth officials - from increasing the rentals which it formerly charged up to the full economic value of the leases? I know of cases which are pending in which freeholders and lessees are disputing how the existing tax should be apportioned, notwithstanding that decisions in regard to it have been given by the Court from time to time. What is the value, for purposes of taxation, of a pastoral lease which takes 20 acres to feed a sheep?

Senator Findley - What areas are there in New South Wales as poor as that?

Senator Lt Colonel Sir ALBERT GOULD - There are areas in the western district which will not carry more than one sheep to 20 acres.

Senator Findley - What will they pay under this tax?

Senator Lt Colonel Sir ALBERT GOULD - Why should we throw our money, away in setting up all the paraphernalia of Courts to deal with such cases? If we declared that the tax is not to be imposed in cases in which it will not result in revenue being obtained, or in settlement being assisted, we should be acting upon common-sense lines. If the land which the Commonwealth recently purchased for £80,000 as a site for the Commonwealth Bank in Sydney had been owned by a private individual, he would have been required to pay, under this

Bill, 9d. in the £1 for every £1 in excess of £75, 000. Probably such an impost would average 4d. or 5d. in the £1 all round.

Senator O'Keefe - I rise to a point of order. Is the honorable senator in order in pursuing a discussion on the general principles of the Bill, which he has been doing for some time? We are nowin Committee, engaged in debating an amendment by Senator Lynch in regard to timber leases.

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