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Wednesday, 11 November 1964

Senator WRIGHT (Tasmania) .- Clause 12 greatly extends the power of the Commissioner of Taxation to decide what are reasonable payments as between relatives and associated persons, such as companies and partnerships, who have dealings with a relative of a partner or whose directors are relatives. I would like the Minister to confirm or correct my understanding of this clause. As I understand it, a payment of any sort as between those associated persons in future is to be considered by the Commissioner from the point of view of whether it is reasonable in the Commissioner's opinion. I am curious to know whether that covers wages, directors' salaries, rental of leasehold premises and interest payments, for example. Does the Commissioner of Taxation have the right to say in respect of those payments that they are excessive or are too small, and that the amounts will be adjusted upwards for the purposes of income and downwards for the purposes of deductions, according tq the Commissioner's view of what is reasonable?

I also wish to ask the Minister specifically whether the Commissioner is given power in the circumstances I am about to describe. I shall take the hypothetical example of a father and two sons on a farm. Let us say that they are in the fortunate position where, on a small farm in Tasmania, they might net an annual income of £6,000. The boys, who are 18 and 19, receive an annual income of £2,000 each. Has the Commissioner of Taxation the power to say that £2,000 for each of those boys aged 18 and 19 years is unreasonably high and that the share of the profits to which he should be entitled under the partnership should be cut from £2,000 to what the Commissioner might think is a reasonable wage for such boys, say, £1,200?

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