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Wednesday, 31 May 1972
Page: 2384

Senator O'BYRNE (Tasmania) - I would be grateful if the Minister for Civil Aviation (Senator Cotton) would indicate whether we should proceed to debate the 3 income tax Bills together.

Senator Cotton - We would be happy with that arrangement.

Senator O'BYRNE - The Bills before the Senate are the Income Tax Assessment Bill (No. 2) 1972, the Income Tax Assessment Bill (No. 3) 1972 and the Income. Tax (International Agreements) Bill 1972. Income Tax Assessment Bill (No. 2) relates to an amendment of section 26 (a) of the Income Tax Assessment Act. Its purpose is to define with more certainty the law relating to persons who have share transactions on the stock exchange. The present situation has evidently been ambiguous as to where the line of demarcation is to be drawn regarding the intention of a purchaser of shares. Each purchaser has been assessed on the circumstances surrounding each transaction and the onus has been on the taxation authorities to evaluate whether the share transactions have been engaged in expressly for the purpose of making a profit by resale or whether the purchaser had been making the purchase as an investment. , .

The Bill attempts to make a clear separation when shares are purchased other than for profit making. For that reason the Bill has disturbed as little as possible the basic principle of section 26 (a) Of the Act while at the same time spelling out in clearer terms what were previously areas of uncertainty. It provides that shares owned by a person for a period of 18 months before resale are riot to be taken into account when assessing income tax. This applies from 12th April- 1972. Briefly, persons who are not share dealers or traders are not subject to income tax on any profit arising from the resale of shares, but any loss sustained by those people is not tax deductible.

The other 2 income tax Bills are complementary. Income Tax Assessment Bill (No. 3) relates to a rebate of the tax on dividends received by companies in particular circumstances and strengthens the law under which a public company is classified for income tax purposes. It provides that certain dividends paid by a private company to another, company are not to be taken into account in assessing whether the private company has made a distribution of its income for undistributed income tax purposes. The explanatory memorandum that was issued in association with these Bills is very comprehensive.' It is- of a very technical nature but for those people who are interested in the finer details the measures are covered very effectively. As I pointed out earlier, these Bills are complementary and consequential to' each other. As our economic advisers1 agree with the provisions of the 3 Bills it is not our intention to oppose them.

Senator COTTON(New .South WalesMinister for Civil Aviation) in reply - (8.3) - As Senator 0'Byrne, my , ex-associate in the Whips Union has indicated we are taking these 3 Bills together. As he. mentioned, they are related and we are discussing them as one. The Opposition: raises no objection to them and Senator O'Byrne has explained the general principles underlying each of them. Income Tax- Assessment Bill (No. 2) makes more certain the tax position of persons involved in stock exchange transactions. This has been uncertain and the Bill introduces more precision.

Income Tax Assessment Bill (No. 3) has the purpose of stopping people from avoiding tax, particularly through private company arrangements under which profit is passed across to a public company and in the net process the tax liability is reduced. In relation to dividend stripping procedures that have been conducted in this country, thereby to some extent defrauding the revenue, that position is being overcome. The Income Tax (International Agreements) Bill brings the provisions into force in the international area. I think Senator O'Byrne was correct in saying that detailed explanatory memoranda are available to earnest students of this subject who are interested. This is a typical move by the Taxation Office. It always brings out this type of memorandum and does it very well. The position is explained and easily understood. I do not think the process of democracy is being furthered by engaging in a long debate on a subject on which we are all in agreement.

Question resolved in the affirmative.

Bill read a second time.

In Committee

The Bill.

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