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Wednesday, 30 November 1983
Page: 3083

Question No. 443

Senator Archer asked the Minister representing the Minister for Defence, upon notice, on 18 October 1983:

(1) Is it expected that the taxing of Defence Force Reserve personnel will induce some resignations; if so, how many.

(2) How then will the Government seek to restore the present numbers.

Senator Gareth Evans —The Minister for Defence has provided the following answer to the honourable senator's question:

The Government is committed to ensuring that the incidence of taxation falls fairly on all citizens and considers that the present total exemption from taxation of Reserve Forces' earnings is unfairly regressive, with the greater benefit accruing to those in the higher income bracket. Those on lower incomes, or unemployed, gain the least or even no benefit from the exemption.

There is much to be said for the principle that income from all sources should be subject to taxation. It is generally preferable that rates of remuneration be established on their own merits and that taxation apply to all earnings.

However, in view of the concerns which have been expressed in relation to the proposed phasing out of the tax exemption on Reserve Forces' earnings, and taking into account claims which have been made regarding the fairness and effects on the Reserve Forces if the earnings of its members are fully taxable, the Government has decided that one half of the pay and allowances will remain exempt from tax, with effect from 1 December 1983.

This will have the effect of restricting the rate of tax on total Reserve pay to a maximum of 30 per cent, while those in lower income brackets will have an even lower effective rate of tax. This represents a balance between the considerations of fairly imposing taxation to which I have referred and recognising the particular circumstances of part time service in the Reserve Forces.

Further, the Committee of Reference for Defence Force Pay is inquiring into appropriate pay and allowances for the Reserve Forces in the light of the Government's decision to apply taxation to their earnings. The Committee has been asked to report no later than 30 June 1984.

These two decisions demonstrate the Government's support of the Reserve Forces and there is no reason why members should be contemplating resigning.