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Tuesday, 6 March 1984
Page: 503

Senator WATSON(10.14) —The Senate is debating the Income Tax Assessment Amendment Bill (No. 5) 1983. This Bill contains many provisions and covers a wide range of topics. It adds, in some cases we feel quite unnecessarily, to the already voluminous nature of the Income Tax Assessment Act , which now contains over 1100 pages. For that reason I will concern myself with only a few of the amendments which have been proposed by this Bill. Although not necessarily in order of importance, they include bonuses and other amounts which are received in respect of certain short term life assurance policies, covered in clauses 6 and 25, and tax avoidance practices in relation to employees superannuation funds covered in clause 5.

In addition, the Bill gives effect to some of the decisions which were taken by the previous Government, the Fraser Liberal-National Party Government. Some of these changes, such as changes to leverage leasing, are generally welcome. However, we vocally and earnestly condemn two principal areas-the changes in relation to employee superannuation funds, and the retrospective provisions which attach to those sorts of funds under this legislation. The previous Treasurer, John Howard, was attacked because of his intention to proceed on leverage leasing tax avoidance arrangements by none other than the Premier of New South Wales, the Honourable Neville Wran. As he said at the time, it would affect a financing arrangement with a New South Wales power station. Yet today we do not hear that same criticism coming from that same Premier when a similar matter is introduced by a Federal Labor Government. However, I think I can detect that it is not quite the leverage leasing arrangements that John Howard introduced. As Senator Dame Margaret Guilfoyle mentioned earlier in the evening, it is foreseen by certain private contractors who are doing business with certain statutory bodies that, the income of those bodies being exempt, they could be in difficulty under this legislation.

The Minister for Finance (Mr Dawkins) and the Attorney-General (Senator Gareth Evans) in the early days of the Hawke Government said that the retrospective legislation would be used only in limited circumstances and only for the schemes of a blatant, artificial and contrived nature. I might not have summarised their words completely, but certainly that was the notion that was given to Australian taxpayers at large. It certainly appears from this legislation and from earlier retrospective legislation introduced into this House that, in the words of my colleague the honourable member for Denison (Mr Hodgman), the Hawke Labor socialist Government has now changed its mind. The Senate should be reminded of what I will refer to as open and complete disclosure in the form of papers that were presented to this chamber by the former Government upon request from this chamber in relation to bottom of the harbour schemes. A voluminous set of documents was presented, and some members of the then Opposition believed that they were being snowed by the volume of information by way of documents that was given to the Senate. A similar request was made by Senator Chipp but we find no more than a letter coming back explaining the situation in not very convincing terms.

In support of the legislation I also have a letter from the Minister for Resources and Energy (Senator Walsh), who sent along the Kelly v. Raymor ( Illawarra) Pty Ltd case. This case gives some indication to the Senate of the blatently contrived schemes the Government is trying to prevent. The previous speaker, Senator Cook, referred to this sort of operation as a cherry picker scheme; in other words, the final beneficiaries were the directors. Let us look at the essential ingredients of this case. There is a superannuation fund, ostensibly a section 23F fund. The first clue to the Commissioner of Taxation, when he should say: 'Yes, we should be on the lookout', is a maximum contribution to the fund by the employer. That is the first signal that something may be wrong. The second clue is that the contribution is loaned back to the company, to the directors. These are disclosed in the superannuation returns and in the balance sheets that are presented with the company accounts. Again, the second clue is that there is no attempt by the trustee to discharge the duties towards the members. The third clue concerns a trustee being removed and another one being appointed-a sure sign that there is trouble. I submit that , as the letter says, there was a deliberate policy of keeping employees in the dark about the existence of their rights under the superannuation scheme. I submit that the Commissioner has not been doing his job and in not doing his job he has thrown the onus upon this Parliament to try to tidy up the mess for him.

All the signs were there. Let us go through the terms and conditions that are required under section 23F. Before doing so, I draw the attention of the Senate to Part IVA. It is a relatively new provision which came into being in the early 1980s. Part IVA was designed to replace an earlier provision which was designed to catch all tax evasion and avoidance measures that had escaped the tax collector's net as a result of a number of High Court decisions. We have not been given evidence by the Minister that Part IVA is not working in this area. We have not been given evidence that the Commissioner was doing everything in his power, by virtue of his having to look at and approve of the trust deed, and receive the annual accounts of the company and the accounts of the superannuation funds. He has seen what has been going on, but he has not been discharging his duty as required and as set down by the Act. I believe the Minister has a responsibility to convince the Senate--

Senator Walsh —The Taxation Office was starved of staff for years by your Government.

Senator WATSON —We have an interjection from the Minister at the table. He said that the Australian Taxation Office was starved of staff. If that is the reason, it is further proof that this legislation should not be before us today. All that the Commissioner has to do is to start to discharge his duties. A very interesting point was raised tonight by my colleague, Senator Hill, a lawyer. Why has not the Commissioner started to invoke section 170 of the Act where there has not been a full and true disclosure? Whichever way he tries to look at the matter, there are plenty of provisions in the Act which permit the Taxation Commissioner to take action in relation to these matters.

I mentioned that I believe section 23F contains all the safeguards which are needed by the Commissioner to be able to discharge his duty. What has been said in this Parliament tonight would indicate that because of a lack of staff and for other reasons he has not sufficiently looked into and examined these superannuation schemes in approving them in the first place and then in not watching the progress of those superannuation schemes over the years. One of the conditions under section 23F is that there must be a communication to the employees to make sure that those employees' rights are safeguarded. I ask: What sort of piece of paper did the Taxation Commissioner ask the trustees of these funds to submit to him as proof that there had been adequate communication to the employees? We all know that bigger companies have a little book wherein the terms and conditions of the provident or superannuation fund are set out. The usual procedure with public companies is that this booklet is forwarded to the Taxation Commissioner. In relation to the private superannuation funds, which have probably not gone to the expense of having a written booklet produced, I ask: In those circumstances does the Commissioner sight a certified copy of that letter from the trustees to the employees? This was the worry of Senator Harradine in the debate tonight. He believes that it is all very well for the Taxation Commissioner to get his chop, but what about the employees? We see in the cherry picker scheme that has been referred to tonight that the rights of the employees have been totally forgotten.

Senator Messner —It is a breach of trust.

Senator WATSON —I wonder whether the employees should now be waking up to themselves and starting to sue the trustees. My colleague Senator Messner said that there has been a complete breach of trust. Mr Deputy President, I seek leave to continue my remarks later.

Leave granted; debate adjourned.